The Bancorp(TBBK) - 2025 Q2 - Quarterly Results

Executive Summary & Company Overview Second Quarter 2025 Highlights The Bancorp reported strong Q2 2025 financial results with increased net income and EPS, driven by growth in loans, particularly consumer fintech, and higher gross dollar volume. Key financial metrics like ROA and ROE remained robust, while net interest margin saw a sequential improvement. A strategic partnership with Block, Inc. for card issuance was also announced Q2 2025 Financial Highlights (YoY Comparison) | Metric | Q2 2025 | Q2 2024 | Change (YoY) | | :---------------------- | :-------- | :-------- | :----------- | | Net Income | $59.8 million | $53.7 million | +11% | | Diluted EPS | $1.27 | $1.05 | +21% | | Return on Assets (ROA) | 2.6% | 2.8% | -0.2 pp | | Return on Equity (ROE) | 28% | 27% | +1 pp | | Net Interest Income | $97.5 million | $93.8 million | +4% | | Net Interest Margin | 4.44% | 4.97% | -0.53 pp | | Loans, net | $6.54 billion | $5.61 billion | +17% | | Gross Dollar Volume (GDV) | $43.65 billion | $37.14 billion | +18% | | Consumer Fintech Loans | $680.5 million | $70.1 million | +871% | | Book Value Per Share | $18.60 | $15.77 | +18% | - The Bancorp repurchased 753,898 shares of its common stock at an average cost of $49.75 per share during Q2 2025, reducing outstanding shares by 6% year-over-year[7] - The Bank amended its Master Services Agreement with Block, Inc. to provide debit and prepaid card issuance and related services for Cash App customers, with services expected to begin in 2026[3] CEO Commentary & Outlook CEO Damian Kozlowski highlighted continued Fintech growth and relationship expansion. The company reaffirmed its 2025 EPS guidance of $5.25 and announced "Project 7" targeting a $7 EPS run-rate by Q4 2026 through Fintech revenue growth, share buybacks, and efficiency gains - The Bancorp maintains its 2025 earnings per share (EPS) guidance of $5.25[4] - The company announced "Project 7," targeting at least a $7 EPS run-rate by the fourth quarter of 2026[4] - Project 7 goals will be achieved through Fintech revenue growth, share buybacks, and efficiency and productivity gains by reallocating or reducing resources[4] Company Profile The Bancorp, Inc. is a financial holding company headquartered in Wilmington, Delaware, providing banking services to non-bank financial companies through its Fintech Solutions, Institutional Banking, Commercial Lending, and Real Estate Bridge Lending businesses. It is recognized as a leader in prepaid card issuance and an SBA National Preferred Lender - The Bancorp, Inc. is headquartered in Wilmington, Delaware, and operates through its subsidiary, The Bancorp Bank, National Association[6] - The company provides services to non-bank financial companies across Fintech Solutions, Institutional Banking, Commercial Lending, and Real Estate Bridge Lending[6] - The Bancorp is recognized as the 1 issuer of prepaid cards in the U.S., an SBA National Preferred Lender, and was included in the S&P Small Cap 600[6][8] Forward-Looking Statements This section clarifies that statements regarding future business, growth, productivity, efficiency, and share repurchases are forward-looking and subject to risks and uncertainties. The company does not undertake to revise or update these statements publicly unless required by law - Statements in the earnings release regarding future business, growth, productivity, efficiency, and share repurchases are considered "forward-looking statements"[9] - These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected[9] - The Bancorp does not undertake any duty to publicly revise or update forward-looking statements unless required by applicable law[9] Financial Performance Analysis Consolidated Income Statements The Bancorp reported a significant increase in net income for Q2 2025 and the six months ended June 30, 2025, primarily driven by a substantial rise in non-interest income, particularly fintech fees and consumer fintech loan credit enhancement. Net interest income