Q4 2021 Bm Technologies Inc Earnings Call

April 1, 2022

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Operator: Good day, and thank you for standing by. Welcome to the BM Technologies Inc. fourth quarter and full-year 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session you will need to press star one on your telephone.

If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Bob Ramsey, CFO. Please go ahead.

Bob Ramsey: Thank you Jerone and good morning everyone. Thank you for joining us for BM Technologies' fourth quarter and fully-ear 2021 earnings call. Our earnings release and Investor presentation are both posted on the Investor Relations page of the company's website at ir.bmtxinc.com.

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Our investor presentation includes important details that we will be walking through on this morning's call and I encourage everyone to pull up a copy.

Before we begin, I would like to remind you that some of the statements we make today may be considered forward-looking. These forward-looking statements are subject to a number of risks and uncertainties that may cause actual performance results to differ materially from what is currently anticipated.

Please note that these forward-looking statements speak only as of the date of this presentation and we undertake no obligation to update these forward-looking statements in light of new information or future events, except to the extent required by applicable securities laws.

Please refer to our SEC filings, including our Form 10-K , and 10-Q for a more detailed description of the risk factors that may affect our results. Copies may be obtained from the SEC or by visiting the Investor Relations section of our website.

This morning, I'm joined by BM Technologies Chair and CEO Luvleen Sidhu. At this time, it's my pleasure to turn the call over to Luvleen. Thank you.

Luvleen Sidhu: Good morning, everyone. Thank you for joining BM Technologies' fourth quarter and full-year 2021 earnings call.

Joining me today on the call is Bob Ramsey, our CFO and also joining us is our COO, Rob Diegel, who is on the line and available during the Q&A section if needed.

We are thrilled to be sharing with you our record Q4 and full-year results and also highlight our great accomplishments over the last year.

Before we get started, I wanted to also acknowledge that we announced yesterday a non-cash restatement of our financials related to severance awards granted by Customers Bancorp to certain employees and executive BMTX in connection with its January four 2021 divestiture of BM Technologies.

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These awards were reported in our company's filings but the associated expense does not recognized by the BMTX because it was considered an expense of Customers Bancorp since they made the award.

because it was considered an expense of Customers Bancorp since they made the award.

BM Technologies management and board were not involved in the granting of these awards. However, upon [inaudible] analysis of technical accounting principles, the company determined that this non-cash share-based compensation expense related to the customer's bank granted severance awards should be included in BM Technologies' standalone financials.

<unk> Standalone financials.

I want to emphasize that this correction has no impact on the company's previously reported revenues, core EBITDA, cash balance, assets, or equity and no impact on the company's operations or its underlying business fundamentals. Bob Ramsey will share more details shortly.

Bob Ramsay will share more details shortly.

So now on to more exciting matters. For those joining us for the first time, I wanted to provide a very brief overview of who we are.

BMTX is one of the largest digital banking platforms and banking as a service provider in the country today.

We are on a mission to financially empower millions of Americans by providing a more affordable, transparent, and consumer-friendly banking experience.

We were one of the first new banking Fintech to go public last year, are one of the first to have a profitable business model, and are now among the first Fintech embracing a bank charter to create an innovative Fintech bank with a sustainable profitable business model into the future.

One of the first to have a profitable business model and are now among the first fintech embracing a bank charter to create an innovative fintech bank with a sustainable profitable business model into the future.

We pursue [inaudible] BDC and banking as a service strategy, which allows us to acquire bank customers at low cost and at high volume. Today, we are acquiring customers at less than $10.

Today, we are acquiring customers at less than $10.

This provides a tremendous competitive edge for us relative to not only traditional banks, but also to most challenger banks, which are having to spend an exorbitant amount to acquire a bank customer.

Today, we are leveraging our [inaudible] and banking as a service strategy in three main verticals. The first being our higher education vertical where we have relationships with approximately 750 campuses across the country, which allows us to touch one in every three college-bound student and introduce them to BM Technologies and offer them a choice to open a bank mobile by checking accounts through our partner bank.

The second vertical is our banking as a service business. Through our proprietary API-driven banking as a service platform and our white label interface, we are able to help Fintech and brand launch fully-branded financial services products to their customers and to their employees at a fraction of the cost and at a fraction of the time it would take them to roll this out on their own.

