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| 8-K - THE BANCORP, INC. FORM 8-K - Bancorp, Inc. | bancorp8k.htm |
Investor Presentation
First Quarter, 2013
First Quarter, 2013
NASDAQ: TBBK
Forward Looking
Statements
Statements
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
Statements in this presentation regarding The Bancorp, Inc.’s business that 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 the words “may,” “believe,” “will,” “expect,” “anticipate,” “estimate,” “continue,” or similar words.
For further discussion of these risks and uncertainties, see The Bancorp, Inc.’s filings with the SEC, including the “risk
factors” section of The Bancorp, Inc.’s Form 10-K. 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.
statements” that involve risks and uncertainties. These statements may be identified by the use of forward-looking
terminology, including the words “may,” “believe,” “will,” “expect,” “anticipate,” “estimate,” “continue,” or similar words.
For further discussion of these risks and uncertainties, see The Bancorp, Inc.’s filings with the SEC, including the “risk
factors” section of The Bancorp, Inc.’s Form 10-K. 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.
1
The Bancorp, Inc.
Planning for Growth with
Safety and Soundness
Safety and Soundness
• Strategic Goal:
– Create and grow a stable, profitable institution with the optimum reliance on capital, risk
management and technology, and manage it with knowledgeable and experienced
management and senior officers
management and technology, and manage it with knowledgeable and experienced
management and senior officers
• Tactical Approach:
– Deposits - Utilize a branchless banking network to gather scalable deposits through
strong contractual relationships at costs significantly below peers
strong contractual relationships at costs significantly below peers
– Assets - Focus on asset classes including loans and securities appropriate to our
expertise to achieve returns above risk-adjusted peer net interest margins
expertise to achieve returns above risk-adjusted peer net interest margins
– Non-Interest Income - Grow non-interest income disproportionately in relation to non-
interest expense through our deposit and asset approaches
interest expense through our deposit and asset approaches
– Operating Leverage - Leverage infrastructure investment to grow earnings by creating
efficiencies of scale
efficiencies of scale
2
Business Model: A Distinct Business Strategy (1)
Securities Portfolio
Primarily highly rated
government obligations
government obligations
•Interest Income
Government Guaranteed
Lending (GGL)
Lending (GGL)
Loans to franchisees;
75% guaranteed by
U.S. government
75% guaranteed by
U.S. government
•Interest Income
Commercial Mortgage
Backed Securities (CMBS)
Backed Securities (CMBS)
• Non- Interest Income
Automobile Fleet Leasing
•Interest Income
•Non-interest Income
Community Bank
Traditional Community
Banking Products
Banking Products
•Interest Income
•Deposits
•Non-interest Income
Prepaid Cards
Open Loop Prepaid Cards
•Deposits
•Non-interest Income
Healthcare
Health Savings Accounts and
Flexible Spending Accounts
Flexible Spending Accounts
•Deposits
•Non-interest Income
Wealth Management
Deposits and Loans for
Clients of Wealth Firms
Clients of Wealth Firms
•Interest Income
•Deposits
•Non-interest Income
Payment Acceptance
Credit, Debit Card, and
ACH Processing
ACH Processing
•Deposits
•Non-interest Income
GGL: 1%
42%
5%
3%
6%
25%
6%
7%
2010 Prepaid
Cards: 33%
4
5%
(1) For the above presentation, revenue for asset-generating departments includes all revenue
from the assets they fund with deposits they generate. It also includes half the revenue on
assets they generate but do not fund. The other half of that revenue is allocated to deposit-
producing departments. The revenue shown was generated in 2013 with the exception of
segments marked 2010
from the assets they fund with deposits they generate. It also includes half the revenue on
assets they generate but do not fund. The other half of that revenue is allocated to deposit-
producing departments. The revenue shown was generated in 2013 with the exception of
segments marked 2010
Revenue Composition
Post Provision Income (1)
(1) Post provision income is calculated as follows: net interest income less provision for loan and lease losses plus non-interest
income excluding gains on sales of investment securities and other than temporary impairment on securities held-to-maturity
income excluding gains on sales of investment securities and other than temporary impairment on securities held-to-maturity
(2) Compound annual growth rate is calculated for the years 2010 through 2012
For reconciliation detail, please see Appendix
$
5
Prepaid Gross Dollar Volume (GDV)
(1) and Cardholder Growth (2)
(1) and Cardholder Growth (2)
(1) Gross Dollar Volume (GDV) is the total amount spent on all cards outstanding within a given period. The bar graph
represents the gross dollar volume for the period segmented by the program contract date
represents the gross dollar volume for the period segmented by the program contract date
(2) Number of active cards as of year-end of the stated year for 2010 through 2012 and quarter-end for first quarter of the years
2012 and 2013
2012 and 2013
