Bancorp Inc. (The) (TBBK)

Andres Viroslav Director, IR
Damian Kozlowski CEO
Paul Frenkiel CFO
Frank Schiraldi Piper Sandler
William Wallace Raymond James
Call transcript
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Ladies and gentlemen, thank you for standing by. And welcome to the Bancorp, Incorporated First Quarter 2020 Earnings Conference Call.

[Operator Instructions]. I would now like to hand the conference over to your speaker today, Andres Viroslav. Thank you. sir. ahead, go please And

Andres Viroslav

Thank you, us Financial you joining And Conference Good for the morning. today XXXX thank Bancorp's Call. for operator. First Results Quarter

the Officer; are On call This XXXXXXX. Officer. beginning is of a p.m. There is replay our XX:XX Kozlowski, me will call on call Frenkiel, Eastern today at confirmation webcast The of the Chief Chief approximately with morning's dial-in Executive with Time the website of and being Financial be Paul our replay for Damian XXX-XXX-XXXX today. code www.thebankcorp.com. a

Before Litigation are to are "anticipates," expressions I turn Reform the and this Such suggested anticipated which Securities call used XXXX. by "believes," over achievements performance, uncertainties, and similar the those to are intended Damian, to statements. Private subject remind risks I'd that conference cause like "expect" differ words of identify everyone statements call forward-looking actual the could results, in or within such to when or Act the of from to materially meaning statements

as discussion SEC. the revisions For the see date publicly Bancorp's of statements, please the to the reflect obligation made no undertakes unanticipated Bancorp risks these statements results to of place events. which reflect or speak uncertainties The reliance occurrence and release with forward-looking which only hereof circumstances these not hereof. on to are date filings undue cautioned Listeners of or any events forward-looking to to the be may after the further

The Damian? Officer, Kozlowski. to like Bancorp's over turn Chief I'd the Executive to Now call Damian

Damian Kozlowski

us joining you Good you, morning. Andres. Thank thank for And today.

experience for of Total in XXXX, Bancorp held from we making XX% interest XX% year-over-year. spread share COVID-XX Loan quarter of increased from In the increased including revenue. both loans have the increased respectively. earned sale XX% quarter-over-quarter and X% loans our and and sure core fee While continued our people home regardless work are and we first developments. current earnings safe, momentum to observe $X.XX

unit drop Payment card efficiency. Expenses XX% higher costs transaction volumes down increased fees gross as resulting increased X% increased year-over-year dollar while with volume, GDV, XX%. our were year-over-year in

income XX%. Pre-tax loans losses increased year-over-year, which originated conditions income excluding and gains the vary decreased on with pre-tax for XX% market sale but

has continues fast of the interest potential be lower rates that the prolonged, the earnings the Accordingly, for is minimum share While still while funds per profitability We $X.XX be XXXX. share the earnings share now attainable, full guidance and evaluated developing to we've become year likely. for for guidance believe $X.XX our could lower business earnings XXXX pandemic per on $X.XX less announced our per previously constitutes impact XXXX. and

the removed the earnings have made target. performance our We $X.XX and of range

key developments quarter listed that are some are There the the events worth release. noting. earnings in first are in These

partners. add business In to building of second could Overall its payment to of gig the to franchise; program its three to financial client addition, relationships In first expand with to economy. services in an key the new expect our we quarter. concentrate portfolio. FinTech our continue and four changes the digitalization have additional driven announced contracts ecosystem currently to support the in products of Bancorp cards in extension SoFi choose our XX by the in implementation We and on quarter, Chime we execute addition

to turbulent this and continue even investments time. We key in make progress making are payments

fast to dislocation base any what advise developing will capital lines. squarely -- of in lower The long-term and focused on monitor our and during our growth we and our lower addition, situation lending In niche outlook. are this risk our have -- closely credits been traditionally changes of then is to helping strong we base credits clients lending continue earnings businesses the

about more over turn call CFO, our the this to who detail Frenkiel, will now first Paul I quarter.

