Bancorp (TBBK) Q1 2026 Earnings Transcript

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DATE

Apr. 24, 2026, 8 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Damian M. Kozlowski
• Chief Financial Officer — Dominic Canuso

TAKEAWAYS

• EPS -- $1.41 per share with EPS growth of 18% year over year.
• ROE -- 35.1% and ROA -- 2.57%, as reported for the quarter.
• FinTech Gross Dollar Volume (GDV) -- 18% year-over-year growth above trend.
• Total revenue growth -- Up 15% year over year, combining fee and spread revenue.
• Credit sponsorship balances -- $1.65 billion, a 50% non-annualized increase over 2025.
• Loan portfolio -- $7.75 billion in ending loans, 9% non-annualized linked-quarter growth, and 22% year-over-year growth.
• Credit sponsorship contribution -- Represented 88% of linked-quarter loan growth and 83% of year-over-year loan growth; now 21% of the total loan book versus 15% last quarter and 9% a year ago.
• Deposit growth -- Average deposits rose 9% on a linked-quarter basis; average deposit cost was 1.7%, down 7 basis points from last quarter and 53 basis points year over year.
• Off-balance sheet deposits -- $1.34 billion at quarter end, up from $850 million in Q4 and $793 million the prior year.
• Net interest margin (NIM) -- 3.87%, down 43 basis points sequentially and 20 basis points year over year; fintech lending fees added 24 basis points and deposit sweep fees added 4 basis points equivalent to NIM.
• Noninterest income mix -- 33%, up from 30% in Q4 and 29% in 2025, excluding credit enhancement activity.
• Fintech fee revenue proportion -- 29%, versus 27% both last quarter and last year.
• Criticized assets -- Declined to $357.6 million, representing a 16% quarter-over-quarter reduction.
• REBL criticized loans -- Down $24 million, or 29%, to $59 million quarter over quarter, and down 75% over 18 months.
• Provision reversal -- $1.3 million in the traditional lending portfolio, with reserve releases driven by improved performance in leasing.
• Noninterest expense -- $55 million, with an efficiency ratio of 41.5% excluding credit enhancement revenue.
• 2026 guidance -- Maintained at $5.90 EPS and $1.75 EPS for Q4; 2027 EPS expectation is $8.10–$8.30.
• Buybacks -- Forecasted at $2 million total and $50 million quarterly in 2026; targeted at nearly 100% of net income in 2027.
• Cash App program -- Launched; expected to ramp throughout 2026 and 2027, with initial accretion in financials by year end.
• Embedded finance partner -- "Very little revenue in for embedded finance in 2026," per Kozlowski; ramp occurs in 2027-2028, with program launch expected in 2026.
• Fintech loan loss reserve ratio -- 1.81% this quarter, compared to 2.84% last quarter, primarily due to a higher mix of secured products.
• Fintech lending portfolio -- Approximately $1.67 billion, up from $1.1 billion at Q4, with full-year goal of $2 billion unchanged despite a near-term volume acceleration.
• Fintech lending economics -- Overall fintech loan portfolio generates a ~3% NIM, funded predominantly with noninterest-bearing deposits; Chime lending program is the lowest-NIM but highest synergistic revenue relationship.
• Off-balance sheet deposit sweep revenue -- $900,000 recognized from deposit sweep fees, reported as other income.
• Aubrey property -- Occupancy rate at 80% (available rooms) and just over 60% (total units), expected to operate breakeven by quarter end; stabilization and targeted exit timing likely in high 80%-90% occupancy after phased upgrades over 9 months.

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RISKS

• Kozlowski said, "We have very little revenue in for embedded finance in 2026. We have more in 2027, but you are exactly right. We are likely to announce at least one partner. It does take a while to fully build out the capability. Depending on what the use case is, it could be very limited or it could be very broad. So the impact of embedded finance will be fulfilled in 2027 and 2028. Very little revenue is in our plan for 2026 for embedded," indicating a material lag in revenue realization from this initiative relative to other fintech programs.
• Canuso noted, "NIM was 3.87% in the quarter, down 43 basis points from prior quarter and 20 basis points from the prior year's quarter," attributing the decline to the loan mix shift and lower short-term rates, which may pressure spread income in the near term.

