• Earnings Per Share (EPS): $1.00 for the third quarter.
• Revenue Growth: Led by fintech Solutions Group with GDV growth of 15% and total fee growth of 22%.
• Credit Sponsorship Balances: $288 million at the end of the quarter, up from $70 million at the end of the second quarter.
• Small Business Lending Growth: 14% year-over-year.
• Net Interest Margin: 4.78% for Q3 2024, compared to 4.97% for Q2 2024.
• Provision for Credit Losses: $3.5 million in Q3 2024, compared to $1.8 million in Q3 2023.
• Non-Interest Income: $32.1 million for Q3 2024, 20% higher than Q3 2023.
• Non-Interest Expense: $53.3 million for Q3 2024, 12% higher than Q3 2023.
• Book Value Per Share: Increased 18% to $16.90 compared to $14.36 a year earlier.
• Fintech Solutions Group Deposits: Increased 11% to $6.64 billion from $6.01 billion in Q3 2023.

• Warning! GuruFocus has detected 4 Warning Sign with TBBK.

Release Date: October 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The Bancorp Inc (NASDAQ:TBBK) reported strong revenue growth, particularly driven by its fintech Solutions Group, with a 15% increase in GDV and a 22% rise in total fee growth from fintech payments and credit sponsorship fees.
• The company has successfully increased its credit sponsorship balances to $288 million by the end of the third quarter, up from $70 million at the end of the second quarter.
• Small business lending showed a robust 14% year-over-year growth, indicating strong performance in this segment.
• The Bancorp Inc (NASDAQ:TBBK) is experiencing above-trend growth in its fintech space, with GDV growth exceeding 20% in October, suggesting continued momentum.
• The company has issued a preliminary guidance of $5.25 per share for 2025, supported by ongoing double-digit growth in fintech fees and credit sponsorship.

Negative Points

• Substandard multifamily loan assets remain elevated, with the company acknowledging it is at or near peak levels, which could pose risks if not managed effectively.
• The net interest margin decreased to 4.78% in the third quarter from 4.97% in the second quarter, reflecting interest reversals on certain loans.
• The provision for credit losses increased to $3.5 million in Q3 2024, up from $1.8 million in Q3 2023, indicating rising concerns over credit quality.
• The company experienced a $1.6 million after-tax loss due to transaction processing delays, highlighting operational risks.
• Regulatory ratios showed a slight decline despite an increase in tangible common equity, suggesting potential changes in risk-weighted assets.

Q & A Highlights

Q: Can you provide more details about the new fintech partnership mentioned? A: Our pipeline is extremely strong, and while there is nothing specific to announce, we are expanding long-term relationships with new product sets, including credit sponsorship. We are in discussions with new partners interested in moving to our platform. - Damian Kozlowski, CEO

Q: What are your expectations for GDV growth and fee growth in 2025? A: We are currently experiencing above 20% GDV growth, and while it can be volatile, we expect GDV growth to be around 15% or higher next year, potentially reaching the 20% range. Fee growth is expected to follow a similar trend. - Damian Kozlowski, CEO

Q: How do you see the trajectory of the net interest margin (NIM) given potential rate cuts? A: Our asset sensitivity has declined, and we expect the NIM to remain stable in the high 4% range, around 4.90% to 5% for 2025. This assumes the Fed funds rate remains around 4%. - Damian Kozlowski, CEO

Q: Can you explain the recent loss from the transaction processing delay? A: There was an application glitch that led to a delay in processing non-sufficient fund files. To avoid consumer confusion, we shared the cost with our partner and have since implemented controls to prevent future occurrences. This is considered a one-time event. - Damian Kozlowski, CEO

Q: What is included in the $1.6 million of consumer credit fintech fees, and do you plan to sell any loans for gain on sale revenue? A: The fees primarily come from customers paying for early access to funds. We have not sold any loans for gain on sale revenue yet, but future plans include holding some assets longer term and distributing others to investors. - Damian Kozlowski, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.