The Bancorp (NasdaqGS:TBBK) Q4 2025 Earnings call January 30, 2026 08:00 AM ET Company ParticipantsAndres Viroslav - Director of Investor RelationsDamian Kozlowski - CEODominic Canuso - CFOStephen Farrell - Investment Management AssociateConference Call ParticipantsEmily Lee - Managing Director and Senior Equity Research AnalystJoe Yanchunis - Equity Research AnalystOperatorGood morning, ladies and gentlemen, and welcome to The Bancorp Q4 and fiscal 2025 earnings conference call. At this time, all lines are ...

Financial Data and Key Metrics Changes - The Bancorp reported earnings per share (EPS) of $1.28 for the fourth quarter, reflecting an 11% year-over-year growth [4] - Gross Deposit Value (GDV) increased by 16% for the quarter compared to the prior year [4] - Revenue growth for the quarter was 3% year-over-year, excluding credit enhancement income [4] - Return on Equity (ROE) reached a record 30.4% for the quarter and 28.9% for the full year [8] - Total assets increased to $9.4 billion, up 7% from the prior year [8] Business Line Data and Key Metrics Changes - Credit sponsorship balances ended at $1.1 billion, up 40% from the third quarter and 142% year-over-year [5] - The total loan portfolio increased by $919 million to $7.26 billion, with consumer fintech loans constituting 15% of the portfolio [8] - Non-interest income, excluding credit enhancement, accounted for just over 30% of revenue in the quarter, with approximately 90% of fees coming from the fintech business [9] Market Data and Key Metrics Changes - Average deposits in the quarter were $7.6 billion, with an average cost of 177 basis points [9] - Delinquency rates declined from 2.19% at the end of the third quarter to 1.6% at the end of the fourth quarter [7] Company Strategy and Development Direction - The Bancorp is focused on three main fintech initiatives aimed at creating significant shareholder value [5] - The company is targeting a guidance of $5.90 EPS for 2026 and $8.25 EPS for 2027, which includes stock buybacks [12] - The strategy emphasizes platform efficiency, productivity gains from restructuring, and AI tools [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the EPS guidance for 2026 and highlighted the positive impact of tax season on business [21] - The company anticipates continued growth in credit sponsorship and overall fintech business, with significant improvements in credit metrics [9][10] - Management acknowledged challenges from legal fees and the unexpected duration of the government shutdown affecting GDV [18][19] Other Important Information - The company repurchased $150 million of its stock in the fourth quarter, totaling $375 million for the year [11] - Criticized assets decreased from $268 million to $194 million, a 28% decline quarter-over-quarter [7] Q&A Session Summary Question: Can you provide more building blocks to help bridge the EPS gap? - Management indicated large revenue opportunities and confidence in upcoming initiatives, including credit sponsorship and the embedded finance platform [16] Question: What were the primary drivers affecting fourth-quarter results? - Key drivers included legal fees, the impact of the government shutdown on GDV, and the timing of credit sponsorship growth [18][19] Question: Can you discuss the economics of off-balance sheet deposits? - Management explained that off-balance sheet deposits are used to optimize funding costs and generate revenue as deposit growth exceeds balance sheet capacity [22][41] Question: What is the plan for the Aubrey property? - The company is nearing cash flow break-even and is looking for exit opportunities to maximize value [32][34] Question: How does the company view the threat of fintechs obtaining their own bank charters? - Management believes many partners will not seek licenses and highlighted the scalability and low-cost benefits of their platform [36][39] Question: What is the expectation for net interest margin (NIM)? - Management expects some compression in NIM as the company shifts towards fintech, but anticipates an increase in fee revenue as a portion of total revenue [60][61]

Financial Data and Key Metrics Changes - Core EPS for Q4 2025 was $0.79, representing an 88% increase year-over-year, driven by record total revenues of $124 million [3][14] - NIM increased by 10 basis points to 311 basis points, with average earning assets up over $650 million on a linked-quarter basis [4][14] - Core deposits rose by $1.2 billion year-over-year, with total deposits up approximately $800 million compared to the prior quarter [4][15] Business Line Data and Key Metrics Changes - Business loans grew over $175 million on a linked-quarter basis and over $500 million year-over-year, with significant contributions from new industry verticals [5][27] - Non-interest income for Q4 was $11.5 million, exceeding guidance [16] - The loan loss provision declined to $10.9 million, with the allowance to loans increasing to 91 basis points [16] Market Data and Key Metrics Changes - The company has a strong liquidity position, with a total capital ratio exceeding 16% and a common equity tier 1 ratio of 11.66% [6][17] - The company is focused on reducing its CRE concentration ratio to the mid-350% area [21] Company Strategy and Development Direction - The company is committed to organic growth, focusing on building out its commercial banking platform and industry verticals [6][10] - Plans for 2026 include modest NIM expansion in the first half and more substantial growth in the second half due to loan repricing opportunities [17][20] - The company aims to operate at a sub-50% efficiency ratio and continue attracting talented bankers to support growth [8][9] Management's Comments on Operating Environment and Future Outlook - Management noted a strong environment for organic growth, with a target-rich marketplace [6] - The company expects to see significant growth in both revenues and loan portfolios in 2026, driven by loan repricing and core deposit growth [8][19] - Management expressed confidence in the company's ability to navigate market disruptions and capitalize on lending opportunities [6][9] Other Important Information - The company has added new capabilities in various sectors, including Fund Finance and Lender Finance, to enhance its commercial banking offerings [11][12] - The company is focused on geographic expansion, particularly in Manhattan and New Jersey [12] Q&A Session Summary Question: What industries accounted for the growth in business loan balances this quarter? - Approximately $400 million of the $500 million year-over-year growth in business loans came from new specialized industries, with healthcare being a significant contributor [27] Question: How much business do you have in New Jersey? - About 8% to 10% of the loan portfolio is in Northern New Jersey, with a deposit-to-loan ratio of 15%-20% [28] Question: How do you view the deposit growth pipeline and pricing? - The company is offering high twos to low threes on money market accounts to attract new customers, with an overall cost of deposits at $168 [33][34] Question: What is the current status of the rent-regulated loan book? - The 100% rent-regulated book is around $350 million, with maturities and repricings expected to be about $250 million for 2026 [36][38] Question: What is the strategy for deploying cash and securities? - The company is not rushing to buy securities and prefers to maintain flexibility on the balance sheet, with cash expected to be used for loans starting in the second half of the year [48][49]