SUMMARY

The Bancorp (NASDAQ:TBBK) reported significant expansion in its credit sponsorship and fintech portfolios, which now represent a growing share of both loan growth and fee revenue mix. Management confirmed the successful operational launch of the Cash App program, with clear expectations for increased financial contribution beginning late in the year, while embedded finance initiatives are expected to impact results in subsequent years due to delayed partner ramp timelines. Notably, the company maintained its 2026 and 2027 EPS targets, underscoring confidence in ongoing fintech program commercialization, cost efficiency gains, and capital return strategy through substantial share buybacks.

• Kozlowski said, "9 buildings, get it up to high 80s, 90%, and then monetize it at this current time," outlining a phased path to divestiture tied to occupancy milestones.
• Credit sponsorship loans may reach "30% or 40% of the balance sheet possibly in the next three to four years," as Kozlowski shared about the Apex 2030 strategy.
• Annual buyback intent is directly tethered to net income, with stated plans to return "100% for the foreseeable future, depending on the multiple," after building "a little bit of extra equity into the end of this year."
• Fintech lending yields a lower NIM compared to traditional loans, but is counterbalanced by structurally lower costs and full credit enhancements, reducing risk of loss.

INDUSTRY GLOSSARY

• Credit sponsorship: A lending arrangement where The Bancorp originates loans on behalf of fintech partners, who may provide credit enhancements and bear primary risk.
• GDV (Gross Dollar Volume): Total dollar volume of transactions processed on payment instruments, often used to measure business scale in fintech programs.
• REBL (Real Estate Bridge Lending): Short-term, transitional real estate loans frequently used for repositioning or value-add projects, typically prior to stabilization or permanent financing.
• Embedded finance: Integration of banking or payment capabilities within third-party platforms, enabling non-banks or partners to offer branded financial products using The Bancorp’s infrastructure.

Full Conference Call Transcript

Damian M. Kozlowski, Chief Executive Officer, and Dominic Canuso, our Chief Financial Officer. This morning's call is being webcast on our website at 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 1807702030 with a passcode of 9545117. 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, 04/24/2026. Yesterday, we issued our first 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 filed 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. Please note that The Bancorp, Inc. 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. I will now turn the call over to The Bancorp, Inc.’s Chief Executive Officer, Damian M. Kozlowski. Damian?

Damian M. Kozlowski: Thank you, Andres, and thank you for joining our call today. The Bancorp, Inc. earned $1.41 a share in the fourth quarter. EPS growth year over year was 18%. First quarter ROE was 35.1%, and ROA was 2.57%. FinTech GDV continues to grow above trend at 18% year over year. Revenue growth in the quarter, which includes both fee and spread revenue, was 15% year over year. Our three main fintech initiatives continue to move forward quickly and are well positioned for success. Our onboarding of new programs and expansion of current programs continues apace. Cash App program has been launched. It will ramp up during 2026 and 2027 and show progressive accretion to our financials.

Credit sponsorship balances soared in the first quarter, to $1.65 billion, a 50% non-annualized increase over '25. As previously stated, we expect to launch at least two significant additional programs in 2026. Announcements are subject to our partners' marketing timelines. Embedded Finance platform is close to completing the development of its first operational use case. We plan to announce at least one partner in this area in 2026. We also made continued progress in reducing our criticized assets, which includes both substandard and special mention assets. These assets declined from $357.6 million, or 16% quarter over quarter. We expect more progress over the next few quarters.

