The Bancorp's CEO Discusses Q2 2012 Results - Earnings Call Transcript

The Bancorp, Inc. (TBBK)

Q2 2012 Earnings Conference Call

July 24, 2012 08:00 ET

Executives

Andres Viroslav – Director, Corporate Communications

Betsy Cohen – Chief Executive Officer

Frank Mastrangelo – President

Paul Frenkiel – Chief Financial Officer

Analysts

Matthew Kelley – Sterne Agee

Frank Schiraldi – Sandler O’Neill

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2012 The Bancorp Inc. Earnings Conference Call. My name is (Sharon), and I’ll be your operator for today. At this time, all participants are in listen-only mode. We will be conduct a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

Now, I’d like to turn the call over to Mr. Andres Viroslav, Director of Corporate Communications. Please proceed sir.

Andres Viroslav – Director, Corporate Communications

Thank you, (Sharon). Good morning and thank you for joining us today to review The Bancorp’s second 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 10:00 AM Eastern Time today. The dial-in for the replay is 888-286-8010 with a confirmation code of 71622633.

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 – Chief Executive Officer

Thank you, Andres, and thank you all for joining us today. We’re talking about the second quarter 2012 results which we think were successful. As you may remember from prior call, this quarter was going to be and was in fact a transition period or a transition quarter for The Bancorp on the deposits side. We exited on at the beginning of May a large customer relationship about which we had been speaking over a 9 months period. And we had promised that we would work diligently to replace the deposits represented by that exit. We succeeded to and even greater extent than we had anticipated and so this quarter and in the net interest margin related to this quarter represents excess funds that we did not yet have an opportunity to invest.

Another way to look at the growth is if one were to exclude the exiting partners deposits at June 30, 2011and June 30, 2012 the period end, the growth in deposits would have been $1.2 billion or roughly 70% of growth in deposits. That resulted as I said again excess funds during the quarter which were not which rejected which has the time to invest. If we were to remove those excess deposits we estimate that the net interest margin would have been about $350 million and we think when those funds are invested that that will be some place around $350 million will be our basic net interest margin.

We also had at what we believe over six months period if one were to look – begin to look at The Bancorp recognizing the seasonality of quarter-to-quarter analysis at a slightly longer perspective that we had a significant increase in operating earnings. Operating earnings were up over that six months period from approximately $16.7 million to approximately $23.7 million or about 40% increase, that number is – that percentage is a valid rate of growth even if when we’re looking at it quarter-to-quarter basis.

If you took a slightly longer view and look back two years, because that’s we have been discussing the increase in operating leverage expressed in operating earnings was one of our goals over this period of time, we’ve had over the two-year period it’s about an 85% increase though. So, the year-to-year 40% is not out of line. The 6 months analysis which is included in the press release looks like credit costs a combination of OREO losses and provisioning, which is consistent so that as we think those are good and meaningful numbers.

Over the significant increase in deposits and the lowering of our cost of deposits – average cost of deposits from 50 basis points to 37 basis points provides us with an opportunity over the course of the next several quarters to look at our portfolio of deposits and hopefully to a prune as we say those highest cost deposits from the portfolio and thus have an opportunity for further reduction in cost.

On the loan side, we had a loan growth and securities growth and asset if you put them together security is being a much more rapid way to deploy our excess deposits. We had a growth in both of those areas aggregating to about an 18% increase in the earning asset component. All of this resulted in an increase not to the level we would like, but certainly an improvement in both our return on average assets and our return on average equity on a year-to-year basis.

Read the rest of this transcript for free on seekingalpha.com

If you liked this article you might like

Ready to Place a Bet on These Longshot Banks?

Ready to Place a Bet on These Longshot Banks?

Three Banks FSI Group Invested in Last Quarter

Three Banks FSI Group Invested in Last Quarter

The Insider Track at 3 Community Banks

The Insider Track at 3 Community Banks

More Small-Bank Bets From 13F Filings

More Small-Bank Bets From 13F Filings

Bancorp (TBBK) Weak On High Volume Today

Bancorp (TBBK) Weak On High Volume Today