Earnings call transcript: The Bancorp’s Q2 2025 performance shines with fintech growth

The Bancorp Inc. reported robust financial results for Q2 2025, driven by significant growth in its fintech partnerships. The company achieved earnings of $1.27 per diluted share, marking a 21% increase year-over-year. Revenue also saw an 11% rise, excluding fintech loan credit enhancement income. The stock price rose by 5.23% to $76.36, reflecting investor optimism. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.37, with particularly strong marks in profitability and growth metrics.

Key Takeaways

• Earnings per share increased by 21% year-over-year.
• Revenue grew by 11% compared to Q2 2024.
• The company’s fintech loan portfolio surged by 871%.
• A $500 million share repurchase program was announced.
• The net interest margin improved to 4.44%.

Company Performance

The Bancorp demonstrated strong performance in Q2 2025, bolstered by its strategic focus on fintech partnerships. The company’s fintech loan portfolio expanded by 871% to $680.5 million, underscoring its successful integration into the fintech ecosystem. Year-over-year, loan balances increased by 17%, while non-interest income rose by 32% to $40.5 million. The company’s net interest margin improved to 4.44%, up from 4.07% in the previous quarter. With a market capitalization of $3.7 billion and a P/E ratio of 17.08, the company trades at attractive multiples relative to its near-term earnings growth potential, as highlighted by InvestingPro analysis.

Financial Highlights

• Revenue: Increased by 11% year-over-year.
• Earnings per share: $1.27, up 21% from Q2 2024.
• Non-interest income: $40.5 million, a 32% increase from the previous year.
• Loan balances: Grew 17% year-over-year.
• Net interest margin: Improved to 4.44%.

Market Reaction

The Bancorp’s stock price increased by 5.23% to $76.36 following the earnings announcement. This positive reaction reflects investor confidence in the company’s strategic direction and growth potential in the fintech sector. The stock’s performance remains strong, trading near its 52-week high of $80.76, with an impressive 68.79% return over the past six months. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its intrinsic value, suggesting investors should monitor valuation metrics carefully. For deeper insights, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Outlook & Guidance

The Bancorp maintained its EPS guidance for 2025 at $5.25 and is targeting a $7 EPS run rate by the end of 2026. The company plans to expand its fintech partnerships and has announced a $500 million share repurchase program over the next 18 months, with $300 million allocated for 2025 and $200 million for 2026.

Executive Commentary

CEO Damian Kozlowski highlighted the company’s strategic vision, stating, "We want to get to a situation in three years, five years where we add a couple hundred people, we go from 800 to 1,000 people, but when we double the net income, we’re not going to go from 800 people to 1,600 people." He also emphasized the company’s robust infrastructure, capable of supporting five times its current volume, and its focus on becoming a leading fintech bank.

Risks and Challenges

• Market volatility could impact fintech partnerships.
• Regulatory changes in the fintech industry may pose challenges.
• Economic downturns could affect loan portfolio performance.
• Competition in the digital banking sector remains intense.
• Technological advancements may require ongoing investments.

Q&A

During the earnings call, analysts inquired about the maturity of the Rebel loan portfolio and potential refinancing strategies. The company also addressed the Aubrey property’s situation and ongoing resolution efforts. Discussions included the potential for AI-driven productivity improvements and the capacity to onboard new fintech partners.

Full transcript - The Bancorp Inc (TBBK) Q2 2025:

Conference Operator: Good morning ladies and gentlemen and welcome to The Bancorp Inc. Second Quarter 2025 earnings conference call. At this time all lines are in a listen only mode. Following the presentation we will conduct a question and answer session. If anyone has any difficulties hearing the conference, please press 0 for operator assistance at any time. I would now like to turn the conference call over to Andres Viroslav. Please go ahead.

