Bancorp, Inc. Q1 FY2025 earnings call

• FinTech Solutions Group has momentum with GDP up 18% y/y and fees up 26%; credit sponsorship balances at $574M, expected to reach over $1B by year-end 2025.
• Loan balances grew 17% y/y but net interest income down 3% due to lower rate environment in 2024; loan interest income down 5%, mitigated by bond purchases and fixed-rate strategies reducing asset sensitivity.
• Rebel portfolio substandard and special mentioned loans down 1% and 20% q/q; expected progress in reducing substandard assets in coming quarters.
• Confirmed guidance of $5.25 per diluted share for 2025, excluding $150M stock buybacks.
• FinTech Solutions deposits average $7.81B, up 26% q/q; non-interest income excluding credit enhancement income up 29% y/y; non-interest expense up 14% y/y with 11% increase in salaries and benefits.

The Bancorp's FinTech Solutions Group showed significant momentum with GDP increasing 18% year over year and total fees growing 26%. Credit sponsorship balances grew to $574 million or 26% quarter over quarter. Loan balances grew 17% year over year, but net interest income was down 3%. Loan balances excluding consumer fintech loans grew 6%. Net interest income was impacted by the lower rate environment in 2024, but mitigated by $900 million of fixed-rate bond purchases in April 2024. Rebel portfolio substandard and special mentioned loans were down 1% and 20% respectively compared to prior quarter end. FinTech Solutions Group: GDP +18% y/y, total fees +26% y/y; Credit sponsorship balances $574M (26% q/q); Loan balances: +17% y/y, net interest income -3%; Rebel portfolio: substandard and special mentioned loans down 1% and 20% q/q.

• Confirmed guidance of $5.25 per diluted share for 2025.
• EPS does not include impact of $150 million of stock buybacks authorized for 2025.

Q: Regarding margin, asked about average yield on fintech loans and asset sensitivity.

A: FinTech loans have a 5% yield; asset sensitivity reduced significantly, was close to 1% last quarter and targets to be in 1% zone.

Q: On margin trajectory in Q1, ask about deposit cost and NIM.

A: Higher cost deposits from insurance settlements ballooned in Q1, will roll off; NIM should improve in Q2 as those deposits roll off, NII fairly flat plus loan growth.

Q: On take rate on GDV, asked about one-timers.

A: Volatile, mix issue, should look over time; better to look at card and ACH fees together.

Q: On share repurchase, asked about leaning in.

A: Nothing decided yet, net income around $250M, $100M to repay debt, buyback $150M, may use proceeds for buybacks depending on rates and stock price.

Q: On GDP growth and consumer behavior, asked about economic uncertainty.

A: Data is broad, payment volume is nominal, mostly necessary transactions; inflation good for revenue unless consumer spending down much lower.