The Bancorp, Inc. (TBBK) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents mixed signals. Positive aspects include stock repurchases, improved credit metrics, and strategic fintech initiatives. However, lowered 2025 guidance and uncertainties around future revenue from off-balance sheet deposits temper enthusiasm. The Q&A reveals management confidence but also highlights potential risks such as government shutdown impacts and unclear revenue projections. Considering the company's market cap, the stock price is likely to remain stable, reflecting a neutral sentiment.
Key Financial Performance
Earnings Per Share (EPS) The Bancorp earned $1.28 a share in the fourth quarter, reflecting an 11% year-over-year growth. The increase is attributed to strong performance in fintech initiatives and overall revenue growth.
Gross Dollar Volume (GDV) GDV grew 16% in the fourth quarter compared to the prior year. For the full year, GDV growth was up 17% year-over-year. This growth is driven by fintech initiatives and new program implementations.
Revenue Growth Revenue growth in the fourth quarter, including fee and spread revenue but excluding credit enhancement income, was 3% year-over-year. This growth is attributed to fintech business expansion.
Credit Sponsorship Balances Credit sponsorship balances ended at $1.1 billion, up 40% from the third quarter and 142% year-over-year. The growth is due to the addition of new partners and strong fintech performance.
Criticized Assets Criticized assets declined from $268 million to $194 million, a 28% quarter-over-quarter reduction. This improvement is due to better asset management and credit quality.
Delinquency Rate Delinquency rate declined from 2.19% at the end of the third quarter to 1.6% at the end of the fourth quarter. This improvement is attributed to enhanced credit metrics and asset quality.
Return on Equity (ROE) ROE was a record 30.4% in the fourth quarter and 28.9% for the full year, showing year-over-year improvements. This is driven by strong financial performance and strategic initiatives.
Ending Assets Ending assets increased to $9.4 billion, up 7% year-over-year. The growth is driven by a $919 million increase in the total loan portfolio, including $644 million in consumer fintech loans.
Noninterest Income Noninterest income accounted for just over 30% of revenue in the quarter, with approximately 90% of fees coming from the fintech business. This reflects the growing contribution of fintech to overall revenue.
Provision for Loans Provision for loans in the quarter was $858,000, down significantly from $5.8 million in the third quarter. This reduction is due to improved credit quality and lower risk in the loan portfolio.
Net Charge-Offs Net charge-offs in the quarter were $629,000, down from $3.3 million in the third quarter. This decline is consistent with improved credit metrics and lower delinquency rates.
Noninterest Expense Noninterest expense for the quarter was $56.2 million, including $2 million from a legal settlement. Excluding the settlement, costs were up 5% year-over-year, reflecting platform scaling and resource reallocation.
Stock Repurchases The company repurchased $150 million of stock in the fourth quarter, bringing full-year repurchases to $375 million or 12% of outstanding shares. This reflects the company's commitment to returning capital to shareholders.
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Operating Highlights
Credit Sponsorship Balances: Ended at $1.1 billion, up 40% from Q3 and 142% year-over-year. Exceeded the goal of $1 billion.
Embedded Finance Platform: Development is on track with an expected launch early this year.
New Program Implementation: Cash App implementation is on track and expected to significantly impact GDV and fee revenue in 2026 and beyond.
Fintech Loan Portfolio: Increased by $644 million, now constituting 15% of the total loan portfolio.
Noninterest Income: Accounts for over 30% of revenue, with 90% of fees coming from fintech business.
Criticized Assets: Reduced from $268 million to $194 million, a 28% decline quarter-over-quarter.
Delinquency Rate: Declined from 2.19% in Q3 to 1.6% in Q4.
Net Charge-Offs: Decreased to $629,000 in Q4 from $3.3 million in Q3.
Noninterest Expense: $56.2 million in Q4, including $2 million from a legal settlement. Excluding this, costs were up only 5% year-over-year.
Stock Buybacks: $150 million repurchased in Q4, totaling $375 million for the year, representing 12% of outstanding shares.
EPS Guidance: Initiated at $5.90 for 2026, with a target of $1.75 in Q4 2026 and $8.25 for 2027.
