Andres Viroslav - Director of Corporate Communications Betsy Cohen - CEO Paul Frenkiel - Executive VP of Strategy and CFO Frank Mastrangelo - President and COO

Matthew Kelley - Sterne, Agee & Leach Frank Schiraldi - Sandler O'Neill Bob Ramsey - FBR Capital Markets Matthew Kelley - Sterne, Agee & Leach Mark Davis - Davis-Ross Investment Advisers

Good day, ladies and gentlemen, and welcome to the Q4 2009 The Bancorp Inc. Earnings Call. My name is Glen and I’ll be operator for today. At this time, all participants are in listen-only mode. Later we'll conduct a question-and-answer session. (Operator Instructions). I’d now like to turn the conference over to your host for today, Mr. Andres Viroslav, Director of Corporate Communications. Please proceed.

Thank you, Glen, and good morning. And thank you for joining us today to review The Bancorp’s fourth quarter and fiscal 2009 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 12:00 PM Eastern time today. The dial-in for the replay is 888-286-8010 with a confirmation code of 31280636. Before I turn the call over to Betsy, I'd 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’d like to turn the call over to Betsy Cohen. Betsy?

Thank you very much, Andres, and thank all of you for joining us this morning. The fourth quarter and 2009, we feel marked a turning point for us in several ways. During the quarter, we continued to see spread improve, certainly being contained and improve. We saw an expansion of net interest income both on a dollar basis and also rebounding after our capital infusion in the third quarter to 3.84 from the comparable quarter of 2008 of 3.69, and to the linked quarter at 3.74. And so we believe that we're making progress once again towards the utilization of additional capital and funding toward a target of 400 basis points for net interest margin. Interest on deposits decreased once again by 11 basis points on a linked quarter basis and significantly greater than that when compared to the fourth quarter 2008. I might add that for us the increase in transaction accounts and deposits is really part of a business plan that we've been pursuing for many years, it is not merely a secular trend, it's a program which derives growth from a value-added deposit product that Frank Mastrangelo will talk about in a minute, and is contractually based. So we feel great comfort in the continuation of these deposits. Our transaction accounts also continue to represent over 90% of our total deposits, and on the loan side we continue to see a decrease in construction loans. I think, we estimated for you, we felt they would decrease by about $19 million, and that's about where they were on a linked quarter basis, and over 32% on a year-to-year basis. This decrease in construction loans masked really what was new loan origination. We closed during the quarter approximately $50 million in new loans. However, the decrease or payoff connected with our portfolio exceeded our expectation and so the loan growth is not yet visible. On the earning side, the major disruptive factor was the write-off connected with OTTI, and say that certainly provides a reason for us to talk with you about the composition of the remaining approximately $21 million of securities in that bucket. They represented approximately half by liquidating trusts with very well capitalized insurance company that is making progress in reconstituting that bucket of assets and liquefying them towards the end of liquidating that trust. The balance are represented by four single names, all of which are well capitalized, and which give us no concern, and the balance of $2 million represents investments in two pools both of which are performing but about which we have less clarity. The core earnings calculation which is often an indicator of earnings power will be discussed by Paul Frenkiel. And Paul, if you could address that now?

Sure. The net interest margin, as you can see from this quarter to one year ago, net interest income increased to 16.8 million in the three months just ended compared to the prior year $14.9 million. That reflects significant reductions in interest expense and cost of funds, and we are continuing to lower interest rates on many of our different types of accounts even though they’re relatively historically low given the fact that real interest rates in the competition continues to modestly lower. We have some room there, and you're going to see the impact of that in the first quarter based on reductions that we made in the fourth quarter, and you’ll see the positive impact of that on the margin throughout the year. If you look at the OTTI that Betsy mentioned, it was approximately $2.2 million, and while we did have modest security gains that offset the impact of that net amount is still $0.05 per share for the quarter, which if you add it to the drag from the TARP of $0.04 that gives you $0.09 with which you can adjust and kind of normalize the earnings for the quarter.

Thank you very much, Paul, and I think Paul touched on the TARP impact, which is $0.04 a quarter on an EPS basis. And we are proceeding with our discussions about repayment of TARP, but they’re not always as speedy as one would hope. But we think that we’re making progress. We can't estimate the timing for you unfortunately, since we don't control it. I’ve mentioned the growth in deposits and very well priced deposits (inaudible) that by sharing with you that we think we’d still have room to add to earnings through the reduction of that cost and to give you further insight into that I’ll ask Frank Mastrangelo to come on the telephone.

