TBBK - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by and welcome to Third Quarter 2019 The Bancorp Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. Instructions]. [Operator

like Viroslav. conference Please now speaker to hand Andres today, go to would over the your I ahead, sir.

Andres Viroslav

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

are me and our Officer. call Financial Chief Frenkiel, Kozlowski, today the Executive Damian On Chief with Officer; Paul

today. the at This is on webcast will is being morning's p.m. approximately with code There the XX replay a for a of of our be The Eastern (XXX) XXX-XXXX XXXXXXX. Time call replay call website beginning dial-in at confirmation www.thebancorp.com.

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

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

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

Damian Kozlowski

everyone. Good Andres. you, morning Thank

gross spread fee lines loan from the by driven positive board income year-over-year acceleration our dollar business lending with extremely quarter momentum volume of higher increases transactions. in continued our payment the across both and in This total and balances significantly accelerated

gain. our addition, CRE substantial rate a produced floating In securitization

revenue XX% XXXX of million Reported gain earnings restatement Bancorp $XX of $X.XX $XX bank Safe excluding business on XXXX. million. charge $X.XX quarter in a SEC million in litigation per to earned over Excluding grew a third a of the one-time XXXX, sale share expenses IRA $X.X settle share our concerning Harbor the a on of

Total sale, year-over-year excluding expenses X% SEC settlement. up were excluding approximately the while revenue XX% over declined the by

Net provision to million year-over-year, increase million interesting from $XX income XX%. after the improved $XX an of

ratio Tier X.XX% X leverage amounted quarter-end. to at

year-to-date ROE just under stands XX%.

XX% significant in XX% strength continued year-over-year. GDP and payments prepaid growth fee see with our We and growth business related our debit card in to transactions,

year-over-year. indirect also to push-to-card ACH fee Our revenues continue growth and with build XX%

Trends expect of business continue during momentum our GDP in of there GDP growth growth. period balance growth payments this We that fee to will the historic exceed an levels and of should in year. do be XXXX indicate extended

to X%, interest and balances SBLOC. Quarter-over-quarter across of with each and Net contributions line. grew business with at XX% rates loan for respectively XX% annualized income from grew XX% board leasing, SBA,

result in We at loan an current direct of for growth enhanced marketing initiative large building broad-based new XXXX. continue We into resources. have of continue sales portfolios, to a to XXXX, the is growth which and expect continue balance our technology, and the should and currently products, accelerated investments a rate

Our first the from quarters. on securitization to second the continues business and build momentum

from eliminating significantly increased we size related has spread our strategy doubling exposure. in announced, of securitizations million while credit XXXX targeted previously estate As long-term had range This real the in $XXX XXXX. our the revenue,

sale by floating portion investor. $XX securitization of approximate portfolio third in was of results loan CRE of to million. This driven securitized on the gain an million pool interest-only the The a an quarter $XXX gain rate

on sale gain with our risk its valuation loan the and will holding pool prepayment goes into this associated have computation. This held previously any other We portion also security and the the mitigate balance of sheet. securitizations

broad sustained developing market and This positioned are the for We the capabilities expect well growth and Economy FinTech, and we new Gig our to believe innovations site the financial be growth that address many detail Investor improve by growth. in Digital, to expertise we of banking in appear believe performance. next that has and sector. long-term on future the A that also evident XXXX, will long-term should the Presentation in weeks Bancorp’s supported few opportunities the been sustain growth and is will the

productivity developing management last a is of business Phase $X.XX that operating performance we targeting on a X minimum a budget. business years focused In share process in the with momentum. developed improvements in the new plan believe a is the budget, are and this that current and consistent detailed three Lastly, earnings of four-year now made has We innovation for XXXX XXXX. of Bancorp’s

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

Paul Frenkiel

you, Thank Damian.

$X increased reflecting $X.X income, income SEC net The $X.X million in million Bancorp’s XXX% sale net higher and $XX million. gain Net loans lending for CRE approximately of IRA increased in million $XXX XXXX, excluding Average reflected $XXX loans million continuing XX%, or securitization. lines, in XXXX. the interest or of million settlement on CRE including growth increase tax originated to

million. or reflected Growth over income and interest CRE $X.X of for increased and on XX% IBLOC’s million to million XX% increase in increases loans SBLOC’s in million. reflected lines $X.X to IBLOC and respective SBA securitization million prior $XX.X on $X.X SBA The for combined SBLOC $X.X an loans. million increased XX% on $X and million, $XX to in Interest net other balances $X.X lending interest for million interest loans of income and

a recognized approximately $XX XXXX. a September was gain compared of the As in result a $X XXXX QX securitization, to million gain of of million

from will income declined, resulted are anticipate in as to they We compared in $XXX million higher QX XXXX in XXXX the CRE peak decrease market XXXX. largest million gain $XXX spreads quarter interest balances fourth the securitized. a securitization that quarter While the totaling show

to loss conditions. the three two securitizations there market subject past gain and per is of each any In years, been have year or

