Earnings call transcript: The Bancorp Q3 2025 misses EPS forecast, revenue beats

The Bancorp Inc. (TBBK) reported its third-quarter 2025 earnings, revealing an EPS of $1.18, missing the forecasted $1.34 by 11.94%. Despite this, the company posted a revenue of $174.61 million, surpassing expectations by 7.58%. The stock reacted negatively, dropping 7.07% in premarket trading to $71.74, compared to the previous close of $77.2, reflecting investor concerns over the earnings miss and revised guidance.

Key Takeaways

• EPS of $1.18 missed the forecast by 11.94%.
• Revenue of $174.61 million exceeded expectations by 7.58%.
• Stock fell 7.07% in premarket trading post-announcement.
• Non-interest income rose 27% year-over-year.
• Revised 2025 EPS guidance lowered to $5.10.

Company Performance

The Bancorp demonstrated robust revenue growth in Q3 2025, with a 7% increase excluding consumer fintech loan credit enhancement income. Non-interest income also saw a substantial rise of 27% compared to the previous year, driven by increased fintech fees and credit sponsorship balances. However, the missed EPS forecast and lowered guidance for 2025 have overshadowed these positive aspects.

Financial Highlights

• Revenue: $174.61 million, up 7% year-over-year
• Earnings per share: $1.18, up 13% year-over-year but below forecast
• Non-interest income: $40.6 million, up 27% from Q3 2024
• Fintech fees: Increased by 10% to $30.6 million

Earnings vs. Forecast

The Bancorp’s EPS of $1.18 fell short of the expected $1.34, marking an 11.94% negative surprise. This miss is significant and contrasts with the company’s historical trend of meeting or exceeding EPS forecasts. In contrast, revenue exceeded expectations by 7.58%, highlighting strong operational performance despite the EPS shortfall.

Market Reaction

Following the earnings announcement, The Bancorp’s stock dropped 7.07% in premarket trading, reflecting investor disappointment over the EPS miss and revised guidance. The stock’s decline contrasts with its 52-week high of $81.65, indicating potential concerns about future earnings growth.

Outlook & Guidance

The Bancorp revised its 2025 EPS guidance downward to $5.10, citing strategic investments and operational adjustments. However, the company remains optimistic about achieving a $7 earnings per share run rate by 2026 and $8.25 by 2027, supported by new product launches and efficiency improvements.

Executive Commentary

CEO Damian Kozlowski emphasized the company’s focus on embedded finance and AI-driven tools, stating, "Embedded finance is something that’s sometimes mentioned as much as AI is." He also expressed confidence in achieving future earnings targets, saying, "We feel very confident at this point that we expect that we’ll get to the $7 run rate."

Risks and Challenges

• Potential operational inefficiencies leading to EPS misses.
• Market volatility affecting stock performance and investor sentiment.
• Challenges in managing criticized assets and restructuring costs.
• Dependence on fintech and embedded finance market growth.
• Regulatory changes impacting strategic initiatives.

Q&A

During the earnings call, analysts inquired about the Cash App program’s revenue potential, which is on track for Q1 2026. Questions also focused on managing criticized assets and the large market opportunity in embedded finance, reflecting interest in the company’s strategic direction and risk management capabilities.

Full transcript - The Bancorp Inc (TBBK) Q3 2025:

Conference Call Operator: Good morning, ladies and gentlemen, and welcome to The Bancorp Inc. Q3 2025 earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Friday, October 31, 2025. I would now like to turn the conference over to Andres Viroslav. Please go ahead.

Andres Viroslav, Investor Relations, The Bancorp Inc.: Thank you, Operator. Good morning, and thank you for joining us today for The Bancorp’s third quarter 2025 financial results conference call. On the call with me today are Damian Kozlowski, Chief Executive Officer, and Marty Egan, our Interim 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 12:00 P.M. Eastern Time today. The dial-in for the replay is 1-888-660-6264 with the passcode of 37073. Before I turn the call over to Damian, I would like to remind everyone that our comments and responses to your questions reflect management’s view as of today, October 31, 2025. Yesterday, we issued our third 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 mentioned today. These factors and uncertainties are discussed in our reports and filings 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 and the investor presentation. Please note that 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 would like to turn the call over to The Bancorp’s Chief Executive Officer, Damian Kozlowski. Damian.