Thank you, Betsy. Now in the fourth quarter, our pipeline for new partners, new programs continued to be very robust. We closed 17 new agreements in the fourth quarter. We're typically looking year-over-year to measure deposit growth and we continue to achieve very healthy growth rates in all of our business lines. Healthcare for example, 42% year-over-year, private client 141% year-over-year and our prepaid business which grew almost 37% year-over-year growing off of a very, very sizable number in Q4 2008. So, some of that growth does get matched from the seasonality of some of these businesses, which you can see in a snapshot or period end balance, but can be more appropriately viewed, in the average balance sheet that’s included in the earnings release. Viewing the average balance sheet in the earnings release, you can see that the demand deposits increased on average almost $300 million year-over-year and those are some of the factors that continue to drive down the bank’s overall cost of funds and increased net interest margin.

Thank you, Frank. I am going to ask for questions now. Glen if you could open up the lines.

(Operator Instructions) Our first question comes from Matthew Breese from Sterne, Agee & Leach. Please proceed. Matthew Kelley - Sterne, Agee & Leach: Yes, hi guys. It’s actually, Matt Kelley.

I’m sorry, Matt. Yes, that’s what I thought, okay. Matthew Kelley - Sterne, Agee & Leach: Just wondering if you could give a little bit clarity on the expense line items if there are any one-timers in there we should be aware of that will be coming out or is that a good number from which to model upon?

Paul?

I would say there was nothing atypically large in non-interest expense this quarter. So I would say that’s a reasonable approach. Matthew Kelley - Sterne, Agee & Leach: Okay. And same question just on the fee income besides the OTTI was there anything keeping that down or bumping that up?

I would say the fourth quarter is a reasonable going forward number. Now you have to keep in mind we have certain items in there that aren’t evenly distributed over the quarter. We have leasing gains which don’t happen on a very scheduled basis. And we do have some other items like that, but I’d say that’s a fair approach too. Matthew Kelley - Sterne, Agee & Leach: Okay. And can I have the loans 30 to 89 days past due that balance?

Yes we do. We thought you’d never ask. They are approximately $9 million this quarter up a bit from the September quarter but down significantly from the June quarter and they seem to migrate between about six and 10 or $12 million overall. Matthew Kelley - Sterne, Agee & Leach: Okay. But nothing in particular to give you the concern

No. Matthew Kelley - Sterne, Agee & Leach: That things are stalling out on the improvement process?

No, absolutely not. Matthew Kelley - Sterne, Agee & Leach: Okay. And then what type of deposit and loan growth are you looking for in 2010?

Well, I think it’s sometimes hard to predict. I think that our deposit programs are growing in number and are growing in diversity and we are not able to tell you at this time or we could, but we won’t tell you at this time what we anticipate in the pipeline growth. We do see continued, if I may use the word robust, deposit growth in the low interest rate category because all other programs are growing as are the number of programs growing. Matthew Kelley - Sterne, Agee & Leach: Right.

On the loan side, looking even in a broader way and on the asset side, we think that we have an opportunity to come closer to our peers in terms because of our low of cost of funding in terms of securities purchases which don’t stress our ability to take advantage of an increase in interest rates are keeping them modest in duration. And in fact during the course of the fourth quarter we pulled in our duration in terms of our securities and we’ll continue to be very cognizant of that. We have substantial opportunities on the loan side and we are working at sorting them through, how quickly they will close is not something we predict. Matthew Kelley - Sterne, Agee & Leach: Okay. And last question Frank, could you give us a little bit of clarity on the 17 new relationships across which business lines those fell and the nature of those?

Sure the new relationships were spread actually across healthcare, prepaid, merchant acquiring and private client. The nature of the business is very much in line with the current composition of the partners and portfolios there. Matthew Kelley - Sterne, Agee & Leach: Okay. And any sizable new accounts there or was it mostly granular smaller type relationships?

There certainly were some programs that we have, decent expectations for good growth in actually all the business lines across the board.

Our next question comes from Frank Schiraldi from Sandler O'Neill. Please proceed. Frank Schiraldi - Sandler O'Neill: I’ve got a question, I guess, for Frank maybe, but on the deposits, core deposit balances excluding CDs linked quarter were down significantly, and I know 3Q is seasonally the strongest quarter probably for deposit inflows at the bank. But was there anything that you saw linked quarter other than seasonality there that would have led to the decrease?

