INVESTOR PRESENTATION
Fourth 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,” “intend,” “plan," or similar words. These forward-looking statements are based upon the
current beliefs and expectations of The Bancorp, Inc.’s management and are inherently subject to
significant business, economic, regulatory, and competitive uncertainties and contingencies, many of
which are difficult to predict and beyond our control. For further discussion of these risks and
uncertainties, see the “risk factors” sections of The Bancorp, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2013, Quarterly Report on Form 8-K for the three months, and year ended
December 31, 2014, and other of its public filings with the SEC. In addition, these forward-looking
statements are subject to assumptions with respect to future strategies and decisions that are subject to
change. Actual results may differ materially from the anticipated results discussed in these 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,” “intend,” “plan," or similar words. These forward-looking statements are based upon the
current beliefs and expectations of The Bancorp, Inc.’s management and are inherently subject to
significant business, economic, regulatory, and competitive uncertainties and contingencies, many of
which are difficult to predict and beyond our control. For further discussion of these risks and
uncertainties, see the “risk factors” sections of The Bancorp, Inc.’s Annual Report on Form 10-K for the
year ended December 31, 2013, Quarterly Report on Form 8-K for the three months, and year ended
December 31, 2014, and other of its public filings with the SEC. In addition, these forward-looking
statements are subject to assumptions with respect to future strategies and decisions that are subject to
change. Actual results may differ materially from the anticipated results discussed in these 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
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• 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
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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, Pew Research Center
Bank of America, comScore, Nielsen Mobile, Wall Street Journal, AlixPartners, Pew Research Center
BUSINESS MODEL: A DISTINCT BUSINESS STRATEGY (1)
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Specialty Finance Payments
Securities Portfolio
Primarily highly rated government
obligations & corporate securities
obligations & corporate securities
• Interest Income
Government Guaranteed
Lending (GGL)
Lending (GGL)
Includes loans to franchisees; 51% of
which have a 75% guaranty by the
U.S. government
which have a 75% guaranty by the
U.S. government
• Interest Income
Commercial Mortgage-Backed
Securities (CMBS)
Securities (CMBS)
Commercial Loan Sales
• Non-Interest Income
• Interest Income
Leasing
Automobile Fleet Leasing
• Interest Income
• 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
Payments: 69%
Specialty
Finance: 31%
Finance: 31%
Corporate
(1) For reconciliation detail, please see Appendix, page 21.
REVENUE COMPOSITION
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Post Provision Income (1)
$
(1) For reconciliation detail, please see Appendix, page 22.
(2) Compound annual growth rate is calculated for the years 2010 through 2014.
PREPAID GROSS DOLLAR VOLUME (GDV)(1) AND CARDHOLDER GROWTH
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(1) Gross Dollar Volume (GDV) is the total amount spent on all cards outstanding within a given period. GDV is further
broken out according to volume by contract year.
broken out according to volume by contract year.
(2) Compound annual growth rate is calculated for the years 2010 through 2014.
$
$27,216,931
$6,285,271
$13,311,376
NON-INTEREST INCOME-GENERATING STRATEGIES:
GROWTH AND SUSTAINABILITY
GROWTH AND SUSTAINABILITY
8
15% Decrease
$
8%
-6%
28%
34%
14%
-120%
73%
$84,426
(2)
(1)Compound annual growth rate is calculated for the years 2010 through 2014.
(2)Excludes gains on sales of investment securities. For reconciliation detail, please refer to the
Non-Interest Income section of Post Provision Income Reconciliation, in the Appendix (page 22).
Non-Interest Income section of Post Provision Income Reconciliation, in the Appendix (page 22).
SCALABLE BUSINESS MODEL:
NON-INTEREST INCOME / NON-INTEREST EXPENSE(1)
NON-INTEREST INCOME / NON-INTEREST EXPENSE(1)
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(1) For reconciliation detail, please refer to Appendix, page 23.
