The Bancorp, Inc. (TBBK) 28 Apr 232023 Q1 Earnings call transcript

Good morning ladies and gentlemen, and welcome to The Bancorp's First Quarter 2023 Earnings Conference Call. At this time, all lines are in a listen-only mode.

Following the presentation we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Friday, April 28, 2023.

I would now like to turn the conference over to Andres Viroslav. sir. ahead, go Please

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

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

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

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

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

XX% in first share of for XXXX. X.X ROA XX% expense first and grew Net growth you, of XX% XXXX. first was in the year-over-year. quarter year-over-year. was the The first growth. a the and revenue quarter XX% growth GDV earned versus the XX% was Thank Andres. for versus Bancorp income X.X ROE quarter XX% $X.XX quarter

loans year-over-year. NIM steep year-over-year, to a expanded remained was quarter-over-quarter XX% Efficiency ratio growth increase XX% fee Solutions for the at costs. slight XXX. quarter-over-quarter client excluding borrowing in XXX XX% quarter-over-quarter was reflecting Fintech held from sale growth decrease loan X% with and

in recent book, the insured did manage With not Fintech in accounts and spread ecosystem, through liquidity across beginning company. XXX deposits granular increased impact TBBK banking than positioned materially our dislocation of more to significant The short small variable in risk well was volatility a market credit duration the million in borrowing capacity our rate the XXXX. lower

have and platform we and from systemic that our Over shock created rising or system banking risk a an dislocation. company interest benefit the plus, three methodically built rate last event would a purposely rates years rigorously from protect from

new included in schedules two We our release. have earnings

insured overwhelming of The significant and capacity. more has deposit balance our accounts detail value a first is the an and base majority card that of second borrowing our is low stored on review

in XXXX, first continued The expectations in potentially and further will might additionally improved ROA, are that improve moreover, financial growth our efficiency tailwinds fee other net momentum result Solutions in metrics Indications EPS. income Fintech XXXX. NIM ROE, growth, GDV growth, quarter that ratio, in significantly performance positive surpassed

included slower Number securities two, above NIM of XX%; been which versus than deposit rate growth X%; agency, forecast. and one, payments loan funds purchase due our three, of in treasury four trend have above Fed performance other not GDV increased higher to more growth, growth and

XXXX. buybacks from per are of raising purchased since quarter for guidance performance, $XX quarter not have significant of $X.XX Due our security these to XXXX. rate We the $X.XX in million a impact share without we a long-term share factors to including first fixed share

to first I'll now quarter. for turn over Frenkiel, on more the Paul the call CFO our

Damian. you, Thank

on the quarterly would reviewing I of to comment Bancorp. results, risk profile like Before low liquidity

$X.X Home must largely Loan potential is line their base Federal has needs Bancorp Reserve Bancorp's deposit requirements, them. by Bank unrealistic [ph] its exceeds mandated bank's accounts, with the Bank Bank credit in and collateral window, by its the that depositors risk funds small Reserve small comprised charter. as by Bank with withdraw line which short the noted, balance Federal liquidity credit the of residential is with loans that approximately a Federal of agency's Home the The is Loan Damien billion. corresponding apartment collateralized of collateral maintaining building our notwithstanding Bancorp As also of Federal with lines satisfy

Bancorp has mandated interest assets Additionally, risk significant maintained and low has profile other emphasized risk Bancorp access a to variable which limits. tested. rate also periodically rate policy is liquidity, institutional with

a its rates X.X% Bancorp by this of in quarter assets increases the benefited and rate These and result to higher and XX% in increase resulted that securities return from variable increases equity and on As were income. net the driven loans interest significantly XX%. in

sheet lending balance years, In the benefit instruments. down a purchases limited the environment. of business pay normalized its has has lines over addition were structured of of to interest allowed management largely period rate while more and variable fixed to rate a higher our portfolio it the majority from focused rate to of on rate sensitivity Accordingly, investment

than deposits rates Reserve Federal changes. loans the the more on majority to Additionally, adjust of rate fully