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Risk or Challenges
Criticized Assets: Despite progress in reducing criticized assets (substandard and special mention assets), they still stand at $194 million, posing a risk to asset quality and financial stability.
Delinquency Rates: Although delinquency rates declined to 1.6% from 2.19%, they remain a concern for the company's loan portfolio performance.
Legal Settlement Costs: The company incurred $2 million in legal settlement costs related to a previously disclosed legal proceeding, which could impact financials if similar issues arise in the future.
Dependence on Fintech Deposits: 95% of deposits are from fintech, which could pose concentration risks if there are disruptions in the fintech sector.
Provision for Loans: The provision for loans, while reduced, still represents a potential risk if credit conditions deteriorate.
Stock Buybacks: The reliance on stock buybacks for EPS growth could be impacted by stock price volatility, potentially affecting financial targets.
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Guidance & Outlook
EPS Guidance for 2026: The company is initiating guidance of $5.90 EPS for 2026, with a target of at least $1.75 EPS in the fourth quarter of 2026.
Preliminary EPS Guidance for 2027: The company is maintaining preliminary guidance of $8.25 EPS for 2027.
Stock Buybacks: The company forecasts $200 million in stock buybacks for 2026, distributed as $50 million per quarter.
Fintech Initiatives Impact: The company's three major fintech initiatives, platform efficiency, productivity gains from platform restructuring and AI tools, and capital return through buybacks are expected to drive EPS accretion in 2026 and 2027.
Credit Sponsorship Growth: The company aims to add at least two new credit sponsorship partners in 2026, with announcements to be made at the appropriate time.
Embedded Finance Platform Launch: The embedded finance platform is expected to launch early in 2026, contributing positively to financials in 2026 and significantly in 2027.
New Program Implementation: New program implementation timelines, including Cash App, are on track and expected to deliver meaningful contributions to GDV and fee revenue in 2026 and beyond.
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Shareholder Return Plan
Stock Buyback in Q4 2025: The company purchased $150 million of its stock, representing 5% of outstanding shares in the fourth quarter.
Full Year Stock Buyback in 2025: The company repurchased $375 million worth of stock, equating to 12% of outstanding shares for the year.
Stock Buyback Guidance for 2026: The company plans to execute $200 million in stock buybacks, distributed as $50 million per quarter.
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Key Q&A
Q:Your outlook calls for a steep EPS ramp. Can you provide more building blocks to bridge the EPS gap?
A:The company sees large revenue opportunities and has more clarity now than last quarter. They are on track with initiatives, including launching an embedded finance platform by early 2026 and credit sponsorship announcements in the next few quarters. They are confident in hitting the $175 million target by the end of 2026, with 2027 expected to be a strong year.
Q:Can you unpack the drivers that weighed on Q4 results?
A:The three main drivers were legal fees, the unexpected duration of the government shutdown affecting global payments and deposits, and significant credit sponsorship growth occurring late in the quarter, reducing average balance income. These factors impacted Q4 but set the stage for achieving 2026 expectations.
Q:Will a potential government shutdown in Q1 2026 be a headwind?
A:Management does not expect a government shutdown to be a headwind. They anticipate a strong tax season with substantial tax remittances positively impacting Q1 and Q2 2026.
Q:You exited the quarter with $400 million in off-balance sheet deposits. Can you discuss the economics of this program and future deposit flows?
A:The company expects deposit growth to outpace demand, optimizing earnings by shifting higher-cost deposits off-balance sheet. This will reduce funding costs and generate revenue through systems like IntraFi as liquidity grows.
Q:Can you confirm if all announced REBL refinancings were with new partners, and provide details on equity and interest rates?
A:Some refinancings were with new partners, while others were recapitalizations. Existing properties are in stronger positions, with some step-down in yield due to the lower interest rate environment. Most refinancings involved stronger sponsorships.
Q:What is the plan for the Aubrey property?
A:The company has doubled available rooms and achieved 80% occupancy rates, nearing cash flow breakeven by Q2 2026. They aim to exit prudently, maximizing value as the property stabilizes, with an appraisal over $50 million.
Q:How do fintechs obtaining bank charters impact your business?