The second vertical is our banking as a service business. Our proprietary API driven banking as a service platform and our white label interface, we are able to help fintech and brand launched fully branded financial services products. Their customers and to their employees at a fraction of the car and at a fraction of the time it would take them to roll this out on the road.

Our proprietary API driven banking as a service platform and our white label interface, we are able to help fintech and brand launched fully branded financial services products.

Their customers and to their employees at a fraction of the car and at a fraction of the time it would take them to roll this out on the road.

Our offerings provide them with a strong point of differentiation that leads to attracting new customers, building greater customer loyalty, adding new revenue streams, and accessing data to provide an even more personalized experience for their customers.

Additionally, we manage the entire program end-to-end and also provide back-office banking operations, compliance, fraud and risk management, and customer service support which is an important differentiator and a competitive edge in the banking as a service space.

Our best vertical is best exemplified today by our partnership with T mobile and with the launch of our checking account product T Mobile Money. We continue to expand and significantly grow this relationship.

Lastly, our niche direct-to-consumer vertical is our most nascent vertical. We continue to have high conviction in the market need and value in executing targeted direct-to-consumer strategy to underserved affinity groups.

This will include continuing to focus on employee demographics as we have talked about before but we will extend beyond that to other attractive segments. More to come on this over the next six months to 12 months and overall, we continued to make solid progress in all three of our verticals.

More to come on this over the next six months to 12 months and.

and overall, we continued to make solid progress in all three of our verticals.

From a financial standpoint, our vision continues to be to create a company with a market cap of 500 million to 1 billion over the next three to five years by executing on the strategy that we've laid out and building upon the strong foundation, we already have. So let's get started. Flipping to slide four.

So let's get started.

Flipping to slide four.

I am delighted to report record results for the fourth quarter and full-year 2021. We are pleased to report Q4, 2021 revenues increased 46% to $25.3 million up from $17.3 million in Q4 2020.

We are pleased to report Q4, 2021 revenues increased 46% to $25 3 million up from $17 3 million in Q4 2020.

2021 full-year revenues increased 41% to $94.6 million from $66.9 million in 2020.

Additionally, Q4 core EBITDA increased over 400% to $7.8 million from $1.5 million in Q4, 2020, and full-year 2021 core EBITDA increased 625% to $28.6 million from $3.9 million in 2020.

In 2020.

Q4 core earnings were $3.1 or 26 cents per diluted share compared to a loss of $2.2 million in Q4 2020.

2021 core earnings were $10.9 million or 92 cents per diluted share compared to a loss of $9.9 million in 2020.

Lastly, we continue to show strength in new account origination, opening approximately 440,000 new accounts in 2021.

Turning approximately 440000, new accounts in 2021.

Moving on to slide five. You can see that our average service deposits totaled $2 billion in Q4 2021, a 111% increase compared to Q4 2020.

You can see that our average service deposits totaled $2 billion.

In Q4 2021.

111% increase compared to Q4 2020.

Average new business service deposits increased over 200% to $1.3 billion compared to Q4, 2020, which is about a $900 million increase.

Compared to Q4, 2020, which is about a $900 million increase.

As a reminder, our new business segment includes our banking as a service and niche direct-to-consumer banking vertical. In our student business, organic deposits and also as a reminder, these are deposits that are above and beyond any school disbursement.

And our student business organic deposits.

And also as a reminder, these are deposit that are above and beyond any school disbursement.

These organic deposits increased 17% year-over-year to $2.2 billion for the 12 months ended December 31, 2021, indicating strong primary banking behavior.

Additionally, debit card spend was $777 million in Q4, 2021, a 14% increase compared to Q4 2020. And new business debit spend increased 35% compared to Q4 2020.

And new business debit spend increased 35% compared to Q4 2012.

Lastly, in the higher education vertical, we disbursed $13.4 billion in refunds to students for the full year of which $1.8 billion was deposited into bank global live accounts held at our partner bank.

Let's move to slide six.

We continue to see strong performance in the overall business. Our revenue for 90-day active accounts increased 39% year-over-year to approximately $188 in 2021. The strong revenue per account metric is driven by healthy average balances and spend across the portfolio.

