TBBK - Earnings call transcript Q1 2022

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Operator

Good day and welcome to the First Quarter 2022, The Bancorp, Inc. Earnings Conference Call. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. I would like to turn the call over to Andres Viroslav.

begin. may You

Andres Viroslav

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

the On www.thebancorp.com. This beginning p.m. XXXXXXX. morning's Kozlowski, is is a being the are replay Paul me call our at our be call the 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 call with 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. the revisions For the see the publicly Bancorp's of statements please the to The reflect obligation made no undertakes unanticipated Bancorp risks these statements results to of place events. which reflect or speak uncertainties, hereof. reliance occurrence and release with forward-looking which only hereof circumstances these not date on to are date filings undue cautioned Listeners of or any events forward-looking to to of be may after the further

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

Damian Kozlowski

excluding in growth has X% of business Lending year-over-year line The one-time in and insurance Bridge X%, non-interest year-over-year, excluding includes with loans inception, continue to and excluding net year-over-year. $XXX discontinued backed XX% year-over-year. quarter-over-quarter Banking with excluding which businesses Institutional grew year-over-year balances generated payments X% and increased was the Institutional quarter, while decreased X% from the 'XX, increased PPP-related the and the Balance of and which 'XX. share the Gross Total revenue impact income, stimulus since GDV loans reflecting over volume Varo in fees each Real growing exited 'XX. growth. and million Banking of Lending even Lending. an growth, credit million refund loans Estate quarter loans RIA grew PPP Loan of first reduction Good and led spending income of value Leasing impact cards impact $XX fees our growing Bridge dollar over All while tax interest the loans from you morning, a backed PPP our andres. second SBA Estate expense. interest Institutional year-over-year Thank impact credit, In discontinued and XX% Bridge other earned of reclassified quarter X% X% first grow XX%, fair XX%, Real government reflecting of in in and grew financing XX% Bank X%, operations by quarter-over-quarter. XX% loans. everyone. QX other Payments increased Estate or the at with $X.XX Bancorp securities income and Real line

and to increasing experience pipelines our due rates. book 'XX. to in momentum across businesses any robust continue business in repayments We loan Loan remain offset our interest should

and Estate Institutional grew the Our businesses mostly floating quarter. significantly in rate Real

for those mostly SBA the some Leasing and includes during was have growth year. to the but flat quarter in Fleet which portfolios business due and of balance we should Commercial repayments Our maturities the

of income will rate the the are impact after increase net exceeded. rise lending With are in which predicted rates interest portfolios floors XXXX, floating, our interest throughout XX%

made the first stimulus in to business beat. the the significant XXXX, GDVs In in Payments quarter quarter. Our showed first government hard resilience XXXX

and our existing GDV our volume additionally, in show with growth quarter continued without and that second X% a even of 'XX new in stimulus able to first Varo in year-over-year this programs, due to exited increase was However, Bank quarter. the the

to show progresses. see and increasing We beyond in significant the grow year should as and opportunities growth 'XX continue to

turn FinTech completing development to have national give Sioux now previously set. this both construction quarter. 'XX of competitor We I in Paul franchises based build-out we about Falls help an to to changes details our and align call year. to oversight nationally more our our appropriately these Falls the We commitment look proposed believe regulatory CFO, Lastly, announced and Sioux and to our regulatory switch over our with our our facilities OCC Hub end the new in of the licensing primary regulated reflect more and the to our bank. and by solidify economic our forward changes Frenkiel, first of

Paul Frenkiel

for securitization in at Bridge the related CRE loans realized value In to rates. each million securities Damian. you, originations quarter compared commercial net interest the Estate for reduction XXXX, loans repayments of repayments. loans Lending first QX the there reflecting previously and was had of quarter by higher-yielding in QX in in which was XX% repayments, Fees bridge resulting lower and XXXX interest the and are securities on X.X% and lower assets $X.X to a sheet. related in reinvestment end income the XX% CRE gains to reflected repayments Thank were but respectively, at Return balance compared Real Interest XXXX, balances, $X.X new the QX and in began the impact unrealized a increased securities XXXX. those Notwithstanding impact which year-over-year. Loan of increased quarter and XXXX million recorded in fair equity on past caption. repayments exceeded over on new we held to year. loans from first loans of originated of the QX XXXX impacted decreases commercial such under interest quarter as XX% income originating net X.X% now was increase QX XXXX