also saw a modest increase Consolidated Condensed Income Statement Highlights (Dollars in thousands) | Metric | Q2 2025 | Q2 2024 | Change (YoY) | 6 Months 2025 | 6 Months 2024 | Change (YoY) | | :---------------------------------- | :-------- | :-------- | :----------- | :------------ | :------------ | :----------- | | Net interest income | $97,492 | $93,795 | +4.0% | $189,235 | $188,213 | +0.5% | | Provision for credit losses (non-consumer fintech) | $1,494 | $1,477 | +1.2% | $2,368 | $3,840 | -38.4% | | Provision for credit losses (consumer fintech) | $43,233 | $0 | N/A | $89,101 | $0 | N/A | | Total fintech fees | $35,645 | $27,895 | +27.8% | $70,091 | $55,145 | +27.1% | | Consumer fintech loan credit enhancement | $43,233 | $0 | N/A | $89,101 | $0 | N/A | | Total non-interest income | $83,743 | $30,722 | +172.6% | $167,385 | $60,104 | +178.5% | | Total non-interest expense | $57,223 | $51,446 | +11.2% | $110,517 | $98,158 | +12.6% | | Net income | $59,821 | $53,686 | +11.4% | $116,994 | $110,115 | +6.2% | | Diluted EPS | $1.27 | $1.05 | +21.0% | $2.46 | $2.10 | +17.1% | Net Interest Income and Margin Analysis Net interest income increased year-over-year for both the quarter and six-month periods, despite a decrease in net interest margin. The average interest rate on interest-earning assets decreased, while the average rate on deposits and interest-bearing liabilities also decreased, contributing to the margin compression. The Q2 2025 net interest income included a $3.1 million gain from the final sale of a security related to a discontinued commercial real estate securitization business Net Interest Income & Margin (Dollars in thousands) | Metric | Q2 2025 | Q2 2024 | Change (YoY) | 6 Months 2025 | 6 Months 2024 | Change (YoY) | | :---------------------- | :-------- | :-------- | :----------- | :------------ | :------------ | :----------- | | Net interest income | $97,492 | $93,795 | +4.0% | $189,235 | $188,213 | +0.5% | | Net interest margin | 4.44% | 4.97% | -0.53 pp | 4.25% | 5.06% | -0.81 pp | - The second quarter of 2025 included $3.1 million of interest income from the final sale of the "CRE-2" security, which was related to the Company's discontinued commercial real estate securitization business[3][17][20] - The average interest rate on $8.18 billion of average deposits and interest-bearing liabilities during Q2 2025 was 2.23%[7] Non-Interest Income and Expense Non-interest income experienced substantial growth, primarily driven by a significant increase in consumer fintech loan credit enhancement and higher fintech fees. Non-interest expenses also increased, with salaries and employee benefits being the largest component Non-Interest Income (Dollars in thousands) | Metric | Q2 2025 | Q2 2024 | Change (YoY) | 6 Months 2025 | 6 Months 2024 | Change (YoY) | | :---------------------------------- | :-------- | :-------- | :----------- | :------------ | :------------ | :----------- | | ACH, card and other payment processing fees | $5,562 | $3,000 | +85.4% | $10,694 | $5,964 | +79.3% | | Prepaid, debit card and related fees | $26,113 | $24,755 | +5.5% | $51,827 | $49,041 | +5.7% | | Consumer credit fintech fees | $3,970 | $140 | +2735.7% | $7,570 | $140 | +5307.1% | | Total fintech fees | $35,645 | $27,895 | +27.8% | $70,091 | $55,145 | +27.1% | | Consumer fintech loan credit enhancement | $43,233 | $0 | N/A | $89,101 | $0 | N/A | | Total non-interest income | $83,743 | $30,722 | +172.6% | $167,385 | $60,104 | +178.5% | Non-Interest Expense (Dollars in thousands) | Metric | Q2 2025 | Q2 2024 | Change (YoY) | 6 Months 2025 | 6 Months 2024 | Change (YoY) | | :-------------------------- | :-------- | :-------- | :----------- | :------------ | :------------ | :----------- | | Salaries and employee benefits | $37,134 | $33,863 | +9.7% | $70,803 | $64,143 | +10.4% | | Data processing expense | $1,227 | $1,423 | -13.8% | $2,432 | $2,844 | -14.5% | | Legal expense | $1,863 | $633 | +194.3% | $3,820 | $3,820 | +162.7% | | FDIC insurance | $1,202 | $869 | +38.3% | $2,255 | $1,714 | +31.6% | | Software | $5,144 | $4,637 | +10.9% | $10,157 | $9,126 | +11.3% | | Other non-interest expense | $10,653 | $10,021 | +6.3% | $21,050 | $18,877 | +11.5% | | Total non-interest expense | $57,223 | $51,446 | +11.2% | $110,517 | $98,158 | +12.6% | Financial Position & Capital Consolidated Balance Sheets Total assets decreased slightly QoQ but increased YoY, primarily driven by growth in loans, net of deferred fees and costs. Deposits also increased YoY, while total liabilities saw a slight decrease QoQ but an increase YoY. Shareholders' equity continued to grow Consolidated Condensed Balance Sheet Highlights (Dollars in thousands) | Metric | June 30, 2025 | March 31, 2025 | Dec 31, 2024 | June 30, 2024 | Change (YoY) | | :---------------------------------- | :------------ | :------------- | :----------- | :------------ | :----------- | | Total assets | $8,839,231 | $9,385,727 | $8,727,543 | $8,145,401 | +8.5% | | Loans, net of deferred fees and costs | $6,535,432 | $6,380,150 | $6,113,628 | $5,605,727 | +16.6% | | Allowance for credit losses | $(59,393) | $(52,497) | $(44,853) | $(28,575) | +107.8% | | Total deposits | $7,765,935 | $8,364,582 | $7,746,046 | $7,155,688 | +8.5% | | Total liabilities | $7,978,965 | $8,556,040 | $7,937,760 | $7,368,410 | +8.3% | | Total shareholders' equity | $860,266 | $829,687 | $789,783 | $776,991 | +10.7% | Capital Ratios The Bancorp and its subsidiary bank remain well-capitalized, with all key capital ratios significantly exceeding regulatory minimums under Basel III, demonstrating strong financial stability Capital Ratios (as of June 30, 2025) | Ratio | The Bancorp, Inc. | The Bancorp Bank, N.A. | "Well capitalized" minimums (Basel III) | | :-------------------------------- | :------------------ | :--------------------- | :------------------------------------ | | Tier 1 capital to average assets | 9.40% | 10.33% | 5.00% | | Tier 1 capital to risk-weighted assets | 14.42% | 15.80% | 8.00% | | Total capital to risk-weighted assets | 15.45% | 16.83% | 10.00% | | Common equity Tier 1 to risk-weighted assets | 14.42% | 15.80% | 6.50% | Book Value Per Share Book value per common share increased by 18% year-over-year, reflecting growth in shareholders' equity and the impact of share repurchases Book Value Per Share | Date | Book Value Per Share | | :---------------- | :------------------- | | June 30, 2025 | $18.60 | | March 31, 2025 | $17.66 | | December 31, 2024 | $16.69 | | June 30, 2024 | $15.77 | - Book value per common share increased by 18% year-over-year from $15.77 at June 30, 2024, to $18.60 at June 30, 2025[7] Business Segment Performance & Operational Metrics Loans by Major Business Line The total loan portfolio grew significantly year-over-year, primarily driven by a substantial increase in consumer fintech loans. Small business lending and institutional banking also showed solid growth, while direct lease financing and real estate bridge loans experienced slight decreases or modest increases Loan Balances by Major Business Line (June 30, 2025, Dollars in millions) | Major Business Line | Balances | Year over Year Growth | Linked Quarter Annualized Growth | Average Approximate Rates | | :------------------------------------------ | :------- | :-------------------- | :----------------------------- | :------------------------ | | Institutional banking | $1,873 | 4% | 7% | 6.2% | | Small business lending | $1,047 | 11% | 15% | 7.3% | | Leasing | $698 | (2%) | (7%) | 8.2% | | Commercial real estate (non-SBA loans, at fair value) | $109 | nm | nm | 7.5% | | Real estate bridge loans (recorded at book value) | $2,140 | 1% | (13%) | 8.2% | | Consumer fintech loans - interest bearing | $60 | nm | nm | 5.2% | | Consumer fintech loans - non interest bearing | $620 | nm | nm | — | | Weighted average yield (Total Loans) | $6,547 | 17% | 8% | 6.7% | - Consumer fintech loans increased by 871% year-over-year to $680.5 million at June 30, 2025[3] - Consumer fintech loans include $346.9 million of secured credit card accounts, backed