from also increased interest X.X% deposits was factors QX had over increase in yield assets while of to QX resulted XXXX Those primarily of represented the million had in estimated on The earning to prior first from XXXX, loans. losses remaining the periods. in The offs. balance provision the QX another credit in cost $X.X X.X% Accordingly, reflected were the lies charge-offs million net $X.X million XXXX, X.X%. NIM of charge which impact to for $X.X quarter increased to in applied compared the outstanding Of million, of $X.X XXXX. QX historical the resulted $X.X million approximately the

our primary QX to fourth related income funding a Additionally, $X in recognized quarter other of compared property are largest QX million payments expense. $XXX,XXX XX% movie $X.X real and and and against owned to other and accounts related was the income non-interest million fees and in and XXXX theater debit $XX estate fee after million charge source of other Prepaid payment XXXX. XXXX XX% termination of Total eliminating increased income. non-interest other driver

Non-interest million, $XX stock numbers XXXX increases from products. as compensation compliance and the increase technology. higher new expense, focus in and a also stock reflected volume staff was expense and QX ownership. the result of op, of on which crimes, of Staffing information of which for Majority resulted XX% increase increased was salary QX reflected deposit transaction increases The higher higher which than XXXX. also a expense development and reflected financial XX% stock

increased higher year earlier, compared to $XX.XX continue quarter partially should value a environment. retained share repurchases offset portfolio earnings shares the at fair $XX.XX share per to XX% resulting value to end reduce Quarterly the rate adjustments to from investment reflecting Book by outstanding.

will I call now turn Damien. back to the

you the Operator, questions? you, Thank for could line open Paul.

question Thank with Your first comes David you, James. Instructions] from ahead. Raymond [Operator Please go sir. Feaster

good Hey, morning everybody.

Good morning, David.

see last about up. You deck Maybe clients of let's start quarter both are drivers dissect. growth it GDV, know clients hard it's in to that year some I you're the talked to that existing just to really can growth with of But scaling at about in and addition seeing? new great be what and the maybe talk the and you the could

your on Just growth GDV any crystal you curious the between into going attribution two look forward ball? maybe the and thoughts as just

across from in but new space. and healthcare, been the It's payment broad neobanks only corporate very in based government not products

one So above it's area. mentioned, I broad not -- robust, get very in but you it it surprisingly that concentrated was past was when trend XX% as

corporate the with pleased very things expectations. like of but broad product we're So new also our it, based have payments surpassed the sets and nature

of of you have clients given the great. then And of of adds think to scale That's know seen in always to I pulse of looking are in of change you the kind got the do that just this the pace how join, new clients given on, just in the a year? the about and maybe you increases And the in stability more following market, shift this the or platform. just pipeline? lot market any the just think maybe pushes client probably but your would I kind you've volatility

we've real we seen So the steady a last haven't had three for any robust and pipeline very change. years and

of so a ecosystem But there's broad product XX for have and our It's there's areas advantage we takes very to those new they're go to it we until the you is as partners, of very stop level to and pretty don't, here years well of based. take year, our been but because new we to to Lot implement partners one our think they're they development the digit somewhere if competitors multiple mature that growth mentioned add visibility they're us us and been of stability. of stable, least to leave. As it's We don't double existing using next not to And before, our once really clients. know, -- don't come the else. we within months. that they companies they it's supported XX and maturity we at the many going size of GDV good sets

a and visibility lot have stability of we pipeline. portfolio the So in and the in

this are second, CRE bridge, but the slide the touching obviously in your that just Obviously then just on there's segment, on there? the the estate strong quarter? of standards, drove are, segment? you on and for portfolio real hyper but and you're appreciate the thoughts on focus other loan Okay. obvious then just color I-block market I and or seeing within And in and what curious, S-block any on that the volatility curious a the a kind you've maybe seeing the underwriting as bridge, broadly I'm bridge, color specifically, deck you any the got trends Was clients segment just look in maybe what

stable. CRE Yes, the is extremely well,

interest Now huge the there's whole has been market because because a down of rise repricing rates. of slowed that the obviously

not standards underwriting have Our changed.