(3) Compound annual growth rate is calculated for the years 2010 through 2012
$
$6,285,311
$13,311,202
$27,138,802
$8,808,149
$9,083,670
6
Non-Interest Income-Generating
Strategies: Growth and Sustainability
Strategies: Growth and Sustainability
(1) Excludes gains on investment securities
(2) Compound annual growth rate is calculated for the years 2010 through 2012
*Not meaningful
54% Increase
$
(1)
7
Scalable Business Model:
Non-Interest Income/Non-Interest Expense(1)
• Non-interest income is approximately half of non-interest expense, driving improving operating earnings
• Cost of customer acquisition continues to decline due to strength of affinity relationships
(1) Excludes gains on investment securities and nonrecurring expenses; 2011 includes a one-time
gain of $718,000 related to a legal settlement
gain of $718,000 related to a legal settlement
(2) Compound annual growth rate is calculated for the years 2010 through 2012
8
Operating Leverage:
Adjusted Operating Earnings (1),(2)
(1) As a supplement to GAAP, Bancorp has provided this non-GAAP performance result. The Bancorp believes that this
non-GAAP financial measure is useful because it allows investors to assess its operating performance. Management
utilizes adjusted operating earnings to measure the combined impact of changes in net interest income, non-interest income
and certain other expenses. Adjusted operating earnings exclude the impact of the provision for loan losses, income taxes,
securities gains and losses and certain non-recurring items. Other companies may calculate adjusted operating earnings
differently. Although this non-GAAP financial measure is intended to enhance investors’ understanding of Bancorp’s business
and performance, it should not be considered, and is not intended to be, a substitute for net income
calculated pursuant to GAAP
non-GAAP financial measure is useful because it allows investors to assess its operating performance. Management
utilizes adjusted operating earnings to measure the combined impact of changes in net interest income, non-interest income
and certain other expenses. Adjusted operating earnings exclude the impact of the provision for loan losses, income taxes,
securities gains and losses and certain non-recurring items. Other companies may calculate adjusted operating earnings
differently. Although this non-GAAP financial measure is intended to enhance investors’ understanding of Bancorp’s business
and performance, it should not be considered, and is not intended to be, a substitute for net income
calculated pursuant to GAAP
(2) For reconciliation detail, please see Appendix
(3) Compound annual growth rate is calculated for the first quarters of the years 2010 through 2013
$
10
Primary Asset-Generating Strategies:
Business Line Overview
Business Line Overview
As with funding, TBBK employs a multi-channel growth strategy for loan origination, with the primary
driver being its regional commercial banking operations.
driver being its regional commercial banking operations.
• Community Bank
– Offers traditional community banking products and services
targeting the highly fragmented Philadelphia/Wilmington
banking market
targeting the highly fragmented Philadelphia/Wilmington
banking market
• Automobile Fleet Leasing
– Well-collateralized automobile fleet leasing
• Average transaction: 8-15 automobiles, $350,000
• 30% of portfolio leased by government agencies
• Wealth Management
– 15 affinity groups, managing & administering $1.8 trillion in assets
• SEI Investments, Legg Mason, Genworth Financial Trust Company,
Franklin Templeton
Franklin Templeton
– Generates securities backed and other loans
• Government Guaranteed Lending
– Loans from $150,000 to $5.0 million primarily to franchisees such as UPS
Stores, Massage Envy, FASTSIGNS and Save a Lot which have a 75%
guaranty by the U.S. Small Business Administration. Approved Franchise
and Medical Guidance lines of over $500 million
Stores, Massage Envy, FASTSIGNS and Save a Lot which have a 75%
guaranty by the U.S. Small Business Administration. Approved Franchise
and Medical Guidance lines of over $500 million
• Securities
– Primarily:
• High credit quality tax exempt municipal obligations
• U.S. Government agency securities primarily 2-4 year average lives
and other highly rated mortgage-backed securities
and other highly rated mortgage-backed securities
• Corporate securities which, like other purchases, are validated and
monitored by independent credit advisory specialists
monitored by independent credit advisory specialists
|
March 31, 2013
|
|
Category
|
March 31, 2013
Balance
|
March 31, 2012
Balance
|
March 31,
2013 Avg. Yield
|
|
|
(in thousands)
|
|
|
|
Community Bank
|
$1,437,359
|
$1,408,910
|
4.12%
|
|
Government Guaranteed
Lending |
120,902
|
43,378
|
5.03%
|
|
Wealth Management
|
253,121
|
166,258
|
2.72%
|
|
Leasing Portfolio
|
157,508
|
130,321
|
7.26%
|
|
Investment Securities
|
943,717
|
499,524
|
2.31%
|
11
Asset Quality Overview
(1) Regional peers include publicly traded Mid-Atlantic commercial banks with assets between $1 billion and $4 billion as of
December 30, 2012; graphs represent median values
December 30, 2012; graphs represent median values
(2) Texas Ratio = (Non-accrual Loans + Restructured Loans + Loans 90 + days past due + OREO)/(Loss Reserves + Tangible Equity).