The strong revenue per account metric is driven by healthy average balances and spend across the portfolio.

Again, our CAC or customer acquisition cost, remains low at less than $10, demonstrating our strong margin on a per-account basis.

Again, we couldn't be more excited about our record financial results for the fourth quarter and full-year 2021. I will now pass it on to our CFO, Bob Ramsey for some additional financial details.

Bob Ramsey: Thank you, Luvleen.

The 39% year-over-year growth that Luvleen referenced has really been driven by both strong growth in deposit balances as well as spend in both our higher education business and the new business vertical.

The tailwind from stimulus in 2021 is evident in the first half of the year but the typical seasonality in the higher rate business is also evident with seasonal peaks and spend in the first and third quarters and lower spend in the second and fourth.

The typical seasonality and the higher rate business is also evident with seasonal peaks and spend in the first and third quarters and lower spend in the second and fourth.

Turning to slide seven, you can see that debit spend increased 14% for the fourth quarter of 2020 into the fourth quarter of 2021 and average service deposits increased to 111%.

The increase in total disbursements from the fourth quarter to fourth quarter was approximately 56%. And taking a step back to exclude a little quarterly timing volatility, disbursements increased on a year-over-year basis for all of 2021 by 15%.

Turning to slide eight, I want to take a minute to discuss a statement that Luvleen already referenced.

In connection with the January 4, 2021 separation from customers bank, customers made severance awards of shares of BMTX that they had received as merger consideration to certain employees. We disclosed the award but the associated expense was not recognized previously in our standalone financials because it was considered an expense of customers bank as customers had made the award after the divestiture closed.

We disclosed the award.

<unk> expense was not recognized previously in our Standalone financials, because it was considered an expense of customers bank as customers that may be awarded after the divestiture close.

In connection with the preparation of our year-end consolidated financials, we did determine that based on the technical accounting application of US GAAP, the non-cash compensation expense related to these awards should be included in our financials, even though we did not make the awards.

As a result, we concluded that our previously issued financials for the first three quarters of 2021 need to be restated to reflect the appropriate accounting of those awards. Now I want to emphasize that this restatement is very narrow in scope. It only touches the non-cash compensation expense of the company.

Emphasize with this restatement is very narrow in scope it only touches the noncash compensation expense of the company.

It has no effect on the company's previously reported revenues, EBITDA, cash, total assets, total liabilities, total equity, net working capital, or cash flows from operations, investing activities, or financing activities. Surely, this correction has no impact on the company's operations or its underlying business fundamentals.

Surely, this correction has no impact on the company's operations or its underlying business fundamentals.

Our earnings release and slides do reflect the restated amounts and I would point you to slide 16 in the appendix of our Investor Deck, which was filed this morning for additional details that point to exactly the amount and geography of the restatement touches.

On Slide 18, you can see here that our revenues grew in 2021 by an impressive 41% year-over-year to $94.6 million.

Our disciplined expense management resulted in a much more modest 5% increase in our core expenses to $66 million.

The strong revenue growth combined with expense discipline yielded an impressive $24.7 million increase in our core EBITDA to $28.6 million, which I'll also remind everyone exceeded our full-year guidance.

I would also note that during 2021, we grew the cash on our balance sheet by approximately $20 million and paid off just over $5 million of debt.

With that, I'll turn it back over to Luvleen to discuss slide nine.

Luvleen Sidhu: Thank you, Bob.

On slide nine, I would now like to provide you with a few key accomplishments and highlights of 2021.

First, let's not forget we had one of the first new banking transactions successfully go public in 2021. We finished the year with strong performance and exceeded guidance with EBITDA increasing over 600% year-over-year and revenue increasing over 40%. On top of this our average deposits grew over $1 billion.

Let's not forget we heard one of the first new banking transactions successfully go public in 2021.

<unk> finished the year with strong performance and exceeded guidance with EBITDA, increasing over 600% year over year and revenue increasing over 40%.

On top of this our average deposits grew over $1 billion.

Additionally, we announced the signing of a definitive agreement to merge with [inaudible] Bank, a Seattle, Washington-based business bank, which was a major step forward in executing our vision to create a disruptive Fintech bank.

