Good day, ladies and gentlemen, and welcome to the Q1 2013 The Bancorp, Inc. Earnings Conference Call. My name is Sharon and I'll be your operator today. At this time, all participants are in listen-only mode. We will 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. And now, I'd now like to turn the call over to Mr. Andres Viroslav, Director of Corporate Communications. Please proceed sir.

Thank you, Sharon. Good morning and thank you for joining us today to review The Bancorp's first quarter 2013 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 am Eastern Time today. The dial-in for the replay is 888-286-8010 with a confirmation code of 51978128. Before I turn the call over to Betsy, I would like to remind everyone that when used in 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?

Thank you, Andres, and thank you all for joining us. We believe that we are reporting today a successful quarter, one in which net income was up compared to the same quarter last year 86%. As a result of our issuance of additional stock in December, earnings per share were up 67%. But also in terms of the returns on average assets, and on average equity, our return on average assets was up from 0.39% in 2012 Q1 to 0.72% we think a significant increase and return on average equity up from 5.84% to 8.83% also showing significant progress. I think this is additionally really reflected in the improvement in the efficiency ratio, which went from about 66% to 59% in that same comparative period. Again, we talk a lot about the mix of our various portfolios. For example, on the deposit side, as you know, we proving that portfolio both for volatility, volatile deposits and expensive deposits last year. But in any one quarter, the mix of those deposits will determine what the net interest margin is and what the cost of those deposits is. The same is true in areas like, gross dollar volume, where the mix of programs in any one quarter determines both the amount of GDV and the basis points earned on that GDV. So Frank will talk to that again in just a moment. On the asset side, we continue to grow assets, so and to make them productive. You could see that very clearly in this quarter with a 20% growth in the securities portfolio, and a 14% really terrific growth in the loan portfolio, and that growth has been in our targeted asset classes, so that the SBA program, the fleet leasing program, securities backed lines of credit all grew on an outside basis. Security backed lines of credit grew 42%, fleet leasing 21%, and on a smaller base, but still a stunning number, the SBA portfolio grew by a 179%. So we continue to translate the investments we made in expenses in those areas into productive assets. Frank, would you like to talk now about the non-interest income component.

Happy to. Thank you, Betsy. So, with another strong quarter from a non-interest income standpoint, the year-over-year non-interest income growth exceeded 53%. Major drivers of that were the prepaid business, which grew non-interest income little shy of 33% year-over-year. I think every bid is importantly, as Betsy touched on, the components of mix of that business, drove very strong revenue this quarter. Hence, if you remember first quarter 2012, earnings on GDV came in at 10.5 basis points. This year we're back to our traditional 13 basis points on GDV to generate a little shy of $12 million in non-interest income in that business unit on little shy up $9.1 billion in total gross dollars volume. That's a GDV increase of 48% from last quarter, driven by some seasonality of course that drives Q1. Another major contributor of course in Q1, as Betsy mentioned, was the new CMBS unit that has basically contributed to non-interest income.

Thanks, Frank. I think that there are several expense items that we would like to talk about now. One is credit costs and although non-accruing loans plus 90 days the non-performing category was up. It's also important to look at the fact that total cash dues were down and that net charge-offs were also down. So that, the mix of those, of the elements of total cash dues anything 30 days and greater past due has been very stable and continues to go down. The other item which impacts net income obviously is the tax rate and Paul, if you could just speak to uptick in that tax rate.

Sure. The tax rate includes both the federal statuary rate of 35% and various state taxes that the bank pays. So there is some variance from quarter-to-quarter. But one driving difference is that because the bank had for federal purposes has a relatively expect growing amount of tax exempt income in quarters where the net income is higher, the tax rate will necessarily increase in that quarter, and that's what you saw this quarter.

Thank you. Also on the expense side we continue to step up for new initiatives, which have not yet been or not yet disclosable because they're not yet mature. But we don't think that the expense rate will significantly accelerate from that, the increases that you saw in the first quarter. The first quarter also since we do have a seasonal business, reflects an outside amount of excess funds in the deposit category, which at the current interest rate level are not altogether that productive. And so, we do believe that if you normalize for those excess funds that net interest margin for the first quarter would be just slightly under what is was for the fourth quarter and that we will see marginal expansion therefore, as those funds runoff in the second to the fourth quarters. With that, I would like to open the floor to questions.

Thank you. (Operator Instructions) And your first question is from the line of Matthew Kelley with Sterne Agee. Please proceed.

Frank, if you could just talk a little bit more about the stored value business. How much of the first quarter fees were driven by tax specific related business. I think in the year ago quarter, like a $1.5 million, $2 million. How much was it in the first quarter?

Yeah, that's not a number that I've available right now. I can actually get back to you about that off-line. As you know, there is seasonality in Q1, a portion of both GDV non-interest income are driven from that refund business.

Okay. And then could you just talk about the pipeline of prepaid business and what you brought on during the quarter, and new business wins during the quarter, and what the pipeline looks like?