TBBK computed with consolidated capital. Source: SNL Financial
TBBK computed with consolidated capital. Source: SNL Financial
12
Primary Asset-Generating Strategies:
Business Line Overview
Business Line Overview
|
March 31, 2013
|
|
Total Deposits: $3.7 billion
|
|
Average Cost: 0.25%
|
|
(Peer Average Cost: 0.46%)(1)
|
(1) Peer data source as of December 2012: Uniform Bank
Performance Report for Banks $1-5 B in assets measuring
interest expense to average interest earning assets
Performance Report for Banks $1-5 B in assets measuring
interest expense to average interest earning assets
|
Category
|
Balance
(in millions)
|
Avg. Cost
|
|
Community Bank
|
$ 360,182
|
0.32%
|
|
Healthcare
|
358,498
|
0.58%
|
|
Prepaid Cards
(including demand deposit accounts)
|
1,601,998
|
0.04%
|
|
Wealth Management
|
855,007
|
0.43%
|
|
Payment Acceptance
|
223,945
|
0.54%
|
|
1031 Exchange
|
313,355
|
0.41%
|
13
Deposit-Generating Strategies:
Sticky and Long-Term
Sticky and Long-Term
The Bancorp has long-term, often exclusive agreements in place with its private label banking partners.
14
Deposit-Generating Strategies:
Growth and Low Cost
Growth and Low Cost
The Bancorp has experienced strong growth in deposits at below-peer costs.
|
Growth in Average Deposits
|
|||
|
|
March 31
YTD Average Deposits
(dollars in thousands)
|
Cost of Funds(2)
|
Peer Cost of Funds(1)
|
|
2013
|
$3,784,785
|
0.25%
|
0.46%
|
|
2012
|
$3,781,858
|
0.28%
|
0.64%
|
|
Change
|
$2,927
|
-0.03%
|
-0.18%
|
|
% Change
|
0%
|
-11%
|
-28%
|
(1) Peer data source as of December 2012: Uniform Bank Performance Report for Banks $1-5 B in assets measuring interest
expense to average interest earning assets
expense to average interest earning assets
(2) Bancorp cost of funds is lower after consideration of seasonal deposits
15
The Bancorp, Inc. Planning for
Growth with Safety and Soundness
Growth with Safety and Soundness
• Strategic Goal:
– Create and grow a stable, profitable institution with the optimum reliance on capital, risk
management and technology, and manage it with knowledgeable and experienced
management and senior officers
management and technology, and manage it with knowledgeable and experienced
management and senior officers
• Tactical Approach:
– Deposits - Utilize a branchless banking network to gather scalable deposits through
strong contractual relationships at costs significantly below peers
strong contractual relationships at costs significantly below peers
– Assets - Focus on asset classes including loans and securities appropriate to our
expertise to achieve returns above risk-adjusted peer net interest margins
expertise to achieve returns above risk-adjusted peer net interest margins
– Non-Interest Income - Grow non-interest income disproportionately in relation to non-
interest expense through our deposit and asset approaches
interest expense through our deposit and asset approaches
– Operating Leverage - Leverage infrastructure investment to grow earnings by creating
efficiencies of scale
efficiencies of scale
16
Appendix
NASDAQ: TBBK
Capital Ratios and Selected Financial Data
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|
|
As of or for the three months ended
|
As of or for the three months ended
