The Bancorp, Inc. (TBBK) 29 Jul 222022 Q2 Earnings call transcript

Welcome to the Q2 2022 Bancorp, Inc. Earnings Conference Call. My name is Vanessa and I will your operator for today’s call. [Operator Instructions] I will now turn the call over to Andres Viroslav.

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

with Time Paul via our approximately Financial be a call Executive webcast our website is on the me of today. There Damian on p.m. are XX:XX On will www.thebancorp.com. Kozlowski, being Officer; webcast and at This the Frenkiel, website Officer. Chief replay beginning at our Eastern morning’s call today Chief call available

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

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

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

dollar growth improvement X% year-over-year earnings X%. Bancorp volume $X.XX Gross share and X% morning, from revenue The everyone. Thank expense. continued of growth with GDV showed Good generated you, Andres. year-over-year reduction a

loans quarter-over-quarter impact and third with a previously continue strong. spread XX balances the to to funding since to estate stable variable the XX% decreased quarter-over-quarter Current year-over-year trend and financing positive grew quarter expenses I growth Loan which of economic platform we rigorously businesses next earnings XX% very S to RIA focus institutional institutional manage lending real growing with two significantly block, continue year-over-year Expenses at year-over-year block quarter-over-quarter real X% excluding as asset grew excluding this All on billion with payment The than growth. XX% with quarters. rates assets. rise due and X.X interest and the loan conditions includes payments the discontinued growth have over commercial estate continues coming XXXX should scalability XX%. bridge partners. and by XX% over loans XX% productivity. years. of expect its through more Bancorp program fair and deposit Both growing sensitive We its in resumption to book growth led Bancorp is value Total grew that businesses its the and ecosystem and approximately be

costs re-pricing We slight expect experienced Reserve. rates increases amounts when increase loan rates. with This significant are in June, Fed of raised with a deposits with lag, funding month. Federal a to reprise to in the increased rates Funds re-priced approximately Low the was XX% as lag by following of delayed

I new collateral, leases cash lower starting to and the and multifamily established economic government on values. institutional XX% interest residual of history and have taken transitional net vehicle floating borrowers, with losses entities have many SBA of are our minimizing or values our in impact block classes the supported collateral, through rate credit cycles, worthiness of are However, by rate our an to begin loans. of that We XX% which appropriate loans economic believe rising increases our believe guarantees portfolio in and June, loan high directly rate loan interest amounts increasing margin. securities states offset loans fleet rates sponsors have that previous have will throughout increases. is loans back and asset losses income we loan block Car and book these had an partial and both with rents from significant occupancy are of S XX% to the Most to liquid money growth impact of or interest populations. risk that

last In held years. and have a rate generally we bonds experienced fixed purchasing rate over half during interest environment the addition, government securities other low and the two

So that interest fixed rate as we substantial exposures capacity rise. to add have rates

as total inflation, contractually sold, the continue rates. rising transactions. business pipeline the Lastly, or of on is recessionary with based rise goods are total environment stagnates in helps insulated also declines a fees This somewhat support value a amount Bancorp the our growth of prices base to and even where from GDP the but strong

We’re raising the share of X.XX excludes a based interest guidance This the per X.XX XXXX range rate share X.XX to our XXXX expectations. Funds of from repurchases, Fed includes assumptions for share. range to but on impact

a quarter over earnings XXXX Frenkiel to quarter. We now give second I expect details guidance the third for turn our to will release. XXXX to on call more Paul issue in

respectively QX, Thank XXXX income compared equity QX for million X.X% XXXX. you, were on and to pre-tax XX% compared quarter to $XX increased in million in $X QX, X.X% second $XX Damian. XX% assets and and to the QX, or Return XXXX. million XX% in

all income related million year million quarter. prior of PPP interest $X.X the Also of a included was quarter in net with PPP comparable QX, was quarter. fees which the current of $X.X which as the reflecting eliminated year result XXXX in prior the to substantially reduction Additionally, interest million $XX

QX, contractually expense adjustments net interest rate funding XX basis XXXX, costs Immediate during the decrease a points rate in our funding X.XX% in immediately from X.XX% to QX, QX, XXXX. QX, and reflected XXXX. to in lag for XX were earlier from loan increases to adjusted increased noted Federal in margin basis XXXX Reserve Additionally, hikes, points and