We are joining to license a few other innovative Fintechs in the marketplace that have taken a similar step of combining a Fintech with a charter, such as square, lending club, [inaudible], and [inaudible].

Euro and profile.

Similar to these other Fintechs, we believe this is a critical step in order to create a sustainable, profitable company with numerous growth opportunities in the future.

We recently submitted our merger application and are working through the regulatory process as we plan for the merger. We expect the merger will close sometime in the second half of 2022, and we are excited about our opportunity as a chartered Fintech bank.

We expect the merger will close sometime in the second half of 2022, and we are excited about our opportunity as a chartered Fintech bank.

Next, we continue to expand our banking as a service business. For example, we continue to expand the product and features of the T Mobile Money account. T Mobile Money customers can now use two names by Mastercard, a feature that lets customers display their chosen name on their T Mobile Money debit card. Additionally, T Mobile Money checking account customers can also now open a savings account.

T Mobile Money customers can now use two names by Mastercard, a feature that lets customers display their chosen name on their T Mobile Money debit card.

Additionally, T Mobile Money checking account customers can also now open a savings account.

We are also proud to share that the BMTX and T Mobile were selected as Best Fintech Partnership of Synovate 2021, one of the leading Fintech organizations for the innovation we together have demonstrated through the launching of the T Mobile Money checking account.

Lastly, our banking as a service pipeline remains strong and we still aspire to bring on board one meaningful significant SaaS partner every 12 to 18 months.

<unk> partner every 12 to 18 months.

We also continue to demonstrate growth in our higher education business.

In addition to the [inaudible] $13.4 billion in refunds to students for the full year 2021 and opening several hundred thousand new student accounts, we also continued to grow our B2B side of the business and added 16 new colleges and universities to our roster through December 31, 2021, providing over 83,000 additional students access to bank mobile disbursement and the bank Global Bank checking account.

The opening several hundred thousand new student accounts. We also continued to grow our <unk> side of the business and added 16, new colleges and universities to our roster through December 31, 2021, providing over 83000 additional students access to bank mobile disbursement.

And the bank Global Bank checking account.

In addition, we signed four colleges and universities up for our new vendor pay offering which increases stickiness with our schools and even provides us with a small revenue generation opportunity.

Lastly, we are preparing for a credit product rollout to non-enrolled or graduated students over the next six to 12 months to drive stronger engagement and customer lifetime value.

Next on slide 10, I covered this last time, and the point here is that we continue to have tremendous growth opportunities in front of us. In our student business, we continue to work on expanding the number of college relationships that we have which gives us access to more students who we can potentially convert to bank account customers.

This last time and the point here is that we continue to have tremendous growth opportunities in front of us.

And our student business will continue to work on expanding the number of college relationships that we have which gives us access to more students, who we can potentially convert the bank account customers.

We are also investing in marketing and product enhancements to drive more bank account adoption and retention.

With regard to existing banking as service partnerships, we continue to enhance our product offering for T Mobile Money.

We also continue to work on our pipeline for new partners. We are a bit picky and choosy with who we want to work with and at this time, we remain committed to working with larger brands that can bring scale.

We are picky and choosy with who we want to work with and at this time, we remain committed to working with larger brands that can bring scale.

Lastly, we are also open to exploring possible strategic M&A opportunities, where one plus one can equal three or more. The latest example of this is our announced merger with first [inaudible].

The latest example of this is our announced merger with first <unk>.

On slide 14, we reiterate that we want to continue expanding our product offerings so we have the best-in-class digital banking platform that includes banking, lending advice, Crypto, investing, and insurance. We will keep you posted as we continue to add new products and services over the next six to 18 months.

So investing and ensuring.

We will keep you posted as we continue to add new products and services over the next six to 18 months.

On slide 12, I would like to end by summarizing our key investment highlights.

Like to end by summarizing our key investment highlights.

We continue to share record results with core EBITDA up over 600% year-over-year and revenue up over 40% year-over-year.

Core EBITDA up over 600% year over year and revenue up over 40% year over year.

We have an established customer base with approximately 2 million accounts.