Damian Kozlowski, Chief Executive Officer, The Bancorp Inc.: Thank you, Andres. Good morning, everyone. In the third quarter, The Bancorp earned $1.18 earnings per share on revenue growth of 7%, excluding consumer fintech loan credit enhancement income, and expense growth of 6%. EPS growth was 13% year over year. Fintech GDV continues to grow above trend at 16%. Revenue growth in the quarter, which includes both fee and related interest income revenue, was 23%. Our three main fintech initiatives continue to make substantial progress. First, our credit sponsorship balances ended at $785 million, up 15% from the second quarter and 180% year over year. We are expecting increasing volumes with new product enhancements and increased utilization. Second, our embedded finance platform development has continued to progress with an expected launch next year. Third, new program implementation timelines, Cash App being the largest, are on track with expected revenue in the first quarter of 2026.

All three initiatives should have an increasingly positive effect on our financials as we move forward through 2026 and into 2027. We also made progress in reducing our criticized and substandard assets, which include both substandard and special mention assets. These assets declined from $216 million to $185 million, or 14% quarter over quarter. We expect more progress in the fourth quarter. Under our Project 7 initiative, which looks to achieve $7 earnings per share run rate by the fourth quarter of 2026, we will be conducting a restructuring of our institutional banking business in the fourth quarter of 2025. Headcount is being reduced by 30 as we de-emphasize growth and reallocate space on our balance sheet for credit sponsorship balances. This will reduce run rate expenses by approximately $8 million while incurring approximately $1.3 million restructuring charge in the fourth quarter.

We are also implementing our first AI-powered use case. We have developed a new tool to reduce the writing of narratives in financial crimes risk management. For a $300,000 investment, we anticipate that we’ll be able to avoid approximately $1.5 million run rate expenses over time based on increasing volumes. This tool will be operational in the first quarter of 2026. This is the first of many AI tools to come in the future. We expect to develop and implement these tools as quickly and as prudently as possible in areas that will lead to increasing efficiency and productivity of our people and platform. These tools should have an increasing positive impact on our already best-in-class profitability.

Lastly, we are lowering guidance to $5.10 a share for 2025, primarily due to lower projected balances on our traditional lending businesses and an increased credit provision for leasing due to losses on the disposition of previously identified credits in trucking. In addition, we are not giving specific guidance in 2026 other than we are targeting a minimum $7 earnings per share run rate by the end of 2026. We are, however, initiating preliminary guidance for 2027 of $8.25 earnings per share. As discussed, we believe that our three main fintech initiatives, platform efficiency and productivity gains from platform restructuring and AI-powered tools, plus a high level of capital return through continued share repurchases, will contribute to EPS accretion. EPS gains are subject to uncertainty, particularly as it relates to the development implementation timelines in fintech and our stock price for repurchases.

We’ll now turn the call over to our Interim Chief Financial Officer, Marty Egan. Marty.

Marty Egan, Interim Chief Financial Officer, The Bancorp Inc.: Thank you, Damian. Excluding consumer fintech loan credit enhancement income, non-interest income for the third quarter of 2025 was $40.6 million, which was 27% higher than the third quarter of 2024. Total fintech fees accounted for most of that increase. Prepaids, debit card, ACH, and other payment fees increased 10% to $30.6 million over that period. Consumer credit fintech fees increased $2.9 million to $4.5 million. Additionally, in the third quarter, we reached an agreement on the earnest money deposit on the terminated sale of a property and other real estate. The $2.3 million settlement amount is included in other income. The provision for credit losses on non-consumer fintech loans was $5.8 million for the quarter, of which $4.8 million was related to the leasing portfolio. The leasing provision was driven by the third quarter net charges of $2.8 million, primarily related to the trucking and transportation industry.