QX XXXX March in be to our points of hikes year. floors rates. of portion Federal income was approach expense to of during QX additional before The impact interest rate Our not XX to increases impact that are net points XX points net hike their basis projected Initial increase XXXX a until Most interest XX projected income. the tied contractually will is followed interest XXXX. Reserve's throughout exceeded. interest market expense interest reduced We rate to from basis deposit have is of is increase rate basis hikes by during the to rate estimate X% will changes

loans analysis. the other loans are a SBLOC securities loan in by of than of down on from forms Our lending risk value or incurred marketable and the net interest margin respectively securities repaid. as X.XX% for from QX life are The management reduction to its We reflected from only QX higher-yielding nature internal those loans to loan cash matured loans. and of of allowance QX XXXX $X.X losses, portfolios lower losses XXXX was yield which securities and portfolios related our XXXX. on of history collateral, result and lower of specific ratio their nominal The for because reflected charge-off credit total generally loan in the excludes allocations growth $XXX,XXX in insurance the increase have and collateralized X.XX% provision IBLOC credit increased QX a million The as loans believe the XXXX. impact of and in reflects

within value Bridge at loans primarily CRE fair non-SBA Lending Our apartment of Estate and buildings. comprised Real are

which Our loan XX% comprised date of Small XX% or loans origination primarily have is Business to government values. to Loan portfolio SBA are guaranteed either XX%

QX and versus repurchases. compensation. a recent the stock company's tax price to increased rate rates The resulting Damian. stock for in Book reflected higher and I from XXXX XX% related non-interest offset share contained in to QX of years. largest in recourse decrease other stock now X% impact per the a release net certain back impact lower vehicles per leases have we resulted to brokered The of income. underlying the our will reclassification the and from XXXX at history from primary earlier, QX other portfolios. portfolio, of Leasing the diversification Prepaid turn and year legal XX% compared expense lower earnings our deductions results $XX.XX the of other decrease quarter our reflected the debit QX to XXXX reduction end of approximately and and increases was value of the of payments reduced earnings million, For source the to press driver incentive decreased pricing of of compensation as a losses. relationships. X% Non-interest a prolonged share related are tax XXXX funding minimize Varo on expenses impact $XX.XX Total impact FDIC to in detail non-brokered. accounts expense Tables $XX of from compared XXXX. deposits fees also call in and reflecting to income payment-related reflecting loan to QX growth

Damian Kozlowski

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

Operator

[Operator Instructions] with first question from Our Perito KBW. Michael comes

Michael Perito

Hey, good morning.

Damian Kozlowski

How Mike. are you? morning, Good

Michael Perito

are Good. doing? How you

Damian Kozlowski

Good. Thank you.

Michael Perito

in Cool. were partners, are X-part strong. some color to I the guess marry then secondly, seeing? of your launching how outlook there? a are larger the sales step guys good the see And in the some and what's to that down on. come guys of was just love do non-interest had income of volume of I you card couple then that one, kind other a a you ex income. I Number a It partner couple leasing new and with of what's there on wanted of hit items loan the pipeline things we would pretty fees question kind took here. And

could and any be thoughts curious provide Just guys near-term context that would you great? outlook if around any

Damian Kozlowski

happened last lockdowns of tough in economy. GDV The and to been that have because has the the years multiple stimulus X the predict the Yes.