times We the caps and floors reserves. and many loans have interest on rate all

had haven't financing, been out So lot of a in whatsoever the we've have the dislocation people and And that financing. portfolio down of wind had we finding old take any portfolio.

down than can't So any, we had a haven't I it respond bit. really other slowed

once will that stop rates. steep report you have, to have up interest the nothing you we think really. pick curve in But having I

price On the S-block side, that's about sensitivity.

we So sensitive clients. lot a price had of

been and for S-block growing interest has rate rates sticker that same the we as expect little got the We've a You get so slowdown expect it the rise rate normal our side, simply had in people historic and to moderating, and shock. this the with the out. interest reasons though month I-block more pipeline interest substantially we seen top

So all. concerned by we're that not at

rate fixed from that we want time And business, more to It when didn't and will it ultimately funds went We securities didn't because so an obviously have excess an and that have really got lock impact. we in XXX, impact. buy just fed at right. have the liquidity is into really cash

we're, was downs. as and we even going big to I slow and were, that's a to many the next down quarter, pay And won't a if think there our pay So lot quarter this over it's have downs, on financials. not going impact be there

Yes.

Thanks Okay. everybody. That's helpful.

you. Schiraldi Frank Sandler. Instructions] next with from ahead. [Operator go comes question Piper Thank Your Please

Thanks. Good morning.

Frank. morning, Good

the these probably of in the on S-block, levels? book, a stronger that think loan do stable about do or talked the Is downs, more On a business follow near-term Damian, it's the at sort pay just still pipeline up there. net you so think you you it

that Well, what month, is this up the, in returning. stability we've seen there's

first once opening side. as short the period would so it high as had sudden the it towards Right? their And I all position X% coupon we're, just pay It steep, so will interest rate as month, anywhere be if against be more go if -- and borrowing It's sure growing. -- of that, maybe changed at will towards side. for down, that in at first just half I or once in again, pay they were should our think again, as quarter. it's what people moderate a insurance. much it securities of over been increases pipeline the of cash that X.XX% of stabilizing the been even getting say radically the it time have Funds. their near it be a they would flat perception to can't and flat but has But And be into did such would their quarter, their did lot. more this we fed be a was don't and as we So the

Right.

business loans, if to of, driven still going if you sheet? forward? to bridge grow see to or overall curious you Okay. Just And have that then the the on have multifamily of the by more want you add will the more be on that if you room growth on balance are at by SBA loan is books the that portfolio you limits legacy what sort

all we And there making COVID I Frank, consultants recall, Yes, an apartment we're do are think if the the have room most, way back to lending room, now lending Great cited when is forms you one safest back and documented actually do. issue went loans the the we can extra of the that one because that the we of some is was that the that of type that building Depression the do we loans. company, of

a confident balance can sheet. measurable we we're the have effect So on that increase and

past, going Yes. to ways keep is, but type it's that we to book, generally a Like recycle We're for very CLO but anything loans. that type fees And of a was going remember in to recycle, gain structures thought XXX% there's those can those would -- we're and the like do of of capital. lot that take for not of loans there in we're have and excess and market we large that. we done we

capital growing this significantly we've even year. So room with our is and got -- capital our our grow buyback, is obviously

we do So room. have

I the I then rates but fed we're that sort terms know implying, that Okay. significantly implying forward of in mean, lastly in get near you peak we funds funds Fed happens, And just down floors XXXX. then, what of you NIM basis in know, might give on sort in implying we'll the XX on multi-family have with of say see down. expectations portfolio the curves, detail funds? for hedges you your let's these are a way any, contraction on loans in other given you what Can protect have that of the you or and Fed any point

you our, in our as shifting so Yes, every mix is now. saw day

in have fixed a new our high asset So we have them, there just sensitivity months excluding floors next if loans a programs rate range, CRE asset very of the putting the with plus sensitive the bonds the at by normalized less, lot that get that we're XX of, exposure, a less rates doing. lock the obviously the will right? So rate. in we're over And out greater And four of getting on day. in all rid lot loans we're really