Andres Viroslav, Investor Relations, The Bancorp: Thank you, operator. Good morning and thank you for joining us today for The Bancorp Second Quarter 2025 Financial Results Conference Call. On the call with me today are Damian Kozlowski, Chief Executive Officer, and Marty Egan, our Interim Chief Financial Officer. This morning’s call is being webcast on our website at www.thebancorp.com. There will be a replay of the call available via webcast on our website beginning at approximately 12:00 P.M. Eastern Time today. The dial-in for the replay is 1-888-660-6264 with a passcode of 45285. Before I turn the call over to Damian, I would like to remind everyone that our comments and responses to questions reflect management’s view as of today, July 25, 2025. Yesterday we issued our second quarter earnings release and updated investor presentation. Both are available on our investor relations website. We will make certain forward-looking statements on this call.

These statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions we mention today. These factors and uncertainties are discussed in our reports and filings with the Securities and Exchange Commission. In addition, we will be referring to certain non-GAAP financial measures during this call. Additional details and reconciliations of GAAP to adjusted non-GAAP financial measures are in the earnings release and the investor presentation. Please note that The Bancorp undertakes no obligation to publicly release the results of any revisions to forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Now I’d like to turn the call over to The Bancorp’s Chief Executive Officer, Damian Kozlowski.

Damian Kozlowski, Chief Executive Officer, The Bancorp: Damian, thank you Andres. Good morning everyone. The Bancorp earned $1.27 per diluted share in the second quarter on year over year revenue growth of 11% excluding fintech loan credit enhancement income, with expense growth year over year of 11%. EPS growth was 21% year over year. Our fintech ecosystem continued to be the driver of revenue growth. GDV climbed 18% year over year with total fee and related interest. Income growth from all FinTech activities grew 30%. On July 14, we announced a five year expansion of our relationship with Block in which we added debit and prepaid card issuance and related services for Cash App customers, subject to program implementation timelines. The additional services are expected to begin as early as 1Q26, and we expect this program to enhance growth of GDV and fees into the future.

We also announced a substantial increase to our share repurchase program over the next 18 months to $500 million beginning in 3Q25. This buyback will be funded by core earnings growth and the replacement of maturing senior unsecured debt at The Bancorp Holding Company of $100 million aggregate outstanding with approximately $200 million of new senior unsecured debt at The Bancorp Holding Company. We anticipate that $300 million of shares will be purchased for the remainder of 2025. This is an increase of $225 million or 300% over the current buyback of $75 million for the last two quarters of 2025. In 2026, $200 million worth of shares are planned to be purchased with $50 million of purchases each quarter. Lastly, we are continuing to maintain our guidance of $5.25 earnings per share for 2025.

We also are announcing Project 7, a project in which we are targeting at least a $7 earnings per share run rate by the end of 2026. We plan to accomplish this goal through FinTech revenue growth, buybacks of shares, and efficiency and productivity gains by reallocating and or reducing resources where appropriate. I now turn the call over to Marty Egan, our Interim CFO.

Andres Viroslav, Investor Relations, The Bancorp: Thank you, Damian. Excluding the consumer fintech loan credit enhancement income, non-interest income for the second quarter of 2025 was $40.5 million, which was 32% higher than the second quarter of 2024. Total fintech fees accounted for most of that increase. Prepaid debit card, ACH, and other payment fees increased 14% to $31.7 million over that period, and consumer credit fintech fees increased $3.8 million to $4 million in the second quarter. Credit enhancement income was $43.2 million, and the provision for consumer fintech loans was also $43.2 million. Overall, loan balances grew 17% year over year, while loan balances excluding consumer fintech loans grew 6%. Consumer fintech loans increased 871% year over year to $680.5 million and 19% over the linked quarter. Average FinTech Solutions deposits for the quarter increased 20% to $7.76 billion from $6.44 billion in the second quarter of 2024.

Net interest income was 4% higher than the second quarter of 2024. The second quarter net interest margin was 4.44% compared to 4.07% for the first quarter of 2025. The second quarter of 2025 included $3.1 million of interest on CRE2, which was repaid in that quarter as a result of the sale of underlying collateral. Additionally, fees on the majority of our growing consumer fintech loan balances are recorded as non-interest income, which impacts both net interest income and net interest margin. Non-interest expense for the second quarter of 2025 was $57.2 million, which was 11% higher than the second quarter of 2024. The increase included a 10% increase in salaries and benefits. Additional details regarding our loan portfolios are included in the related tables in our press release, as are earnings contributions of our payments business. Now let’s turn the call back to Damian.