Paul Frenkiel

Damian. you, Thank

for related losses equity return X.XX% rate of million loss swaps CRE million unrealized Thus, increase Substantially, all to income on through the over XX.X%. to XXXX for sale, fixed in assets from and unrealized and CRE interest might sale. was years of the loans quarter Excluding period. and of held $X.X million $X.X losses resulted losses, reverse the in $X.X related adjusted quarter six $XX hedges December to that rates held Of five maturing for loans $XX.X of pre-tax unrealized million of to which that XXXX. remain approximately there was should million December first related some over million $X.X these

value the loans. an The elevated unrealized for fair hotel portfolio, billion loss from majority of for the majority million loans risk in adjustments of $X $XX which CRE resulted consists estimated the sale reflect hotel loans of to $X.X primarily compared loans. CRE the multi-family of held rest the of may vast of the to These million remaining portfolio,

for X.X% These loans and multi-family losses to press the $XX recognized at not which books on loans resulting floors in characteristics. CRE a for other see projected of and release, in provide tables If breakdown below these be X%. fees cumulative price loans earning are sold, range. as new Expected be generally have are loans by the retained average assets. will the Please interest by firm loan type analytics net from weighted our COVID nationally

$XXX,XXX unrealized were of approximately In the discontinued losses losses million continuing addition operations. in in of operations, to there unrealized $X.X

fair of total a was $X billion there in unrealized losses So value. relating to

the based materialize reverse upon quarter to $XXX,XXX bringing of if loss provision future potential CECL an million the losses to in against loss future, approximately uncertainty was losses. total the $X of losses represents million. additional but Additionally, offsets related economic the first unrealized $X such model added loan could XXXX in COVID the Those

full quarter billion in first impact a loan the have compares quarter below That a on total X.XX% of balance X.X% The CRE overall in the average $X.XX loans that NIM significantly estimated floor have cost X.X%. on The the in floor $X.X weighted average CRE X.X% higher less QX. the exceeds approximate results fallen spread of funds quarter will with to X.X%, and and QX. billion

the is The combined largest reductions X.X% for billion is estimated at to block rate variable which quarter S yield reserve block portfolio $X.X after -- compared portfolio I at X.X% first and better for the XXXX. the

the is Program primarily participation earned estimated $X.X $XXX of fees funding. interest, the Protection second of an estimated Those in will Paycheck include with million second generate which to as Our recognized and and million fundings estimates first in believe be rounds quarter. both the we

million of $X.X to The million a for $XX.X after $XX QX unrealized pre-tax losses that CRE million compares securitization. excluding interest income, realized gains income primarily adjusting income pre-tax net $XX.X primarily loan QX CRE interest increased to million. balances. the $X.X higher doubled an quarterly on $X.X increase million XXXX approximately in billion $XX.X from resulting resulted $X.X of related income quarter net loans The for in and to million XXXX due increase of Average

reflecting loans million, balance XX%. $X.X leases on period million respective increased $X.X of SBA interest increases XX% and increased while on Interest end

related -- are secured incurred. and the quarter as insurance cash in increased marketable second $X by noted, and occurred reductions Reserve While reflecting have I expected combined, less by secured S life been block of million the and quarter for not XXXX. basis than losses decrease those block XXXX. $X.XX XX funds value points below impact I interest is blocks are block rate securities interest over and, was S to income Federal Overall, increased in by of periods, XX% cost of XX.XX% of the

We expected January accounting implemented current CECL, credit of X, as loss, XXXX.

of of combined we million commitments. total for liabilities tax As The increase benefit. result, offset losses retained the million unfunded loan future to booked a their $XXX,XXX $X.X for net was earnings, through and these was $X.X cumulative allowance to which other items

securities loans quarter. block The the resulted losses provision for a the excludes analysis. the greater ratio life I $X.X million million and its XXXX. management block provision and collateralized the resulted from determined S respectively higher total for cash loans quarter provision of insurance, to during provision of model for those the are a March which as internal ended of the loans in in Majority marketable XX, through leases value Because CECL had $X.X charge-offs credit allowance from by

ratio As is X.XX%. that adjusted,

source, in largest XXXX. XXXX to of the related $XX.X income. and prepaid QX up our in million cards primary were non-interest also accounts, QX Prepaid income XX% compared on million $XX.X were funding driver These to

ACH revenue the $XXX,XXX non-strategic decreased and $X.X of million payment to fees and exit reflecting funds processing customers. include rapid high Card risk ACH