start out program disinvert hopefully, that's we add of securities if we purchase rate the rates start and to to curve and a cut, we'll Now, should that as our substantial fixed yield then top when fixed bonds, purchase and rate will really they obviously downside. the and that mitigate any

long-term invested case big below, loans, floors this, base is in will much security. we not just than by, far that and rates buy be that such a below, before range of, are probably If average way far of substantial so to Our bank X.X% we in going in a has that, course, future. have amount been sheet the the of just more our have know part do, balance we'll kick flexibility of foreseeable because the don't they but go more the for you say not the in

opposite. it's problems of It of So banking. where are the situation the do the of opposite we is Obviously that. kind any in didn't all

now long-term we have, the full especially higher of So in. view those rates, yield take rates lock curve advantage changes can and and we'll if

Okay.

sub If a think, of range. get? sort you in that's think X% in doable NIM the you outlook that's put X% of in a So we kind mid-Xs, funds Do you a up XXXX? Fed where

going making were interest and Yes, a going net too. things XX% the at be even though to but think interest zero rates Fed be and able totally overreacting I to ROE when to we're, back we rates, we stay. It depends zero can't we were sure, we're to on

kind the sensitive rates think to think right asset situation less be have fixed So this bit immense in just rates did very portfolios. to they're asset able if we in I long-term we've to any we have in the at sustainable the, flexibility going is left lock normal get this of the, less fed you fund far sensitive. normal in a I and time we're XXXX, far of we got in little get ourselves if and time, and We

Great.

for the color. thanks Okay, all

Thank you.

from comes KBW. go ahead. Tim question Switzer next with Please Your

I'm Hey there, just I Perito. for on thanks wanted… for taking my Mike question.

Good morning.

Hey, securities? made little you morning. to comments good you you treasury like Fed the you're It your cut quick to a purchasing waiting Are to bit starting sounded on proactive? you maybe until just real more be wait plan Fed going the clarify Could these until about to start are going the see cut. you or

daily lot and at -- this there's of we'll a [ph], the feel, we've because but looking a looking Well, a the we we're all do but when at usually advisors to and that's buying time, and panic on basis, looking market have best on of we're obviously lot this start got we of don't color flexibility. have

how see it have inflation see on rates interest numbers. a can we So long, plays to the we out

this some we're it. there's to watch we're just going morning, going few and probably minutes to, a in There's

like We billion, could higher allocate order of $X at our watch is obviously when to going start constantly it have exposure the we much to variable the peer fixed on then rate billion than a and much right rate sheet in of buy mitigate nibbling our thing securities and And group. so our we'll, room, easily $X.X fully that time balance institutional our then rate part other we of business. assets we're some

they of have And aren't because our the loans. portfolio really CRE floors once variable parts like again, that variable there's

as a than in around it for to we're to before, current flexible fixed all verse for So did easier It's other the full we trade sheet variable way obviously. like obviously rate our learned, is of we're in a very advantage higher we balance and interest, good the and remain take position much going position.

watching everything. So we're

put to rate loans continue are that on to going every fixed We're day.

sensitivity asset down rates get and the higher goes on benefits loan the much Our we of side.

our underwriting. standards We haven't any changed of on

we, will don't have, And we if over have should we be not. especially our the maintain Some that able have it people NIM. rates navigate and to a drastic next year, change

of And book? pretty the continued let's you holds clear. expansion as Would more you that's this then say here. Yes, Okay. growing year hikes Fed the loan expect rest it NIM over right one time keep and the

Well, you're as some lag, going discussed yes there's you're, before. still to, so we've

days to then Our our or funding XX for rate adjust costs immediately to up loan variable in it book. more and adjust takes our fully

adjustments still on, through we people which system. XXX% really increase. the think loan of get having even loan we're a of marketplace rate Plus And in higher a because on, kind are on above that's strange book wave these the So putting loans come numbers, bump pricing that every in of much the is are getting you're our the a we're XXX% put I our revenue we're because over putting that fixed. assets to but in that the see

for yes, two continue should expand to So those reasons. it

Okay, loan you runoff that over the portfolio great. year we reasonable if rest commercial Is and take And expect out think X% other look I did to for the the the growth. loan quarterly portfolio, the about at S-block categories? of the

Yes.