Average FinTech Solutions deposits for the quarter increased 10% to $7.3 billion from $6.6 billion in the third quarter of 2024. Non-interest expense for the third quarter of 2025 was $56.4 million, which was 6% higher than the third quarter of 2024. The increase included a 10% increase in salaries and benefits. As Damian mentioned earlier, we made progress on reducing our substandard and special mention criticized assets. We expect that trend to continue in the fourth quarter as $102 million of those loans are under contract and expected to close during the quarter, of which $12 million is already closed and $74 million is expected to close in the next five days. Additional details regarding our loan portfolios are included in the related tables in our press release, as are the earnings contributions of our payments businesses. I will now turn the call back to Damian.

Damian Kozlowski, Chief Executive Officer, The Bancorp Inc.: Thank you, Marty. Operator, could you please open the lines for questions?

Conference Call Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. To ask a question, you may press star followed by the number one on your telephone keypad. If you’re using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star followed by the number two. With that, our first question comes from the line of Tim Switzer with KBW. Please go ahead.

Good morning, Tim.

Good morning. Good morning. Hope you guys are doing well. First question I have is, can you guys provide an update on Square and the Cash App program, some of the other new programs you guys have going on? Is there a timeline for when all the volume has transitioned over to you, and when should we start to see this ramp in GDV and the associated fees?

Damian Kozlowski, Chief Executive Officer, The Bancorp Inc.: Yeah, it’s on track, and revenue is expected in Q1. We’re not sure exactly the ramp-up schedule because it’s really dependent on timelines at Block at Cash App. We do have confidence that as we work through the year, we will have substantial fee revenue generated by the third and fourth quarter of next year.

Okay. That’s very helpful. Can you provide an update on the $27 million rebel loan that was scheduled to sell, I think, in Q3, according to the 10Q? It just looks like it hasn’t closed yet. We’d just love an update on that.

Yeah, that $27 million is expected to close in the next five days. It’s either today or the beginning of next week. That’s a substandard loan.

Okay. It seems like there’s just a lot of momentum or activity in terms of closing new loan sales of some of the criticized assets. Could you just provide an update on how discussions with borrowers and new sponsors are going? Do you expect more sales in the future? Probably you can provide.

Yeah, these things usually take longer, but if you’re going to get all the value out of it, the last thing you need to do is panic when you have a little dislocation, which we didn’t. We’ve just been working with the borrowers, some in deferrals, right? Those deferrals are coming to an end, so we’re getting resolutions. The market has improved generally for these assets, and we’ve gotten much more clarity. I think we’re going to make really good progress in the fourth quarter and in the first quarter of this year. The fourth quarter has already been ring-fenced. It could be a little bit better or worse depending on what happens, but we’re fairly confident of the $102 reduction.

Great. Good to hear. The last question I have is deposits moved a little bit lower. I know you guys are trying to manage the balance sheet quite a bit. I would just love some color on that.

You mean the end-of-period deposits?

Correct. Correct.

We get ups and downs in deposits depending on the program. There’s a big seasonality part of it. We’re looking at it now. There might be some portion of an impact on drawdowns because of the government shutdown. We’re not sure. There’s usually a lot of volatility, but we have a lot of primary liquidity. We’ve taken deposits off the balance sheet, so we don’t have any concerns. We expect the deposits to start to grow in the fourth quarter, and the first quarter is obviously tax season. If you look back in last year, you could see the dramatic difference as it ramped up in the fourth quarter. What’s happened generally is that you get a ramp-up in that fourth quarter. Over the last, and traditionally, you go back five, six, seven years ago, you’d get that big ramp down.

What’s happened now is that because we have our Reg I limit, it’s more about managing deposits off the balance sheet. We have plenty of deposits. The question is, how do we manage it through the cycle so that we don’t have these big ups and downs? We’ve gotten much better at taking deposits off the balance sheet when we don’t need them.

Got it. Makes sense. Thanks, Damian.

Conference Call Operator: Thank you. Your next question comes from the line of Joe Yanchunis with Raymond James. Please go ahead.

Good morning.

Damian Kozlowski, Chief Executive Officer, The Bancorp Inc.: Good morning.

I was hoping I could just ask one more on credit. Can you provide an update on what’s going on with the Aubrey and potentially share any occupancy rates that are there and any conversations that you might be having?