Lastly, we are maintaining our guidance at $5.90 EPS for 2026 with $1.75 a share in the fourth quarter. Our expectation for 2027 EPS is in a range of $8.10 to $8.30. 2026 buybacks are forecast to be $2 million total and $50 million a quarter in 2026, with 2027 buybacks equal to near 100% of net income in the year. Our three major fintech initiatives, along with platform efficiency gains from restructuring and AI tools, plus a high level of capital return through continued buybacks, will be the driving forces behind EPS accretion. EPS gains are subject to development, implementation timelines, and fintech. I will now turn the call over to our CFO, Dominic Canuso. Dominic?

Dominic Canuso: Thanks, Damian. The first quarter builds on our momentum and strategy from 2025 and is setting up for a strong 2026. Ending loans for the quarter are $7.75 billion, which is 9% non-annualized linked-quarter growth and 22% growth year over year. Credit sponsorship growth accounted for 88% of total loan growth linked quarter and 83% of total loan growth year over year, bringing the segment to approximately 21% of total loans, up from 15% prior quarter and 9% a year ago. Our strategy is to continue to shift the loan mix towards the higher returning, lower-cost credit sponsorship business.

Average deposit growth was also a robust 9% non-annualized linked quarter, fully funding the loan growth, with an average deposit cost of 1.7% in the quarter, which was a 7 basis point decrease from prior quarter and 53 basis points lower than the prior year quarter. We also ended the quarter with $1.34 billion in off-balance sheet deposits, compared to $850 million at the end of the fourth quarter and $793 million prior year, demonstrating the continued growth of our partnership-based deposit franchise along with the strength of our overall liquidity position. NIM was 3.87% in the quarter, down 43 basis points from prior quarter and 20 basis points from the prior year's quarter.

The decrease versus prior quarter is driven by both the mix shift in loans to credit sponsorship and the lagged impact of the lower short-term rates on variable-rate loans. For some additional context on NIM, especially as we continue to mix-shift loans towards fintech, our FinTech lending fees are the equivalent to an additional 24 basis points of net interest margin. In addition, given the volume of off-balance sheet deposits, we generated $900 thousand from deposit sweep fees, which is recognized in other income, which equates to another 4 basis points of net interest margin. Noninterest income mix, excluding credit enhancement, was 33% compared to 30% in the fourth quarter and 29% in 2025.

Fintech fee revenue is 29% compared to 27% for both prior quarter and prior year quarter. It is important to note that the growth in the credit sponsorship loans that we saw in the quarter is a leading indicator of fintech fee growth both in the lending fees and higher transaction fees due to the higher volume of churn in that portfolio. Regarding credit, we continue to see improvement in both our current and leading credit metrics, with particular note in REBL and leasing. REBL criticized loans are down $24 million, or 29%, to $59 million from prior quarter and down 75% over the last 18 months.

When excluding fintech credit sponsorship loans, which are supported by full credit enhancements, our traditional lending portfolio saw a provision reversal of $1.3 million even as the traditional lending portfolio grew in the quarter. The release of reserve was primarily driven by specific reserve reductions in our leasing portfolio that were established in 2025, as positive progress continues to be made with those borrowers. Noninterest expense for the quarter was $55 million with an efficiency ratio of 41.5% when excluding the credit enhancement revenue. We continue to invest in the fintech platform, including building out embedded finance capabilities along with launching new products.

At the same time, we are leveraging AI and redeploying cost across the organization to continue to improve efficiency and allocate resources to support our fintech initiatives. We will now open the call for questions. Operator, you may now open the call for questions.

Operator: We are now opening the floor for the question and answer session. That is star followed by one on your telephone keypad. Your first question comes from the line of Joe Yanchunis of Raymond James. Your line is now open.

Joseph Peter Yanchunis: Thank you, and good morning, guys.

Damian M. Kozlowski: Morning, Joe.

Joseph Peter Yanchunis: So with your 2026 EPS outlook reiterated, can you talk a little more about your embedded finance offering and this initiative’s impact on 2026 results? I mean, how long will it take to onboard this first partner after announcement? Obviously, partner delays are a thing in this space. I was hoping to get a little more color on that from your end.