dollar for dollar by cash collateral[3][35] Deposits & Fintech Solutions Group Average deposits increased significantly year-over-year. The Fintech Solutions Group's deposits, primarily from prepaid and debit card issuance, consumer fintech loan fees, and other payments, also showed strong growth - Average deposits for Q2 2025 were $8.06 billion, an increase of $1.34 billion or 20% over Q2 2024[7] - Fintech Solutions Group deposits totaled $7.76 billion at June 30, 2025, representing a 20% year-over-year increase[24] - Non-interest income from prepaid and debit card issuance, consumer fintech loan fees, and other payments fees for the Fintech Solutions Group amounted to $35.6 million in Q2 2025, up 28% YoY[24] Gross Dollar Volume (GDV) Gross Dollar Volume (GDV) for prepaid, debit, and credit cards increased by 18% year-over-year, reflecting organic volume growth and new product launches - Gross Dollar Volume (GDV) totaled $43.65 billion for Q2 2025, an increase of $6.51 billion or 18% compared to Q2 2024[3][22] - The increase in GDV reflected continued organic volume growth with existing partners and products, as well as the impact of new products launched within the past year[3] Loan Portfolio & Asset Quality Allowance for Credit Losses The allowance for credit losses increased significantly year-over-year, primarily due to a substantial provision for credit losses on consumer fintech loans. Net charge-offs also increased considerably, driven by consumer fintech loans Allowance for Credit Losses (Dollars in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change (YoY) | | :------------------------------------------ | :------------ | :------------ | :----------- | | Balance at beginning of period (6 months) | $44,853 | $27,378 | +63.8% | | Provision for credit losses (non-consumer fintech) (6 months) | $2,368 | $3,840 | -38.4% | | Provision for credit losses (consumer fintech) (6 months) | $89,101 | $0 | N/A | | Net charge-offs (6 months) | $76,929 | $2,643 | +2809.9% | | Balance at end of period (June 30) | $59,393 | $28,575 | +107.8% | - Net charge-offs to average loans for the six months ended June 30, 2025, was 1.23%, compared to 0.05% for the same period in 2024[32] - Consumer fintech loans accounted for $89.6 million of charge-offs and $14.6 million of recoveries in the six months ended June 30, 2025[32] Real Estate Bridge Loans (REBL) The REBL portfolio, primarily consisting of rehabilitation loans for apartment buildings, decreased slightly QoQ but increased YoY. The portfolio maintains a weighted average origination date "as is" loan-to-value ratio of 70%, with a focus on workforce housing and robust underwriting processes - The REBL portfolio balance was $2.14 billion at June 30, 2025, decreasing 3% QoQ and increasing 1% YoY[7][24] - The portfolio consists entirely of rehabilitation loans for apartment buildings, primarily workforce housing[7][33] - The REBL portfolio has a weighted average origination date "as is" loan-to-value (LTV) ratio of 70%, based on third-party appraisals, and an "as stabilized" LTV of 60%[7][33][46] Small Business Loans (SBLs) Small business loans, including those held at fair value, increased by 11% YoY and 4% QoQ. The portfolio is substantially comprised of SBA-guaranteed loans and is diversified across various business types and states SBL Portfolio Composition The total small business loan portfolio reached $1.05 billion, with a significant portion being government-guaranteed SBA loans, including 7(a) and 504 programs - Total small business loans (SBLs), including those held at fair value, amounted to $1.05 billion at June 30, 2025, an 11% increase YoY and 4% QoQ[3][24] Small Business Loan Principal Composition (June 30, 2025, Dollars in millions) | SBL Type | Loan Principal | | :------------------------------------------ | :------------- | | U.S. government guaranteed portion of SBA loans | $397 | | Commercial mortgage SBA | $382 | | Construction SBA | $18 | | Non-guaranteed portion of U.S. government guaranteed 7(a) Program loans | $117 | | Non-SBA SBLs | $116 | | Other | $4 | | Total Principal | $1,034 | - The majority of SBA 7(a) loans are government guaranteed, while SBA 504 loans are made with 50%-60% LTVs[38] SBL Diversification by Type and State The non-guaranteed portion of the SBL portfolio is diversified across various business types, with hotels and funeral homes being the largest segments. Geographically, California, Florida, and North Carolina represent the largest state concentrations SBLs by Type (Excludes government guaranteed portion of SBA 7(a) Program, June 30, 2025, Dollars in millions) | Type | Total | % Total | | :------------------------------------------ | :---- | :------ | | Hotels (except casino hotels) and motels | $88 | 14% | | Funeral homes and funeral services | $82 | 13% | | Full-service restaurants | $36 | 6% | | Child day care services | $28 | 4% | | Car washes | $22 | 4% | | Homes for the elderly | $16 | 2% | | Gasoline stations with convenience stores | $15 | 2% | | Outpatient mental health and substance abuse centers | $15 | 2% | | General line grocery merchant wholesalers | $13 | 2% | | Fitness and recreational sports centers | $10 | 2% | | Plumbing, heating, and air conditioning companies | $10 | 2% | | Nursing care facilities | $9 | 1% | | Caterers | $9 | 1% | | Offices of lawyers | $9 | 1% | | Used car dealers | $7 | 1% | | Limited-service restaurants | $6 | 1% | | All other specialty trade contractors | $7 | 1% | | General warehousing and storage | $6 | 1% | | Automotive body, paint, and interior repair | $6 | 1% | | Other accounting services | $6 | 1% | | Appliance repair and maintenance | $6 | 1% | | Residential remodelers | $5 | 1% | | Other | $222 | 36% | | Total | $633 | 100% | SBLs by State (Excludes government guaranteed portion of SBA 7(a) Program, June 30, 2025, Dollars in millions) | State | Total | % Total | | :---------------- | :---- | :------ | | California | $153 | 24% | | Florida | $94 | 15% | | North Carolina | $48 | 8% | | New York | $44 | 7% | | Texas | $39 | 6% | | New Jersey | $38 | 6% | | Pennsylvania | $32 | 5% | | Georgia | $30 | 5% | | Other states | $155 | 24% | | Total | $633 | 100% | - The top 10 non-guaranteed SBL loans totaled $89 million, with the largest single loan being $13 million for general line grocery merchant wholesalers in CA[44] Institutional Banking Loans (SBLOC/IBLOC) Institutional banking loans, comprising SBLOC, IBLOC, and investment advisor financing, increased by 4% YoY and 2% QoQ. These loans are secured by marketable securities (SBLOC) or cash surrender value of life insurance policies (IBLOC), with conservative lending ratios and strong collateral quality - Total Institutional Banking Loans were $1.87 billion at June 30, 2025, increasing 4% YoY and 2% QoQ[7][24] Institutional Banking Loans Composition (June 30, 2025, Dollars in millions) | Type | Principal | % of total | | :---------------- | :-------- | :--------- | | SBLOC | $1,087 | 58% | | IBLOC | $514 | 27% | | Advisor financing | $272 | 15% | | Total | $1,873 | 100% | - SBLOCs are generally lent up to 50% of equity value and 80% for investment grade securities, while IBLOCs lend up to 95% of the cash value of eligible life insurance policies from highly-rated insurance companies[49][51] Direct Lease Financing Direct lease financing balances decreased by 2% YoY and QoQ. The portfolio is diversified across various industries, with construction, government agencies, and real estate/rental/leasing being the largest segments. Vehicle leases constitute the majority of the portfolio - Direct lease financing balances were $698.1 million at June 30, 2025, decreasing 2% YoY and QoQ[3][24] Direct Lease Financing by Type (June 30, 2025, Dollars in millions) | Type | Principal balance | % Total | | :------------------------------------------ | :---------------- | :-------- | | Construction | $127 | 18% | | Government agencies and public institutions | $127 | 18% | | Real estate and rental and leasing | $98 | 14% | | Waste management and remediation services | $92 | 