Yep. We’re continuing to lease up the property. There are units available. We’re finishing up on, I think it’s about 10% of the units that still need to be refurbished. We’re continuing to lease it up. We have people looking at the property to do a transaction. I can’t give you any assurances today when that will happen, but we think over the next 30 to 60 days, we’ll get more clarity on the property. There’s definitely a market out there for the property. The appraisal, if you recall, came in higher last time we reported in the second quarter earnings. We feel comfortable. It’s in a very different state than it was when we had to take the property over. All the major construction, the roofs and the foundations, have been done. It’s just a lease-up situation. We do have over 20 units available for rental.

I think we’re in a fairly good position in the property. Okay. I’m happy to hear that. Moving over to your outlook, I was hoping you could talk about how much share repurchases are implied in both your 2025 and 2027 guide. I know when you initially laid out your 2025 outlook, it included some share repurchases. I understand your fourth quarter 2026 and 2027 do include share repurchases. If you could just unpack that, I’d appreciate it. Yeah. We’ve got a lot going on. We have three big initiatives that we’re not sure exactly of the timing. We have the new programs, including Cash App. We have embedded finance, which we’re launching. We also have the leveraging up of the credit sponsorship business, and there’s ambiguity around new partners, exactly when the revenue will be realized. We have the big share buybacks and what the stock price is.

We’ve looked at both and modeled them out, saying, "Okay, what happens if we get the aggressive versus most likely versus downside case?" Then we looked at the potential stock price with the multiple and said, "Okay, let’s look at all these cases and run a bunch of scenarios. What do we feel comfortable with on both the revenue side, but also on the buyback side, and then also the expense side?" We’re implementing a whole game plan around AI now, which will have an impact on our ongoing cost structure. We don’t want to put something out because of the volatility of where we are right now. As we get better visibility as to. As things play out in the beginning of next year, we could give you more guidance on it. We did not want to give guidance for the first couple of quarters.

We feel very confident at this point that we expect that we’ll get to the $7 run rate. If you play it out, that $8.25 is very doable. In 2027, you have everything hitting at once. You have got all the revenue initiatives. You have got all the buybacks because we would continue to do the significant amount of our net income. You have the cost reduction at the same time. We feel fairly confident regardless of the stock price of the buyback that we’d be able to hit it. We cannot give you the exact—we kind of run it at a bunch of different prices. We look at the revenue expense side and try to triangulate on what best number to go out with. Totally understand that you’re juggling a lot of things right now.

Just in relation to the share repurchases aspect of the guide, should 2027, should we think about the same amount of repurchases, $50 million a quarter, what you have in 2026? Does your 2025 new guide include share repurchases? Just trying to think of where the jumping-off point is as we enter next year. Yes. Right. It includes the buyback. If, obviously, if it’s a lower share price or we get better clarity exactly on the implementation timelines, we’ll give that guidance to the market once we get clarity. We just know that under all the things that are going on, $7 is very attainable to get to the run rate. If we get to that run rate, then you have a whole bunch of things hitting in 2027 because you’ve already ramped everything up.

As for the tradition, which has not been approved by the board, our tradition is that we’re going to return, depending on the multiple of the company, 100% of our net income in buybacks. At that point, it’ll be $300 plus million of net income. That would be similar to the buyback that we did this year. Okay. I appreciate that, Tyler. Just kind of shifting focus here. In the quarter, we did see total fintech fees drop sequentially, kind of driven by a decline in ACH fees. Can you discuss what occurred here and how we should think about the trend for this line item moving forward? Yeah. There’s a lot of volatility. There are incentive fees. There is a whole bunch of things in there. There is seasonality in there too. You are coming off the income period. They are volatile.

I think you look year over year is the best metric to understand that, and over a couple of quarters. You look at the trend and you look year over year. Sometimes we do have a slight depression quarter to quarter, especially coming off the first to the second, but sometimes the second to the third. It starts ramping up again. I would encourage looking at it longer term and looking at it year over year. We’re definitely above. Remember, we have not implemented some of these things like embedded finance. We have not implemented Cash App yet. There’s no volume there. Even on the volume that we currently have, we’re above trend right now in GDV growth. That’s without the large addition of the next program. I think you’re going to still see the above trend, if not higher, going into next year.

