The Bancorp, Inc.

Welcome to the Q2 2022 Bancorp Incorporated Earnings Conference Call. My name is Vanessa, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press 0, then 1 on your touch-tone phone. I will now turn the call over to Andres Vilslaff.

Thank you, Vanessa. Good morning, and thank you for joining us today for the Bancorp Second Quarter 2022 Financial Results Conference Call. On the call with me today are Damian Kozlowski, Chief Executive Officer, and Paul Frankel, our 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 p.m. Eastern Time today. Before I turn the call over to Damian, I would like to remind everyone that when used in this conference call, the words believes, anticipates, expects, and similar expressions are are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties which could cause actual results, performance, or achievements to differ materially from those anticipated or suggested by such statements. For further discussion of these risks and uncertainties, please see the Bancorp's filings with the SEC. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. 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?

Thank you, Andres. Good morning, everyone. The Bancorp generated 53 cents a share, earnings from 3% revenue growth and 2% year-over-year reduction in expense. Gross dollar volume, GDV, showed continued improvement with year-over-year growth of 5%. We expect this trend to continue in the coming quarters. Loan growth continues to be strong. All businesses grew balances quarter over quarter, led by real estate bridge lending with 38% growth and institutional, which includes S-block, I-block, and RIA financing with 10% quarter over quarter growth. Both businesses grew significantly year over year, with commercial real estate growing to $1.1 billion since its third quarter 2021 resumption and institutional growing 35%. Total loans of the Bancorp excluding loans at fair value grew 14% quarter per quarter and 61% year over year, excluding previously discontinued assets. Expenses decreased 2% year over year as we continue to manage expenses rigorously with a focus on scalability and platform productivity. Current economic conditions and the rise of interest rates should have a positive impact on earnings growth over the next two years. The Bancorp is asset sensitive due to its approximately 70% variable loan book and very stable deposit funding through its payments ecosystem that has spread over more than 50 payment program partners. We expect deposits to reprice to approximately 42% of Fed funds increases when rates are raised by the Federal Reserve. Loan rates repriced with a slight lag with significant amounts of repricing the following month. This lag was experienced in June as funding costs increased with a delayed increase in loan rates. However, starting in June, previous rate increases will begin to directly impact loan interest income, and net interest margin. We believe our loan book and securities portfolio is lower risk and in asset classes that have taken the losses throughout economic cycles. Significant amounts of liquid or cash collateral back both our S block and I black loans. SBA loans have partial to 75% guarantees or 50 to 60% loan to values. Car fleet leases have the credit worthiness of our borrowers, many of which are government institutional entities. with an established history of minimizing losses through appropriate residual values on vehicle collateral. And our floating rate transitional multifamily loans are supported by new money from sponsors and rising rents that we believe offset the impact of interest rate increases. Most of these loans are in states that have had high occupancy rates and economic growth with increasing populations. In addition, we have generally held purchasing government bonds and other fixed rate securities during the low interest rate environment experience over the last two and a half years. So we have substantial capacity to add that fixed rate exposures as interest rates rise. Lastly, the Bancorp is also somewhat insulated from inflation as our GDP base fees are contractually based on the total value of transactions. This helps support fee growth even in a recessionary environment where the total amount of goods sold stagnates or declines, but prices continue to rise. With a strong business pipeline and rising rates, we are raising our guidance for 2022 from $2.15 a share to the range of 225 to 230 per share. This range excludes the impact of 2022 share repurchases, but includes interest rate assumptions based on Fed funds' expectations. We expect to issue guidance for 2023 in our third quarter 2022 earnings release. I now turn over a call to Paul Frankel to give more details on the second quarter.