Investor Presentation
Fourth Quarter, 2013
Fourth Quarter, 2013
1
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.
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
Statements
The Bancorp, Inc.
Planning for 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
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
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
of scale
2
The Bancorp, Inc. Planning for Growth Consumer Distribution Channel Penetration Percent of U.S. Households, 1980-2012Sources: Federal Reserve, FRB Boston, FRB Philadelphia, SRI Consulting, University of Michigan, Mintel, Celent, Bank of America, comScore, Nielsen Mobile, Wall Street Journal, AlixPartners
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Securities Portfolio
Primarily highly rated
government obligations
government obligations
•Interest Income
Includes loans to
franchisees;
75% guaranteed by
U.S. government
franchisees;
75% guaranteed by
U.S. government
•Interest Income
Commercial Loan Sales
• Non-interest Income
• Interest Income
•Interest Income
•Non-interest Income
Community Bank
Traditional Community
Banking Products
Banking Products
•Interest Income
•Deposits
•Non-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 full year 2013 with the exception of segments marked 2010, which represent full year 2010.
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 full year 2013 with the exception of segments marked 2010, which represent full year 2010.
37%
4%
8%
5%
22%
3%
8%
9%
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. For reconciliation detail, please
see Appendix
excluding 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
$
5
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
dollar volume for the period segmented by the program contract date
(2) Number of active cards as of year-end 2010 through 2013
(3) Compound annual growth rate is calculated for the years 2010 through 2013
$
6
Prepaid Gross Dollar Volume (GDV) (1) and
Cardholder Growth (2)
Cardholder Growth (2)
$6,285,311
$13,311,202
$27,138,802
Non-Interest Income-Generating
Strategies: Growth and Sustainability
(1) Compound annual growth rate is calculated for the years 2010 through 2013
(2) Excludes gains on investment securities
40% Increase
$
(2)
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Scalable Business Model:
Non-Interest Income/Non-Interest Expense (1)
(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 2013
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(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, Automobile Fleet Leasing, Government Guaranteed
Lending, Institutional Banking, and CMBS.
Lending, Institutional Banking, and CMBS.
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(2)
$
Compressed Interest Rate Environment:
Net Interest Income Generators
Operating Leverage:
Adjusted Operating Earnings
(1) Compound annual growth rate is calculated for the fourth quarters of 2010 through 2013
$
10
Primary Asset-Generating Strategies:
Business Line Overview
As with funding, The Bancorp employs a multi-channel growth strategy for asset origination.
• Investment Securities
– 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
highly rated mortgage-backed 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
Templeton
– Generates securities backed and other loans
• Automobile Fleet 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 $360 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 securities markets that are held
until their quarterly sale
until their quarterly sale
Category | Q4 2013 Balance | Q4 2012 Balance | Q4 2013 Avg. Yield |
(in thousands) | |||
Investment Securities | $1,350,322 | $763,244 | 2.41% |
Institutional Banking | 306,710 | 252,475 | 2.67% |
Automobile Fleet Leasing | 175,611 | 156,097 | 6.85% |
Government Guaranteed Lending | 148,257 | 90,795 | 4.58% |
Community Bank | 1,342,575 | 1,403,487 | 4.01% |
CMBS | 53,485 | 11,341 | 5.95% |
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Asset Quality Overview
(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
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Primary Deposit-Generating Strategies:
Business Line Overview
Business Line Overview
Total Deposits: $4.3 billion |
Average Cost: 0.25% |
(Aggregate US Banks Average Cost: 0.42%) (1) |
(1) Aggregate US Banks data as of September 2013
(in millions) | ||
Prepaid Cards | $1,738,009 | 0.02% |
Institutional Banking | 1,031,582 | 0.39% |
Payment Acceptance | 431,696 | 0.66% |
Healthcare | 397,783 | 0.54% |
Community Bank | 372,564 | 0.22% |
1031 Exchange | 301,355 | 0.21% |
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Deposit-Generating Strategies:
Sticky and Long-Term
The Bancorp has long-term, often exclusive agreements in place with its private label banking partners.