Approximate of rate for increases net SBA, Reserve addition on reflected leasing. positive the X.X% growth, in In loan increase impact offset the partially and for Federal for FRB loan decrease, yields XXXX, XXXX the majority the the were July SBLOC, portfolios X.X% quarter. in to the X.X% by the impacted of interest which income

on of the and loans yields with market These originated spreads lines of charge-offs. recently securitizations. timing varies X% securitization have for had yield approximated has CRE that While low business historically

points basis Overall the changes, impact comparable to funds Reserve’s points. XX which net fund to the basis increase commercial was Federal higher XX basis the contributed and It XXXX end the loans of were and cost of QX also securitized basis QX yield originations of increased the rate to The point QX at reflected of short-term XX quarter. also XXXX borrowings more point XX the increased which yields. of in to in use costly reflected increase time asset over the deposits

impact securitization of point increase and higher loan originations basis to improvement cost by in to XXXX, portion compared factors X.XX% adjust the market card NIM increase the rates. for the It of which slightly yields quarter. in Those reflected The of XX than rate the third The X.XX% less relatively prepaid aforementioned of in due quarter to Fed from for in X.XX% The the increases deposit interest borrowings. time the aforementioned deposits, year-over-year asset reflected a cost decreases funds were lesser only reflecting primarily overnight lesser higher resulted partially which those larger funds. quarter contractually NIM from primarily rates, with during the rates offset down rate short-term higher deposits also decreased second the was rates.

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

and ACH processing to payment include rapid and funds XX% Card increased million. fees $X.X revenue

was million, million quarter million quarterly prior that’s slightly SEC Non-interest non-deductible discussed calls. settlement XXXX expense target $XX.X $XX above the for third in $X.X excluding the

incentive, was and Salary expense and higher compared FDIC increase incentive higher SBLOC, credit expense million reflected in commercial and the insurance $X.X Information QX and expenses. reductions compensation by quarter software, to That processing during other in was partially data million, one-time securitization Technology, $X.X offset XXXX. legal, loan

Securities $X.XX XX, from rates. at primarily long-term June to Book value per reflecting XXXX, share Investment the compared market share the interest per of $X.XX of resulting increased $X.XX earnings value and increased lower to

ratio end. for securitization. originated average approximately at approximately assets The XX% prior quarterly X.X% to from was leverage The which upon reduction quarter reflected QX loans is resulting based consolidated higher the compared XXXX assets average

Our opportunities well of a to capitalized base more in our than space. advantage provides payment conduct position solid our take and and lending operations

to offset in receivables. recovered Bancorp on which customer those a believes amount resulting the its XX, ACH as deposit bank another parties amount will resolve working as it result issue the with were the resulted of books to in the The institution, from by parties in million the million which an $X.X from on loss by the is of ACH returned failure relevant Any possible. fund a the disbursements. the carriers net in soon the not banks returns The can financial XXXX, On reimbursed insurance amounts of were properly receivable funds bank. to responsible is bank against October certain transactions the from $XX.X

That concludes back my questions. call the comments and to I Damian for will return

Damian Kozlowski

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

Operator

Instructions]. [Operator

And our of first William comes from Raymond James. question Wallace

open. now is line Your

William Wallace

someone's transfer ACH accounts. just -- direct this disclosed. Maybe transfer just out -- with you that issue on you where you Can let’s cash a an out guys thought of ACH that wire of ended on I was

So how guys could this there again, -- feel that curious no that assured could that cash there's if other happen was clients. just I’m if you something when funds and transferred be with isn't

Paul Frenkiel

our wanted really are hope vast for it unrelated our caution. of type all business. but of we That's card the of that situation to be will the involved comprises minor say can which the and represent We to revenues communicate majority an resolved moment. as of part a can I the payments say abundance the business

William Wallace

of that support spending I So transfer. transfer of walk mechanics mean; card is this bank area mean, cash you the were your But for how guys of can't the of lot without right kind to to through growth I focus thought time I an the you a --?

Paul Frenkiel

-- this Not payment particular

William Wallace

Not this line?