X% the A expense lower expense was the or $XX.X lower QX XXXX was $XX.X compensation the below incentive Non-interest in year million quarterly which below million prior expense driven calls. the gain $XX of on compensation incentive primarily related the net that in discussed That reduction quarter. prior for realized loan portion million significant sale to reflected salary the and quarter target was by expense.

primarily X.X% end, risk $X.XX Book compared is average value leverage at earnings based XXXX QX $X.XX reflecting share. quarter which the and ratio year per The per XX%. increased consolidated assets, quarterly to first to approximated was approximately is ratio, upon prior base share

closing, characteristics our in the in are shown press our In new as I there highlight. tables loan certain like release portfolio would to which of

of majority the loss are X% a their loans, of of held billion projections. than $X.X which recognized our rate COVID vast multi-family an As loans cumulative previously have less analytics in expected sale nationally mentioned, commercial by for firm

Our block S equity I declines recent historic losses, loans, next and largest notwithstanding incurred have which of the not consists portfolio $X.X in billion loan block markets.

loans government with is is portfolio six-month a mortgages and XX% paying the loans period. for majority the the date value. loan of on U.S. loan to to principal of and SBA other XX% interest commercial half of those consist Approximately SBA origination guaranteed U.S. The government

recourse For issues, leases to which vehicles. we credit have the experience lease

these of our which the future, there risk to we demonstrate lower are is believe forms of other than related While positive uncertainty characteristics lending. portfolio

comments. my back turn concludes Damian. And That to it I'll

Damian Kozlowski

operator. to a for open We're up Paul. Thanks lot, questions, Okay. going


you. Frank our Piper Schiraldi line with the Thank of question And first [Operator comes Sandler. Instructions]. from

is now open. Your line

Frank Schiraldi

Good morning, Kay.

Damian Kozlowski

Frank. morning, Good

Frank Schiraldi

actively these your as wide point sale you value think I First, and it'll on through for didn't the that this or to book that -- go at is get keep thoughts on wanted your And it for some had this Are like point deposit you sort made a you you sales for of seems now balance least it held time? you to just mark. fair marketing be the this at sell? sheet At to nice well. deal pretty get open

Damian Kozlowski

it. No, we'll keep

the really market We sell time. have at then the for not a is that review and right issued There now. to how next lot isn't we're looked being days going XX to

market up. We're we're getting as still good wait if days XX to see we're -- very we've disclosed. So firms going and getting the

we I the or been little from disclosure the last think made, deferrals for to anything very date requests have portfolio. there

the very in. participating we're strong So gamut. we've marketplace, the collections it's generally seen markets especially Early what that in the performing across are the in

June. and though, are happens what there early we in -- see it's April really especially So to May, and days have May

holding the now if just historically. we will what do continue for we're and have them gets So to hopefully we better done market

Frank Schiraldi

Okay. sheet And credit, a loan then your just create balance block big portion S of areas for a in obviously sort of terms like book. of just fortress

Just you you guess is LTV that SBA and mentioned pretty you the that? the talk you curious book? if where $XX feeling hotel the book, low sale the held risks see or about the outside I greatest the Is could outside within SBA for is where of on are enough that portfolio those million in hotel good Thanks. of about it portion

Damian Kozlowski

you I is Well, Yes. correct. think what said

exposure we don't be have that like things are open on we've and got to and where economy government assets travel. dependent the think guarantee I obvious a

and very it's the So low. good is the that low LTV us like are exposure you of for said part

our the would but hotels. since the taken be first auctions We be most -- see on haven't and especially all. area, SBA people at a small The unguaranteed in And the we then incur have portion, concern Then loan losses so it's I the would historically are My substantially losses and the second. that hotel even the the CRE portion S in the also guaranteed from during it recently. would of in black of leasing have taken securitization and starting guess but a on card I losses SBA any block portfolio it was exposure lot would stressed leasing, cycle, obviously, not other of any be focus not is open based, didn't amount portfolio. wait we to which would and

Frank Schiraldi

take will leased months just you total back deferrals things the vehicles of do XX some days days. -- deferrals offer you the deeper and you you for or the dive offer guess to And after probably that these a expect in these when harder assume look for least? XX you leases another of a leasing or at think take XX about Do do days maybe a book, I six

Damian Kozlowski

as we're well, when it seen from and now a debt months -- that's do guidance Well, be six restructuring. to the total FASB the

everyone to guidance we're else like the follow going So is.