While they to loan rates fully more lag, changes. rate adjust

to positively we reserves lowered to the credit continued will to to from credit our a incentive and a to source income. for million income impact XX.X FDIC pools. pandemic non-brokered share in loans funding year loan by million resulting earnings, the end of impact QX, begin per greater outstanding. XXXX loan losses on back broker are of expect factors Non-interest of driver reduce XXXX. and $XX payment a $X.X the yields exceed XXXX, margins reflecting of XXXX current payments reflecting XX.XX settlement loan interest The compared XXXX. provisions. year of for in other the credit Damian. provision CECL QX, was reclassification government from in compensation our on partially credit in the as XXXX certain from the Quarterly increases quarter related related X% of of related related X% and the resulting XXX,XXX the lower rate proportion decrease Those compared impact to in and fair a QX, notwithstanding increased in million expense retained funding X% XX.XX expense decrease fees from value QX credit Book compared non-interest deteriorated in credit the Prepaid share $X.X will of investment growth. partially offset net The the So re-price, was of that primary have earlier, reflected I costs QX, in and loans, were Total guaranteed related and to increased of QX, to to increase cascade call adjustments income. value repurchases environment. XXXX the accounts reflected in QX, and now The low debit reversal turn million largest and portfolio, deposits reflected higher matter XXXX. shares by to QX, a The expense. offset loans

Operator, the Paul. lines please could Thanks, questions? open you up for

our Frank Piper Sandler. and Schiraldi will begin [Operator session. Instructions] first from We question now with our answer we And question have

to on, first talked growth GDP this that of year-over-year a back know strong about the there’s dissipate strong half. the I bit wondering really some you Just Damian growth really the in a year, in is XXXX. year-over-year half and will obviously given the headwinds

can GDP half the So your year-over-year growth on this on update thoughts if you just year. in us back of wondering

off again. we it stimulus, of of up expected accelerating, the gapped it’s burn kind so that’s and it because gapped looks never and the like down of kind Yes, but

it’s trend. So the returning

program We’re bump borrow, the over a stimulus. the loss of and in the

it’s going be smoother. So now much to

programs. new adding We’re

is much years than ago. larger was it couple so of a So the volume

So you’re with we’re And double single, and growth. the through trend. of go more the we we to to But double returning digit as this, looks that lower happening next like predict digit it get year can’t beginning going of on into always should high the economy. what’s We nicely then the move year. depending

may your institutions in in talk of And the of out? there are shaking cost and there terms are competition be of higher general? Neobank concerns thoughts capital of those some any What pipeline

We it. haven’t seen

products many new corporate we’re programs, adding the with funded well. And much only not mature more a We those dealing verticals, strong state pipeline, have all incredibly well space, FinTech new we’re doing in across things healthcare, are we’re cards, and programs. incentive, a

in business. haven’t do we order any platform a So mature more the seen to in to programs wanting deterioration more complex have

now. in we’re right good shape So

We haven’t seen any deterioration.

wondering, deposit And here? growth at you And just growth expect continue terms Can where balance how balance say? than the balances? pace a managing thinking the are be you footings to then, about of Just on sheet, in you here. year to growing by just from GDV from greater grow do sheet

discontinued over and the off. the we’re extraordinary year-over-year looked took in you if out assets be portfolio, running to that the at quarter-over-quarter, look continue the And had, if the loan you and we Well, we range. was had out were that at, replacing XX% you securities take annualized, growth we

a But see down because that’s So we’re that continued. lot slow replacing loans. to obviously of going the you’ll

growth come the XX, area, out a XX% sheet. growth, block some portfolio the very And great max balance overall should down really bit. XX% strong opportunities had got and portfolio increasing we’ve targeting in spreads in real we portfolio or that We’re estate we the S until

were to XX% of the XXXX. year, in going growth So that in end hopefully and range we the into that targeting XX%

of terms in make like growth about balances, growth, GDV should sense? And that that we just think just does about sort matching most to of deposit generally the thinking

liquid. Yes, we’re very

ways do deposit taxes, type quarter a short seasonality, some have gift the and XXXX cards, term, going because third of things. increase those and our the first then to to into have We of base. might fourth we We of know lot never of quarter,

we’re where it end see of quarters going So during the two quarter. to fairly we leave to first the usually at be those open

see the been in to So once burn deposits, it’s growth off stimulus, a by replaced other not increase if how big that would thought we our We in current programs. funding again, in permanent burned we’ll necessary. has and know And more programs put off. did from that

structure, funding as to opportunities programs XX don’t the mostly have. more in funding a be in the expect growth. the grow And we to growth but There continued or radically past plus, either be bit change it result we, have some short we our than We that’s Fed payments. or the may mostly can come at we in so longer as So little then more expect has that faster deposits we’ll will more on put to Funds based aggressively. predict. of a not term we something what only that’s term borrow And expect

to And want sure just just terms in then math. understand finally, I of the rate hikes, interest make

the XX% So that variable variable sale, that’s on well. now threw book floors rate. of for the you is rate I the as loan guess [Indiscernible] And

when you loan within the the about XX% betas. that’s So talk

quarter. happened in the got on going second you is, what’s two things So

costs funding You immediately the interest it. take of increases, had some part rate and we

up, a through number our had but costs which goes were floors, it goes So We one. have funding we lag. up,

had We pricing. lag loan a in the also

from goes it next the prime the on right. So S things re-price will like block month, next month based

the the in So month, you’ll of get if the it it beginning was at end of.