Paul Frenkiel

is part revenue. of As a I said, it minor very

Damian Kozlowski

part minor can't our situation very into -- of go this a is our of business. is detail we a part This This of about.

said, we've generally transactions are matched. and As they're already ACH pre-funded

October was an go is to And can't can't this can't occurrence was it. institution obviously disclose. speak financial at we on and another we reasons, various issue which there XX. to just release prior into So this for it we earnings produced This

William Wallace

Okay.

Well, then. Okay, I'll all on right. move

I guidance target time, at occurring guys an Bancorp. put ever EPS the you the So first can recall that out the for

businesses there. think us target? that achieve great how Is kind loan to kind it's businesses, are wondering mechanics you just the of the I'm target of income you mechanics seeing be out through you going driven the you if some achieve fee talk this momentum some walk that will by putting continued how more I of the of target? growth of think on a of could maybe you that you're you that help anticipate in through

Damian Kozlowski

we remember a was first equity. to regulatory wanted the out the X have a to talked we We be level so being about and close there operating think on issues and about about a which we Yes, also bank getting XX% the efficient we're we’re plan, generate focused return on our lot of that at very business of. which believe Phase remediation

lost Safe have where the a next were phase our delayed ROE working plan. little Harbor a but we down six where the on spent number sat So this and And business because on we the we also year we deposits. months had sales fees -- in

at about now we're of XXXX. the in So third quarter that

of that continue bottoms comfortable very momentum we're the both the tops business up the growth perform at looking current down, four and will what to next lot and a business with over be by after driven our revenue years, So should balances.

SBLOC, also trend, and fee leasing with XXXX SBA, and balances, especially for above So growth.

where XX% plus at that said we'd we'll able to looking us a to business it plan, we on a like it we some we think give that be be minimum be to becomes I minimum, balances that budget. our four-year a finalize to ROE. get as clear -- get of we’ll $X.XX, to able really at XXXX to as on But guidance So business plan the expect that

And be next so we like that year. was where really to

like in So XX% more simply if XXXs. capital looks you times time our the it base,

we've where SBA and the and that's I also platform but of that XXXX. order understanding to and of through services, what new like a technology, modeling both at in products really enhancement the in reengineering will be and of transactions. looking debit operations and we’re think the leasing primary have with have the payments cards momentum So in that expense of we'd will where business the We our scale the been And a think our SBLOC technology balanced it card of large to support the very FinTech revenue growth. business, platform But growth. business, minimization portfolio with and of investment of support for then we expansion industry, throughout the type a in also the display

William Wallace

a lot there. Okay,

there's two, third two question. So maybe wanted a ways I

remarks prepared and you what's that your above it again about trend the giving GDV in XXXX. think said said you above revenue little you and prepaid confidence hinted You I in shift? be or just go deeper momentum business in the there growth Can you should confidence this industry in on you about giving at

Damian Kozlowski

Yes, the industry. shift is the well throughout happening

sponsor And So there's providers. clearly of banking to we're a alternative a shift those.

of which FinTech are a companies, enabling. seeing where them people their relationship primary as with you're behavior buying banking we're selecting So change new in

the And a seems be this for seeing something that growth portfolio. point we're between that's inflection about market growth So talked that growth. is is behavior supporting seeing But years. that at GDV it been it there's consumer least buying that that our industry in in you're GDV to

So that's growth supports above in GDV trend think continued what our business. the cards we

William Wallace

Okay.

quarters growth is acceleration levels? about XX%. first the those levels are is three XX%. averaging XXXX, those I the growth And averaging mean, an or So look year-over-year, of talking of if I revenue we continuation at of a GDV

Damian Kozlowski

be that it'll in continuation We those a think levels range. of somewhere

slight So not, the we're we're in believe seeing in slight it quarter. or GDV -- seeing fourth acceleration

always doesn't XXXX that fee So growth. translate

it's you So I there, have track. generally, good to but caution a

year obviously continued that's market strongly carried started accelerating been been entire the last very seeing quarter-to-quarter. the in of end -- trend this but that growth year, and we're has throughout So

So that is what's -- understanding. basing that our

going grown, if the some just even get you're impact have then and you continued saying. So we're over, the from as that look acceleration fees year-over-year the from to year-over-year

William Wallace

due that expectation competitive on just with continued see evading? then you some see some And will pressures the pressure to Okay. we margins that

Damian Kozlowski

the Well, not I really, wouldn't short-term. pressure say in competitive

are layered, on programs the that volumes Some volumes fees the have lower you that as you of process that we so up. depending have go

they're impact really contracts. pressures we -- long-term because have competitive a don't the So longer-term short-term in

one So tomorrow, we really cases. down pricing wouldn't goes it feel four in some we to years if market for

affects to -- predominantly don't our XX don't And our competitive represent programs year we So and those contracts. have are we in XX% directly long-term. one of about of have of pressures that or four volume our all

William Wallace

Okay.

just did the to SBLOC you great. notice I right, all Okay, see, been great base? onboarding on jump in question the of this Well, growth the that's big with the clients I existing asset then line guess. pretty product or side, And a delay is Have from the this new quarter.

