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Bancorp Inc. (The) (TBBK)

Participants
Andres Viroslav Director-Investor Relations
Damian Kozlowski Chief Executive Officer
Paul Frenkiel Chief Financial Officer
Frank Schiraldi Piper Sandler
William Wallace Raymond James
Call transcript
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Operator

Good morning, ladies and gentlemen, and welcome to the Second Quarter The Bancorp Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host Mr. Viroslav. Andres ahead. go Please

Andres Viroslav

Good The thank financial Bancorp's call. Jorel. us results for today for second morning, you, you and joining conference Thank quarter XXXX

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

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

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

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

Damian Kozlowski

X%. Gross institutional dollar RIA $X.XX X.X%; institutional our year-over-year. XX% million which related Interest a includes volume X% $XX year-over-year. a X%; X%. Bancorp revenue and expense increased XX% of by loan or and year-over-year grew excluding XX% Total non-recurring growth. of SBLOC, banking, was XX% credit Loan Good share line non-interest income XX% Quarter-over-quarter balances increase balances. Total growth with you, morning, year-over-year Andres. cards growth grew led income business Thank The with net and in earned PPP balance leasing financing everyone. a from grew growth IBLOC SBA income and grew XX% from fee year-over-year. in

previously partner not now Solutions with virtual challenge set have enables Acceptance corporate business announced base. to named enhance the our Payments named partner but gift, in in continues The implementation to Group other payment of rapid the another push-to-card newly was group also healthcare Group Solutions verticals to funds. includes all only pipeline. Fintech as and our capabilities and Fintech debit This prepaid of to expanding development a quarter major integration bank government Payment and card, addition robust Current such ecosystem. card, market, our expanding in our an Our Solutions as We solutions created

also we partners. of will addition, innovation new named announced integrated and The In Fintech members in environment Bancorp Building our create our team hub creation for Falls. downtown Sioux an

launched We new this XXXX. website expect a to reflect a quarter our We new as in occupy fully facility the to company. progress expanded

companies. and find presentation, helping in our plan In can four-year build index for of Small-Cap success from and and also economy. is also in index Index. XXXX. the we This S&P it including index to Vision to XX% a the that Also focused is are included to XXX company about useful better you partners. of This with site new broad sustainable were selected information million or new presentation large on key investor a are industry and achieve by always the includes representative On public educational the honored industries S&P ROE set companies part the a mid-cap our team be investor to XXX, small-cap revenue the introducing who quarter, be and our in second our power XXXX insights we $XXX

performance a our our Lastly, $X.XX of outlook, XXXX $X.XX to year-to-date $X.XX. share based our we and from on XXXX are guidance increasing

that earnings see drive and continued tailwinds We continue XXXX in growth beyond. should to

We for call Current XXXX suggest earnings more more preliminary of with details XXXX guidance second growth release. to give CFO, now share the will the quarter our Paul I turn XX% per about XXXX give revised income would over third or our quarter. over Frenkiel for trends the guidance. to

Paul Frenkiel

while increase quarter The income, $X reflected losses, approximately loan of year-over-year and $X a each respectively not a increased to SBA SBA loan lower fees. increase $X and expected related increase reflected and equity million million X.X% to provision fund rate. interest to and non-recurring non-interest assets PPP in X.X% net fees tax income excludes institution growth in $X recur. you, a increases of compared in increased Damian. increased leasing IBLOC another million. line and million, originations Thank for of credit negative PPP XX% and are net QX which interest adviser second a to interest returns and XX% were financing $X.X the Return The income credit in The on to million the SBLOC, XXXX. for and

$X.X prepayment million CRE at realized from resulting payoffs. on fees primarily net slightly and on commercial exit on interest loan income fair While in value loans loans non-interest decreased gains reflected

