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| 8-K - THE BANCORP, INC. FORM 8-K - Bancorp, Inc. | bancorp8k.htm |
INVESTOR PRESENTATION
First Quarter, 2014
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.
“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.
FORWARD LOOKING STATEMENTS
2
• 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
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
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
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
expense through our deposit and asset approaches
– Operating Leverage - Leverage infrastructure investment to grow earnings by creating
efficiencies of scale
efficiencies of scale
PLANNING FOR GROWTH WITH SAFETY AND SOUNDNESS
3
PLANNING FOR GROWTH
4
Sources: Federal Reserve, FRB Boston, FRB Philadelphia, SRI Consulting, University of Michigan, Mintel, Celent,
Bank of America, comScore, Nielsen Mobile, Wall Street Journal, AlixPartners
Bank of America, comScore, Nielsen Mobile, Wall Street Journal, AlixPartners
BUSINESS MODEL: A DISTINCT BUSINESS STRATEGY(1)
5
Assets Deposits
Securities Portfolio
Primarily highly rated government
obligations
obligations
• Interest Income
Government Guaranteed
Lending (GGL)
Lending (GGL)
Includes loans to franchisees; many of
which have a 75% guaranteed by U.S.
government
which have a 75% guaranteed by U.S.
government
• Interest Income
(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 the first quarter of 2014 with the exception of
segments marked 2010, which represent full year 2010.
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 the first quarter of 2014 with the exception of
segments marked 2010, which represent full year 2010.
Commercial Mortgage-Backed
Securities (CMBS)
Securities (CMBS)
Commercial Loan Sales
• Non-Interest Income
• Interest Income
Leasing
Automobile Fleet Leasing
• Interest Income
• Non-Interest Income
Community Bank
Traditional Community 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
Payment Acceptance
Credit, Debit Card, and ACH Processing
• Deposits
• Non-Interest Income
Institutional Banking
Deposits and Loans for Clients
of Wealth Firms
of Wealth Firms
• Interest Income
• Deposits
• Non-Interest Income
REVENUE
2010 Prepaid
Cards: 30%
Cards: 30%
2010 Community
Bank: 40%
Bank: 40%
REVENUE COMPOSITION
6
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. For reconciliation detail, please see Appendix
gains on sales of investment securities and other than temporary impairment on securities. For reconciliation detail, please see Appendix
(2) Compound annual growth rate is calculated for the years 2010 through 2013
$
PREPAID GROSS DOLLAR VOLUME (GDV)(1) AND CARDHOLDER GROWTH(2)
7
(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
The bar graph represents the gross dollar volume for the period segmented by the program contract date
(2) Number of active cards as of year-end 2010 through 2013 and quarter-end for the first quarter of the years
2013 and 2014
2013 and 2014
(3) Compound annual growth rate is calculated for the years 2010 through 2013
$
$27,216,931
$6,285,271
$13,311,376
NON-INTEREST INCOME-GENERATING STRATEGIES:
GROWTH AND SUSTAINABILITY
GROWTH AND SUSTAINABILITY
8
(1)Compound annual growth rate is calculated for the years 2010 through 2013
(2)Excludes gains on investment securities
27% Increase
$
(2)
12%
-35%
50%
14%
117%
152%
-19%
SCALABLE BUSINESS MODEL:
NON-INTEREST INCOME / NON-INTEREST EXPENSE
NON-INTEREST INCOME / NON-INTEREST EXPENSE
9
(1) Compound annual growth rate is calculated for the years 2010 through 2013
(2) Excludes gains on investment securities and nonrecurring expenses; 2011 includes a one-time gain of $718,000 related to a legal settlement
(3) Peers are comprised of insured commercial banks having assets greater than $3 billion; Data Source: Uniform Bank Performance Report
(3)
COMPRESSED INTEREST RATE ENVIRONMENT:
NET INTEREST INCOME GENERATORS
NET INTEREST INCOME GENERATORS
10
(2)
$
(1) Compound annual growth rate is calculated for the years 2010 through 2013
(2) Other is comprised of net interest income produced by the following areas: Investment Securities, Leasing, Government Guaranteed Lending, Institutional Banking,
and CMBS.
and CMBS.