(2) Compound annual growth rate is calculated for the years 2010 through 2014.
(3) Peers are comprised of insured commercial banks having assets greater than $3 billion; Data Source: Uniform Bank Performance Report;
Peer data for 2014 is as of Q3 2014.
Peer data for 2014 is as of Q3 2014.
Columns represent TBBK
SCALABLE BUSINESS MODEL:
NON-INTEREST EXPENSE/AVERAGE EARNING ASSETS(1)
10
(1) For reconciliation detail, please refer to Appendix, page 23. Assets Held for Sale, from discontinued operations, are assumed to be reinvested
and are included in the calculation.
and are included in the calculation.
(2) Source: BankRegData.com.
(2)
COMPRESSED INTEREST RATE ENVIRONMENT:
NET INTEREST INCOME GENERATORS
NET INTEREST INCOME GENERATORS
11
(1) Compound annual growth rate is calculated for the years 2010 through 2014.
$
ADJUSTED OPERATING EARNINGS(1)
12
$
(1) For reconciliation detail, please see Appendix, page 24.
CATEGORY | |||
(in thousands) | |||
421,862 | 293,109 | 2.57% | |
211,364 | 148,109 | 4.23% | |
194,464 | 175,610 | 6.12% | |
178,376 | 55,196 | 3.33% | |
42,743 | 53,068 | 3.36% | |
46,990 | 67 | 2.50% | |
Discontinued Business Line* (formerly Community Bank) | 898,134 | 1,303,125 | 3.65% |
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• 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 security backed lines of credit and other loans
• 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, approximately 51% of
which have a 75% guaranty by the U.S. Small Business Administration
UPS Stores, Massage Envy, FASTSIGNS and Save a Lot, approximately 51% of
which have a 75% guaranty by the U.S. Small Business Administration
– National lending in Financial Practice Acquisitions, Franchise and Healthcare-
professionals
professionals
• Leasing
– Well-collateralized automobile fleet leasing
• Average transaction: 8-15 automobiles, $350,000
• 31% of portfolio leased by local, state, and federal government agencies
• CMBS
– Loans which are generated for sale into CMBS markets that are
held until sold
held until sold
• Consumer/Other
– Home equity lines of credit and other consumer loans; commercial financing
related to student loans
related to student loans
(1) Yield is on a tax equivalent basis.
*Discontinued Business Line is not included in the pie chart.
ASSET QUALITY OVERVIEW
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Reserves/Loans |
(1) Source: BankRegData.com
(2) 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.
15
PRIMARY DEPOSIT-GENERATING STRATEGIES: BUSINESS LINE OVERVIEW
Total Deposits: $4.4 billion
Average Cost: 0.29%
(Aggregate US Banks Average Cost: 0.33%) (1)
(1)Aggregate US Banks data as of Q3 2014, source: BankRegData.com
CATEGORY | Q4 2014 BALANCE (in thousands) | Q4 2014 AVG. COST |
$2,034,224 | 0.02% | |
1,157,512 | 0.37% | |
461,674 | 0.47% | |
699,239 | 0.67% | |
15,286 | 0.17% | |
Discontinued Business Line* | 223,154 | 0.16% |
Discontinued Product* | 47,934 | 0.02% |
*Discontinued Business Line and Discontinued Product are
not included in the pie chart.
not included in the pie chart.
DEPOSIT-GENERATING STRATEGIES: STICKY AND LONG-TERM
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(1) Percentages shown include deposits associated with private label agreements
in the Healthcare, Institutional Banking, Prepaid and Payments Acceptance
groups. Data is as of the end of the fourth quarter of 2014.
in the Healthcare, Institutional Banking, Prepaid and Payments Acceptance
groups. Data is as of the end of the fourth quarter of 2014.
(2) Contracts associated with over 99% of deposits in the <1 year segment are
structured with an automatic renewal.
structured with an automatic renewal.