Damian Kozlowski

from No, of finally We're of all coming in over the switching both. it's layer. process to

platforms with IBLOC integrate SBLOC and product. to have we the So deliver that the

So technology that's significant ongoing. increase there's the But due definitely to enablement. a

IBLOC been growing. also has

get to the increase time their to easier over to and we make ultimately, want money. we for people So products services want but it

this significant we be the very close year our So over of end And push that's for $X envelope think we feeling more for activities, XXXX to billion approach we're that that. We growth really our of amount budget. or XXXX, as give what will of set the is. able we target will and hopefully we can finalize be as clarity in get we

William Wallace

Okay, asked thanks. a following. a know sorry, have lot of And only couple I've there's more but I'm questions, two left us I I

you questions, put have you'll last in on bear me, time two if this with quarter? deposits million I So $XXX

Paul Frenkiel

Yes.

William Wallace

that that, on Can you was expand so --?

Paul Frenkiel

for higher $XXX averaged the the -- million. that of over securitization, we Because the loans securities generate securitization

short-term short-term we borrowings CDs. in with those those So, overnight funded

William Wallace

Okay.

So those gone already?

Paul Frenkiel

again, liquidity. we CDs time-to-time, borrowings from short-term But use use gone. be manage them to we may will our and They

William Wallace

update you're you us enough. question if is, And let you put you you Fair Dam, it. expectation? order What’s know Good. presented had give Can I your I plan feel the consent is close. an business the you together what left? could said getting Got your Okay. like on last you. assume us just

Damian Kozlowski

Yes.

closely I expectation XXXX. of industry a where to think So beginning set our Center into XXXX. a model. We've really this we're working of build we're of out Excellence real with from we fully for made, were meet We've to We is bank. build to capability. a go going out full our review the to been problem in in in tremendous progress understood The neck regulators the of where across unusual. it's the that of consent sponsor really new this not role It's a the order this get industry as to

And so of new build we're that wanted and for banks we so identified to tried business. really to we've because on. items regulars next a think type And short and wanting sponsor to the very really more clarity much the become our banks paradigm you how close, get of We're do this wanted are worked -- we there -- review. list a pretty we've I

will that hopefully, have guarantee But partners sound our confident we can is that we requirements. and feel and regulator, our what So always we capability the meets do. a safe

William Wallace

Okay.

full next the early review said? what you that XXXXs, that So is is

Damian Kozlowski

Yes, early XXXX.

William Wallace

guys. Thanks Great.

Damian Kozlowski

meeting that we And we’re of the time the we were -- have at minds. a holding

William Wallace

step asked Thanks. right, I all Okay, fingers out, lot of crossed. will questions. a

Damian Kozlowski

you, Thank Wallace.

Operator

you. Thank our question from O'Neill. comes of Frank Sandler next Schiraldi And

Your now is line open.

Frank Schiraldi

think getting I XXX. only XXX? push-to-card is year I that I that I your growth in growth there know know anticipate past at next is couple preliminary ask to much to you don't how anticipate direct how the the growth to the you guide least part impact initiative; about be talked have guys of much to about -- wanted you of left. year-over-year

Damian Kozlowski

revenues. wouldn't is to way need those it we say in minimum, Well the any of

without push and area. but we we the discussing think when that be those with significant the and XX% payment in growth to when we're the get in a minimum side hoping minimum minimum. the nice grow. growth we have for think So that that could do growth We we're and to not considering ROE balance the can a a We're the to revenues

Frank Schiraldi

Okay.

big So it's for I initiative know I you mean, a guys.

talked maybe trying to in XXXX, -- the more fruit longer lot a about XXXX So in is to into that bear really in initiative time. get getting of the minds just push-to-card, into going terms you just your XXX XXXs, is a lag the it's

Damian Kozlowski

this prepared; don't we're is down lot a don't once difference of of a could be Yes, interest our make it a the area. still know very right we enterprise initiative. -- this again, of And We the avenue We're -- doing be large working whether there way earnings. it is and it’s we're in potentially revenue in But a that'll or the to substantial yet. advantage taking opportunity. overall not know a