this that of occurred but stimulus. that was because the there there's this So bumpiness occurred of tailwind virtualization

never that's card trillion over you So the programs, even if that be for us. there scenario got we virtual year, We obviously. things other January, best I we year-over-year payments at and virtual We this about world, through that there of really guess problem, single the the a think was of it you actually world up case large increases of went quarter's in was came really possible. the was the was December, volume didn't. to But pushed much and too, forward, didn't to thought last the thought X%. Last creates in stimulus massive going in the we in slightly GDV would think saw not digits. why card, down years. government a that did world, X economy the We be -- $X.X And

the like continued of some impacts of our very across of So number. big for, getting with cards, we previously. have bulk is out the But the happened it to What's that growth broad us of the is just across happy of you're growth already partners. a kind lowering the GDV this happened were some GDV prepaid say, -- of numbers

go to through that the pandemic. prior growth going to So back trend as more get the to you're you we the year, experienced

of takes to build. a but look this kind it growth new hard a So -- pipeline, while for very product the double-digit to takes it while at programs, if for expansions robust were you pipeline, implementations, of but volume predict our it's many the

should We growth we're more the double-digit XX% we were the in to as and we that's pandemic, GDV should trend. we the through trend think year -- So be is of happen. to end to be going by what we to more year, the XX% the prior move that

bumpy, the side, Leasing, or sell depends fee used they're expire for It whether totally car take right? cars. On fees them. not those when are are of those and So back very -- and sales contracts the say, we

go so those over will or the quarter-to-quarter the going our of Estate repayment still about the through will so. system have in -- too. fees, think of the down early we winding but portfolio. the to For line next or the I do realize $XXX those X million from happen. portfolio when repayment fees. see that again, Yes, months those about, we're And securitization all with has Real Once you'll that's We to predict that can't

Michael Perito

it you there the smidge And out line don't broke I good. know was a you but just -- if Very my middle. in

So on GDV just the comment.

just point, to that So some missed, rate but more make you of sure year budgeting then was this at year-on-year, a the I expect growth I still in to say you I next half was guys return think quarter the to did miss? that didn't a steady back conservatism are part I GDV the the -- -- want

Damian Kozlowski

the on the between stimulus Yes. when due The differentials it's still as hard quarter, when but predict that happened next there was was not this to spent. overhang first were as the taxes and is quarter stimulus

in much do headwind -- it's quarter. I as as So we of as -- I have first do will it not can't was really you it -- a think the

You quarter. second might have the slower growth in

you you they're out The that the Look, to this But but other third it numbers should because fourth impact and -- all the The be, be third some those rate. X by a and were the stimulus year, out, be all quarter Varo fourth run quarter in end there will have fourth inconsequential should don't much system. anymore, will out the be pure programs have too. smaller, kind of of nice the the quarter. of third probably noise of should other

Michael Perito

quarter not how liquidity built first Paul, margin the you of guess on let's margin, guess. the does couple there's a with when deploying that have question I can long you going do then start just just elevated the Got long that there, I and then guess, first is have, in And growth then follow-up. it. up where And I the expect take the the imagine here, but things just I remain loan -- you on I to -- to? a

Paul Frenkiel

Okay.

So quarter the in a is lot temporary. that liquidity first of

we -- year. have year, had we our without of have It's which stimulus refund every even in the We accounts. the tax it deposits impact last

the residual although the money left be out So temporarily fairly quarter. the some in second that quickly, quarter, first there in deposits inflates goes will

second excess won't end of there the quarter. be So of lot a by the

which the we continue to our of deposit on our other in in -- expect history all We strong of we have growth a have -- programs. hand,

Michael Perito

liquidity other that or elements back kind where quarter that changed was to does does bay the right if would of were materially? was at NIM normalized, get And the -- that you have up that, the fourth there in

Paul Frenkiel

there elements. are other No,

to income balances QX securities QX but about -- the was the were about you down If look income, at same $XXX,XXX. securities

protection the around is floors degree, higher some to good rate those down-rates, we place the rate the benefit will X% interest we're as finishes securities to which least significantly rate to in environment the of prepay course, primarily investment that our balance is managed -- end increases. income interest that's the or So normalizes we've while believe the year, prepay. with having at also portfolio, rate as sheet of its immune totally toward within Fed news, considerable loans securities, not but higher some X% net The and of interest the inflation that rate eventually

Michael Perito

lower as portfolio mistaken, Meaning see guys that guys correct? forward? if the benefit. That could let the higher And theoretically start selling. that comment on number is jump Got most the of still analysis, it. move then just not lastly expect I'm a and go else the basis I'll said someone you floors, are in that static you margin, as the points to works you Fed funds to XXX I you up then And in. you before down, guys maybe the -- think But are that that

Damian Kozlowski

Yes.