The Bancorp is deeply
integrated with its private label
banking partners, and has
long-term, often exclusive
agreements in place.
integrated with its private label
banking partners, and has
long-term, often exclusive
agreements in place.
(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
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APPENDIX
18
19
Capital Ratios and Selected Financial Data
As of or for the three months ended December 31, 2014 (dollars in thousands) | As of or for the three months ended December 31, 2013 (dollars in thousands) | ||
Selected Capital and Asset Quality Ratios: | |||
Equity/assets | 7.10% | 7.64% | |
Tier 1 capital to average assets | 8.04% | 8.58% | |
Tier 1 capital to total risk-weighted assets | 12.58% | 14.57% | |
Total capital to total risk-weighted assets | 12.71% | 15.83% | |
Allowance for loan and lease losses to total loans | 0.41% | 0.33% | |
Tangible common equity | 6.98% | 7.49 % | |
Balance Sheet Data: | |||
Total assets | $5,017,989 | $4,706,065 | |
Total loans, net of unearned costs (fees) | 879,533 | 655,320 | |
Allowance for loan and lease losses | 3,638 | 2,163 | |
Total cash and cash equivalents | 1,114,235 | 1,235,949 | |
Total investments | 1,587,404 | 1,350,322 | |
Discontinued assets held for sale | 926,278 | 1,299,914 | |
Deposits | 4,399,151 | 4,020,317 | |
Shareholders’ equity | 354,930 | 359,604 | |
Selected Ratios: | |||
Return on average assets | nm* | 0.68% | |
Return on average common equity | nm | 8.17% | |
Net interest margin | 2.62% | 2.54% | |
Book value per share | $9.44 | $9.53 | |
*not meaningful
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Current Loan Portfolio and Asset Quality Overview at 12/31/2014
Category (dollars in thousands) | Balance | % of Total Loans | Nonaccrual Loans | Nonaccrual/ Total Loans | OREO | 30-89 Days Delinquent | 90+ Days Delinquent | Q4 2014 Quarterly Charge-offs (net) |
SBA | $172,660 | 16% | $- | -% | $- | $- | $ - | $(253) |
SBA held for sale | 38,704 | 4% | - | - | - | - | - | - |
Leasing | 194,464 | 18% | - | - | - | 6,915 | 149 | (25) |
Security backed lines of credit | 421,862 | 38% | - | - | - | - | - | (3) |
Other consumer lending | 42,743 | 4% | 1,907 | 0.2% | - | 466 | - | (672) |
Other specialty lending | 46,990 | 4% | - | - | - | - | - | - |
CMBS | 178,376 | 16% | - | - | - | - | - | - |
Total | $1,095,799 | 100% | $1,907 | 0.2% | $- | $7,381 | $149 | ($953) |
Specialty Finance | Payments | Corporate | |||||||
Category (dollars in thousands) | Institutional Banking | GGL | CMBS | Leasing | Prepaid | General Affinity | HSA | Payment Acceptance | Investment Securities |
Interest income | 11,753 | 8,344 | 4,354 | 11,951 | - | - | 1 | 56 | 34,261 |
Interest expense | 4,647 | - | - | - | 325 | 268 | 2,149 | 3,396 | - |
Non interest income | 2,721 | 1,126 | 12,197 | 2,873 | 51,288 | 2,842 | 5,570 | 5,809 | 450 |
Allocated income, based on deposits | 6,603 | (4,172) | (2,177) | (5,975) | 3,620 | 235 | 930 | 936 | - |
Allocated income, investment securities | - | - | - | - | 21,846 | 1,422 | 5,583 | 5,860 | (34,711) |
Total | 16,430 | 5,298 | 14,374 | 8,849 | 76,429 | 4,231 | 9,935 | 9,265 | - |
Percentage | 11% | 4% | 10% | 6% | 56% | 7% | 6% | - | |
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Revenue By Segment Reconciliation(1)
Specialty Finance | Payments | |||||||
Category (dollars in thousands, average balances) | Institutional Banking | GGL | CMBS | Leasing | Prepaid | General Affinity | HSA | Payment Acceptance |
Deposits | 814,754 | - | - | - | 1,712,560 | 111,500 | 437,701 | 459,435 |
Loans | 371,050 | 190,535 | 120,397 | 189,910 | - | - | - | - |
Net | 443,704 | - | - | - | 1,712,560 | 111,500 | 437,701 | 459,435 |
Percentage of total allocated income to be received | 14% | - | - | - | 58% | 14% | 14% | |
Percent of Securities allocation to Payments, based on deposits | - | - | - | - | 67% | 16% | 17% | |
(1) Revenue for Specialty Finance departments includes all revenue from the assets they fund with deposits they generate. It also includes half
the revenue from assets they generate but do not fund. The other half of the revenue is allocated to Payments departments and Institutional
Banking for funding they provide. Additionally, revenue generated through the bank’s Investment Securities portfolio is allocated amongst the
Payments business lines, based on each group’s deposits.