Okay, me. from That's great. you. all Thank

David are at no time. go ahead. There have following question from like you. we this Feaster. Thank Looks a further Please questions

one side, are accelerate projects or that time following we the revenue strength, touching expenses. expenses maybe line higher in just item? was I'm kind just some some seasonally expense expense starting curious, to other maybe given there more obviously the Hey anything or maybe there's up, on of

And that think of we stay I growth talking just opportunities? the drop do the then given in XX% you the initiatives do think ratio, about we think efficiency that XX%? or kind the, about, kind realm, you mean, low you're about stability curious of and the how like some we with sounds of it Just here below just of kind as that.

XX%, growth. Paul. be could ahead, drop Yes, well obviously around but it'll below go of the revenue that it because But

and accounts expenses largely also increased. by in additions the transaction, customers, the and other expense expenses volume by new driven, of number in GDP Yes, expense. employees so Other new staff transactions. volume increase the was Those driven the non-interest terms was salary of were that driven

We expense of and be will moderate. employees, good has have terms expect expenses There prospects, some some to those up we that some of really good anticipatory very catch of growth number have hires. in but was we there

we so need we compliance products, be new financial at support staffed and want for looking and fully we're to So for reasons, to crime fully forth. be staffed

bank at see digit to least double we So the rates. at continuing grow

And so we staffing up that. for are

Okay, that makes sense.

core run expect this as you're for line so as we're expense is again, just planning the growth the about. growth some rate continued on continue, good future just So we're kind growth in of talking and in that a

the Yes. but And yes, economy core remember some real had, inflation which us. hit too, there's we in remember

down salary the adjustments good attrition sign we've So, we grades. made for changed across employees, our industry. It's is that

is industry Ours incredible have XXX our top half employees. and to about the stability a XX is, in we of what

moderation, group affects We individuals, see have that moderation. definitely Paul, stuff. of that core definitely But, a but that right. adds virtually with no see how, inflation, see attrition how in a We'll we'll so think happens employee what costs to it, I we and

we'll Yes, Damian we some our have inflation adjustments I still think, structure. to said, salary had as

up, year. elevated, more which do. it have staffed So prior year moderate, see we or when fully so, you'll the the to to need still But over increases compared next we should some

those all we're things investing have our are have across happening cloud Yes. entire across that for our those programs the because use incredibly built partners. best how tech our we and only have important investments not portfolio, risk it, tech new compliance, five. whole a a things are are third of the aspects been robust lot, the stack like party from but we That's why infrastructure marketplace all ACH, But systems, to substantially the we ecosystem oversight, continuously et position the really in the I putting there last for cetera, systems mean, the for to our

sense. of Thank Makes a lot you.

Thank you.

following ahead. Your is question go from Please Tim Switzer.

was if tax on are one. expenses, a I a What but quarter. quick little follow was my going to taking I'm I Hey, forward? just here, lower can rate your this ask going The thanks since about expectations up. bit for get actually

talk a rate. details XX% Ongoing, it normal of for your won't so go the our but and historical rate annualized We here. and I little accounting confusing the closer bit I to forth, about models, do tax is XXQ is into in the around think an

That's me. Thanks. Perfect. from all Okay.

Tim. Okay. Thanks

no Thank this at are go Kozlowski, questions you. time. Mr. further There please ahead.

Thank for we'll Operator, today. it, us talk you joining soon. can you appreciate the We really disconnect call. and

and Ladies concludes call disconnect please and great this gentlemen, that for participating you conference We ask your thank today. day. you for your lines. Have a