Damian M. Kozlowski: We have very little revenue in for embedded finance in 2026. We have more in 2027, but you are exactly right. We are likely to announce at least one partner. It does take a while to fully build out the capability. Depending on what the use case is, it could be very limited or it could be very broad. So the impact of embedded finance will be fulfilled in 2027 and 2028. Very little revenue is in our plan for 2026 for embedded. Now we do have revenue in there for continued sponsored lending growth and for a potential announcement around two new partners. So that has more of an impact than embedded would on our budget.

Joseph Peter Yanchunis: Got it. That is helpful. And in your prepared remarks, you discussed some metrics behind your off-balance sheet deposits and that strategy. How should we expect this to evolve over the coming quarters? I assume the amount earned per deposit is based on the individual deposit cost, and correct me if I am wrong there. But will the biggest driver of revenue growth from this be moving more deposits off balance sheet or getting better economics per deposit?

Damian M. Kozlowski: It is both. Over time, we take the higher-cost deposits off the balance sheet. Depending on the program that we are taking off the balance sheet, we may get some spread on that. In our forecast, that is a small part. It is basically gravy. In the way we look at our own forecasting over the next three to five years, as we grow the other parts, the main initiatives, that is literally gravy on top. It is not a big part of our planning. And they are volatile. It depends on the program. But they will grow.

We will have fewer basis points on what we have to pay out as we take more higher-yielding deposits off the balance sheet and in select occasions, we will get some spread on transferring those deposits through a network to other banks.

Joseph Peter Yanchunis: Okay. What about the Aubrey? What are your current thoughts on the timing of selling that property, and has your thinking around the sale price changed given the recent softness that we have seen in rent prices? And then, additionally, have there been any thoughts behind redeploying those proceeds into share repurchases? Or will you just accrete that to capital?

Damian M. Kozlowski: We are going to return 100%, as we have said before, of share buyback from our net income until we get a multiple that we think is appropriate for our ROE and growth. So whatever we get in net income, we will distribute back to shareholders through buybacks. But Dominic can give you a good Aubrey update.

Dominic Canuso: Sure. We continue to invest in the property, increase the occupancy rate. The occupancy rate of available rooms has been 80% even as we doubled it. And there are plans to continue to finish the remaining 50 units that need to be upgraded. We are just over 60% of occupancy on a total unit basis, and we expect to hit near 70% in the very near term. We expect the property to be operating breakeven by the end of this quarter, so its impact to our financials should be neutral.

And we have shifted a bit given the significant progress and success in the continued occupancy from just removing it from the balance sheet to actually getting it to a stabilized valuation, which may take a little longer, but ultimately result in better economics for the bank when we exit.

Joseph Peter Yanchunis: Okay. That was helpful. But I want to dig into something that you said, Damian. I was under the impression the guidance implied $50 million of share repurchases per quarter in 2026, and then you returning 100% of net income, or making the buyback 100% of net income in 2027. So would that mean if you sold the Aubrey—and does that mean you are going to sell the Aubrey in 2027 based on your answer?

Damian M. Kozlowski: We are looking to—I think we will be totally full if we are going to go to stabilization. That would probably be a first quarter next year event. There are close to 50 buildings on the property, and there are 9 left. We are reconditioning those 9 buildings over 3 phases over the next 9 months. If we get the stabilization, it probably would occur at the end of next year, where stabilization is in the high 80s, low 90s. Then we would be able at least to get our basis covered, but the appraisals are in the low 50 millions. If we were to monetize, it would be a rounding error to our buyback.

We are a little bit less than net income this year because we did so many buybacks last year. We are just building a little bit of extra equity into the end of this year, and then we would return 100% for the foreseeable future, depending on the multiple. The exit on the Aubrey, if stabilized, someone does not come in and just write a check, but our current intention is to fix those 9 buildings, get it up to high 80s, 90%, and then monetize it at this current time. We have done so much work already.

Joseph Peter Yanchunis: Right. Okay. Great. And then one last one for me here. How much of your balance sheet are you willing to dedicate to credit-enhanced loans over time?