the revenue from assets they generate but do not fund. The other half of the revenue is allocated to Payments departments and Institutional
Banking for funding they provide. Additionally, revenue generated through the bank’s Investment Securities portfolio is allocated amongst the
Payments business lines, based on each group’s deposits.
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Post Provision Income Reconciliation(1)
Category (dollars in millions) | 2010 | 2011(2) | 2012 | 2013 | 2014 | Q4 2013 | Q4 2014 |
Interest income | $24.4 | $31.1 | $39.4 | $51.2 | $70.7 | $14.3 | $18.5 |
Interest expense | (12.4) | (10.3) | (10.1) | (10.0) | (10.8) | (2.5) | (2.7) |
Net interest income | 12.0 | 20.8 | 29.3 | 41.1 | 59.9 | 11.8 | 15.8 |
Provision for loan and lease losses | (1.4) | (1.7) | (0.9) | (0.2) | (3.6) | 0.2 | (0.2) |
Net interest income post provision | 10.6 | 19.1 | 28.4 | 40.9 | 56.4 | 12.0 | 15.6 |
Total non-interest income | 19.8 | 29.7 | 49.3 | 81.9 | 84.9 | 21.8 | 17.6 |
Gain on sales of investment securities | (1.2) | (0.7) | (0.6) | (1.9) | (0.5) | 1.1 | - |
Less other than temporary impairment | 0.1 | - | 0.2 | - | - | - | - |
Non-interest income | 18.7 | 29.0 | 48.9 | 80.0 | 84.4 | 20.7 | 17.6 |
Post provision income | $29.3 | $48.1 | $77.3 | $120.9 | $140.8 | $32.7 | $33.2 |
(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.
gains on sales of investment securities and other than temporary impairment on securities.
(2) 2011 includes a one-time gain of $718,000 related to a legal settlement.