based beginning the the other for is increase are backward Sulphur XX looking an that’s about CRE guess in block S on There things re-price things that kind I are portfolio days. of of the average, August. XX So recent sulphur. will like

August interest excuse in July. impact that to of is me really the increase So be June or last in rate in felt only going

quarterly. re-priced immediate of a lag and funding some this in have FBA, the you FBA So pricing, loans impact, fact,

So approach throughout the schedule loan, XXXX, as to revenue go the the year and the have this through you’re as we loan re-pricing next going on months. six different happens

Thank you.

Our Perito next question with KBW. is from Michael

taking back guys range of of about the guys like I based are I for half be might or thinking settle mean, guide? in NIM like able we Thanks you morning. any follow year just give on you you questioning. to good to on guys, updated that that. of where end last think indication the X.X%, something of the of are I’d to question. up line talking the kind like of by or mean, my willing year, the the north Hey,

up. will it go So

of right. up through the about Now it floors, is, me XX% go should increase whatever XX, excuse that the went

So we’ll now floors, realize based XX you it’s calculation is variable. obviously ago, of so that points this the of for make get and lead fact two we’re to XX% the course you will NIM like a that XX% happened that through just our portfolio have that the can basis that day on recent one, then into the or that

rate X% could other these potentially low more variable, all This you to at future. X% to tightening high of or impact be, But you the this and It’ll and to maybe this the to rates increase. that’s that next If need from have increases, it through threes. the get X.X% a talking it’ll get it more, you with lagged, it interest on the past go Fed is you do end the the the be modeling looked close a the it’s you you mid on And we threes. and obviously high so by to could and going to assets it’ll of continue what Fed it’ll if to if Fed neutral, big the will obviously with through do. threes range very XXX be they’re we could depending rate X%. around Funds un-normalized hold Funds And range Funds So we continue go Fed continue changes, with year NIM. the course, year, process, calculations and X.X% less go from our the

more GDV. few think themselves. of sequential I fees The a just the for me on quarter rate growth little card Just was delink ahead a

forecast there should if could the that moving of that of about there’s of half normalize year. the we we in kind as think back Just revert forward wondering kind anything or and

No.

We’re more normal.

generally really a fee general had than higher reloadable debit. purpose general period points basis we reloadable where higher and And remember, purpose was Now is over. was debit declining taking spread,

So you through and they’re peers had big the their had we programs that going And on. the for peers. all

So you general have you’re massive growth ago than energized had when going reloadable the and had a stimulus payments. GDV especially a year of better half first a match by would fee and get you purpose to and growth debit

reloadable. of So through that a lot through purpose went debit go didn’t general

not fee saw the growth. And so growth disproportion GDV but you same

rate, sequentially just of wondering And then on talk took just increase through guys that it could up the the the maybe half if run expense the some a and here, step year. back you provide context expectations for of

subject. favorite Paul’s that’s Well,

I’ll So Paul. that give to

Sure.

you So salary by was an we quarter, had, link we is compensation. did some if driven There have expense. And look incentive variability. that increase in

that expense implies decisions when to that have that pick you’re those the to going You up production expense. and have

will is this quarter be So a probably increases. I run using inflationary should what rate and think doing you as we some see

at increase. that we’ve And looking not that we’re in we’re got significant an very a as automated. scalability. think of investments I We’ve so made lot extreme

you’ll increases on from think modest I in. here have So

to the tax quarter expect the of more or remainder And rate the the at the quarter? if year to for second similar like, first be last, you rate higher do of the

higher the should rate of XX% what using be in for in XXs. our That’s be the It’ll the we’re internal range. planning. It

you. thank And

now closing We have I to Damian will turn no questions. for over remarks. the Kozlowski further call

Operator, soon. the you today. you, we’ll Appreciate call. and can Thank interest, us talk for joining your everyone, disconnect

concludes conference. And you. and thank Thank This for participating. ladies our you gentlemen. you Thank

You may disconnect. now