Damian Kozlowski, Chief Executive Officer, The Bancorp: Thank you, Marty. Operator, could you please open the lines for questions?

Conference Operator: Yes, thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on a touch-tone phone. Should you wish to cancel your request, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Once again, that is star one should you wish to ask a question. Our first question is from Tim Switzer from KBW. Your line is now open.

Damian Kozlowski, Chief Executive Officer, The Bancorp: Good morning. Thank you for taking my questions. Congratulations on the new partnership with Block and Cash App. Can you provide some details on if this is an entirely new product for them or if you are a new sponsor for a current product and any color. Sorry, go ahead. No, go ahead. I was just going to ask any color you can provide on what exactly you’ll be doing. Like, is this part of your rapid funds transfer offering like your other program with Block? No. We know this is the card issuance. We already do the rapid funds transfer. There are 15 use cases that were transferred to Wells Fargo during last year. You saw that growth in our other payment and ACH line of our business. This is the entire portfolio of the card issuance for Block.

Whether they use us exclusively or like in many other cases, they use another bank, we’ll see. This is one of the big programs. There are three dominant programs, Chime, PayPal, and Block. We now have the RFT business and the card issuance business. This is, as everyone knows, one of the major players in the fintech world and they have over 50 million customers. It will be very meaningful in the future to both GDV and fee growth. Okay, so this is for the Cash App card, correct. Issuance. Okay.

Andres Viroslav, Investor Relations, The Bancorp: Okay.

Damian Kozlowski, Chief Executive Officer, The Bancorp: Are you supplementing Sutton Bank, who’s currently the issuer, or replacing them? The mandate is to replace that volume over time. Okay, great. I also wanted to ask about the lower deposits this quarter. Was that kind of an action by you to manage the balance sheet or what was the driver there? Correct, that’s. There was a couple of, there’s tax receipts during that part of the year and we actually took some savings deposits off balance sheet and we also had $500 million of insurance deposits through our corporate payments partners for the California wildfires. That’s running off. Plus the tax season. It was a very big tax season this year. We took some of the excess liquidity also off balance sheet. That was all balance sheet management driven. Gotcha. We saw the criticized loans and non-accrual step up a little bit in the Rebel loan portfolio.

With the bulk of that portfolio reaching maturity over the next year, can you provide some color on borrowers’ ability to make the balloon payment? How many have taken the one-year extension versus paying off the loan entirely? How many need to inject additional equity or find another lender? This is, it’s not like a point in time. We’re always working with these borrowers. We have a lot of visibility as to their business plans and whether they plan to recap or do something else. Potentially if there’s a problem or just simply to repay or extend the loan. In the case where they’re doing their business plan and need a little bit more time, there’s kind of a natural extension and that’s gone up over recent times just because of market conditions, which we’re fine with.

Obviously if you have a performing property and it’s cash flowing and it’s met all its requirements, extensions are a good thing for us. What happens is that you see this way before, while many of these loans were done in this vintage, we have a lot of visibility. If there’s any issues with that, they would have already appeared in the criticized or substandard assets. It’s not like there’s this date and then we don’t know what’s going on and we don’t know what’s going to happen with the borrower. We’ve been working through that over the last year. We don’t expect a big, another spike in substandard assets. We had kind of a spike in the third, fourth quarter of last year. Went down a little bit in the fourth quarter, and it’s been a little bit stable. Hopefully we’ll be able to work through that next.

It’s taking a little longer than we want. We had the Aubrey situation where we weren’t able to close the property, but we are hoping over the next two quarters that will go down meaningfully. Okay, great. Thank you, Damian.

Conference Operator: Thank you. Our next question is from Joe Yanchunis from Raymond James. Your line is now open.

Damian Kozlowski, Chief Executive Officer, The Bancorp: Good morning. Good morning, David. I was hoping to kind of continue the credit discussion there. With respect to the Aubrey, I believe it was undergoing some renovations before the prior contract was terminated. Are those renovations continuing and are you guys funding those? Yes. There are about 20 units available to rent. The occupancy has gone up dramatically over the last eight months from the mid-30% to the mid-60%. There are already 20 units that have been totally reconditioned that are ready to be leased out. There is some additional work to do, but we’re in active discussions with potential purchasers of the property and that’ll really depend over the next six weeks. If we don’t get that traction to dispose of the property, we’ll probably finish the balance of the units. I think it’s in the 10% to 15% range. We will fund it.