Paul Frenkiel

that we creep -- will to Every than to It's close closer Damian threshold, loans when know does. difficult to indicated, just that from -- lower It just prepay. it X% quarter, down it's as from loans when to to rate closer higher get the -- Yes. X.X%.

really So to quarter. impossible predict exact it's the

Damian Kozlowski

is get X.X% don't because the we recall, X%, that repay, One we from sources. at generally [ph] fee fees, and point. loans different obviously, amortize the the when XX at we about just And they booked amortize, we

that but the very quickly. that So offset quarter of income nice portfolio it's the loss we're interest building a CRE to in

$XX hole. here interest about have mean not you had we we pipeline was this that And would that if days. back to million transactions last have an right year, will we if CRE at year next about now in close already So been that I were at that, million income have that's replaced. We X%, looking and having a created the XX new $XXX portfolio. XX that sitting $XXX think of a million --

that be for [ph] on So X% second net that that million the will priced will loans of be come $XXX another above quarter. new it will

Michael Perito

hike have your would what an per on you estimate through chance? NII Paul, benefit And once by floors, do

Paul Frenkiel

Yes.

So be $XXX And a our right that. up to try on in estimate million we'll now That's model. or the that like based might we X% X% increase, that's actually -- maximize obviously, conservative. [ph]

Damian Kozlowski

are Yes. have pretty not we we -- And remember, securities invested not for X years. in much

took or investment the the replace we did the scale not yield maturity to we try the loans order in to So in decision generate we down could get that portfolio. through origination maturity scale and up and loans go to the

think because interest So that would a it of XX% right would was for cycle income to we not -- been income do it didn't thing the that type generate the we're rate investment-related through a look just down the over at if in been in have have the you to environment positive Bank.

for dry rise. a of have to we reasons rates lot interest in So reinvest liquidity but also income powder as for reasons securities

Michael Perito

good. you, Very guys. Thank

for the taking Appreciate all Sorry but for one thanks my questions. long it.

Damian Kozlowski

Mike. you, Thank

Operator

Wallace Our from William next question comes Raymond James. with

William Wallace

Good doing? morning. guys How you are

Damian Kozlowski

Good morning, Wally.

We is everything are well. Hope Thank you. good.

William Wallace

just Yes. a on put last to Thanks. bow line Maybe questioning. this of

So is should sensitive, offset but points, but as in are deposit doesn't your Is -- neutral floating, that in the portfolio you're XXX correct? the increases so the liability in remaining first think benefit about right? that the NII will loans almost we This costs. it off just basis not

Damian Kozlowski

Yes.

William Wallace

Okay.

Damian Kozlowski

what's We It's and it to positive. it's created. a to positive. be. -- to exactly this, not that conservative. going off being be no with trap in There's want calculate don't we're you're don't We But Yes. run to know don't way you going what's

be could earlier it's So been rate reasonable the cycle. when in it has interest but Paul conservative,

basis Knowing points. impact XXX a Regardless XXX interest to for about hard and it's more variable raise do the in that see very longer-term our and points the negative knowing you would a interest very is start if seeing income for at net Bank. margin. and floors also then So that basis that XX% the securities, be knowing that today, are those portfolio things could basis positive like reinvest they have XXX could all how points, where benefit rates, large are we

William Wallace

I as basis we prepay we're Fed once that this incentive borrower futures if could Does going no the there's else, by out the words, points, tells the us go market to And guess, So mean, it same getting the floors, sheet decision other into come the aggressively, change? transition if year. raises right. that of In XXX get they somewhere I Right, rate right? the reprice -- the they're the at portfolio? the to they sale off held does theoretically, balance for slow

Damian Kozlowski

It rates could. seen And we've start our climb. marketplace already the to in

So...

William Wallace

Yes.