OPERATING LEVERAGE: ADJUSTED OPERATING EARNINGS
11
(1) Compound annual growth rate is calculated for the first quarters of 2010 through 2014
$
12
AS WITH FUNDING, THE BANCORP EMPLOYS A MULTI-CHANNEL GROWTH STRATEGY FOR ASSET ORIGINATION.
|
CATEGORY
|
Q1 2014 BALANCE
|
Q1 2013 BALANCE
|
Q1 2014 AVG. YIELD
|
|
|
(in thousands)
|
|
|
|
Investment Securities
|
$1,508,857
|
$943,717
|
2.36%
|
|
Institutional Banking
|
332,563
|
253,121
|
2.65%
|
|
Leasing
|
181,007
|
157,508
|
6.78%
|
|
Government Guaranteed
Lending |
167,628
|
120,902
|
4.57%
|
|
Community Bank
|
1,381,199
|
1,408,957
|
3.97%
|
|
CMBS
|
203,631
|
28,402
|
3.78%
|
PRIMARY ASSET-GENERATING STRATEGIES: BUSINESS LINE OVERVIEW
• Investment Securities
– High credit quality tax exempt municipal obligations
– U.S. Government agency securities and other highly rated mortgage-backed
securities
securities
– Corporate securities which, like other purchases, are validated and monitored
by independent credit advisory specialists
by independent credit advisory specialists
• Institutional Banking
– 15 affinity groups, managing & administering $2.7 trillion in assets
• SEI Investments, Legg Mason, AssetMark Trust Company, Franklin Templeton
– Generates securities-backed and other loans
• Leasing
– Well-collateralized automobile fleet leasing
• Average transaction: 8-15 automobiles, $350,000
• 30.7% of portfolio leased by local, state, and federal government agencies
• Government Guaranteed Lending
– Loans from $150,000 to $5.0 million including loans to franchisees such as
UPS Stores, Massage Envy, FASTSIGNS and Save a Lot, many of which
have a 75% guaranty by the U.S. Small Business Administration
UPS Stores, Massage Envy, FASTSIGNS and Save a Lot, many of which
have a 75% guaranty by the U.S. Small Business Administration
– Approved Franchise and Medical Guidance lines of over $390 million
• Community Bank
– Offers traditional community banking products and services targeting the
highly fragmented Philadelphia/Wilmington banking market
highly fragmented Philadelphia/Wilmington banking market
• CMBS
– Loans which are generated for sale into CMBS markets that are
held until their quarterly sale
held until their quarterly sale
ASSET QUALITY OVERVIEW
13
|
Reserves/Loans
|
(1) Texas Ratio = (Non-accrual Loans + Restructured Loans + Loans 90 + days past due + OREO)/(Loss Reserves + Tangible Equity).
TBBK computed with consolidated capital. Sources: SNL Financial; FDIC Call Reports
TBBK computed with consolidated capital. Sources: SNL Financial; FDIC Call Reports
14
PRIMARY DEPOSIT-GENERATING STRATEGIES: BUSINESS LINE OVERVIEW
|
CATEGORY
|
Q1 2014 BALANCE
(in thousands) |
Q1 2014 AVG. COST
|
|
Prepaid Cards
|
$1,846,967
|
0.02%
|
|
Institutional Banking
|
1,055,146
|
0.39%
|
|
Payment Acceptance
|
387,127
|
0.74%
|
|
Healthcare
|
442,560
|
0.51%
|
|
Community Bank
|
389,712
|
0.24%
|
|
Discontinued Business Line
|
125,696
|
0.21%
|
Total Deposits: $4.3 billion
Average Cost: 0.23%
(Aggregate US Banks Average Cost: 0.39%)(1)
(1) Aggregate US Banks data as of December 2013
DEPOSIT-GENERATING STRATEGIES: STICKY AND LONG-TERM
15
(1) Percentages shown reflect data as of the end of the first quarter of 2014
(2) Contracts associated with 100% of deposits in this segment are structured
with an automatic renewal
The Bancorp has long-term,
often exclusive agreements
in place with its private label
banking partners.
often exclusive agreements
in place with its private label
banking partners.
