The Bancorp(TBBK) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The Bancorp earned $1.04 per share in Q3 2024, with revenue growth primarily driven by the FinTech Solutions Group [4] - Total credit sponsorship balances increased significantly to $280 million from $70 million at the end of Q2 2024 [4] - Non-interest income for Q3 2024 was $32.1 million, a 20% increase compared to Q3 2023 [13] - Book value per share rose 18% to $16.90 compared to $14.36 a year earlier [14] Business Line Data and Key Metrics Changes - The FinTech Solutions Group experienced a 15% growth in GDV and a 22% increase in total fee growth from FinTech payments and credit sponsorship fees [4] - Small business lending grew by 14% year-over-year [5] - Non-interest expense increased by 12% to $53.3 million, driven by an 11% rise in salaries and benefits [13] Market Data and Key Metrics Changes - Average FinTech Solutions Group deposits increased by 11% to $6.64 billion from $6.01 billion in Q3 2023 [11] - The provision for credit losses was $3.5 million in Q3 2024, compared to $1.8 million in Q3 2023 [11] Company Strategy and Development Direction - The company is focusing on expanding its FinTech partnerships and enhancing its payments ecosystem, with expectations of continued double-digit growth in FinTech fees and credit sponsorship [4][8] - Plans for stock buybacks in 2025 have been adjusted to $150 million, down from $250 million in 2024, due to potential debt repayments [6] - The company aims to provide more detailed business segment profitability reporting in future financial disclosures [6] Management's Comments on Operating Environment and Future Outlook - Management believes they are at or near the peak of substandard assets and expects to reduce these balances over the next two quarters [5][23] - The anticipated decrease in interest rates is expected to aid in reducing substandard assets [5] - Preliminary guidance for 2025 is set at $5.25 per share, supported by continued growth in FinTech fees and credit sponsorship [8] Other Important Information - The company is implementing a new methodology for interest expense allocation to better explain profitability [7] - The impact of a recent application glitch resulted in a one-time loss, which management believes will not recur [30] Q&A Session Summary Question: Inquiry about a new partnership in FinTech - Management indicated a strong pipeline and ongoing discussions with new partners but did not announce any specific new partnerships [16][17] Question: Thoughts on 2025 guidance and GDV growth - Management expects GDV growth to remain above 15%, potentially reaching 20% [18][19] Question: Trends in balances moving to permanent financing - Management noted that liquidity is building in the market, but significant movement has not yet been observed [20][21] Question: Credit sponsorship rollout and growth outlook - Management is working with multiple partners and expects significant growth in credit sponsorship balances by the end of next year [24][25] Question: Margin trajectory outlook - Management anticipates stable net interest margins in the high 4% range for 2025, depending on interest rate movements [28][33] Question: Reason for adding to the Rebel reserve - The increase in reserves is a theoretical accounting requirement, despite not expecting actual losses based on current LTVs [35] Question: Update on loans with modifications - Management expects modifications to be peaking and has implemented multiple levels of review to identify problem loans [36][37] Question: Composition of consumer credit FinTech fees - The $1.6 million in fees primarily comes from early access fees for loans, with no current plans for gain on sale revenue [38][39]