No, it was all due to seasonality within the prepaid business line, Frank. So, that the prepaid business line had a significant tickdown in deposits which is seasonal and planned. But private client for example grew deposits quarter-over-quarter 32%, merchant ticked up about 13, healthcare ticked up about nine, which are in line with previous year expectations in those business lines.

Frank at sometimes, it’s sometime hard to be predictive of exactly where on a seasonal basis at period end those deposits will land, and you’ll see that we had short-term borrowings that we put in place because we had estimated based on the prior year experience that that period end might be even lower than it was. So we are heartened by the fact that it was where it is and if you look at the average balance sheet that as Frank said, that was up significantly over the prior year. So it’s very hard to be predictive on the exact number. Frank Schiraldi - Sandler O'Neill: Right. And it’s tough to look historically and try again in a sense of where end of period deposits might fall linked quarter say last year or the year before because, obviously, the business is growing so quickly.

Absolutely. Frank Schiraldi - Sandler O'Neill: So in that vein, is it possible to give some sort of guidance in terms of what would you expect seasonally speaking from 4Q to 1Q? Does it pop back up? Sort of it is seasonally high the third quarter or flattish the fourth quarter?

You mean what is our seasonality within the current portfolio. Frank, do you want to speak to that? Frank Schiraldi - Sandler O'Neill: Sure. From a deposits standpoint Q3 and Q1 are typically strong quarters for the bank. In the third quarter, we have a run up in a number of programs in prepaid in Q1. Healthcare funding is very, very strong as new accounts related to calendar year open enrollments, FSAs and things like that begin to fund for the calendar year. The prepaid business itself, as I said, initially we really look at that year-over-year. I think we have been projecting 30 to 35% year-over-year growth rate of that business. If we look Q4 2008 to Q4 2009 that growth rate was a little shy of 37%. Frank Schiraldi - Sandler O'Neill: And between 3Q and 1Q, is there a seasonally stronger or basically they are both, I mean you’d point to that’s being the strongest?

They’re probably on par, but 3Q one on par.

There are different drivers in Q3 and Q1. Frank Schiraldi - Sandler O'Neill: Okay.

Different business line drivers. Frank Schiraldi - Sandler O'Neill: Right. And then I know it slightly tough to comment on TARP. You can’t give a timeline because it’s not in your hands. But what seems to be the issue in terms of, I don’t know if you call it delay or what’s taking time, is it just getting regulators on the phone, is it they are asking for a stuff that has to go back and forth and it’s just a lot of paperwork going back and forth? What sort of it’s I guess –

I don’t think there are any issues. I think at the year end, they were allowed to go on vacation. And we started this process in the late fourth quarter. I think we are making good progress. But it would be foolish for us to give you a date. Frank Schiraldi - Sandler O'Neill: Okay. And then finally on the trust preferreds, I just don’t know if I understood the breakdown. First, I had thought that there were some mark to the equity already. So if the total portfolio was 21 million, the fair value was lower. Is that correct? And if so, do you have the fair value?

Well, the 20 million is net. A couple of years ago, the Bank transferred from available-for-sale to held-to-maturity, and so that there was an adjustment at that time. So we have a net amount, the amount the 21.5 million that is the net amount that’s on the balance sheet now after those adjustments. And you’re right Frank, that had in fact gone through equity. Frank Schiraldi - Sandler O'Neill: Okay. But I had thought it was even lower. So that is the fair value then, 21.5?

Well, no, because when you transfer it to held for maturity, you don’t have to adjust to the fair value because they are not impaired. As Betsy said, their credits are good credits. And if it’s in held-to-maturity then you have the ability and intent to hold them until maturity; no further adjustments were required after they were transferred. Frank Schiraldi - Sandler O'Neill: Right. So that’s the –

So and hopefully they’ll stay on the balance sheet, and they are, that’ll get repaid. Frank Schiraldi - Sandler O'Neill: Okay. So that’s the amortized cost, 21.5 million. So is there an unrealized loss that would be part of that portfolio and would be net intangible equity? Is there unrealized losses on that cost deferreds?

Yes. It’s about the amount to equity, it’d be like maybe $2.5 million or so that was in the original adjustment to equity. And accounting requires you to amortize that over the maturity. And it goes back and increases book value over that maturity until you get to maturity. Frank Schiraldi - Sandler O'Neill: Okay. So I think I am little confused.