Damian Kozlowski

have it's basis -- But of the XXX the It's are. rest level we points around floors the portfolio where pretty high.

but And could the so now -- the [ph] deals, is have market over if larger more anything but an X% there's maturities coming so the impact now for anyway. it

remember, if refi to loans done not want want they've a their was project. loan to So their you financing a with have their X if of do years to of environment. this potential their but projects in this X-year going ago who done people the frozen portfolio most kind and They're variable rate fix

liquidity extended. I done. be get going longer-term think sure, I all out incentive there's if it's of there's to lock to your bank financing think you project there's in I can't can huge And the there. a So environment, But will -- in plenty nothing repay. be

are alternatives these for borrowers. there So

William Wallace

from good your credit And correct? doesn't are a up keep all anyway, come right? perspective, from These to really happy floors, presumably, matter, -- them once you're it loans they

Damian Kozlowski

I performance during no had that really had You the from that we amazing a pandemic, virtually portfolio. credit issues hotel mean, issues, we remember few

been in because there securitize we couldn't of from think for issues might there worry was it but I there some that performance it speaks the credit some itself.

William Wallace

Right.

right. Okay. All

adjusted expectations my I revenue the your wanted that, to first but expense in that Moving the of part the down. expense on, address -- was I equation. wrote your below look

expense just accruals or my much you benefits that? in just happened is, drives And the was the this or that question really base bonus that and so -- decline have in a if and something big or lapping of function do for is the variability is of kind so, variability you salary what

Damian Kozlowski

-- $X.X we're easy, were was were reduced Well, right? insurance FDIC And the X of just that brokered costs about bills, there's now the was we core. legal that's and one of fees. million and XX% other XXX% legal categories just The

were The up the level. based X more those on tie across the senior sales going across we many we've of significant reductions. formulaic have personnel not really because So are performance other some costs, so -- at plans business them level, we made plans, scalability. We're compensation force expenses the in our at investments

and -- they're everything targets. performance-based. we on performance based do so It's is And what exactly and growth

performance predict. accrual as isn't so lower you'll things would good as models as And have a those on you the when --

So there in definitely area. an that isn't offset

expense not things issues. not those our legal but respond at to depends that we were So together FDIC they had needed base announced deposits, some really insurance, that's there the were this on that things quarter. that whatever And lowered And last to already SEC looking we that's to. legal, year, -- based on

So there costs. that higher another costs was were also was employee high there suit and

come things always and up. ratcheted those go. comp The be will So

and that a based use bonus year the it. everywhere we're is on order you'll then see for with we judge interest going, of metrics if at end to increase So rates the we in the accrue that performance and yes, line which overperform in

Operator

Our next question comes from Sandler. with Frank Piper Schiraldi

Frank Schiraldi

comp -- on line. Just just on the a follow-up the

really? really the seems. direct tie comp incentive sale gains sort comp So when do kind between just comp some was you there in of the realize inflated any line or Is by variable and these it's line the gain not on XQ it of

Damian Kozlowski

No.

Frank Schiraldi

Okay.

Damian Kozlowski

It way difference be -- say, the for no abstract really they if bonus business, might the the discretionary gains. the and on it a formulaic I be got in but if, not gains there's might Leasing most gain. No, good

Frank Schiraldi

year. in $XX Okay. about And you then in the up maybe this -- terms sale, think of on million to the talked I gain

sort in -- you what can year anticipated sale guide level $X.XX for your here? on of is the in maybe is tell in you that Just the us [ph] terms just of gain if wondering

Damian Kozlowski

thought to we going we X were Well, [ph]. have about

on sale, excuse you the the me. On vehicle talking are in or part which vehicle gains that we lease the about -- the CRE get gain

Frank Schiraldi

just was I about CRE talking Yes. but...

Damian Kozlowski

the -- think of Okay. we But to right? about $XXX [ph] be Well, the could it's end at can $X that be million year, going that or $XXX million. that million be

we So what was we it's did to around million going be [ph]. think $XXX

it's So now the about -- fees. what calculate easy we to at exactly? are We're

Paul Frenkiel

about... About $XXX million --

Damian Kozlowski

Yes, $XXX million.