That will obviously drive fee growth, as well as the adoption of more credit sponsor partners and also the launch of embedded finance. You talked about these several initiatives which are going to drive growth, which aren’t really hitting the numbers now. Is there any way to kind of rank order these opportunities in terms of potential magnitude? Embedded finance is where the market—not just in 2027, but over the next few years. The embedded finance opportunity is very large, right? We haven’t traditionally done any program management for our partners. What embedded finance really does is package all the capabilities that we have today. We’ve talked about this whole layer cake of fee opportunities, and it delivers the entire menu to somebody who wants to embed it in their app, such as a gig economy company.

That makes that we not only—and because we have such scale and the other things, and obviously we’re profitable doing it, if you’re able to deliver the program management element, and that’s a big growing market. It’s going to be in the future, it’s a big opportunity. If you recall, the program manager, you’d have to rebate this, obviously, to your partner, but that is the biggest part of where you get the fees, right? That typically can be up to 80% of the interchange structure in the program management. That’s where they get all their revenue from, right? Today, we’re a few percent, maybe 4% at the max of those fees. If you’re able to layer on the program management element, you still obviously have to pay things like Visa, MasterCard, and the networks.

There is a much richer fee environment, of which, of course, you’ll share that with your partner. That makes our platform much more profitable than it would have been if we just sold it piecemeal. For some partners like Chime, we sell all layers of the cake. In certain cases, we only sell parts of that offer. That is kind of packaging that entire offer, and it increases the fee environment for us to monetize the platform. That was a very thorough answer. I appreciate that. Last one for me here. Can you talk about the health of the consumer, particularly on the lower end? Obviously, you’ve discussed how GDB growth remains above trend. I was just wondering if you’re seeing any underlying trends within the data. Not in spend. It’s hard to tell. We’re seeing momentum in things like the short-term MyPay and Instalone world, right?

You’re seeing some momentum, but we can’t tell if that’s just adoption or an economic reason. We haven’t seen the stress on the economy yet. People are still spending. Remember, the vast majority of our program partners are corporate payments. That’s not going to be—insurance payments aren’t going to really be affected. We’re generally paycheck to paycheck in a lot of our universe. People are still employed. They’re still spending. We haven’t seen the stress yet. Just to piggyback off that, have you seen any increased demand or demand in the early wage access from furloughed government workers? I know that’s not the bread and butter of the programs that you offer, but just wondering if you’ve seen a tick up there. Yeah. We still have momentum in the balances. We can’t tell generally if it’s driven.

You would think that it was, but we can’t be sure that it’s—you would think that it’d have to have some impact, right, just logically. We can’t tell if it’s just more adoption of the product set through our partner’s marketing. Let’s say it hasn’t doubled, right? It’s maybe a little elevated in the adoption level, but not enough to say that it’s from a specific group other than just the normal business marketing. Okay. I appreciate you taking all my questions. Thank you. Your next question comes from the line of Arvip Gangat with Cygnus Capital. Please go ahead. Hey, good morning. I have two questions. My first question is on the loan delinquency data in your press release. It looks like sequentially the rebel loans past due doubled from June to September, ballpark $37 million to $74 million.

My first question is, what’s driving that, and should we expect continued migration as we step through this quarter of more past due loans in the rebel portfolio? No, some of that will be resolved in that $102 million that’s under our contract. That’s expected to improve in the quarter. We should expect, when we see the same data for Q4, a lower past due line item for rebel loans. Yes. Great, thank you. The second question I had is on the consumer fintech loans. Could you help me understand, given the charge-offs in that portfolio, understanding that your partners indemnify you for losses, help me understand the high charge-off rates in those loans. What’s the nature of those loans? Why are they charging off at such a high rate? For your partners who are indemnifying you on those losses, what’s in it for them?

