The Bancorp (NASDAQ:TBBK) used its fourth-quarter and fiscal 2025 earnings call to outline progress across its fintech initiatives, improving credit metrics, and a new earnings outlook that implies a step-up in profitability over the next two years. Management also discussed the impact of several fourth-quarter headwinds, balance sheet strategy—including off-balance sheet deposit sweeps—and continued share repurchases.
Quarterly performance and growth indicators
Chief Executive Officer Damian Kozlowski said the company earned $1.28 per share in the fourth quarter, representing 11% year-over-year EPS growth. He also highlighted ongoing growth in the bank’s fintech-driven payments activity, noting that gross dollar volume (GDV) increased 16% versus the prior-year fourth quarter. Revenue growth in the quarter, which management defined as including both fee and spread revenue while excluding credit enhancement income, rose 3% year over year.
Fintech initiatives: credit sponsorship, embedded finance, and program implementations
Management emphasized three “main fintech initiatives” it believes can create significant shareholder value. First, credit sponsorship balances ended the year at approximately $1.1 billion, up 40% from the third quarter and 142% year over year, exceeding the company’s stated goal of at least $1 billion. Kozlowski said the company hopes to add at least two new partners in 2026, with announcements to come “at the appropriate time.” Later in the Q&A, he said the portfolio could be “at least $2 billion” by the end of 2026 and “as high as $3 billion,” adding that management believes it could “easily be double where we are today at the end of 2026.”
Second, the company’s embedded finance platform development “continued to progress on pace,” with an expected launch “early this year.” Kozlowski said the bank is confident it will be able to complete the platform for certain use cases by the beginning of 2026.
Third, management said new program implementation timelines—“Cash App being the largest”—remain on track and should contribute meaningfully to both GDV and fee revenue beginning in 2026. Kozlowski said all three initiatives should become “increasingly positive” through 2026 and have “significant impact” entering 2027.
Balance sheet, liquidity, and credit metrics
Chief Financial Officer Dominic Canuso described the quarter as a “strong” finish to 2025 and said the company produced record profitability metrics, including 30.4% return on equity (ROE) in the quarter and 28.9% ROE for the full year.
Ending assets were $9.4 billion, up 7% from the prior year, as the loan portfolio increased $919 million to $7.26 billion. Canuso said the increase was driven by $644 million in consumer fintech loans, which now make up 15% of the loan portfolio. During the quarter, the bank also purchased $317 million in bonds, including $82 million of fixed-rate agencies, leaving the investment portfolio at 18% of assets, which he said was relatively consistent with year-end 2024.
Liquidity remained “very strong,” according to Canuso. Average deposits were $7.6 billion in the quarter, at an average cost of 177 basis points. He said 95% of deposits are from fintech, and 92% of total deposits are in “short” (as stated on the call).
In credit, Canuso said that when excluding fintech loans that are covered through the credit enhancement, the provision for loans in the quarter was $558,000, down from $5.8 million in the third quarter. Net charge-offs were $629,000, down from $3.3 million in the prior quarter and “consistent with the low end of recent historical averages.”
Expenses, buybacks, and items affecting fourth-quarter results
Non-interest expense was $56.2 million in the quarter and included $2 million from a legal settlement related to a previously disclosed legal proceeding initiated in 2021. Canuso said the company is engaged with its insurance provider on recovery, including potentially recapturing historical legal fees. Excluding the settlement, he said costs were up 5% versus the fourth quarter of 2024 as the company continues to scale and reallocate resources to support growth.
During the Q&A, management also detailed several factors it said weighed on fourth-quarter results:
- Legal costs tied to the settlement.
- The “unexpected duration” of a government shutdown, which Canuso said affected the global economy and the flow of payments and deposits, reducing GDV versus expectations and affecting balance sheet mix.
- Timing of credit sponsorship growth: while balances grew significantly, Canuso said much of it occurred late in the quarter, which reduced average balance income relative to expectations.
Management also discussed off-balance sheet deposit sweeps, noting the company exited the quarter with $400 million in off-balance sheet deposits. Canuso said the strategy has so far been used primarily to optimize funding costs and net interest margin, and the company expects to continue evaluating the mix between on- and off-balance sheet deposits as deposit growth outpaces the bank’s on-balance sheet demand. Both Canuso and Kozlowski said the company has not yet experienced meaningful revenue from the sweep program beyond funding cost reduction, but expects opportunities to monetize excess liquidity over time.
Capital return remained a key theme. Canuso said the company repurchased $150 million of stock in the fourth quarter, or 5% of outstanding shares, bringing full-year repurchases to $375 million, or 12% of outstanding shares.
2026 and 2027 guidance and net interest margin expectations
Kozlowski announced initial guidance of $5.90 EPS for 2026 and said the company is targeting at least $1.75 EPS in the fourth quarter of 2026. He also reiterated preliminary guidance for 2027 EPS of $8.25. Management said guidance includes stock buybacks, forecasting $200 million of repurchases in 2026, or $50 million per quarter.
Asked about net interest margin (NIM), Canuso said management expects variability quarter to quarter as deposits flow through and the company optimizes the on- versus off-balance sheet mix. He said the bank anticipates some NIM compression “near 4%” as it shifts more toward fintech activities that produce more fee revenue and lower-cost deposits than interest income. He added that the company expects fee income to increase to 35% of total revenue when excluding the credit enhancement. Kozlowski also noted there is a fee line item that represents an agreed “interest rate” with a partner, and said adding it back can provide a better sense of total NIM, though he emphasized that would be a non-GAAP measure.
About Bancorp (NASDAQ:TBBK)
The Bancorp, Inc (NASDAQ: TBBK) is a Delaware-chartered bank holding company that provides a range of banking and financial services to individuals, businesses, and financial institutions across the United States. Through its subsidiary, The Bancorp Bank, the company offers FDIC-insured deposit accounts, cash management solutions and specialized lending products. Its business model focuses on partnering with fintech firms, asset managers and payment processors to deliver integrated banking-as-a-service (BaaS) capabilities.
The company’s product suite includes interest-bearing and non-interest-bearing checking accounts, money market accounts, certificates of deposit and debit and credit card services.
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