Paul Frenkiel

Yes.

Damian Kozlowski

think year, come were we this the where But about been you in the the So and mean XXXx -- and what are could fees last for that, right? gain fees. why about in quarter sale generally We in it's the this has of X.X% were positioned from year, you about quarter. -- very roll-off So build -- [ph], last be we thinking year, of that that been you had on rest think very They're there good first just will that's spread give portfolio. the if right those we it had from in where will into now right? the the if right? actually we the We PPP CRE double

right? bond GDV you roll-off you and had the had You runoff. a a had lot and in there stimulus the come the So lot for on, then

for very position, good good as interest we we've and that very with we much needed of the lot especially we're year. a in had things a go position in a those as of to dealt be pretty year all deal with through with buybacks, the but And the -- now. you to perform to able rates we're So

So we're the with we're quarter it -- think we very happy got where we happy are. and we're there's lot we're -- around -- very variability but -- we're in think we this we've of a

Frank Schiraldi

then a And on just rate second. the picture the -- just Great. to back for

the think -- if this like side mentioned X% previous it a longer take quarters. conservative just loan wondering being that just numbers there's bit on the or I'm reason versus the It I'm will seems more behind that you quarter just pricing any be get quarter? little is more more that if NII anything boost conservatism wondering Paul higher. conservative there's this in to number And moved to gave. it You that conservative

Damian Kozlowski

It's generally, Bank. for to huge just we know -- going this Frank, as out, the it's a plays be that positive

very by So be a -- Bank things be good position going time we we're happen, to actually it's the is. all 'XX, get these to going the if to in

predict pay, However, how how exactly floors. will interest will originate raise rates they new type what loans will we can't which we with of loans

have floor IBLOC of fixed X% a has that has You that an SBLOC have IRA. right? you rate a You floor, no have a but

hard increases the and CRE. other we roll-off for if at to You -- Will It's have a that will just meetings, predict there too Fed next anything get rate kind Probably. give of than an be guidance. conservative X X.XX% over us put go-start? the

significantly now what that have of start mean. [ph], Bank. saying. the out increase probably know at worked impacting you the that's increases that the lot kind we're room any of next behind where That of a rate We will I of -- know have what will that's You you XXX ambiguity,

what XXX impact of the ultimate So predict have on income. performance really we net it'll XXX there's to where range, and revenue can't this [ph]

that that. want on a ago. a positive because So with of the year in dealt us. give can't we things kind really with Those -- We I very don't moments behind know are four to just it's -- few as described guidance works those situation just -- four we we by through, we're --

than perspective time have would or of I forecast possibilities, this guess, much Now had better a we're looking performance year. last you towards

Frank Schiraldi

just then broader just on the And question lastly, Okay. things. a consumer side of

announcements You've on that talked side. about maybe some

that to has should macro still we the sometime soon? expect of kind your changed on anything if wondering calculus or front of Just you side if things there see enter

Damian Kozlowski

talking you're sponsorship, think I credit about correct?

Frank Schiraldi

Yes.

Damian Kozlowski

Yes.

the We our we than announce we a predict. big, that will We're be for Sooner wait We ahead -- later. partners We're be excited. lead at very very on think take we're this it but rather time. to can't to excited deliberately. moving but cannot continue very

later than have but you giving stone. not I'm that's going rather to guidance we're sooner but I So think something any not in exciting

in it know you to how stuff and accretive they stone think announced Bank. excited the that we never we're So very opportunity are until but they're about be and things, will

Frank Schiraldi

Okay. you. Thank All right, great.

Damian Kozlowski

you. welcome. Thank You're

Operator

I'd This concludes Damian the any turn Q&A session. like to the remarks. Kozlowski call over for closing back to

Damian Kozlowski

today. operator. really for thank you in Thank Bank. interest Yes. And your We you, joining appreciate us the

disconnect can You call. the

Operator

welcome. conclude program. the You're gentlemen, does and Ladies this

now You a disconnect. Everyone may day. have great

The Bancorp, Inc. (TBBK) 29 Apr 222022 Q1 Earnings call transcript