July. new of securities securities lower CRE higher-yielding occurring closings reinvestment interest prepayments balances, generating in Total rates. interest loans a million with $X We in reflecting lower and the of reflected first income securities begun reduction have

loan are of Our related result the lending collateral. their as reflects average charge-off history, quarter of a than believe risk the nature generally growth $X.X forms billion other loans of of QX which over of for lower XX% our We represents XXXX. portfolios

estate loans value fair $X.X securities insurance. buildings, and or collateralized at the apartment respectively billion by comprised are our commercial life are cash real non-SBA of securities of IBLOC Our primarily value of SBLOC while marketable

to have loan origination Our small values. or either primarily loan SBA are date which XX% business XX% of to comprised portfolio government-guaranteed is loans XX%

while have only prolonged have The July minimize X, due payments. contractually million The funds to was rates. deferrals cost pricing interest of expense leases of legislation majority and contained been The tied we reflected XX business $XXX,XXX in loan losses. March of by X.XX% of underlying which is XXXX issuance COVID the which all million million with Most small portfolio, of and in to our not loan made earning in QX unguaranteed from payments, Of the was history remained rates. leasing Federal deferrals principal July had XXXX. points. detailed of net expense XXXX encouraged primarily to QX diversification Tables basis for release as stimulus XXXX XXXX, Reserve deposit in resulted debt earnings XX, interest loans $X.X payment our press our For the QX interest $XX which expired increase XXXX portfolios. compared compared recourse senior to the all an impact a date deferral. of the of increased at $X.X loans vehicles nominal the to in reduction substantially the temporarily Loan average market at business small of margin interest vast balances X.XX% only balance QX their was of

loans payments up the excludes our total was of primary loans $XX.X those to recovery losses, compared losses ratio the June $X.X QX expense. funding increase economic in risk non-recurring an related The reflected value spent, vehicle credit after the and to of credit Non-interest funds vehicle The the XXXX the $X.X income credit analysis. $XX.X $X incentive million to XXXX and impact served auctions Prepaid to for and a and payoff, respectively $XXX,XXX, loan management are of were XX, largest XXXX. for shortages. income. marketable the reversal was source from the quarter. Total QX on non-interest decreased X.X%. fees, of of cash aforementioned factors internal provision accounts billion debit is payment-related to income expense, of The offset margin reductions only was by other in net X%. impact its vehicle securities benefited in insurance to were a CECL $X fees and of Leasing due reduced; are reopening X% an in driver adjusted incurred $XX.X assets shutdowns by reflected higher yields. As because loan securities loans of ratio prices QX line billion model market the and and approximately the XXXX from and for higher life million which collateralized including compared average of million these of increased in which interest expense allowance and the the IBLOC have compensation negative certain SBLOC pandemic pandemic-related the nominal balances increase million, equity to million, salary and total reflecting and allowance The an of or compensation

to focus in expense relation management, to on revenue especially continue We growth.

turn impact versus price related the per stock-based value retained Capital XX% in compared average from ratios stimulus second to of levels impact approximate Second tax compared tax recent primarily increased company's which of the at resulted the $X.XX in compensation. quarter deductions back earnings reflecting Damian. earlier continue results per a an reflected also as the temporarily large result benefit year to rate excess increase resulted stock higher XX% Book The The I notwithstanding and share original to share years. call the increased from reduction now will of tax deductions impact the earnings a rates as XX.XX% repurchases. of assets. stock satisfactory quarter the and to grant to date. payments,

Damian Kozlowski

Operator, Paul. could Thank you open it for up questions? you

Operator

Schiraldi question Frank first [Operator with Your comes Instructions] Piper from Sandler.

Your open. line is

Frank Schiraldi

morning. Good

Damian Kozlowski

Frank. morning, Good

Frank Schiraldi

more so anticipate kind color curious going preliminary growth to XXXX Just if the could detail in I'm have got know drivers more give you'll terms the guidance payments to you few in I just sure about, to fee there which give the quarter, any about plus? you get guess you're questions. offer. getting next on more rates you the I'm and And I talk income. is wondered of can I But XX% of to

Damian Kozlowski

also think next with economy. that obviously. very XX% but It's bumpy payment buying GDV real over It's sustain is in stimulus, But still we have on the because months, a pipeline we there's behavior. of over with the Yes, our the can think get of transition the as pipeline we'll we we the particular couple years of side extremes growth consumer because the years still couple GDV. last that been

still $XXX XX% the and already have So closed million IBLOC XX% We XX% there in million the been pipeline. side to SBLOC about commercial demonstrating. the very growth growing another in that's side, From side. that we estate we as side payment lending the on close so and and and And side. robust IRA the restarted multifamily. on to between pipeline or from been business disproportionately real the XX% it's We $XX the in side we have are close. a deals already have we've to

