The Bancorp's CEO Discusses Q1 2012 Results - Earnings Call Transcript

The Bancorp Inc. (TBBK)

Q1 2012 Results Earnings Call

April 25, 2012 8:30 AM ET

Executives

Andres Viroslav – Director, Corporate Communications

Betsy Cohen – Chief Executive Officer

Frank Mastrangelo – President

Paul Frenkiel – Chief Financial Officer

Analysts

Frank Schiraldi – Sandler O’Neill

Matthew Kelley – Sterne Agee

Presentation

Operator

Good day, ladies and gentlemen. And welcome to the Q1 2012 The Bancorp Inc. Earnings Conference Call. My name is Cheney, and I’ll be the coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s conference. (Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today, Mr. Andres Viroslav, Director of Corporate Communications. Please proceed, sir.

Andres Viroslav

Thank you, Cheney. Good morning. And thank you for joining us today to review The Bancorp’s first quarter 2012 financial results. On the call with me today are Betsy Cohen, Chief Executive Officer; Frank Mastrangelo, President; and Paul Frenkiel, our Chief Financial Officer.

This morning’s call is being webcast on our website at www.thebancorp.com. There will be a replay of the call beginning at approximately 10:30 a.m. Eastern Time today. The dial-in for the replay is 888-286-8010 with a confirmation code of 65379042.

Before I turn the call over to Betsy, I would like to remind everyone that when using this conference call, the words believes, anticipates, expects, and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated or suggested by such statements. For further discussion of these risks and uncertainties, please see The Bancorp’s filings with the SEC.

Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

The Bancorp undertakes no obligation to publicly release the results of any revisions to forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Now, I would like to turn the call over to Betsy Cohen. Betsy?

Betsy Cohen

Thank you, Andres, and thank you all for joining us for this Q1 call. We’re delighted to report to you to date $0.12 per share earnings, which is the high-end of the analysts’ estimates. It is driven as it has been in past quarters by our increases in non-interest income and specifically within that category our prepaid income.

We believe that this validates our business model and provides us with confidence that new programs which are currently launched and I think we have spoken about in the past the time between initiating or signing a new client and actually launching that program and having some impact on the P&L or the balance sheet and so you begin to see the implementation or the launching of programs in this quarter.

The 90% increase in prepaid is a very high number and as it was last quarter. It’s been two quarters in which it has exceeded 90%. But we don’t believe that that’s a reasonable continued expectation although we do believe that the growth will be significant, all of this growth is organic.

And in that regard, we need to focus on the fact that we terminated some nine, almost nine months ago one of our large programs, the program effective date for termination is the beginning of May and so you’ll see several factors which occur as a result of that.

First in retrospect, if we were to have eliminated those deposits from our deposit base in each of 2000 -- 03/31/2011 and 03/31/2012, the growth in deposits would have been 50%. This is organic growth from new and existing programs, and we are very cheered by that fact. The program that’s been terminated does not have non-interest income associated with it. So you will not see an impact on non-interest income.

The other important element that will be a different because we view this as a transition quarter from a deposit point of view and I think we spoke about this in our last call, is that as we have been anticipating the exiting of a large program we have been building up our existing, our remaining programs and launching new ones. And so what you see is despite during this quarter in deposits, which impact both capital ratios and the net interest margin.

The capital ratios were bounced back to a more normal level for us in the second and third quarters, and the non -- net interest margin, which if we were to compete it without the existence of our terminating partner would have been in the range of our norm for the last four quarters which ranges from a higher 367 to the current 357 during those quarters. So that net interest margin will remain relatively consistent.

Loan on the asset side, loan growth was less than anticipated not because originations were not at the normal level, we originate approximately $100 million in new loans a quarter, sometimes it’s $85 million, sometimes a $115 million, but the average is about $100 million.

What we don’t always anticipate exactly is the amount of pay down and so the net growth was smaller for the linked-quarter. However, if one were to compare the current first quarter to the first quarter of 2011, that growth was in the 7% range, which is almost precisely what we had, have been discussing.

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