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Category (dollars in thousands) | Q4 2014 | Q3 2014 | Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 | Q2 2013 | Q1 2013 | Q4 2012 | Q3 2012 | Q2 2012 | Q1 2012 |
Average assets | 4,443,016 | 4,293,960 | 4,475,754 | 4,955,143 | 4,261,727 | 3,984,728 | 3,972,306 | 4,165,418 | 3,341,602 | 3,084,178 | 3,384,272 | 4,107,802 |
Other assets | 64,904 | 85,541 | 132,332 | 115,646 | 95,629 | 76,321 | 85,476 | 83,902 | 78,755 | 78,241 | 126,547 | 229,504 |
Average earning assets | 4,378,112 | 4,208,419 | 4,343,422 | 4,839,497 | 4,166,098 | 3,908,407 | 3,886,830 | 4,081,516 | 3,262,847 | 3,005,937 | 3,257,725 | 3,878,298 |
Non-interest expense | 36,567 | 33,135 | 33,996 | 31,227 | 27,126 | 26,384 | 25,353 | 22,954 | 21,990 | 20,018 | 19,176 | 19,007 |
BSA & lookback consulting expenses | 3,883 | 2,749 | 2,169 | - | - | - | - | - | - | - | - | - |
Adjusted non-interest expense | 32,684 | 30,386 | 31,827 | 31,227 | 27,126 | 26,384 | 25,353 | 22,954 | 21,990 | 20,018 | 19,176 | 19,007 |
Non-interest expense ratio | 2.99% | 2.89% | 2.93% | 2.58% | 2.60% | 2.70% | 2.61% | 2.25% | 2.70% | 2.66% | 2.35% | 1.96% |
Scalable Business Model: Non-Interest Expense/Average Earning Assets
Reconciliation
Reconciliation
Category (dollars in millions) | 2010 | 2011(1) | 2012 | 2013 | 2014 | Q4 2013 | Q4 2014 |
Total non-interest income | $19.8 | $29.7 | $49.3 | $81.9 | $84.9 | $21.8 | $17.6 |
Gain on sales of investment securities | (1.2) | (0.8) | (0.7) | (1.9) | (0.5) | (1.1) | (0.1) |
Other than temporary impairment | 0.1 | - | 0.2 | - | - | - | - |
Non-interest income | 18.7 | 28.9 | 48.6 | 80.0 | 84.4 | 20.7 | 17.5 |
Total non-interest expense | $58.1 | $69.1 | $80.2 | $101.8 | $134.6 | $27.1 | $36.6 |
BSA & lookback consulting expenses | - | - | - | - | (8.8) | - | (3.9) |
Non-interest expense | 58.1 | 69.1 | 80.2 | 101.8 | 125.8 | 27.1 | 32.7 |
Non-interest income/Non-interest expense | 32% | 42% | 61% | 79% | 67% | 76% | 54% |
Scalable Business Model: Non-Interest Income/Non-Interest Expense
Reconciliation
Reconciliation
24
(1) Excludes gains on sales of investment securities and expenses we believe to be mostly nonrecurring, such as Bank Secrecy Act related expenses and lookback consulting expenses;
2011 includes a one-time gain of $718,000 related to a legal settlement.
2011 includes a one-time gain of $718,000 related to a legal settlement.
(2) 2011 includes a one-time gain of $718,000 related to a legal settlement.
(3) 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 performance. Management utilizes adjusted earnings to measure the combined impact of changes in net interest income, non-interest income and certain other expenses.
Adjusted earnings exclude the impact of income taxes, securities gains and losses and certain items we believe to be mostly non-recurring, such as lookback consulting expenses. Other
companies may calculate adjusted 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.
assess its performance. Management utilizes adjusted earnings to measure the combined impact of changes in net interest income, non-interest income and certain other expenses.
Adjusted earnings exclude the impact of income taxes, securities gains and losses and certain items we believe to be mostly non-recurring, such as lookback consulting expenses. Other
companies may calculate adjusted 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.
Adjusted Operating Earnings Reconciliation(3)
Category (dollars in thousands) | Q4 2014 | Q3 2014 | Q2 2014 | Q1 2014 | Q4 2013 | Q3 2013 | Q2 2013 | Q1 2013 | Q4 2012 | Q3 2012 | Q2 2012 | Q1 2012 |
Income before income tax expense | (3,264) | 1,535 | 3,404 | 4,936 | 6,696 | 3,060 | 6,025 | 5,206 | 1,220 | (1,151) | (2,365) | (133) |
BSA and lookback consulting expense | 3,883 | 2,749 | 2,169 | - | - | - | - | - | - | - | - | - |
Gain (loss) on sale of investment securities | 85 | (35) | 159 | 241 | 1,104 | 42 | 476 | 267 | 554 | 107 | - | - |
Adjusted earnings | $534 | $4,319 | $5,414 | $4,695 | $5,592 | $3,018 | $5,549 | $4,939 | $666 | ($1,258) | ($2,365) | ($133) |
NOTES
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www.thebancorp.com
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