Sure, sure, new business prospects continue to be very strong. I think we talked a little bit about this last quarter. We continue to see new entrants into our pipeline for varying reasons including, Durbin related conversions. Still conversions from you know other institutions and new entrants into the State. So the industry fee, overall industry growth rate continue to look very healthy and our prospects in pipeline are very strong. We added a number of new clients during the quarter, none of which have been publicly announced yet, all of which are nice ads to the book of business and improvement.

Could I just, kind of just store one item that Frank had eluded to that the timing of a launch of a program impacts not only the fee income that's generated from it obviously, but also both deposits in GDV at any one quarter. And so, even a 30 day either delay or advance impacts and that's a third of a quarter, impacts that quarter. So I think when we're talking about all of these number we really should be looking at them on an annualized basis or an excuse me not annualized but on an annual basis because that's really I think the soundest approach.

And Frank, the industry I think has grown 25% to 30%; do you still feel comfortable that you will exceed that as you take market share over the coming years?

Yeah, we do absolutely.

That's interesting. A question on credit I mean, have you considered taking some type of a one-time charge just a write down whole pipeline and whole stack of problem assets to have, some of the lumpiness in credit costs behind you? I think it's something that's a lot of investors and myself would view positively, just that you cannot isolate the solid fee income nor to the business?

I hear you. And we do have that under consideration as the FASB rules are tweet in this area, and we certainly will get back to, later in the year with our conclusions.

Okay. And then, last question Frank. So that the tax rate, what should be using going-forward then? I'm little unclear on what the guidance is?

Paul, do you have that?

Paul, yeah.

Sure. I would be at 36%, 36.5% for next -- for the time being.

Thank you. Your next question is from the line of Mark Palmer with BTIG. Please proceed.

Question about where things stand right now with regard to your question to the commercial real estate origination and sales arena? And I know there in the past you talked about trying to get to critical mass, just want to see where things stand there?

I think that we only have two quarters Mark under our bill in term. So that, to say that we've an absolute hand alone what each quarter would look like, but not the fourth right. We do see a very full pipeline. The pipeline is growing. The size of the securitization grew, and so we're optimistic about that plan. It takes a little bit of time to get the rhythm of those numbers to be absolutely consistent. But the market is highly responsive to our team and we think that we're finding great success.

Very good. And also, along those lines, with interest rates being as low as they are, are you looking other areas where you could put cash to work similar what you're doing with commercial real estate?

Absolutely. We have a core expertise in several areas, among which was the origination of loan for sale. And there are many products that build around that concept and we are exploring them. We try to keep within our areas of expertise and skill set. But that being said -- certainly on a senior management level that being said, we will add appropriate team, as we identify products that reflect our own risk-reward matrix.

Okay. And one more question. With regard to the improvements that that have been made both sequentially and year-over-year with regard to ROE and ROA, can you give sense of where you see the trajectory going with regard to those ratios and if there are targets you have in mind?

We don't give you projections in any area if we can help it. And so, we're going to add this as another one in which we do not project.

Thank you. And your next question is from the line of Frank Schiraldi with Sandler O'Neill. Please proceed.

Just a few questions. First I wanted and I may have missed it. Frank, but can you give what is gross dollar volume for the quarter and what was that year-over-year?

Yeah, $9.1 billion for the quarter, and that was a 48% increase from Q4, '12 that was in at about $6.1 billion.

And I think the other important factor Frank, is that for the first quarter '13 versus the first quarter '12, the basis points earned on GDV were 13 -- 13 for '13 and 10.5 for '12.

So, for the first quarter of '12, that was the fourth quarter of 2012, right, that was 10.5?

Yeah the first quarter of '12 was actually 10.5 basis points. The fourth quarter of '12 was actually, was actually 15, highlighting some of the seasonal changes and the mix of business. Q1 '13, was actually in 13 basis points. So on our yearly average for 2012 but almost but more than actually 20% higher than Q1 2012.

Okay. And I thought you said that prepaid processing fees were up 33% year-over-year to $12 million '12. Is that right?

That's correct.

Okay. I'm just wondering if there's any, I know you don't break it out in the release, but I'm coming up a little bit in terms of just my own modeling when I look at, what I expected prepaid and where total fee income came in for the quarter at 18.9 excluding the securities gains. Is there anything else within other line items that might be deemed non-recurring, might just be in this quarter and not in the remaining quarters of the year?

Not to the best of my knowledge.

Okay. And then, I wondered if, Betsy you talked a little bit about expenses. I had always had a mid-teen expense growth baked in year-over-year for the remainder of at least 2013. I thought you had said that the expense growth might be slowing a bit. Could you just may be speak to that or Paul speak to that?

Paul, do you want to start and I'll finish.

Well, I think part of the answer Frank is the point that we made earlier that we had invested in the new initiative. One of which was the European prepaid and the other of which was CMBS. So while we do have those expenses that actually accelerated the over your model, we are getting the income from the CMBS and as Betsy noted the income from the other initiative we're expecting later this year.