Damian M. Kozlowski: All of it. All of it.

Joseph Peter Yanchunis: Okay.

Damian M. Kozlowski: Oh, credit-enhanced or credit sponsor loans. Which one do you mean?

Joseph Peter Yanchunis: The credit-sponsored loans.

Damian M. Kozlowski: So there are two parts. There is credit-enhanced loans, and then there are also loans that we might do that are distributed or we might take parts of bigger originations, slices of it, and keep it on the balance sheet. Of the sponsorship loans, it is possible—when we are looking at our pipeline—that will be a much bigger part of our business. That is over many years. Many of our businesses like SBA, the real estate business, which we have distributed before, are fairly liquid assets. The same is true with our demand loans on the institutional side. This is a multiyear thing, and it really depends on the programs.

Chime is a very unique situation where we are using a lot of balance sheet. That is very unlikely to happen. There will be some balance sheet used for future programs. Some might be bigger than others. Chime is a very special case. When we look at our Apex 2030 strategy, we originally were thinking 10%, and then we thought more like 30% or 40% of the balance sheet possibly in the next three to four years.

Operator: Your next question comes from the line of Manuel Navis of Piper Sandler. Your line is now open.

Analyst: Hey. Good morning, guys. This is Grant on for Manuel. I just wanted to ask, could you talk a little bit more about the shift in LLR for fintech loans? It came in at 1.81% this quarter and was 2.84% last quarter. Could you just talk a little bit more about what drove that shift? Did you do more secured credit cards that require less reserve?

Damian M. Kozlowski: With the economics, I will let Dominic handle it. The overall economics, the NIM, of the entire program, because it is in different places on the balance sheet and we fund it with noninterest-bearing deposits, is around 3% NIM for the whole portfolio of products if you take a look at all the economics. The cost structure on that is not traditional lending. You are not supporting it with origination and all the things that you would on a traditional business. And it is credit secured. The whole economics over the portfolio is around that and would move up over time potentially with different product sets. I am only talking about Chime.

But, Dominic, do you want to dig a little deeper?

Dominic Canuso: Sure. Grant, to your question, the secured product did outperform the growth in the quarter, and so there was a mix shift towards that product, which does have a lower loan loss reserve relative to the other products. But across all product, performance continues to improve as you can see in those metrics, as the performance of customers along with the growth demonstrates the growth potential of the programs.

Analyst: Understood. Thank you. And I also wanted to ask, what is the pace of fintech loan growth from here? I see the goal was $2 billion by year end. You are now at $1.67 billion, and you were at $1.1 billion at 4Q. How does this adjust other metrics like fee income or NIM?

Damian M. Kozlowski: The success in the quarter, we are very pleased with, and I think it outran our internal expectations. It does not change our full-year targets or expectations. What it does is demonstrate the strength of the balance sheet we will see in the near term along with the fees that we anticipate from the churn, particularly in that higher-volume portfolio. Our targets remain the same. I think there was just a little bit of a pull forward of volume that we anticipate, which is very positive, and we are excited to see.

Dominic Canuso: So it just means that the balance sheet will be a little higher earlier in this year than originally expected.

Analyst: Alright. Thank you. That is it for me.

Operator: Your next question comes from the line of Tim Switzer of KBW. Your line is now open.

Timothy Jeffrey Switzer: Hey. Good morning. Thanks for taking my questions.

Damian M. Kozlowski: Good morning, Tim.

Timothy Jeffrey Switzer: So, Damian, you mentioned in your opening comments that the new Cash App program has launched and will ramp up over the course of the year. It looks like we saw some acceleration in GDV. Was there any contribution at all this quarter?

Damian M. Kozlowski: Very little. Our partners are meticulous when they launch these programs in several waves. We go through a long testing phase. We are in the full “turn the dial” stage where everything is set. We are watching incremental gating issues. We have already passed the first gate, and we are ready to start turning up the dial. A lot of work has been done. By the end of the year, it should be fairly meaningful to our financials, all predicated on the timelines of that gating. It is going very well so far. Things can change, but I think it is going to be good. You will see that dial turned up through 2026 and then especially through 2027.