Financial Data and Key Metrics Changes - The company reported a net income of PEN 456 million for the quarter, representing an 81% increase year-over-year, with a return on equity (ROE) of approximately 16% [9][16] - The accumulated ROE for the first nine months of 2025 stands at 17.4%, which would have been 18.3% excluding the one-off impact from Rutas de Lima [15][16] - The risk-adjusted net interest margin (NIM) improved by 60 basis points over the past quarter, with a current NIM of 3.8% [9][28] Business Line Data and Key Metrics Changes - Interbank's loan portfolio grew by over 5% year-over-year, with higher-yielding loans increasing by 7% [21][39] - Interseguro reported strong performance in private annuities and life insurance, with retail premiums growing by 58% year-over-year [10][35] - Inteligo's assets under management reached new record highs, growing at a double-digit pace [7][32] Market Data and Key Metrics Changes - Peru's GDP growth was reported at 3.3% as of August, with private investment projected to grow by 6.5% by year-end [4][12] - Inflation in Peru remains low at around 1.7%, and the Peruvian sol has appreciated by approximately 10% this year [4][11] - The internal demand projection for 2025 has been revised upward to 5.1%, driven by strong growth in private investment and consumption [13][14] Company Strategy and Development Direction - The company aims to achieve digital excellence and deepen primary client relationships through data-driven services and innovation [7][10] - There is a focus on maintaining profitability while expanding into higher-yielding loan segments and enhancing the payments ecosystem with PLIN and Easy Pay [23][25] - The company is committed to long-term sustainability and profitability, adapting quickly to market changes [6][7] Management's Comments on Operating Environment and Future Outlook - Management maintains a cautious outlook due to international conditions and the pre-election period but remains optimistic about Peru's economic stability [4][5] - The company expects to navigate challenges related to pension fund withdrawals while focusing on higher-yielding segments [23][50] - The outlook for 2026 anticipates moderate growth in internal demand and a stable economic environment despite potential political uncertainties [12][14] Other Important Information - The company has provisioned around 40% of its exposure related to Rutas de Lima, which represents less than 1% of its total investment holdings [46][48] - The cost of risk remains low at 2.1%, with expectations for gradual increases as the consumer and small business portfolios expand [27][28] - The company continues to invest in technology and talent to support long-term growth ambitions, with a cost-to-income ratio of 37.7% [20][39] Q&A Session Summary Question: Regarding Rutas de Lima and its impairment level - Management indicated that 40% of impairment has been booked, and the situation is being closely monitored as legal proceedings continue [46][47] Question: Impact of pension withdrawals on retail growth - Management noted that pension withdrawals may have a short-term negative impact on growth but could also lead to increased liquidity and improved collections [50][51] Question: Expected loan growth for 2025 and 2026 - Management expects to continue accelerating growth in credit cards and consumer finance, with a focus on gaining market share [58][59] Question: Corporate-level disbursements in 2026 - Management anticipates mild growth in corporate activity, primarily focused on working capital replenishment and small CapEx, with no large projects expected [63][64]

Financial Data and Key Metrics Changes - The Common Equity Tier 1 (CET1) ratio stood at 13.56% as of Q3 2025, with Risk-Weighted Assets (RWA) at 570 billion [2] - The Return on Equity (ROE) was reported at 11.1%, showing a slight increase from the previous period [3] - The Net Interest Margin (NIM) improved by 12 basis points to 1.56% [4] Business Line Data and Key Metrics Changes - The Non-Performing Loan (NPL) ratio was reported at 2.8%, indicating a stable credit quality environment [5] - The company achieved a Profitability Factor (PF) of 30.1%, reflecting strong operational efficiency [6] Market Data and Key Metrics Changes - The company noted a 4% growth in its market share, driven by strategic initiatives and competitive positioning [10] - The NIM is expected to remain stable, with projections indicating a range of 4% to 6% for the upcoming quarters [10] Company Strategy and Development Direction - The management emphasized a focus on enhancing digital banking services to improve customer engagement and operational efficiency [12] - The company is strategically positioning itself to capitalize on emerging market opportunities, particularly in the fintech sector [13] Management Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the economic recovery and its potential positive impact on loan demand and profitability [14] - The company anticipates a stable regulatory environment, which should support its growth initiatives moving forward [19] Other Important Information - The company is actively managing its RWA to optimize capital efficiency, with a focus on maintaining a robust CET1 ratio [21] - There is an ongoing commitment to improving asset quality, with measures in place to monitor and manage NPLs effectively [20] Q&A Session Summary Question: What are the expectations for loan growth in the next quarter? - Management indicated that they expect loan growth to remain strong, driven by increased consumer and business demand [10] Question: How is the company addressing competitive pressures in the market? - The company is enhancing its digital offerings and customer service to differentiate itself from competitors [12] Question: What are the key risks the company is monitoring? - Management highlighted credit risk and regulatory changes as primary concerns, with strategies in place to mitigate these risks [19]