We've weakness So we're of when of board. And a tailwinds. not give we'll guidance. and across experiencing color a got per-share strength lot more a I lot lot give And think we a issued about as look we go at a where which new company. are yesterday, we we and think presentation, our which can today you can additional where of investor facts has we the lot

Frank Schiraldi

the related partners. quarter side, on that with looked seeing, to lot has if then down. in we’ve least big is I seeing margins been GDV like And it we've look the I stabilized. did my been discounts know margin this at generally just a at come volume model. It Okay. of

still about think in one-for-one? stabilize you growth, you kind of if get margins thinking or So XX% do of GDV income terms of half growth, are fee you when that

Damian Kozlowski

I But -- just is ramping have Current started half, partners joined that up. new of SoFi, a think last we a which ecosystem. year, which such still we have still being because real have like we partners high-profile our one lot just

too So the like in face obviously players and Chime. we dominant industry have the to PayPal

still this a think more for it little half the maybe again chunky rest it's than will year. bit that. I So But of be

this we For November which And year. in really quarter excel year-over-year we the then with bad third quarter, we had a the year, the comparison. a fourth last stimulus have should

the We'll think still fee maintain stability see fee to going you're there'll from growth. bumpiness year in in growth this be GDV the more you So I next what and growth. And GDV year. and see

Frank Schiraldi

you then couple a partners there. And of Okay. mentioned

past seems partner the I had So first Current on know -- other the bank usually the banking other And couple primary it the couple of or first a TBBK current has bank front, and partner. of has in is like partners.

over it is Current? if that of wonder it Is business? some more I partnerships say there I of I their new How were if place? anything there that relationship with versus apologize anything, other you but there in about detail the your So does Is was business? taking out can work some missed, old

Damian Kozlowski

been in appeal product envelope capabilities, BSA both TBBK of our our of in and our compliance has the part but procedures. and of So technology investment also processes

So but we're been real with benefit to mature view of other things with two a programs those that lot being attracting have more company. our a as partners,

a or to they is fintech it's order base more not good thing diversified. a that's relationship one for -- there banking So processing bad that thing a a have ensure or company have to in necessarily a partners a

And However, many establishing. there and tends to more other banking bank be a we're more like relationship. in of parts lead

over to speak be of partner them, a Sometimes time. ecosystem but of advantage it's the don't to of strategy has and our and business each spectrum not we for if upfront with plans. player ecosystem build partner to is many own we for it Current we even their across to the establish valuable partnerships, within the and activities that's one But time. we our first. our I our partners partners And how the tend that within over relationship want build we become for that dominant the run

Frank Schiraldi

Then for me. just Okay. lastly

that SoFi a you could own Obviously, after is know just wondered relationships certainly that ramping up. You charter. I you about talk their that they've And that. even if I have more after bit partners also with still business mentioned Borrow. little like can gone bank

on and said how still -- to touch or are is guess saying is -- and up ramping somewhat So this. TBBK. ramping ramping ways could about of still you business I then that into that all wondered competitor when up business Galileo think just revenues still that if they in And for become up, you they how fits some that? Do I become or can you're

Damian Kozlowski

be capability SoFi. a not manager. processor was you Galileo's by know Galileo There a a processing. as is can -- processor. Galileo was We're a acquired also where occasions are program

you program think manager you can and to competitor bank. if if they're the involved, if partners. processor a they're other program a captive parties managers, the be of competitor Those the have not on there's are manager. the the there there's with competitor program ours three So is processor main but generally. they're the not They together, a bank, of three depending a and And then

Frank Schiraldi

Okay.

at if just all. they I Okay. wondered were expanding

Damian Kozlowski

with I to provide with think of SoFi think don't I relationship not be have the of there not. envelope that. That's think of over a they going like Well, always -- with can They we time long-term manager. are I to get -- -- able if we're not anticipate regardless we're long periods will don't companies be that regardless up of Galileo. them charter And part a SoFi I to course. activities competing we're program But is a or competing the of value