COVID, need being not will do another when probably to definitely people going really if months -- if deferral down to six they're know businesses their of So shut It's we because not those and extended due we're that. again. deferrals for

is So you there or not that's fourth seeing this is portfolio, credit where really if probably too. banks start the going be earliest the quarter that, but XXXX at first quarter events -- in to only other us probably

Frank Schiraldi

And then for Right. me. just finally

up If new your your usage of tremendous sense better partnerships GDV thoughts up questions with GDV the about credit you I quarter, the in about holds hold And growth put you but the would in here. the obviously get from debit trying on can some -- think. first than think some shouldn't of terms growth to if on certainly shuttered, how economy quarter the there's you second in

Damian Kozlowski


– So

Frank Schiraldi

I know a Thanks. it's wildcard. kind just of

Damian Kozlowski

Yes. wildcard. It is kind of a

that's So payments debit we getting the into cards. of one our things started those, in stimulus

So end payments we been $X for stimulus the first quarter had and very in the April. That and of funding could over see funding. our now billion, in positive you impact over has that on $X.X us million

we've What One couple negative, certain funds we're area the seen gift was positive. the was a seeing, of was right? programs rapid actually that growth the down the quarter And card. first that in other was only in

have will money than If lot we're that they across, think be reopens and base at that seeing early. people I the deposit it's later economy now because restaurants, et too cetera. are think I our same a seeing on sooner just of more other right people by it's mitigated the on spend need it things least a of something to basis, that there, necessity not rather

hasn't April. you'd slowed So it into and yet that's like expect shifted, but the spend has going down

too. the lot don't said, that well might volume products already implemented we're have know. there's sign we to in now starting programs is XX do mitigate as and Like to products second new major a We So expect we three example, programs that a being where are of program. from that example and implementing quarter, good just the for or their is hit four SoFi just as -- I

it the And business So second an by that quarter, the impact will there's and the litigants there like from at new -- like not economy from things looks like the have the looks if for there's quarter. hopefully third stimulus business will least again. third on the be open

Frank Schiraldi

-- I had then so And cards, stimulus, those the $X.X those with on And that came people -- mostly that filed to billon guess, IRS. just is

Damian Kozlowski

too. through we into it now it yes, quarter another quarter Yes, we're of There's of -- that some two. of in getting all lagged expecting -- million was and that's $XXX checks most was -- was were one, it these probably deposits type actually --

a number who they it Chime has Bancorp given a our like that that So -- is account second impact into carry that or stimulus when onto card account that represented But taxes on a to filed all platform. their quarter. the going was came through anybody

Frank Schiraldi


just prepaid follow-up, comments And Okay. I your the about on need categories.

gift of were I prepaid. cards the you if really gift broke but guys prepaid. is there's total lot you talk noted the prepaid? of release weakness big out place detail types know saw only card percentage You how within a don't great, in you a that I offered about you about know which where Can as

Damian Kozlowski

gift statistic. knows -- The don't that total if I amount I'm -- of card know not Paul

Paul Frenkiel

third-party relatable terms information, information it looked we that. to because so We've detail, disclose in that, that's we're giving We certain at reluctant we to a No. be can release third-party don't don't of actually don't. specific Frank, but

Frank Schiraldi

I right. That's All Okay. Kay. Thanks, all have.

Damian Kozlowski

you much, Thank Frank. Okay. very


question Thank you. comes Raymond And the the Wallace William James. last with from line of

Your now line is open.

William Wallace

Thanks. Good morning, guys.

Paul Frenkiel

Good morning.