|
|
|
|
March 31, 2013
|
March 31, 2012
|
|
|
|
(dollars in thousands)
|
(dollars in thousands)
|
|
Selected Capital and Asset Quality Ratios:
|
|
|
|
|
|
Equity/assets
|
8.38%
|
6.78%
|
|
|
Tier 1 capital to average assets
|
8.26%
|
6.59%
|
|
|
Tier 1 capital to total risk-weighted assets
|
15.52%
|
14.94%
|
|
|
Total capital to total risk-weighted assets
|
16.78%
|
16.19%
|
|
|
Allowance for loan and lease losses to total loans
|
1.77%
|
1.80%
|
|
|
|||
|
Balance Sheet Data:
|
|
|
|
|
|
Total assets
|
$4,132,095
|
$4,104,047
|
|
|
Total loans, net of unearned costs (fees)
|
1,968,890
|
1,748,867
|
|
|
Allowance for loan and lease losses
|
34,883
|
31,500
|
|
|
Total cash and cash equivalents
|
1,139,156
|
1,805,787
|
|
`
|
Total investments
|
943,717
|
499,524
|
|
|
Deposits
|
3,712,985
|
3,773,878
|
|
|
Short-term borrowings
|
0
|
0
|
|
|
Shareholders’ equity
|
346,076
|
278,233
|
|
|
|||
|
Selected Ratios:
|
|
|
|
|
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Return on average assets
|
0.72%
|
0.39%
|
|
|
Return on average common equity
|
8.83%
|
5.84%
|
|
|
Net interest margin
|
2.25%
|
2.19%
|
|
|
Book value per share
|
$ 9.27
|
$ 8.41
|
18
Bancorp’s Real Estate Lending
Business Targets Well-Positioned
Attractive, Stable Markets
Business Targets Well-Positioned
Attractive, Stable Markets
• Commercial lending is substantially all in greater Philadelphia/Wilmington metropolitan area
– Consists of the 12 counties surrounding Philadelphia and Wilmington, including Philadelphia, Delaware, Chester,
Montgomery, Bucks and Lehigh Counties in Pennsylvania; New Castle County in Delaware; and Mercer, Burlington,
Camden, Ocean and Cape May Counties in New Jersey.
Montgomery, Bucks and Lehigh Counties in Pennsylvania; New Castle County in Delaware; and Mercer, Burlington,
Camden, Ocean and Cape May Counties in New Jersey.
• Philadelphia/Wilmington and the surrounding markets encompass a large population, stable economic activity and
attractive demographics.
attractive demographics.
• Throughout the current down cycle and in prior cycles, the Philadelphia region has exhibited significant stability, which is
reflected in a lower negative equity compared to the rest of the nation, as shown below.
reflected in a lower negative equity compared to the rest of the nation, as shown below.
|
4th Quarter 2012 (1)
|
US
|
NJ
|
DE
|
PA
|
|
% of Homes with Negative
Equity |
21.5%
|
20.0%
|
16.6%
|
11.0%
|
(1) Source: CoreLogic, March 19 2013
20
Post Provision Income Reconciliation (1)
|
Category
(dollars in millions)
|
2010
|
2011
|
2012
|
Q1 2012
|
Q1 2013
|
|
Interest Income
|
$82.7
|
$88.4
|
$96.8
|
$23.9
|
$25.4
|
|
Interest Expense
|
(14.5)
|
(12.0)
|
(11.4)
|
(3.0)
|
(2.7)
|
|
Net Interest Income
|
68.2
|
76.4
|
85.4
|
20.9
|
22.7
|
|
Provision for Loan and Lease Losses
|
(19.3)
|
(21.5)
|
(22.4)
|
(5.2)
|
(5.5)
|
|
Non-Interest Income (2)
|
19.5
|
29.8
|
49.1
|
12.3
|
18.9
|
|
Post Provision Income
|
$68.4
|
$84.7
|
$112.1
|
$28.0
|
$36.1
|
(1) 2011 includes a one-time gain of $718,000 related to a legal settlement
(2) Non-interest income excluding gains on sales on investment securities and other than temporary impairment on securities
21
www.thebancorp.com
NASDAQ: TBBK