If parties. it you between competition get you that different think the sometimes about the in

you but And manager that. do too. we don't could bank, be a be can also program You a

a the not say that roles work this we manager. We're one we of worry the a can and processor not competitive a role. We're ecosystem not threat. so program do three about anybody with So within being we

Frank Schiraldi

push I into with charter they Galileo of owned they're that sound well. believe doesn't a that Sure. SoFi, like a looking the thinking was by SoFi it just bank business. But being to are you bank as getting side now

Damian Kozlowski

for value think many scale they can or the we I'm of across decide using real whole SoFi, of long-term and going whether going too. make activities I envelope case not, not but partners they're scope we do understanding have speak that platform. I to to different Well, sophistication the and large that in to the so the think there's that but that our partners to ecosystem our And including

of Just about are or whether not to the having at or the are And platform just seeing us and partners capabilities. there. added lot more out what our least as we would contacting they discussion more and differences recently, Current using better other at our we've we're institutions opportunities a be see a those that

Frank Schiraldi

Okay. Thank you.

Operator

James. Wallace William Raymond question [Operator next from Instructions] Your with comes

open. line Your is

William Wallace

guys. Thank Good you. morning

Damian Kozlowski

morning, Good Wallace.

William Wallace

Excuse me.

$XXX So closed you think just the pipeline. business multifamily Is mentioned million this lending $XXX Damian, with million said another the XX… you I in restarting

Damian Kozlowski

No, to should another we million we to then XX And or we've the XX million. have days. $XX closed $XX close soon that next close within

William Wallace

Okay. Thank securitization you. sheet be Is this a meant a business? to business balance or

Damian Kozlowski

These securitization are This deals. all the new the is replacing business.

was loss floating our really low but banking if one securitization takes asset securitization of think was business all multifamily a it but commercial which the away to the the were class It's which national it's loans banking activity So spectrum this conduit on very investment element, have a rate really business between This which community which banking. in is business. created, you That's most is local banking community more rates. properties either. mainline where securitization the not way

William Wallace

deals Are the balance already and the or closed pipeline out that's on the securitization portfolio new? deals these are that from all that broken of these coming are sheet you the in the

Damian Kozlowski

These retained with team that it's after shut we that down. are new all a but of part that was business loans,

So direct national broker asset with these people type are loans. within experienced class, these our framework are of of and this the other doing contacts that with

to quickly. got very the in We of a this pipeline the were going. business rapidly restart really initiated May. beginning we very So And able good we

to that will exit at you be And some about months if portfolio portfolio capital. time at XXX% floating new loans have roll is Remember, these So of off. maybe rate will X% that this XX a we realized going too. put on we fees old think about fee that then of

asset these also can we opportunities, hold and loans. distribution also other will of fast that very who portfolio. amortizing channels sale They're there to put we company's so to may are other So capital or sell extremely want grows, It's it good but insurance into companies conduits. flexible. And people, types as loans have, the class base an to

is very flexible. this So

need reduce we reduce easy do to that because it. to if So other growth businesses of portfolio it's of the very

William Wallace

Okay.

called the And – in prepared five-year to you can you remarks, it your to mentioned remember ROE? the so, I plan get XX%

Damian Kozlowski

XXX, Investor it released. been in just it plan, is our called four-year that's appears The presentation, Vision and

William Wallace

Okay.

portfolio were So the due loans these of yielding, well, floors? is this rates, above billion to $X.X correct, loans timing when of with market underwritten multifamily

Damian Kozlowski

little but X% so portfolio very floors, have billion, for Correct. X.X% difference not Yes. big difference But but the $X.X before. they're in portfolio. in the smaller loans we approximately originating low as But where we'll and they're they a X.X% But the a up at loans now. that, they by holding are than They're There's where is the points accretive. make between XX about were basis ballpark. originating you're replacements we're and

I XXX% we'll But capital. originate out XXX% at And at capital. think to we'll about we're max loans. of continue of

sell we'll So loans we right, excess can origination, if those more. a originate for fee, have so X% we

off to be income So interest excess loans in up transitional also to we'll difference able fees loans, with need the order then loans if and any both excess originate to cover that's the make we the those roll-off. coming between

William Wallace

Okay.

you you a yield, Is your lower of that need return you've product. to hit managed equity on asset much this just of this need correct? given line right? I So, presumably then now business business mean, that excluding then risk to generators, will target kind