Everything is going well, and all of us—our partner and us—are pleased with the implementation.

Timothy Jeffrey Switzer: Awesome. That is great to hear. So it sounds like the real acceleration—the inflection point—occurs in the beginning of 2027.

Damian M. Kozlowski: It will ramp up this year. It will start being meaningful. When we talk about our own forecast with our programs, we see a bump in the fourth quarter. That is part of the bump. It is not embedded finance like we were saying before, but it is definitely the Chime lending, it is definitely Cash App, and other programs. We will announce other lending programs. We will also announce other banking-as-a-service programs over the course of the year. All those things will start meaningfully contributing by the end of this year, but then in 2027 there will be multiple things ramping up together, which will really lead us into that 2027 guidance that we have.

Timothy Jeffrey Switzer: And you talked about this earlier with Grant’s question on the 3% NIM, but I am not sure if that was just the secured card or all the fintech loans. Could you help us understand the economics?

Damian M. Kozlowski: The reason I said that is because there is a lot of confusion because it is in different places. We do not break it out separately, and it is total economics. We are funding it with noninterest-bearing deposits. There are multiple different products—there are four, and it is growing. If you look at the entire economics of it today at The Bancorp, Inc., it is around 3% NIM for us because it is funded at zero. That is everything together. We do not give independent economics, but it is a blended economics. That potentially will grow over time depending on the product mix. It is incredibly synergistic for both us and our partner. It works for both of us.

The programs have grown. It has been a great source of revenue, but also of relationship deepening for Chime. We are trying to support initiatives by using our balance sheet. That is a very unique relationship. We have a very deep relationship with them for the issuance of their cards, new products, and now their lending products. We look at the entire economics of the relationship. That 3% does not include, obviously, all the interchange—our part of the interchange that Chime originates. Not on secured card. If you look at all the lending products, we are talking about all products. Any of their products where there is interchange involved, we get a portion of that.

Plus, they have deposits that are sitting in the bank that are in excess of the noninterest-bearing deposits. Some are savings deposits. Some of those are off balance sheet. There is the lending part where, if you add all the economics together, it is around 3%. It is also secured—remember, it is credit enhancement. Then separately, there is a whole stream of revenue that appears in fees that is only linked to interchange. And then the third part of economics, there are other deposits that fund the bank—excess deposits that are lent out—that provide deposits to the bank too. It is such a broad, deep relationship that there are multiple revenue streams from the Chime relationship.

Lending is just one of them.

Timothy Jeffrey Switzer: I am getting a lot of questions about the profitability on these loans. If we take the numbers that are disclosed and directly tie to those loans—if I take the fintech fees and the interest income, and then those average balances—it looks like it is an annualized yield of about 2.7%. And it is pushing off these non-fintech loans yielding nearly 7%. I know on credit risk, it is not a traditional loan where it costs as much to originate. Maybe just the broader parts of that relationship—Chime—so all of this ties in together, like you mentioned.

Damian M. Kozlowski: You are not that far off. That is 2.7%. We are saying it is around 3% today with the mix currently. But the cost structure is radically different. It is only a fraction of traditional lending. You are getting a 3% NIM, and that is separate from the other two revenue streams. You are hitting a 3% NIM, but it is a fraction of the cost of traditional lending, and it has no risk of loss. If you think about that, it is almost like a short-term bond yielding 3%. Then you have all these other revenue streams coming off that, including increased spend.

We are lending money out to people that would not have used it otherwise, and that creates interchange. The velocity there is extremely quick. We are talking about billions potentially every month that are going through products, creating fees for Chime, obviously, but also creating economics for us. It is creating additional GDV spend.

Dominic Canuso: Just to add, I think the most important part here is the fact that each partner has unique expectations and unique designs.