William Wallace

bigger or quick a -- Is anecdotally you follow-up the is card, just kind of it last is as the just business of the XX% it question. Maybe do to feel -- gift

Damian Kozlowski

No, XX%. less that. it's less We that than it's don't no, It's no. than far hard. but give out, No,

William Wallace


given achieve the confidence the So with a you bold maybe you the moving then to uncertainty. if and and target your low the to intact, just you kept you could if is I'm little a get move -- your to which some of kept bit guidance the maybe talk of end visibility the have that us you'd about your you help ability parts there? curious

Damian Kozlowski

So do. what we we we we're was ran did what did -- to supposed

securitize the a ways different we if So whether if numbers we don't, we loans, situation looked ran we certain we growth and of at get then in the areas. bunch

at like very our $X.XX. loans the impact comfortable the expense with a with that things and growth. course in new we Of for payment fees it interest outlook level ran we low protection come and would rates of the became And

So reasonable with is a we enough ran the it to different scenarios that $X.XX target think to in bank. continue times

not a different one with kept ways it different things down and and in whole range. we it's coming So on that our on being thing, assumptions based we up ran bunch of

is just a we say investors to little hands in have we there. what's what it easy say to out really throw guidance have is So know and guess. think don't guess we put we bold that going if happen. going responsibility But your I it's decided to to happen think I a we we up to

all the we've why why and that's We credit don't financial we but there that to occur shock know CECL. that's about reserves the have services might implemented to seems be, industry,

that's So a we there obviously reason. that can't either, second for guess

say that reserve is event So say matter doesn't CECL the there be we'll might up it our can't true. screw well and because in some all just that's heads we our and seems that, always future, oh,

$X.XX one, through $X.XX the we $X.XX. seg would say I be we scenarios different the over website not deterministic possible The out in guidance guidance us in our real will of we outcomes, best we were around and more model over gave like our could $X.XX growth. and comes doing -- became the give did to our with of the to targets the with product presentation, try it each on we again comfortable looking where With So which different all updated businesses. that's for how at we

William Wallace

growth portfolio approach. you Okay. on balance -- a hope. Is an that hard say the expectations there That's very interesting in that should It's loan hit sheet in the interesting. growth would've I -- Thanks. Maybe

Paul Frenkiel

some, original but Yes, this from for There are were of $X.XX. target are some, the down them yes. Yes. we've ratcheted where -- for there they

in they're but as they Damian there, add are And lower. So would --

Damian Kozlowski


Paul Frenkiel

Yes. Go ahead.

Damian Kozlowski

while I things the portfolio No. And very seeing Okay. good like it was we're block where and block S growth. still

So people are looking liquidity. at they need securities their and

certain So of very we're having areas the pipeline business. in good

So nobody we've much we our now deferral, those look going refinancing ratcheted -- we not that months zero just modeling And so it's to as prepayment. no, to lot forecasts. a easy spread and six be than so is have it's to business that when a some were say of you've easy we to you're because it's where got we've think down think growth, right this lower leasing expect don't down things going took to

what So hard would you've you look product a at at pipeline stability, it asset and and be. a take reasonable each got how look probably the and rate of growth see renewed so lot is the line really

William Wallace


Did got And prepared some apologize commentary late. like on bit so remarks little it the maybe it expense and you -- expectation? give I said I around in you sounds a your

Damian Kozlowski

the level enough situation it this the quarter. right we're then and kind -- a stay to we're the its Well, And improve. have depend are well, would growth. the like at going -- to lot so once quarter expect improves, least second up so opens first level, growth in Right looks of until business, seems Yeah. on expense for at again the revenue the will where the so we we now until world million similar. in revenue of revenue XX% we're now stay the to or going the -- that maintain business. tied at or between this That's $XX.X it expenses And around how right

William Wallace

to Great. kind are you continuing about you the business, if little to -- CMBS just continued waiting a market CECL underwrite talk Okay. with underwriting, all see you Can are to business what that and have opens? you're originations bit now? doing In but you of the

Damian Kozlowski


of we clear was loans end we tail to changed a sold. -- it transactions the was the And weren't there terms. that So going weren't once be were dramatically we --

to going reserve So I not one-year we're in loan transactions there think $XX but prior them. they now LTV committed was million, $XX they're down million the about about have substantially and of to lower that a they're different, through, to we sales

pretty we're deals just to have which difficult I attractive so debt up you're year And of So Many want finishing a now to, proportion put -- capital. these, interest if love loans they to are principal have reserve lot much going do. right few that's too over wouldn't principal we but would But go has -- just that. left We CRE from to with a $X obviously it, could loans do and previous XXX% those wouldn't -- extremely are from have they're to a and billion $X of and put now to our reserve terms, if we I billion new of out extremely then do very on to just a dropped restrictive, commitments. died.