So even though we’re not buying anymore, the amounts of book value increased slightly every period until maturity at which signed up, they should be repaid. The accounting is somewhat complicated, but I think the point to remember is that credits are good. And as Betsy said, they are well capitalized, the biggest insurance company it has an access of capital. So they should be fine. And the accounting will work itself out over the maturity with no big amount taken or recognized in any one period. In fact, it’s a plus because it’s building back the book value and with the offsetting credit to equity. Frank Schiraldi - Sandler O'Neill: Okay. And I think that’s it how these four banks, four single issuers?

That’s correct. They’re all well capitalized, performing well. And what we said there were only two $1 million pieces that were in any securities system, which we don’t have quite as much visibility that’s performing and nothing is non-performing. Frank Schiraldi - Sandler O'Neill: All right.

Yeah. There is no impairment.

And we do an impairment test, and there is no impairment in those two securities as yet. Frank Schiraldi - Sandler O'Neill: So the four banks are about 10 million, is that right?

Right. That’s an approximate number.

Right. Yeah. That’s – you can use that, yes.

Yes. That’s right. Frank Schiraldi - Sandler O'Neill: Some institutions have started basically just listing their trust preferred securities in their Q or their release. Are you going to dispose those or not?

It’s not our intention, Frank, although we hear you loud and clear. Frank Schiraldi - Sandler O'Neill: And then can you just describe again the other piece? It’s debt of an insurance company, is that the –

Yeah. It’s a bucket of securities that were in their reserve less than liquid. And as to which they needed time to liquefy and they set up this -- funded this liquidating trust. We see through to what they are doing with the securities. They are converting them into liquid securities in anticipation of the distribution. Frank Schiraldi - Sandler O'Neill: And what do those securities look like? Those individual securities on their books, those aren’t trust preferreds or are they?

No. No. They are not. Frank Schiraldi - Sandler O'Neill: Okay.

They are converting to short-term securities and other securities. And they were subject to review of an accounting firm. And the accounting firm they should report. And it shows just a huge excess of capital. So we don’t see any issues there. Frank Schiraldi - Sandler O'Neill: Okay. And just one last question on that. I am just wondering, so how did that come on the books, that insurance piece?

They were on the books about six years. I’ll have to go back and find out. I just don’t have that information.

Our next question comes from Bob Ramsey of FBR Capital Markets. Please proceed. Bob Ramsey - FBR Capital Markets: Hey, I guess I’ll start with Frank. I just wanted to be sure I caught the numbers correctly. Did you say that private client deposits were up 32% quarter-over-quarter, healthcare nine and merchant 13?

In fact, we can expect that, quarter-over-quarter healthcare was 9%, private client was 32, merchant was 13, yes. Bob Ramsey - FBR Capital Markets: Okay. Thank you. And what was the community bank deposits at the end of the quarter?

Community bank deposits at the end of the quarter was $422 million.

But that’s flat with the prior quarters. Bob Ramsey - FBR Capital Markets: :

I think that we see them more or less across the board. We are in an area and we feel very fortunate to be in the mid-Atlantic area this time, Philadelphia seems to be in a period of recovery according to all the gurus who are out there including the local Federal Reserve Bank. And the Case-Shiller Index which was just published the other day showed that in the Philadelphia MSA that year-over-year median housing prices were only down 1.7%. So that’s inline with what we see on disposition. And we have some improvement in performance and some dispositions which make up that total. So I think, we find ourselves not yet in a market in which securitization has rebounded for commercial real estate or anything of that sort. And so the resolution comes from either improvements in a particular factor or disposition of the loan or disposition of the underlying real estate. Bob Ramsey - FBR Capital Markets: Did the construction non-performers continue to decline in the quarter?

Yes. And we continue to see sales. So sales are an individual house sales. So sales are an important component of performance. Bob Ramsey - FBR Capital Markets: Okay. And how much of the growth in the CRE book was loans moved out of the construction portfolio into mini-perm, was that a factor this quarter or not?

It was not. If you look at the note in the press release, you'll see that commercial construction portfolio was flat quarter-to-quarter. Bob Ramsey - FBR Capital Markets: Okay. And sort of we talked a little bit earlier about 2010, what is the tax rate expectation for next year?

Paul.