We have solid account growth and opened approximately 440,000 new accounts in 2021. We demonstrate deep customer engagement. Our revenue per account increased 39% year-over-year to approximately $188 in 2021, driven by higher average balances and spend.

increased 39% year-over-year to approximately $188 in 2021, driven by higher average balances and spend.

We have strong existing partnerships with approximately 750 university partners and T Mobile.

We have developed a proprietary banking as a service platform, which is API- driven and ready to rollout quickly and integrate with partners easily.

We have a very attractive valuation, which today is at a deep discount relative to both private and public peers. And lastly, we couldn't be more thrilled and excited about our growth prospects once our merger is complete and we become a true Fintech bank.

Once again, I want to thank our investors and shareholders for their continued support and also to all the BMTX team members whose passion and dedication make all of this possible.

Operator, we would now like to open the line for questions. Thank you.

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Operator: Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad, and if you would like to withdraw your question, press the pound key. One minute for your first question.

I'll ask a question. Please press star one on your telephone keypad and if you would like to withdraw your question press the pound key.

Women for your first question.

Your first question comes from the line of Mike Grondahl with Northland Securities. Your line is now open, you can now ask your question.

Northland Securities. Your line is open to ask your question.

Mike Grondahl: Hey, thanks, and good morning, Bob and Luvleen.

First question, does anything one-time in revenues or adjusted EBITDA for Q4? I know a couple of quarters ago there was like some development fees and whatnot, just trying to understand if there's anything one-time.

A couple of quarters ago, there was like some.

Development fees and whatnot, just trying to understand if there's anything one time.

Bob Ramsey: Yes, so I'd be happy to take that one Mike, good morning.

There's really not anything one-time. We have said that we do have in our revenues at times some development-related revenues and that they are lumpy, but they are certainly recurring and are not one-time in nature.

I would tell you that at the end of the fourth quarter, there was a little bit of that. It was less than $1 million but I would not characterize it as one-time. I would point you to the reconciliation that we have. The calls are what we consider to be our core earnings in EBITDA and that does exclude what is one-time in nature. There was about $65,000 in merger-related expenses that I would call one-time, but that would be it in the quarter.

$5000 in merger related expenses that I would call one time, but.

But that would be it in the quarter.

Mike Grondahl: Fair enough. And then, roughly a year ago, you guys had three Rfps, I think there was a large grocer, a big-box retailer, and an international bank. Are those still in the pipeline? Did they fall out? I think you guys had said you thought you were going to get one in 2021, just an update there would be helpful.

And then.

Roughly a year ago, you guys had.

Rfps I think there was a large grocer, a big box retailer and an international bank.

Are those still in the pipeline did they fall out.

I think you guys had said you thought you were going to get one in 2021, just an update there would be helpful.

Luvleen Sidhu: Sure. As I said, Mike, we have a very strong pipeline. We don't like to call out individual sort of companies because these are actually very secretive in nature, because these brands et cetera work really hard to create differentiation. That being said, we've talked about how the lifecycle of closing these tends to be longer in nature, given what strategic priority and how much emphasis that these larger brands put on and so it's very much a heavy diligence process. All of those opportunities are still in the pipeline and we're very optimistic that we will have the opportunity to bring some good news to the market soon.

Because these are actually very secretive in nature, because these brands et cetera work really hard to create differentiation that being said.

We've talked about how the lifecycle of closing the tends to be longer in nature, given what strategic priority and how much emphasis that these larger brands put on there.

And so it's very much a heavy diligence process all of those opportunities are still in the pipeline and we're very optimistic.

We will have the opportunity to.

Bring some good news to the market.

Mike Grondahl: Got it. Anything to call out in your new business category sort of marketing that was employed or anything that keeps pushing that strong growth that you can help us kind of think through?

Anything to call out in your new business category sort of marketing that was employed or.

Anything that keeps pushing that strong growth.

You can help us kind of think through.

Luvleen Sidhu: I think in general, we're constantly innovating and enhancing both marketing and our product. So there is nothing to call out individually, but sort of the importance of keeping our branding, our positioning, our value proposition fresh, something new to look forward to, our product enhancements, these are all things that the product and marketing teams actively work on daily to make sure that we're bringing the best product to market and it's a constant evolution, constant iteration, and constant matter of innovation that we hold very closely and are continuing to pursue.