Given the ability to generate deposits, generate transaction fees—whether it is debit or credit—parking loans on the balance sheet, and potentially off balance sheet in the future for loans, off balance sheet in deposits that are excess, or funding other programs with deposits, we believe the economics to the partner are where they need to be for them to invest and grow in their programs, and for us to see the returns on a total ROA and ROE basis that are accretive to where we are today, which is why we expect and intend to continue to shift the balance sheet towards these products.

Timothy Jeffrey Switzer: Got it. That answers my question very clearly. In terms of the velocity, what was the volume on the loans this quarter? Or how long are you holding these on the balance sheet on average? And how might that change in the future—whether you change your strategy or these two upcoming credit sponsorship programs sound like they might be shorter duration—if you plan to transfer more or securitizations? Anything like that would be really helpful.

Damian M. Kozlowski: It is hard to give you clarity on that because we have not announced. There are a bunch of different use cases from wage access to longer-term installment loans, and we intend to do all those things. We intend to provide some on balance sheet—probably not as much as our current relationship with Chime—to other partners. We intend to securitize a lot of it so you will get incredibly high velocity, and you will hold those loans from three to thirty days probably at the most. Usually, it is only a few days. They will be purchased back by the fintech partner and then securitized.

There is definitely a situation where we will be holding pieces of loans at a much higher yield. Loans that we like, or if it is important to the product for us to hold the strip, we will. Those loans will be very, very high. If you look at the NIM today of The Bancorp, Inc., where it is today, we are around 4% if you add back what Dominic was saying—the basis points in the fees that potentially could be viewed as interest. We had some deterioration in our NIM, but if you add back the increased fees from this quarter versus last year, it is 12 to 13 basis points different in NIM.

Your NIM should go up over time if you add back all those fees depending on the programs because you are going to have pressure on deposits going down due to our liquidity. We will take more higher-rate deposits off the balance sheet. In these programs, the Chime situation is probably the lowest NIM situation because of all this synergistic revenue. Over time, once again, adding back potential fees from the line that we have—the third line in our financials around fintech loan fees—plus the interest already in our NIM calculation, after this initial stage, NIM should start moving up. In many of these cases, the velocity of loans is high.

You will be getting fees and effective yields on very short-term loans very quickly. Many of them will be backstopped versus securitization. You will have a conversion of the balance sheet from traditional to nontraditional lending. There will be less of a traditional bank reserve, given the structure of these loans. The velocity will go up very high, and if you add back the fees on these loans, the effective NIM on these loans over time will go up. In the near term, it will go down for the reasons we have stated on the Chime program, but that should turn as we add new partners.

Timothy Jeffrey Switzer: Great. That is really helpful. Regardless of where the reported NIM goes, Apex 2030, ROA 4%/40—bottom line is moving up.

Damian M. Kozlowski: Just look at this quarter. We had a 35% ROE. Look at our ROA. If you consider that we are repatriating all our equity or equity stays the same, as our net income moves up, our ROE and ROA will continue to move up, and our efficiency ratio is likely to move down.

Timothy Jeffrey Switzer: Another area that has become a bigger and bigger opportunity in the fintech side of things for you is those off-balance sheet deposits. It is, I think, up to $1.3 billion right now. Your press release mentioned $900,000 earned on deposit sweep in other income. Is that where all the revenue from your off-balance sheet deposits is reported? Just want to make sure I am capturing all the revenue.

Damian M. Kozlowski: Yes. Dominic can answer that, but yes, that is correct. That is where it is located.

Dominic Canuso: As Damian mentioned earlier on the call, the first quarter is seasonally high just because of tax season. We do expect it to contribute, but it is probably a secondary or tertiary benefit from all the strategies we just talked about.

Timothy Jeffrey Switzer: Okay. Makes sense. I think I am the last analyst on this call, so I have a few more if that is okay. On the REBL book, it is good to see another quarter of improvement in the credit metrics there. Could you give us an update on how the maturities and the refinancings within the REBL book are going right now? One thing I am looking at is how the percentage of REBL balances maturing over the next 12 months declined meaningfully for the first time in a while in Q4; it is now less than 50%. It seems like that could indicate you are seeing less one-year extensions and more actual payoffs.