Sure. We’ll have somewhat less likely than 34%, because of our municipals. At least half of the year we had about a $38 million portfolio of municipals. As Betsy noted, we’re reducing duration on those, so we sold a number of those. We may sell some more, and we’re buying municipals but with shorter lives to reduce duration in the event rates increase. That said we believe that there's still value in the municipal market, even if rates do increase somewhat, and we think it's an extremely safe way to build the margins. No, I was just going to say, seeing our assets that investment securities non-taxable had a tax equivalency yield of 8.20, but we continue to think there's value in that segment. Bob Ramsey - FBR Capital Markets: Okay. And then in terms of expenses, given this was a reasonably good quarter and good place to build on, what sort of expense growth are you all modeling for 2010?

Well, we’re doing our best to control expense. And these are conversations and planning that we’ve been doing to really limit the expense growth minimally. And at the same time, as you’ve gathered from looking at our history and our growth, we’re very focused on investing into new programs, and as Frank said like we were signing a lot of agreements, and we have a lot of strong prospects. So if we need to invest to ensure those future revenue streams, we’ll do that. But as of right now, I think, we’re going to be able to hold the line fairly closely. Bob Ramsey - FBR Capital Markets: So, that would suggest slower growth than you all saw in 2009?

Yes.

Yes, yes.

Our next question is a follow-up from Matthew Kelley of Sterne, Agee & Leach. Please proceed. Matthew Kelley - Sterne, Agee & Leach: Yes. Hi, guys. On the credit cost going forward, given the trends in past dues and non-accruals, and just your commentary being fairly positive, how much additional reserve building do you think we’ll see in 2010 beyond charge-offs, so are you getting to the point where the provision may match charge-offs and there's not a lot of incremental build?

Well, if we anticipate growth in the portfolio that will have to be covered, Matt, so I think, we think that 2010 is a year in which it would be a good thing to continue to invest in the reserve. Matthew Kelley - Sterne, Agee & Leach: But regardless of growth on the existing portfolio, do you think there's much additional excess reserve and provisions needed?

Well, we believe that one should look at 2010 as opposed to 2011 as a year in which we continue to reserve robustly because we think that that has no downside. If losses as a result of economic improvement and performance improvement take place then we'll have excess reserves in the reserve. Matthew Kelley - Sterne, Agee & Leach: Okay. Got you. And just to clarify on the tax rate questions, you’re saying less than 34% was the border line?

: Matthew Kelley - Sterne, Agee & Leach: Just for modeling purposes relative to the 34 this quarter, what would you be using for 2010?

If you want a precise estimate, I’ll actually have to look at the state taxes and back at my budgetary projections, which I don’t really recall…

But, I think, you could do that offline, I think, Matt. Matthew Kelley - Sterne, Agee & Leach: Okay.

Our next question comes from Mark Davis of Davis-Ross Investment Advisers. Please proceed. Mark Davis - Davis-Ross Investment Advisers: Hi. Good morning. How do things look as far as the American Home acquisition, what is the status of that right now?

We haven’t had any regulatory resolution on that yet. And if we don’t soon we'll find other ways. We have several other plans as alternatives since the primary focus of the acquisition was to provide a vehicle for safeguarding preemption for our customers. So there are many other strategies. We felt this was a good one, but we have not had regulatory resolution on it yet. Mark Davis - Davis-Ross Investment Advisers: Okay. Yes, well, it's just one of those things where you just can't control it, because it's out of your hands?

That's too true. Mark Davis - Davis-Ross Investment Advisers: Yes. I’m sure we can all appreciate that. As far as the alternatives are concerned, how long does it take you to gear up to implement those alternatives?

They are not long-term lead time items. Mark Davis - Davis-Ross Investment Advisers: Okay. And as far as the goals of that are concerned, I understand they're primarily in regard to your prepaid cards, is that correct?

That’s correct. The national customer base that we have, and that we could access additional customers we could access. Mark Davis - Davis-Ross Investment Advisers: And right now as far as your prepaid base, what’s the geographic sort of breakdown of how that’s distributed?

Well, I think, we view our prepaid business as a national business, I mean, in essence it really doesn’t make any difference where the sponsor is physically located, because the cards are distributed by and large across a national footprint. Mark Davis - Davis-Ross Investment Advisers: Okay. So you’re just looking for additional ways to do that within the national footprint.

Yes. Correct.

There are no further questions at this time. I would now like to turn the call over to Betsy Cohen for final remarks.

Thank you very much, Glen, and thank all of your for your good and probing as always questions. We look forward to reporting to you on the next quarter. Thank you.

Ladies and gentlemen, that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.