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(1) Percentages shown reflect data as of the end of the fourth quarter of 2013
(2) Contracts associated with 100% of deposits in this segment are structured with an automatic renewal
(2)
The Bancorp, Inc.
Planning for 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
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
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
of scale
15
Appendix
Capital Ratios and Selected Financial Data
As of or for the three months ended | As of or for the three months ended | ||
December 31, 2013 | December 31, 2012 | ||
(dollars in thousands) | (dollars in thousands) | ||
Selected Capital and Asset Quality Ratios: | |||
Equity/assets | 7.62% | 9.10% | |
Tier 1 capital to average assets | 8.55% | 10.00% | |
Tier 1 capital to total risk-weighted assets | 14.56% | 16.39% | |
Total capital to total risk-weighted assets | 15.81% | 17.64% | |
Allowance for loan and lease losses to total loans | 1.95% | 1.74% | |
Tangible common equity | 7.47% | 8.93% | |
Balance Sheet Data: | |||
Total assets | $ 4,703,334 | $ 3,699,659 | |
Total loans, net of unearned costs (fees) | 1,958,445 | 1,902,854 | |
Allowance for loan and lease losses | 38,182 | 33,040 | |
Total cash and cash equivalents | 1,234,168 | 968,093 | |
Total investments | 1,350,322 | 763,244 | |
Deposits | 4,272,989 | 3,313,221 | |
Shareholders’ equity | 358,543 | 336,677 | |
Selected Ratios: | |||
Return on average assets | 0.68% | 0.62% | |
Return on average common equity | 8.17% | 7.04% | |
Net interest margin | 2.54% | 2.73% | |
Book value per share | $ 9.53 | $ 9.06 | |
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Current Loan Portfolio and Asset Quality
Overview at 12/31/2013
Overview at 12/31/2013
Category (dollars in thousands) | Balance | % of Total Loans | Nonaccrual Loans | Nonaccrual/ Total Loans | OREO | 30-89 Days Delinquent | 90+ Days Delinquent | Q4 2013 Quarterly Charge-offs (net) |
Commercial | $450,113 | 23% | $29,651 | 1.52% | $7,370 | $ - | $ - | $ (2,796) |
Commercial mortgage | 625,810 | 32% | 5,861 | 0.30% | 9,436 | 6,997 | - | 39 |
Construction | 258,889 | 13% | 1,667 | 0.09% | 9,489 | - | - | (4,601) |
Direct financing leases (auto leases) | 175,610 | 9% | - | 0.00% | - | 4,720 | 110 | (30) |
Residential mortgage | 94,850 | 5% | 2,016 | 0.10% | - | - | - | - |
Securities backed loans and other | 346,334 | 18% | 1,356 | 0.07% | - | 443 | _____- | (81) |
Total | $1,951,606 | 100% | $40,551 | 2.08% | $26,295 | $12,160 | $110 | $(7,469) |
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Post Provision Income Reconciliation
Category (dollars in millions) | 2010 | 2011 (1) | 2012 | 2013 | Q4 2012 | Q4 2013 |
Interest Income | $82.7 | $88.4 | $96.8 | $106.6 | $24.7 | $28.2 |
Interest Expense | (14.5) | (12.0) | (11.4) | (10.8) | (2.6) | (2.8) |
Net Interest Income | 68.2 | 76.4 | 85.4 | 95.8 | 22.1 | 25.4 |
Provision for Loan and Lease Losses | (19.3) | (21.5) | (22.4) | (29.5) | (7.4) | (6.5) |
Net Interest Income Post Provision | 48.9 | 54.9 | 63 | 66.3 | 14.7 | 18.9 |
Non-Interest Income (2) | 19.5 | 29.8 | 49.1 | 81.5 | 15.1 | 21.2 |
Post Provision Income | $68.4 | $84.7 | $112.1 | $147.8 | $29.8 | $40.1 |
(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
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Adjusted Operating Earnings Reconciliation (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. Net income (loss) available to common shareholders Preferred stock dividend and accretion Income tax expense Gain on sales of investment securities Other than temporary impairment in securities Loss on other real estate owned Provision for loan and lease losses Core operating earnings
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