So there is nothing to call out individually, but sort of the importance of keeping our branding our positioning our value proposition fresh.

They need to look forward to our product enhancements. These are all things that the product and marketing teams actively work on daily to make sure that we're bringing the best product to market and it's a constant evolution constant iteration and constant.

Matter of innovation that we hold very closely and are continuing to pursue.

Mike Grondahl: Got it. I'll ask one more and then jump back in the queue.

In the press release, I think you guys said for 2022 that you'll meet or exceed the consensus estimate for adjusted EBITDA of $30 million. You guys did $28.6 million in 2021. Do you guys consider that $28.6 million sort of core? And I'm just trying to think through the growth in 2022. Or is the core number really closer to 25 just because some of the development fees and stuff that you had in 2021? The question is just in relation to how to think about the growth.

The consensus estimate for adjusted EBITDA of $30 million.

You guys did 26.

In 2021.

You guys consider that 2008, six sort of core and I'll just.

Trying to think through the growth in.

2022 or is the core number really closer to 25, just because some of the development fees and stuff that you had in 2021.

Question relation to how to think about the growth.

Bob Ramsey: So I'll take that one Mike. So I do think we consider the EBITDA that we had in 2021 to be core, we actually call it core EBITDA and strip out anything we consider non-core. The development-related fees are absolutely core recurring pieces of our business and so I would certainly leave that in there. We did have a tailwind from stimulus in the first part of 2021. I think that is still core and there were mitigating the challenges or times of debit spend in 2020 had certainly drop, but all of that is core to our business.

I do think we consider the EBITDA that we had in 2021 to be core we saw we actually call it core EBITDA.

Strip out anything we consider non core.

The development related fees are absolutely core recurring piece of our business and so I would certainly we've got in there. We did have a tailwind from stimulus and the first part of 2021 I think that is still core and there were mitigating the challenges of times is debit spend in 2020 certainly drop.

All of that is core to our business.

We did, as you say that we expect to meet or exceed the consensus number. I think full-year numbers may depend on when the first south bank transaction closes because as we pivot to becoming a bank, I think there will be different metrics that are sort of evaluating. EBITDA tends to be more Fintech than bank focus, but we feel very good when you look at the consensus numbers that are out there right now, that we'll be able to meet or exceed those numbers.

Look at the consensus numbers that are out there right now that we'll be able to meet or exceed those numbers.

Mike Grondahl: Okay, thanks.

Luvleen Sidhu: Yeah, and I just want to emphasize as well that as Bob said, there's some uncertainty around the timing. We're still very optimistic in the latter half of this year that we will be able to successfully execute on the merger. And I do want to emphasize that we do continue to believe strongly that we're building a company for the future that is very sustainable and profitable and we do expect that the merger will be significantly accretive to the combined company revenue EBITDA and earnings trajectory over the next one to three years.

As Bob said there.

Some uncertainty around the timing, we're still very optimistic in the latter half of this year that.

We will be able to successfully execute on the merger and I do want to emphasize that we do continue to believe strongly that were building a company for the future that has very sustainable and profitable and we do expect that the merger will be significantly accretive to the combined company revenue EBITDA and <unk>.

Earnings trajectory over the next one to three years.

Mike Grondahl: Got it. I'll hand the call over and just jump back in the queue.

Bob Ramsey: Thank you, Mike.

Operator: And our next question comes from the line of Michael Diana with Maxim Group. Your line is open.

Michael Diana: Thank you. Luvleen, could you remind us of the benefits and or changes in the business model from once you become a bank? And Bob, something you just mentioned about metrics changing, can you tell us how your financials are actually going to look different once you become a bank. Thank you.

When could you remind those benefits.

Benefits and.

And there were changes in the business model from once you become a bank and Bob could you something you just mentioned about metrics changing can you.

Tell us how your financials are actually going to look different warm to become a bank.

Thank you.

Luvleen Sidhu: Hey, Mike, good morning. Yeah, absolutely, let me get started then Ramsey--Sorry, I call him Ramsey. Bob can continue to answer the second part of your question. So we are thrilled, excited about becoming a Fintech bank and I think that there are so many benefits for us to go in this direction and it's the best operating model for the business that we're in.

