Earnings Summary on Bancorp

Key Points

• - Earnings per share (GAAP) were $1.27, slightly missing analyst expectations, while net income and key fee metrics showed strong expansion.

• - Net interest margin continued to compress, offset in part by rapid growth in fintech-focused fee income and deposits, declining from 4.97% in Q2 2024 to 4.44% in Q2 2025.

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Bancorp (NASDAQ:TBBK), a technology-driven specialty bank serving fintech firms, payment platforms, and specialized credit markets, released Q2 2025 results on July 24, 2025. Earnings per share (EPS, GAAP) were $1.27, just below analyst expectations of $1.28. Despite the small GAAP EPS miss, Bancorp showed notable growth in areas like deposits, fee income, and its overall loan portfolio. The quarter demonstrated strong fintech segment momentum and robust capital levels, though net interest margin declined versus the prior year.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

About Bancorp: Business Model and Recent Focus

Bancorp operates as a partner bank for major financial technology firms, offering private-label banking, card issuing, payment processing, and a range of niche lending solutions. It is best known for enabling fintech companies, such as consumer payment apps and specialized online lenders, to launch card programs and banking products using Bancorp’s regulatory infrastructure. Its business is structured around fee-driven fintech services, as well as traditional lending like securities-backed credit lines and real estate bridge loans.

In recent years, Bancorp has prioritized expansion in its fintech solutions group, scaling up processing services for consumer payments, debit and credit card issuance, and tailored lending to a broad spectrum of technology partners. The main success factors have included growing fintech transaction fees, capturing deposits at scale, investing in technology for secure and efficient operations, and maintaining sound credit risk controls as both traditional and new loan books increase.

Quarter Highlights: Fee Momentum, Lending Growth, and Margin Pressures

Total fintech fees grew 28% year over year. Total “fintech fees” (GAAP) rose 28% year over year, driven by continued organic volume growth with existing partners and products, as well as the impact of new products launched within the past year. Within this category, prepaid and debit card fee income increased by 5.5% year over year, while consumer fintech loan fees saw a sharp rise. For context, gross dollar volume on Bancorp-issued cards reached $43.65 billion, up 18% over the prior year, reflecting rising payment flows through Bancorp’s fintech partners.

On the lending front, Bancorp increased its loan portfolio by 17% year over year, with consumer fintech loans ending the period at $680.5 million, a jump of 871% year over year. Much of this is secured credit card lending, backed by deposits held with the company. Small business loans, a mix of government-backed and specialty facilities, also rose 11% year over year to $1.05 billion. Real estate bridge loans, which fund apartment building rehabilitations, remained steady, emphasizing risk mitigation through a 70% weighted average origination date loan-to-value (LTV) ratio and focused underwriting. Direct lease financing remained stable but trended slightly down year over year.

Bancorp’s deposit base expanded by 20% to an average of $8.06 billion, with a very high share of balances either insured or small enough to spread risk. The company emphasized that, as of June 30, 2025, 94% of deposits are insured—an important measure in today’s regulatory and risk-conscious climate.

Net interest margin (the difference between interest income and interest expenses, as a share of earning assets) declined to 4.44%, down from 4.97% a year ago. This was offset in large part by the growth of fee income tied to fintech activities, which do not directly contribute to net interest income but add to overall revenue. Bancorp used fixed-rate bond investments and strategic balance sheet management to help control exposure to swings in interest rates. Non-interest expenses (GAAP) rose 11.2% year over year, with much of the increase tied to scaling operations, higher salaries and benefits, regulatory fees, and software costs.

Profitability metrics remained strong, with return on average equity (annualized, GAAP) growing to 28.4% and the efficiency ratio (non-GAAP) holding at 41%. Notably, as of June 30, 2025, Bancorp’s capital ratios continued to exceed regulatory thresholds by a wide margin, supporting both growth and risk management initiatives.

Asset Quality and Partnerships: Risks and Opportunities

Asset quality trends are a point of close attention. As of June 30, 2025, nonperforming loans rose to 0.96% of total loans. Provision for credit losses linked to fintech loans was offset by matching revenue from partner guarantees, so there was no net hit to the company’s profits. Real estate bridge loans remain secured, with an average origination LTV of 70% as of June 30, 2025, and a focus on workforce housing, providing some cushion against market changes.

Bancorp’s technology platform continued to scale with major partners, including Cash App. A new five-year card issuing agreement with Block (operators of Cash App) is set to bring additional volume in 2026, supporting the company’s outlook for recurring fintech growth. Across the quarter, the company highlighted the role of multi-layered fee streams—spanning cards, payments, and other fintech services—in driving sustainable top-line performance, while also investing in underlying tech infrastructure.

From a regulatory standpoint, Bancorp maintained capital levels well above “well-capitalized” standards. The deposit base remains highly stable. However, the company acknowledged ongoing competitive and margin pressures, especially as fee income becomes a larger share of results.

Looking Forward: Guidance and What to Watch

Management reaffirmed its full-year 2025 earnings per share (EPS) target of $5.25 and its long-term goal of reaching a $7 EPS run-rate by Q4 2026. This guidance assumes continued momentum in fintech-driven fee income, ongoing share repurchases, and operating efficiency gains. The company’s growth plan rests on expanding service offerings to existing and new partners, growing deposits, and prudent capital allocation, while managing shifts in credit quality and interest margins.

No new guidance was provided on revenue or loan growth specifics, but the company remains focused on scaling its core fintech programs, broadening partnerships, and optimizing deposit mix. Key areas for investors to monitor in upcoming quarters include asset quality trends—especially in both consumer fintech and real estate loan books—sustainability of fee income growth, the evolution of net interest margin in a changing interest rate environment, regulatory developments, and signals of competitive shifts that could affect partnership models or profit streams.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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