Do you have that updated number for Q1?

Damian M. Kozlowski: Remember, we have great visibility. These are repositioning—mostly of workforce housing—and they require work. There are constant draws. We have reserves and everything. The reason that we had that bubble when we did was that, because of the origination period where we got back into the business, there were a lot of loans done at that time. We have maintained the portfolio, but that large bump in origination during that period that resulted in classified assets has worked through the system. Those were the buildings that were having issues due to the supply shock and sharp interest rate increases. That bubble has gone through the system. That is dropping because we just have not had as many originations.

If a project is completed and it is on plan, sometimes sponsors will want a year or two, and that is built into our contract—two one-year extensions—and people take advantage of that sometimes. It is at both of our agreement. They may want to do an exit and they do not exactly want to do it at this interest rate. The reason that was so high was because of that bubble, and that bubble is working down quickly.

Timothy Jeffrey Switzer: Okay. That is helpful. And related to that, it looks like the average yield on the REBL book has gone down from about 8.5% to 7.6% in the last two quarters. It seems like a pretty quick decline. Could you talk about the drivers there in terms of what new loans are coming on at versus rolling off? And how much of that decline could be due to some of these extensions or modifications?

Dominic Canuso: Just as a reminder, a third of that portfolio is variable, so you would clearly see a step down with the short-term interest rate environment that we have seen over the past year. But to the point that you just spoke about, which was that vintaging—that large vintaging roll-through—again, they are on 3-1-1 contracts, many of which came to that second term and were either recapped or refinanced or sold out. Either those recaps and refinances were at lower rates because they were at more stable, stabilized values with previous investments and stronger investors. Those rates, by the quality of the positioning of those loans, brought down the rate combined with the variable-rate environment.

We think we are at a good point now, having worked through that large vintage bubble and with the lower rates, that we should see much more stability going forward. You will continue to see loans rolling off in the low 8s and being put on in the mid 6s. You will see that natural portfolio churn, but that is just the interest rate environment we are in—nothing more than that.

Timothy Jeffrey Switzer: Alright. That is helpful. And the last one for me—thanks for taking all these questions. Is there any risk or even opportunity from the proposed executive order on banks being required to obtain citizenship info? It seems like that would be a big lift for a lot of the BaaS things given the third-party relationships and how small some of these accounts are. On the opportunity side, would your prepaid card products be required to obtain citizenship info as well? It seems like it could push a lot of people towards those products.

Damian M. Kozlowski: That would be a very difficult thing to do since prepaid cards—every prepaid card—that would be every incentive card. That would be a restaurant card. That would be very difficult. There are some, and those deposits on those types of cards, in many cases, are not even insured deposits because you do not know who it is. We have—versus many institutions—fairly good information in that area. If it gets implemented, if it becomes a requirement, everyone will have to do it. I am sure there will be an implementation phase. There might be new accounts. All those things are not clear at this time. We cannot really comment on it.

We do collect a lot—depending on the type of account and the use—there is already a lot of information like Social Security numbers for many of our clients’ end users whose deposits end up at our bank. There are requirements already in place. Right now, we do not know how that has to play out—how that actually gets worked through the system. Obviously, the regulators—FinCEN and others—would have to be involved, and it would have to be implemented over long periods of time.

Timothy Jeffrey Switzer: Yeah. There are very little details on exactly how it works. Appreciate it. Thanks for taking all my questions, guys.

Damian M. Kozlowski: No problem. Thank you.

Dominic Canuso: Thank you.

Operator: I would now like to hand the call back to Damian M. Kozlowski for closing remarks.

Damian M. Kozlowski: Thank you for joining us today, everyone. Operator, you may disconnect the call.

Operator: Thank you for attending today's call. You may now disconnect. Goodbye.

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