Obviously, we have the deposit. Hopefully, we’ll be able to recapture that. The equation would be at that point, if we fully leased up the property, we would look not only to get out of the base loan that we have, but we would also look to get a gain on the property at that point if we were able to lease it up to the 90% range. I appreciate that. One more on your expanded partnership with Block, are there going to be any associated expenses leading up to the new card program? Yes. Our base infrastructure is very leverageable in many of the categories, but there will be incremental hires, so there won’t be a lot. We’re getting a lot of efficiencies over time and productivity enhancements through things like machine learning.

Hopefully, AI will kick in in the next year or two, but there will be additional resources. There might be a little bit extra in the third and fourth quarters ramping up, but usually as the volume, that’s maybe a few, but when the volume starts kicking in, we’ll have to assess adding additional resources. Of course, we’ll be getting large volume and revenue increases, so it’ll be offset obviously. A little bit of build maybe, but when the volume comes in, we’ll have to add additional resources depending on where we are with our productivity gains. Just kind of sticking with the productivity gains, you mentioned in your release targeting fourth quarter 2026 EPS of at least $1.75, which will be driven by several factors including these productivity gains. Can you talk about where you see the benefits of AI impacting your business? It sounds like that might be.

Andres Viroslav, Investor Relations, The Bancorp: Latter half of 2026 event.

Damian Kozlowski, Chief Executive Officer, The Bancorp: If I kind of read the tea leaves right in your prior answer, there are two things. That’s one thing. The first thing though is that we really have had two different banks kind of operating synergistically, but two banks. One was more of a traditional bank. While we were levering up the bank, spread increases dominated kind of our profitability. That’s switching to our, you know, it’s not no longer a payments bank, it’s really a middle office fintech and technology platform, that ecosystem that we built for the fintech industry. That is rapidly, obviously growing very, very quickly, adding new partners and product sets. We’re becoming much more focused on that fintech bank. As that happens, we’ve already said for years that we’re going to take some of the traditional businesses off the balance sheet.

That’ll be lower on balance sheet for those businesses, and we’ll need to reallocate resources as the fintech business increases its use of the balance sheet. In many cases that’s just a reallocation. We want to get to a situation in three years, five years where we add a couple hundred people, we go from 800 to 1,000 people, but when we double the net income, we’re not going to go from 800 people to 1,600 people. Some of that is that we are reallocating resources from the traditional to the fintech bank. Now on the AI front, there’s so much happening in this space. One of the key areas where it’s likely that we’re already using tools, we’re using broad tools for people to get more productive, but we’re using tools in, say, for legal contracts, et cetera, where AI is very well suited.

Going into the future, there are things like SARS filing, doing the initial work where there could be big productivity gains. We’re not going to be the first person to do it, but we’re already studying those things and we really want to lean into it in 2026. We’re looking for use cases very aggressively. Of course, these are models so they have to be tested and they have to be robust. We have to make sure the quality control is there and testing is there. We think it’s going to have an impact going into especially in part of 2026 and 2027, they’re becoming just better tools. We’re finding out, you know, use cases are being tested in the industry and we think it’ll make good gains.

Which means that obviously as we grow to the first point, we won’t have to go from doubling the amount of people into the future when we have sizable gains in GDV, which we expect. We’ve been over trend for a while. Adding Block is going to add another leg to the GDV growth. We want to make sure that we can resource that very effectively and productively with the best use of tools in areas like AI. Very thorough answer. I appreciate you taking my questions this morning.

Conference Operator: Thank you. Once again, please press Star one should you wish to ask a question. Your next question is from Ariath Glaunut from Cygnus Capital. Your line is now open.