Okay, but it's that not a --

The -- if I might just round out that answer a bit. If we have additional new initiatives for which we deem to be appropriate and profitable, you may see a continued increase or a continued level of increase. But if we do not identify such within this year's identify such new initiatives, you won't, so that I don't think, although that's not highly predictive and not altogether helpful to you Frank. I'm sorry that's a reflection of the business.

Okay. So is it your, and I know you don't give guidance, but would it be your expectation then unless there's some big new initiative that you don't foresee currently that the efficiency ratio continues to migrate downwards from here or is this a good level?

I think that baring any big initiatives, it should migrate down.

Great.

Or be at this level or lower.

Great, okay. And then finally just wanted to ask about credit, the increase in non-accruals, quarter-over-quarter, it looks like it was about $8 million which of course was tampered a bit, so loans 90 days past due came down, but just wondering if you can talk a little bit about in what portfolio those came. If those were older credits, if that reflects newer long growth and then talk a little bit about those added non-accruals?

Yeah I think they're virtually all from loans from what we'll call legacy loans from a prior economy. And so I think that's what you're seeing that's we may have a different view of a loan that goes 30 days today and move it right through the system into non-accrual, because people's reactions to payment are different. And so I think that's what you're seeing in this quarter.

Okay. Is it fair to assume that there is a -- that this is made up of several or more loans or is it?

Oh yes, yes, yes, its several or more loans. And that's why I took the ratio or identified the trend in terms of total past due anything 30 days or more past due was down about 5%.

Thank you. (Operator Instructions) Thank you. Your next question is from the line of comes from the line of Matthew Kelley from Sterne Agee. Please proceed.

Yeah, I just had a follow-up question. How much have you spent on the development of your European business and can you just talk about the revenues that that will generate the nature of those revenues and when we should expect to see those, if you know?

Well, as the first two parts of that we will not enter. But as to the latter part, Frank, do you want to talk about how you see the business developing and when you expect to see the revenues?

Sure, absolutely. We've been focusing first and foremost on infrastructure and quality of service that we will be able to provide there much like we provide in U.S. We would anticipate that the first series of clients that we would be able to take from the U.S. to the European Union would occur probably in Q4. That's when I think you'll begin to see some of the revenue impact from the initiatives. But let me say in a way just like the U.S. business, signing an agreement getting commitment from a partner is kind of like step one of an evolutionary process that has to unfold and those programs will take some time just like the U.S. programs to really when create GDV and therefore generate revenue for the bank. So it's really, probably not going to be that impactful this calendar year although there will be some impact in Q4. This is really 2014 driver of non-interest income.

As you would be thinking about the structure and economics in a similar way to the U.S. business, I mean GDV from the basis point generate fees and some spread income or deposit, how do you talk about that?

Yeah, no it will be non-interest income. There will be a correlation between gross dollar volume and that non-interest income. It very well may be different than the U.S. business so potentially higher.

You're saying that the basis points on GDV are not necessarily the same as the U.S.

Correct.

Yes.

And then question on the CMBS business, just talk about the pipeline kind of where we stood at quarter end and the outlook for that as we go into Q2?

The pipeline is robust.

Thank you. Your next question is from the line of Jeff Bernstein with AH Lisanti. Please proceed.

Yeah, just a couple of questions. One, can you talk about the mobile wallet programs you're involved in and what the rollouts look like there? When you expect those programs to start to ramp up? And then two, on Europe, are we talking about just prepaid cards or general purpose reloadable cards in Europe?

I think those are both really excellent questions and reflect in some ways the nature of the business that we're involved in, which is an evolving and growing national and international business. And therefore our opportunity to invest in new efforts such as mobile, ahead of getting the revenues, and Frank for more specifics that was a philosophical response, but more specifics Frank do you want to talk about that? Frank?

I'm sorry. We seem to have lost the line of Frank.

All right. So why don't we come to Jeff off-line, I can tell you in a general way that we have a very firm contractual foot in the mobile market. The rollout of that market is really not within our control or our prognostication it's in its adoption curve, which is, we can be predictive about but we're not, we don't have any control over it. So what we have done, which we've talked about a little bit before is to invest in our being the important player in that market with supporting contracts with all the important players and that will benefit us as the adoption curve goes up. I hope that's responsive to your question.

And just on Europe, are you general purpose reloadable cards there?

Oh, yes. I'm sorry; I forgot the second part of your question. Yes we will be doing that.

How does the FDIC see the insurance piece of that work? So, if I'm a Spanish National and there's a general purpose reloadable card available, is that an FDIC insured account for me?

How about if we, it's a technical issue and how about if we get back to you off-line.

Thank you. I'd now like to turn the call over to Betsy Cohen for closing remarks.

Thank you. And as always I thank you for your good questions you bring out issues, the important issues in our business through those questions, and we're delighted to have had the opportunity to share with you what we consider to be a successful quarter and hopefully laying the ground for a successful year. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.