Why are they continuing to suffer those types of losses in these consumer fintech loans? Yeah. This is only—all our consumer fintech loans are now Chime, okay? We haven’t added another partner as of yet. As has been disclosed before, we have $1.8 billion that we have a limit on, their use of our balance sheet. There’s five different products, and they have their own—I won’t speak for Chime—but they have their own. Obviously, they have plenty of—you can look at their financials. They have plenty of wherewithal to sustain the losses. They do it for various reasons. I don’t want to speak for them, but I believe it’s a profitable activity even with the charge-offs. There’s other marketing reasons that they do the loans in order to make relationships more sticky and to add relationships. I can’t really speak to their strategy.

All I could say is that if you look at what they say about their—they’re definitely in that business, and they have the ability to change the dynamics around how they lend, and that’s up to them. We’re just providing the infrastructure and the balance sheet at this time to the limit of $1.8 billion, and they make the decisions ultimately about what losses they like to bear and at what rate. Is there a benefit to do that either financially or for marketing? Got it. Just to follow up on that then, in your conversations with Chime, are they concerned about consumer weakness. Slowdown, particularly at the lower-end consumer, the same subprime-related problems we’re seeing in other pockets of the market. That would then potentially give them pause around lending to the same extent or tightening their underwriting criteria?

Where I’m going with it is, if they do that, how does that impact your fee income and growth prospects in fintech? Once again, that’s their decision. That’s a question for Chime. I obviously can’t disclose any conversations we’ve had. That’s really a Chime question. We’re here to support our partner. We have, obviously, an incredibly close strategic relationship. We’ve provided them with enablement for them to help their business plan. We’ve given them a limit of $1.8 billion. They can change that. They can change their view of how they want to build their business tomorrow. I’d ask you to look to their own announcements and stuff of what their intentions are. Okay. Appreciate it. Thank you. We do have a follow-up question coming from Tim Switzer with KBW. Please go ahead. Hey. Thanks, guys.

Embedded finance is a pretty broad term that captures a lot of different products and activities. I’m not looking for a specific partner or anything like that, but can you just provide some color on what you’ll be doing next year as you launch that platform? Are you referring to launching a single program or just the platform broadly? We already have a workable mockup platform that’s actually live, right? We’re in the development process. We started on the track several years ago because it wasn’t like we discovered a bunch of our partners had asked us if we had the capability to do this aspect and if we could help them build out a capability within their own user experience, right? That’s where the journey started. It became clear to us that the market wants a bank solution, right? They want the entire infrastructure.

You’re going to have third parties, but they want it to be a bank solution. That’s where there is a lot of demand, especially if you think about the types of companies that need this and where it’s not their primary business model. It’s mostly the gig economy, but it’s not only that, right? That’s where we’re focused at first. It’s clear that embedded finance, if you look at any industry study, is something that’s sometimes mentioned as much as AI is. It’s something that’s going to be broadly accepted. People want that financial services capability. Our journey is focused on the use cases that will kind of deliver our entire capability set.

Most of that in the early days will be gig economy types of companies, but there are many other use cases as those companies adopt this type of capability that will build on those capabilities and have a large potential market. The market is obviously a very large market. The revenue streams from this type of activity can be very large. I think we have the—and they can be costly, right, for the provider. Because of the investments we’ve made in the key core capabilities that are needed, such as financial crimes risk management and compliance risk management, we believe we have an economic advantage in delivering embedded finance to the marketplace over many of the competitors. That will result in significant profitability enhancements for The Bancorp.

That’s part of the reason why, as we build these new capabilities, we don’t want to give—and these are all kind of being done at the same time. There is obviously huge potential. As we get clarity of the market and as we launch these things, we’ll tell the market. The potential is large. However, it hasn’t been proved out yet. We think these are all going to be, within the next 12 months, a very important part of our profitability story. Got it. Very helpful. Can you maybe help us think about—I know the NIM is a really moving target here, but maybe the trend or trajectory of NII, given the impact of Fed rate cuts going forward? Yeah. We’re very different than four years ago when we opened the balance sheet. We’re very flat, so we’re not very asset-sensitive.