So we $X But next really bottom-line. it can not generate saying really $X good to won't a do lot year million. we $X make and difference will of million, our million,

going very we momentum budget, the attainable, XXXX way when our -- and But sets X we right of plan, we've yet our we that is. careful put current let's it that just became what very know business own once that we're done don't haven't to our out around So under build again, the that generally, -- planning finalized have. We it Phase way. confident, our current our that that was product XXX business

Frank Schiraldi

back or then And there programs or that’s growth partnerships to are Okay. -- on new GDV continue that's that to current programs that here. strong mostly big continue Is the coming really board? to anticipated ramp-up

Damian Kozlowski

Yes, both.

next are that partners So to us be join around getting, over XX we have there pipeline that months. three And like significant an programs platform. will we're our new would the amazing of joining

a very good So combination, we're growth. it's seeing

me I at months, looked excuse think it last the time three I --

Paul Frenkiel

months. Three

Damian Kozlowski

quarter-over-quarter program year-over-year. XX Three and was growth almost of every days our top programs in we're seeing ago

about rates higher why over So broad-based. on have that that's us we three traditional market the And joining because mostly the and that It's banks. debit it's we're focused non-traditional making conversion significant months. between the programs a very programs growth statement next are are

that that's that, have preliminary once quarter, increased we why the again, stress sustained is numbers we And or So seen I'll preliminary numbers in we become we've not, believe have growth. increasing. GDV very the GDV confident and it fourth

have that, we XXXX. support all three have payments into those we continued to growth our areas So

Frank Schiraldi

to GDV banking the you I what percentage, of term then or I mean, -- banks, or you alternative mean if think XX think GDV use and you I these banks. whatever months? I where And the growth challenger that just challenger do current banking the give over either is next moves of sort can challenger Okay. your

Damian Kozlowski

and They're in obviously. thought interested we've we are The very about people higher. only because that thing have that really

growing. So they're not they're higher alone. But

broad enabled a an this types clear spectrum move So that that you But adoption there's see. we challenger towards there program a is provide. the side technology of across of

I So a give it's percentage. higher you can't growth, -- you're getting

decided have out we we that. publish they There's by want some clients, asked haven't We would reasons been backing not people or not whether things. to that our

So we that. in are that's where

Z? higher you're than growth. much Y, is at card So from programs you're higher getting from usual those growth time. getting We this you're But disclose definitely their can't programs. getting How and X,

Frank Schiraldi

the this those I point, can Right. of up mean percentage growth, in versus in a broad roughly the you makes up, just GDV at what say that percentage pie? about challenger forget banks range, what entire terms make

Damian Kozlowski

necessarily that can clients we put not put love But disclosure. it's have be under their helpful the all they and have that sometimes advisement for stuff. a distributed certain don't advisement. that all not put things we under will That's they to because confidentiality and and programs and our volatile, We'll growth and want page would future so

Frank Schiraldi

I'll have be guess price out or the I one to that that ask about continue and whittling And seems loan, in there's Okay. to that major been seems discontinued in larger book along. that then some there just sized be down to Florida mall obviously finally moving there you

that you months? if movement the off the in Just next anticipate any books over few wondering

Damian Kozlowski

to We would like it move.

lease one we our deal reasons the fell through. major why That previous ground of probably is So purchased. to what you're referring the was

or in purchasing are We’re interested there that the now hopeful mall. two very parties converting

it So Luckily will. that income is mall we're producing. the hoping

suggest last we So two have the should. the when over operating taken we income we years results obviously, when

at like are right parties a of And it range. that both transaction losing have now, to So not we dispose would doing at looking we looking at at that money -- the are par. mall we're

I all, to say. but this that's So second on we're constructively we're the right don't -- mall. table, the signed We have can dispose working a deal hoping

Frank Schiraldi

Okay, great. marked been And par where you’re mean last where you to, about right? it’s then -- I when said talking

Damian Kozlowski

it's marked Yes, marked -- marked -- marked yes the down par been where appraisal. -- to not just but from

Operator

And does to Thank this back ladies I question-and-answer the any and remarks. call for to conclude now our you. gentlemen, like session. Damian Kozlowski over would closing turn

Damian Kozlowski

thank Yes, fourth appreciate And we'll your talk I you, in operator. the quarter. again attendance.

Operator

this today's Well conference ladies and gentlemen; concludes call. Thank you for participating.

now disconnect. may You

The Bancorp, Inc. (TBBK) 25 Oct 192019 Q3 Earnings call transcript