A:Management does not see a major impact. Many partners will not obtain licenses due to valuation and oversight concerns. Even licensed partners may use the company's infrastructure for scalability and cost benefits.
Q:Can you walk through the economics of off-balance sheet deposits and future expectations?
A:Currently, off-balance sheet deposits optimize funding and net interest margin. As deposit growth exceeds balance sheet capacity, the company expects revenue generation from off-balance sheet deposits, particularly with new partners and programs.
Q:Can you provide details on the $102 million in criticized REBL loans?
A:The loans are spread across various markets, primarily in the Southeast, Texas, and Florida, with no single concentration. These markets offer advantageous legal and structural environments for real estate.
Q:What is the year-end exit rate for the credit sponsorship lending portfolio, and will other portfolios be rationalized?
A:The company aims to add at least two new partners, targeting $2-3 billion in credit sponsorship loans by the end of 2026. They have already reduced participation in lower-yielding portfolios and have sufficient liquidity for growth.
Q:How should we think about net interest margin (NIM) given portfolio changes?
A:NIM is expected to compress near 4% as the company shifts towards fintech and fee revenue growth. Fee income is projected to reach 35% of total revenue, offsetting NIM compression. Adding back fees tied to interest agreements provides a clearer picture of total NIM.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the exact year-end exit rate for the credit sponsorship lending portfolio, instead offering a range of $2-3 billion. Additionally, while they discussed the economics of off-balance sheet deposits, they did not quantify the revenue expected from these deposits in the future.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
APEX ROE
CFO Dominic
Conference
Damian improvement
Damian momentum
Damian today
Delinquency loan
Dominic Damian
Liquidity deposit
ROE record
Viroslav Damian
addition bond
agency investment
announcement finance
asset delinquency
asset end
asset loan
average expense
balance goal
balance partner
beginning brand
bond rate
brand future
cost basis
credit asset
credit sponsorship
delinquency nonaccruals
deposit credit
deposit fintech
development pace
end CFO
end Liquidity
end average
enhancement fee
enhancement provision
fee fintech
progress
settlement
sponsorship balance
trend
TBBK Transcript
The Bancorp, Inc. (TBBK) Q4 2025 Earnings Call Transcript
Unknown1-30
The earnings call presents mixed signals. Positive aspects include stock repurchases, improved credit metrics, and strategic fintech initiatives. However, lowered 2025 guidance and uncertainties around future revenue from off-balance sheet deposits temper enthusiasm. The Q&A reveals management confidence but also highlights potential risks such as government shutdown impacts and unclear revenue projections. Considering the company's market cap, the stock price is likely to remain stable, reflecting a neutral sentiment.
The Bancorp, Inc. (TBBK) Q3 2025 Earnings Call Transcript
Positive10-31
The earnings call summary suggests a positive outlook with strategic partnerships and planned share buybacks. Despite some uncertainties in the Q&A, the company's growth initiatives, especially the expanded relationship with Block and embedded finance, are promising. The market cap indicates moderate sensitivity to news, and the share repurchase plan should boost investor confidence. The guidance remains strong, with expected EPS growth and a focus on fintech solutions. Overall, the positive aspects outweigh the negatives, suggesting a likely positive stock price movement.
The Bancorp, Inc. (TBBK) Q2 2025 Earnings Call Transcript
Positive7-25
The earnings call highlights strong growth in fintech solutions, significant increases in noninterest income, and a promising partnership with Block, which is likely to positively impact stock prices. Despite some concerns about deposit reductions, management's proactive approach in addressing potential risks and leveraging AI for productivity improvements suggests a positive outlook. The market cap indicates moderate sensitivity to these developments, leading to a positive sentiment overall.
The Bancorp, Inc. (NASDAQ:TBBK) Q1 2025 Earnings Call Transcript
Positive4-26
The earnings call summary reflects strong financial performance, with significant EPS growth and fintech solutions expansion. Despite some competitive and regulatory risks, the company maintains strong loan growth and positive fee income trends. The Q&A section suggests analysts are cautiously optimistic, with no major concerns raised. The company's stock buyback plan and optimistic guidance further enhance positive sentiment. Given the market cap of approximately $1.9 billion, the stock is likely to experience a positive movement of 2% to 8% over the next two weeks.
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