If rates go down 400 basis points, it’s only 3% of net interest income because of the way we’ve structured the balance sheet. The question for us is when appropriate—and we’ve got such balance sheet flexibility. For example, obviously, we could have made up room on our net interest income deficit by just buying bonds, but we haven’t because the flexibility in this kind of environment is at a premium. We’ll look at those opportunities. We haven’t gone down the credit curve because of price. As you know, the spreads are very tight in the marketplace. We don’t feel, with all the things that we’re working on, we don’t feel a need to go down the credit cycle, go down the price. Go down in price, or put on bonds just to make up for the lack of origination on the traditional credit. That’s our position.

We obviously had a little deficit in our net interest income versus what the expectations were, but we don’t want to chase in this market or be forced into a position that many people have been forced into, the place of buying bonds just to supplement some of the net interest income. Got it. That’s really helpful. Can you provide an update on how regulator expectations for banking-as-a-service partnerships are changing? The administration’s been here for nine months now. Have you seen an easing due to that? What areas have you found it easier to operate in? Has this allowed some of your peers, many who were forced to pull back the last several years, to start to reenter and become more of a competitor again? I don’t think you’re going to get any reentering. There was obviously a lot of people who got into banking-as-a-service.

It’s more than just the regulatory part of it. It’s all the infrastructure. What the regulators have basically said, I don’t want to say overreach, but there were clearly some standards that were starting to be suggested that were not necessarily consistent with guidance. What the regulators have said is, "Listen, we’re going to use the guidance. We’re not going to try to create things that are out of guidance." I think that’s helpful to the entire industry, including us, because if you remember, we’re kind of the highest volume, largest provider. If they’re going to set a standard, they’re probably going to start with us. If they’re not going to set a new standard and they’re going to manage to previous guidance, we’re at previous guidance.

That helps us a lot in that we won’t have to meet a new standard, but we’ll have to hit the regulatory standard that we’ve met in the past. We haven’t seen it. We’re focused on the largest programs implementation. We haven’t seen any. We’re still seeing a lot of the business. We don’t do it all, right? We don’t see a pipeline difference at all. I think over time, it’s good for everybody if they manage to—it’s the ambiguity around it. I think that’s good for everybody that if the regulators focus on what the regulations are, you can have a clean understanding of what their perspective is, right? Then you can meet that perspective. People join us, it’s not only because of the regulatory expertise, which we have. It’s all the other infrastructure.

It’s the look through the programs through our ability, through financial crimes, and our data management capability, and our fraud list, and all that stuff. That’s the only one aspect of it. It hasn’t been asked yet. Go ahead. The commercial fleet leasing, there’s a lot going on in that space with the freight recession. I know you typically lease the smaller fleets. You were probably struggling with that. There’s also the government shutdown. You have, I think, some exposure to government agencies. What were the issues kind of facing these credits here? Is there continued pressure at all going forward? Could you just clarify? Was this several borrowers, it sounds like? Yes. There were three borrowers. We don’t have a large exposure. The transportation segment got hit hard because there was a bubble during the pandemic because everybody was delivering things. Nobody was going to stores, as you know.

They closed all the small stores down. You could only go to Walmart, if you recall. That ballooned the trucking industry. We never had a very large portfolio. We only have $12 million left. We haven’t done a credit in a couple of years. This is a legacy disposition of assets where some people are—it’s gotten so bad that there’s reports of people abandoning these trailers, not the truck, but the trailer part. People have actually abandoned them at truck stops. We get the trucks back, and then you go through a process of disposition. They just aren’t realizing because of the pressure on the market price, even in our discounted view, because we’ve usually taken gains on all of our transportation assets, vehicles, and trucks. It’s a whittled-down portfolio. We only have a small exposure left. It’s all centered on losses and disposition of assets. Got it.

The last question I have, thanks for taking all these, just an update on CFO Search. I can’t give you anything today, but I think we’ll be able to announce something soon. Cool. Thank you, Damian. Thank you. That concludes our question-and-answer session. I would like to turn it back to Damian Kozlowski for closing remarks. Thank you. Thank you, everyone, for joining us today. Operator, you can just disconnect the call. Thank you, presenters. Ladies and gentlemen, this concludes today’s conference call. Thank you all for joining me. This concludes the call.

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