Damian Kozlowski

to roadmap looked it's business, is payments, which those see there's capital through to credit news now the next of and strategy over to grow. the Vision and looked time. classes day you'll the all we asset and good or understand, than can credit three the we're commercial-heavy high will XXX sheet that four a a whether we've very and faster then the roadmap years maintain right? planning commercial-heavy growing but a long the and to process, of ecosystem the the able into embedded returns, balance key business difference said that going drive hold this share equity process, expense continue main I ongoing part are the at on buybacks, able revenue real XXX. how somewhere so the the the what in also of exercise four that at we're balance the been positive maintain scenario years and there's And is And expenses, or So, period revenue sheet per growing really return on which or last the Vision to equity. credit return then future, still sustainably in at payments-heavy, this should over was, roadmap, end are between There's an for elements Vision and in we mean, payments-heavy around of tenets between the obviously the Jaws things of believe and the When this there's income did we it's that is of XXX.

William Wallace

Okay.

that those and did Is was to those buybacks the You XXX,XXX I another half up. safe the two, you'll are when mention of see existing buybacks, back et that that went noticed buyback? grants the bought over cetera stock a it that, the in quarter. buybacks even that, one first assume booked. the share it the lot continue year is usually good I exhaust the But to believe will with of period-end count

half million buyback continue you in see the the that $XX the count mentioned So roughly year of impact had favorable would per should to at we range the that more share back before? quarter

Damian Kozlowski

Paul. give to that to going I'm

Paul Frenkiel

wouldn't But a the to We've that buyback. we will last You're absolutely that more grants. right half divesting There but the in year year. typically grants of the more be are continue no year. It's of first something represents similar XXXX. some Wally at half over or announced there the of million There's that to planning. continue fewer, reason time we're the going in $XX think

you see reduction. a so time over yes, And should

Damian Kozlowski

this and between sure that dividends where stock dividends between is. our with the and The market we'll continue returning rigorous XX%. price we're making and That $XX through XX% is consistent we're year. on mix was choosing XX% industry basis around buybacks million target depending the yearly and a or right at but the and Board buybacks also quarterly capital we're on buybacks Now and the of with

William Wallace

it a Okay. on I'm the the mistakenly some was this this call Thank week to the going a amount you. decisions CFPB And to I earlier question ask investigate sending I'm around the extent on Chair how this this Banking, made. curious of call wrong account noise comment And large just account time. been Senate to the supposedly. letter complaints are Earlier asked right Chime to week, There's so you closures. on closure can there what

mentioned in the I that one of Frank's have you think about you it of and your making guys answers to procedures rules questions compliant. regulations everybody and around that and one sure policies is

any around, you it generically etcetera? you closures specific maybe to a help Chime, decisions partner So doesn't and to comment that make but might just be on could have how make account

Damian Kozlowski

that when and follow our in state because we're rules. were to it across governments. specific process institutions all, and for And are can't of also way. they but things And of we the maybe activities process. And responsibilities they press knee-jerk case we the overlooks we take are certain that dollars we federal billions first identify across one reportable. do regulatory a on at really we billion We file all anything. law the other program the any literally that been And do go seriously. government platform of was programs, level clients. $X And see covered have to able report to are It's and not part things I required not So in proud almost and defrauded the recover our have that. the extremely or fraudulent obviously of federal accounts we US through a both to letter effect can decision-making has very a we on practical state comment certain to try don't. in way of a We but but

have another one can individual in multiple that ecosystem. program partner you we may doing and account across our activities have can and you So that in activity will be see an

and of it than we're it comment part by seriously. it's can't to take necessary. We on when other So, really the I do do law We're that it really, required process. we

William Wallace

my Appreciate Thank helpful. step That’s will question. I you. Damian. out. Very last it.

Operator

I'm now this I to would turn conference like showing back to Damian at time. further no Kozlowski. question the

Damian Kozlowski

joining operator. you, you everyone Thank Thank us. for

for profitability think and you a for everyone growth working joining us we we're our going to lot continue to community. next see I over and in of few the today. continue years hard Thank

Operator

Thank gentlemen and you your participation day. and have this wonderful today's concludes Ladies for conference. a

disconnect all may You