William Wallace

market put on if to or have that and to And the point closed you you're Okay. opened as what make seasoned portfolio? the the up. that the you'll reserve if said CECL old you remains those? market to back in of become would and decision And then and move too these it's where you'd to going for market revisit into if so be XX days so, to the there loans them see -- sell review have a today Is just held investment the

Damian Kozlowski

securitize, to first -- the yes. Well, and

there probably go if -- nine the months market loans is those to you're those to going loans. securitize loans they six, though you're for the still So if going past not securitize a

institutional investor that company like it exposure. doesn't that an to kind that wants an can't mean So you of insurance sell

-- securitized, yes, no. loan loan the sale, the So the

loans last someone the Of course selling were we else to securitize in transaction. for the

preclude case, But sale. who that would to in also loans. that want other buy So loan investors that would there are

The what the sorry. second part? and -- was I'm

Paul Frenkiel

Yes. answer loss the loan on implication. the second part. I can this. reserve It I can answer was

Damian Kozlowski

-- Oh, anyway. okay. Yes. that's That something seems you

Paul Frenkiel


regardless and can't So And where hold switch at you bear net you you accounting those actually value that. in that would of retain fees the we mind own of $XX. fair loans

So I loss issue think comprised don't -- be we experience have have for that don't majority -- it's an would those and loans we portfolio. for significant the the which the vast the of multi-family families

don't to I going that's believe be an So issue.

William Wallace

that So this you million -- the more be loss think don't with would think cover, $X booked you prudent. quarter, basically cover that' you

Paul Frenkiel

basing than so we small bit other, if I'm we there's other and disclosed use a the have don't a cumulative -- virtual firm COVID the which in aside will tables, that have losses. according tail it less of majority what the $XX retail in with we a predict small million to the Multi-family No, is off from as -- is little and even analytics X% vast of multi-family.

it doesn't there. an there's that be issue So to going appear

William Wallace

the question -- you this million million on deposit, Nut us last have the Okay. it based how works? The accounting that said can book And how portfolio. you tell then on $XX.X you $XX.X standards? I

Paul Frenkiel

we a we in disclosure, what's release. -- really comment. That legal so the is can We comment have was can't the only Yeah. press

William Wallace


Damian Kozlowski

in is not million $X.XX As guidance. that just $XX.X always our be clear, to

William Wallace

you. Thank Okay.

Damian Kozlowski

that's into I that. why think probably you're

William Wallace

through curious and you income like it or would were at going I then just look booster fee if over and a not. a two be Okay. or Well, was year

So thank you. helpful. That's

as regulators you consent and checked then. like all update, you I felt Can an us Can order. the relates know last in there has on stand? coming -- changed the I update to since said question. believe world you you Last had were quarter obviously boxes you the give the where was you it

you and So think help? the update to et us consent about restrictions can any order help cetera would the

Damian Kozlowski

we concerned expect If think maybe will that will you acknowledge not be. such are in are we're we not said that period. that. and And happen soon very priority believe world as a used to compliance. changed the bank expect, the agree in full maybe has the we regulators that assessment our imagine But with we and you'll will -- we regulators in a full we're we so -- we the that dramatically still We are about, before hopefully can fairly -- short our as

William Wallace

Yes. Okay.

in an So did annual come a...? I it's review don't do if their and they know or

Damian Kozlowski

they Yes, in. did come

William Wallace

Yes, Okay. okay.

Damian Kozlowski

I can't speak more I -- that's on really say all can that,

William Wallace

Understand. Thank Understand. you.

questions, guys. -- sound it Thanks I of Okay. probably I've step else nobody like so I'll asked to out. there's ask kind enough but


session. this and And remarks. turn now closing does you. for to question Thank conclude today's answer Kozlowski I would Damian call like back to the

Damian Kozlowski

being talk Thank you, earnings course, these safe Okay. think today. operator. we'll Thank call you of on soon. you everyone. Be important that's We appreciate And most I the times. obviously in very interesting


today's And disconnect. Thank participating. concludes you you this may and call. now you. Thank for conference Ladies gentlemen