Hey, good morning guys. Thanks for taking my call. I have a few questions about the Rebel loan portfolio. First is we haven’t seen your June 10-Q yet, but from March the disclosure was roughly $1.4 billion of Rebel loans would be maturing within the next 12 months. My first question is, you know, given where interest rates are, third party capital availability for these types of properties, would you expect that the majority of that $1.4 billion would be refinanced by third parties or could we instead expect that you guys will end up having to extend and modify those loan maturities?

Damian Kozlowski, Chief Executive Officer, The Bancorp: If they’re on their business, we have two one-year extensions available to borrowers. If they’re on their business, with the vast majority on their business plan, cash flowing properties, we’re more than happy to extend those loans if they want to wait for lower interest rates. Most of the exits, if they’re stabilized properties, can exit through the GSEs. That’s the main refinance or five-year fixed. It’s really about their planning. When you have a maturing performing loan, that’s really about the sponsor’s planning, whether they’re waiting for an interest rate decrease or not, which is obviously top of mind for everybody. Once again, we’re working with these borrowers all the time. While there is a lot of a maturity wall because a lot of these were done a year into the pandemic when we restarted the business, it’s a wall that we understand really well and we’ve already identified.

You see the universe of just a handful of loans that are in the substandard category, which has already been identified if there’s a real issue with the business plan. We’re working through it diligently. We don’t expect there to be a lot of increases in the substandard category. We think we’ve peaked and we think that over the next few months we’ll work through those maturities and we’ll also see a decline in substandard loans.

Okay, appreciate that. Since you mentioned the sort of peak in substandard loans, I’m going back to Q3 of last year where I think you made some similar comments around not expecting to see a significant increase in criticized Rebel loan portfolio loans. Looking at the disclosure from the press release, it looks like non-accrual loans did pick up sequentially, as did special mention, and substandard went down a little bit. Help us understand, versus six months ago when we were all together on the Q3 call, what’s driven the higher non-accrual, higher special mention loans versus your prior view around Q3 of being the prior peak?

The first thing is the Aubrey, we expected that to be closed and off the books. There was a lot of momentum on that property and we were holding obviously a deposit on that property. That was a surprise. That would have rolled off and obviously substandard or E would have gone down. The non accrual is actually in a recap process. We are hoping to get that off the books also next quarter. It took a little bit longer than we thought and as a matter of prudence, we put it in non accrual until that recap was done. It is just taking longer than we had expected to reduce the substandards. It has not really increased. The classified assets have gone down a touch. We have a little bit of movement in other categories. We are working on it.

It is a handful of loans, it is very manageable. We have a lot of visibility. We are working very proactively. When you have these situations, sometimes they just take a little bit longer to resolve. We are working very hard to do that. Okay.

No, appreciate that color and just last couple of questions, quick ones. On the Aubrey, I noted the new appraisal that was done, $51 million as is and ballpark $59 million as stabilized. If you could help us reconcile those higher appraised values versus the prior one, which is something in the $40 million range. Reconcile why the appraisal went up in value when you’ve gone through a process now for the better part of 15 months where you haven’t been able to find a buyer at a value even at the outstanding loan amount. Meaning what I’m asking is that market tests versus, you know, funding a spreadsheet, you know, putting a cap rate on NOI, help us reconcile the appraisal versus market test process.

Yeah, we had a buyer and they actually put money into the property and put a sizable deposit and couldn’t close the transaction, which is unfortunate. During that time, we substantially changed. A lot of investment went into the property. It went from a 35% occupancy all the way up to the mid-60% and obviously a lot of visibility on the rents that are realized. What people have done, investors have actually done, and you can actually go on the Aubrey Houston website and see it. The property is business as usual. It’s in a very different state than it was eight to twelve months ago. The appraisal is done totally on a third-party basis looking at comps and everything else. It went up from $48 million to, I think it was $51 million.

It went up $3 million based on those criteria and obviously a stabilized increase as the property has improved. We don’t, obviously, we’re not the appraiser. That’s done on a third-party basis. Because of those metrics, the rents realized, the occupancy, the market conditions, this property is in a good neighborhood. It’s obviously in the top at its current state. It’s one of our better properties with good amenities and everything. That is the appraiser’s value. That’s not ours.