(2)
• 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
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
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
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
expense through our deposit and asset approaches
– Operating Leverage - Leverage infrastructure investment to grow earnings by creating
efficiencies of scale
efficiencies of scale
PLANNING FOR GROWTH WITH SAFETY AND SOUNDNESS
16
APPENDIX
17
18
Capital Ratios and Selected Financial Data
|
|
|
As of or for the three months ended
March 31, 2014 (dollars in thousands) |
As of or for the three months ended
March 31, 2013 (dollars in thousands) |
|
Selected Capital and Asset Quality Ratios:
|
|
|
|
|
|
Equity/assets
|
7.79%
|
8.38%
|
|
|
Tier 1 capital to average assets
|
7.39%
|
8.26%
|
|
|
Tier 1 capital to total risk-weighted assets
|
13.01%
|
15.52%
|
|
|
Total capital to total risk-weighted assets
|
14.26%
|
16.78%
|
|
|
Allowance for loan and lease losses to total loans
|
2.27%
|
1.77%
|
|
|
Tangible common equity
|
7.65%
|
8.23%
|
|
|
|||
|
Balance Sheet Data:
|
|
|
|
|
|
Total assets
|
$ 4,699,623
|
$ 4,132,095
|
|
|
Total loans, net of unearned costs (fees)
|
2,044,004
|
1,968,890
|
|
|
Allowance for loan and lease losses
|
46,409
|
34,883
|
|
|
Total cash and cash equivalents
|
836,609
|
1,139,156
|
|
|
Total investments
|
1,508,857
|
943,717
|
|
|
Deposits
|
4,247,208
|
3,712,985
|
|
|
Short-term borrowings
|
-
|
-
|
|
|
Shareholders’ equity
|
366,170
|
346,076
|
|
|
|||
|
Selected Ratios:
|
|
|
|
|
|
Return on average assets
|
0.02%
|
0.72%
|
|
|
Return on average common equity
|
0.33%
|
8.83%
|
|
|
Net interest margin
|
2.30%
|
2.25%
|
|
|
Book value per share
|
$ 9.71
|
$ 9.27
|
19
Current Loan Portfolio and Asset Quality Overview at 3/31/2014
|
Category
(dollars in thousands)
|
Balance
|
% of Total
Loans |
Nonaccrual
Loans |
Nonaccrual/
Total Loans
|
OREO
|
30-89 Days
Delinquent |
90+ Days
Delinquent |
Q1 2014
Quarterly Charge-offs (net) |
|
Commercial
|
$489,574
|
24%
|
$21,901
|
1.08%
|
$9,504
|
$401
|
$ -
|
$ (2,098)
|
|
Commercial mortgage
|
610,990
|
30%
|
5,250
|
0.26%
|
9,437
|
-
|
-
|
(2,124)
|
|
Construction
|
283,928
|
14%
|
13,770
|
0.68%
|
8,822
|
912
|
-
|
(4,629)
|
|
Leasing
|
181,007
|
9%
|
-
|
0.00%
|
-
|
3,042
|
189
|
-
|
|
Residential mortgage
|
95,397
|
5%
|
1,175
|
0.06%
|
-
|
-
|
-
|
(108)
|
|
Securities backed loans
and other |
383,108
|
18%
|
2,605
|
0.13%
|
-
|
1
|
-
|
(114)
|
|
Total
|
$2,044,004
|
100%
|
$44,701
|
2.21%
|
$27,763
|
$4,356
|
$189
|
$(9,073)
|
20
Post Provision Income Reconciliation
(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
|
Category
(dollars in millions)
|
2010
|
2011 (1)
|
2012
|
2013
|
Q1 2013
|
Q1 2014
|
|
Interest Income
|
$82.7
|
$88.4
|
$96.8
|
$106.6
|
$25.4
|
$29.5
|
|
Interest Expense
|
(14.5)
|
(12.0)
|
(11.4)
|
(10.8)
|
(2.7)
|
(2.9)
|
|
Net Interest Income
|
68.2
|
76.4
|
85.4
|
95.8
|
22.7
|
26.6
|
|
Provision for Loan and Lease Losses
|
(19.3)
|
(21.5)
|
(22.4)
|
(29.5)
|
(5.5)
|
(17.3)
|
|
Net Interest Income Post Provision
|
48.9
|
54.9
|
63
|
66.3
|
17.2
|
9.3
|
|
Non-Interest Income (2)
|
19.5
|
29.8
|
49.1
|
81.5
|
18.9
|
23.9
|
|
Post Provision Income
|
$68.4
|
$84.7
|
$112.1
|
$147.8
|
$36.1
|
$33.2
|
Adjusted Operating Earnings Reconciliation(1) Category (dollars in thousands) Q1 2014Q4
2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012 Q3 2012 Q2 2012Q1 2012 Q4 2011 Q3 2011 Q2 2011 Q1 2011 Q4 2010 Q3 2010Q2 2010 Q1 2010Net income (loss) available to common shareholders $298 $7,324 $4,788 $5,592 $7,406$5,237$3,561 $3,854 $3,972 $3,288 $2,282 $660 $2,688 $2,041 $588 $407 ($4,056)Preferred stock dividend and accretion 6,242 Income tax expense 1684,0982,0343,2624,4311,6221,795 2,150 2,227 1,382 1,209 289 1,431 946 156 197 1,233 Gain on sales of investment securities(241)(1,104)(42)(476)(267)(554)(107) (136)(20)(603)-14 (2)(469)(750) Other than temporary impairment in securities 2076 126 75 35 Loss on other real estate owned62(8)403815251103533 421 1,451 64 439 52 22 Provision for loan and lease losses17,3006,5008,0009,5005,5007,3915,540 4,287 5,220 4,844 5,019 6,963 4,672 4,212 5,219 5,806 4,148 Core operating earnings $17,587$16,810$15,183$18,693$17,341$13,875$11,322 $10,838 $12,870 $9,378 $8,554 $7,748 $8,918 $7,213 $6,118 $5,941 $6,817
(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.
www.thebancorp.com
22