13% | | Health care and social assistance | $29 | 4% | | Other services (except public administration) | $25 | 4% | | Professional, scientific, and technical services | $23 | 3% | | Wholesale trade | $18 | 3% | | General freight trucking | $16 | 2% | | Transit and other transportation | $12 | 2% | | Finance and insurance | $12 | 2% | | Arts, entertainment, and recreation | $11 | 2% | | Other | $108 | 15% | | Total | $698 | 100% | - Of the total direct lease financing, $644 million consisted of vehicle leases, with the remaining balance being equipment leases[52] Loan Delinquency and Other Real Estate Owned (OREO) Total past due loans increased, with consumer fintech loans showing a notable amount of past due balances. The Other Real Estate Owned (OREO) balance also increased, primarily due to a transfer from a nonaccrual real estate bridge loan Total Past Due Loans (June 30, 2025, Dollars in thousands) | Delinquency Status | Amount | | :----------------- | :----- | | 30-59 days past due | $42,077 | | 60-89 days past due | $8,299 | | 90+ days still accruing | $883 | | Non accrual | $61,590 | | Total past due | $112,849 | - Consumer fintech loans had $20.5 million in total past due balances at June 30, 2025[54] - The Other Real Estate Owned (OREO) balance increased to $66.05 million at June 30, 2025, partly due to a $39.4 million apartment building rehabilitation bridge loan transferred to OREO in Q1 2024[56] Asset Quality Ratios Asset quality ratios show an increase in nonperforming loans and assets, as well as the allowance for credit losses relative to total loans, indicating a shift in the risk profile, likely influenced by the growth in consumer fintech loans Asset Quality Ratios | Ratio | June 30, 2025 | March 31, 2025 | December 31, 2024 | June 30, 2024 | | :-------------------------------- | :------------ | :------------- | :---------------- | :------------ | | Nonperforming loans to total loans | 0.96% | 0.51% | 0.55% | 0.34% | | Nonperforming assets to total assets | 1.45% | 1.10% | 1.14% | 1.08% | | Allowance for credit losses to total loans | 0.91% | 0.82% | 0.73% | 0.51% | Liquidity & Capital Management Available Credit Lines The Bancorp Bank, N.A. maintains substantial lines of credit with U.S. government sponsored agencies, totaling over $3 billion, ensuring robust liquidity - The Bancorp Bank, N.A. has total lines of credit available amounting to $3.08 billion as of June 30, 2025[7][28] Summary of Credit Lines Available (June 30, 2025, Dollars in thousands) | Source | Amount | | :---------------------- | :------------- | | Federal Reserve Bank | $2,049,770 | | Federal Home Loan Bank | $1,027,750 | | Total lines of credit available | $3,077,520 | Deposit Composition The vast majority of The Bancorp Bank, N.A.'s deposits are low balance and FDIC-insured, contributing to a stable funding base and mitigating liquidity risk - The vast majority of The Bancorp Bank, N.A.'s deposits are low balance, insured deposits, which do not constitute the liquidity risk experienced by certain institutions[7][29] Estimated Insured vs Uninsured Deposits (June 30, 2025) | Category | Percentage | | :---------------- | :--------- | | Insured | 94% | | Low balance accounts | 3% | | Other uninsured | 3% | | Total deposits | 100% | Non-GAAP Financial Measures Efficiency Ratio The efficiency ratio remained stable at 41% for Q2 2025 and 41% for the six months ended June 30, 2025, indicating consistent operational efficiency in generating revenue relative to expenses. This calculation excludes consumer fintech loan credit enhancement income Efficiency Ratio | Period | Efficiency Ratio | | :---------------------- | :--------------- | | Three months ended June 30, 2025 | 41% | | Three months ended June 30, 2024 | 41% | | Six months ended June 30, 2025 | 41% | | Six months ended June 30, 2024 | 40% | - The efficiency ratio calculation excludes consumer fintech loan credit enhancement income, which amounted to $43.2 million for Q2 2025 and $89.1 million for the six months ended June 30, 2025[59]