Okay, last question for me, please. You referenced the earnest money deposits, you know, in the dispute with the buyer around who gets that money since the deal didn’t close. From a financial statement point of view, how have you accounted for that $3 million? Have you kind of reflected a receivable, expecting to collect it, or is it somehow there’s a reserve on it? If you can help us understand how you’ve accounted for that, please.

Yes, it would be because of the appraisal at Aubrey. If we get that deposit, they’ve objected to it, which is, you know, we don’t think. We think we will get that deposit, but you can’t object to it in these situations. It will be income. It hasn’t been recognized as income yet because it’s been disputed, but we expect to get that, and that will be realized in income. Okay, thank you.

Conference Operator: Thank you. Our next question is from Tim Switzer from KBW. Your line is now open.

Damian Kozlowski, Chief Executive Officer, The Bancorp: Hey, guys, thanks for letting me back in. I wanted to follow up on the question about the earnest money. How quickly should this earnest money litigation be resolved? What is the legal process for that? Are you guys pretty confident you’ll be retaining all the money currently in escrow? We hope so. I mean, it was. I think. We think we have a clear. It’s very clear. I mean, there was a deposit put down for the purchase of the property. Of course, you get a situation, you’re going to get an objection. It is really up to the court to weigh the evidence, but we believe it’s pretty clear cut that the deposit should come to us without a lot of delay. We’re hoping to resolve it next quarter. Okay, good to hear. Outside of the Rebel loan portfolio, there’s a little bit of an increase in NPAs.

It looks like it was largely in the SBL book. Could you provide some color there? We’ve seen across the industry for small business lending, there’s been a little bit of credit migration. Yeah, it was very little. It was one, you know, one or one big one, and it really wasn’t a lot. We aren’t seeing a deterioration, really, in the portfolio, I mean, very low. Obviously, in these cases, there’s many of these cases, there’s backstops, obviously through the SBA program. We’re not worried about that. There was a little tick up. The main focus really is we think we’re in good shape on the SBA and the leasing portfolio. We had a little trucking like everyone else did, issues in the leasing portfolio and that’s kind of run off. We’re not seeing the same thing anymore. We don’t have that much left either in that space.

Those portfolios seem to be in very good shape. The main focus has been getting those substandard assets down in the Rebel loan portfolio. Also, the maturity, what people see as a wall, but we see more as a very, you know, a 12 month process of working with buyers to refinance or extend their loans. We think we’re in good shape in that area at this point. Okay, and then if I get one more. You guys are bringing on a lot of volume with the new programs with Chime, new partners like Block. How much more capacity do you have for your new partners or new programs? There’s obviously a lot of demand out there. Just wondering if you guys are still able to continue taking share. Yeah, the share is determined by who you have in your portfolio. Do you have the winners in the fintech space?

A lot of this in many of these areas has been decided. You see it by looking at commercials during any sporting event. You’ll see these commercials. Many times our name will appear on the bottom. We have built an ecosystem where we could have five times the volume that we have today. We have a process to take the deposits off the balance sheet, a way of working with our partners where we have clearing accounts. We’ve been building this since 2018, really focused on building this, redoing the entire tech stack, redoing our infrastructure so that we can accommodate dramatically higher gross dollar volume. To be honest, we never envisioned five years ago that there would be this much opportunity.

With the addition of Block, having the three largest, really the three largest digital wallet neobanks, which dominate the marketplace with marketing spend and everything, and have other opportunities with those three that go beyond that, is really a big driver. That’s across our verticals. Do you have the winners in these fintech spaces? In many cases we do. They have disproportionate opportunity out there because they have the ability to invest in their businesses with marketing spend, and we believe we can support it. We could have easily multitudes of volume, and we’ve been preparing for this for the better part of at least five years, if not more years. Yeah. Makes sense. Appreciate all the color.

Andres Viroslav, Investor Relations, The Bancorp: Thank you.

Conference Operator: Thank you. There are no further questions at this time. I will now hand the call back over to Damian Kozlowski for the closing remarks.

Damian Kozlowski, Chief Executive Officer, The Bancorp: Thank you, everyone, for joining us today. Operator, you can disconnect the call.

Conference Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.

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