Bob.

Continue to to answer your second part of your question. So we are thrilled excited about becoming a fintech bank and I think that there's so many benefits for us to go in this direction and it's the best operating model for the business that we're in.

Specifically, we are really great at these gatherer or acquirer of low-cost deposits in high volume. And being able to supplement that with an asset-generating strategy and to be able to deploy those deposits, provides the opportunity to not only maintain our economics, but expand it into the future, which is a very powerful engine.

We are really great at Cid.

Gathering our acquirer of low cost deposits and high volume and being able to supplement that with an asset generating strategy and to be able to deploy those deposits.

<unk> provides the opportunity to.

Not only maintain our economics, but expand it into the future, which is a very powerful engine number two.

Number two is having a more vertically integrated offering for banking as a service, meaning you're not only providing the technology but you also provide sponsor bank, you could say are the charter to the program. It's a way more compelling offering for a client that wants to work with you because it now is one platform, one partner, one experience, which adds less friction to an already complicated program and also provides better economics for all, so that's another very tangible benefit.

But you also provide sponsor bank you could say are the charter to the program.

Is a way more compelling offering.

For about a client that wants to work with you because it now is one platform one partner one experience, which adds less friction to an already complicated program and also provides better economics for all that.

That's another very tangible benefit.

Third is things that we haven't even talked about yet, which are untapped revenue opportunities as a bank and having the access to the charter to bin sponsorship opportunities et cetera, we're really being able to support Fintechs and other operating models by enabling payment, blending, debit products, et cetera are revenue opportunities that are really untapped and now we are opening the door for. And lastly, new products and services, cross sell opportunities for our customers, being able to offer them a broader suite of products and services that not only provide greater customer lifetime value but also that the customer experience is deeper and more expansive. These are all things that we're really looking forward to and find beneficial in our future model as a Fintech bank.

Things that we haven't even talked about yet which are untapped revenue opportunity as a bank and having the access to the charter to bin sponsorship opportunities et cetera.

We're really being able to support syntex and other operating model by enabling payment blending debit products et cetera are revenue opportunities that are really untapped and now we are opening the door for end and lastly, new products and services cross sell opportunities.

For our customers being able to offer them.

A broader suite of products and services that not only provide greater customer lifetime value, but also that the customer experience is is deeper and more expansive. These are all things that we're really looking forward to and find beneficial.

Our future model as a Fintech bank.

Bob Ramsey: Alright, thanks Mike. I'll then jump to, you had asked how do our financials look different when we become a bank.

And then jumped to you had asked how do our financials look different when we become a bank.

Sure.

Simply put, I would say that one of the real driving reasons to do this transaction is so that we could generate greater revenues and increase the profitability of the business as we look to monetize deposits. Most of our income statement would be the same. What I would tell you is that today, we do have a deposit servicing fee revenue item and that item will go away and will be replaced by net interest income. Today, that deposit servicing fee, if we look at all of 2021 as a percent of deposits came out to be about 2.75% and it's our expectation that as a bank that that net interest margin would be somewhere between 3 and 4%, so we would generate more revenues. Now, it may take a little bit of time to leg into that because in order to generate that margin will have to grow a loan portfolio and so we may start off a little bit more heavily concentrated in securities, and we'll build but we think that that short term transition will be more than justified by the greater earnings down the road.

One of the real driving reasons to do this transaction so that we could generate greater revenues and increase the profitability of the business as we look to monetize deposits. Most of our income statement would be the same what I would tell you is that today, we do have a deposit servicing fee revenue item and that item will go away and will.

We were pleased by net interest income.

Today that deposit servicing fees, if we look at all of 2021.

As a percent of deposits came out to be about 275% and it's our expectation that as a bank did that net interest margin would be somewhere between three and 4%. So we would generate.

More revenues now it may take a little bit of time to leg into that because in order to generate that margin will have to grow a loan portfolio and so we may start off a little bit more heavily concentrated in securities and we'll build but we think that that short term transition will be more than justified by the greater earnings down the road.

I would also call to your attention and I know you cover banks as well, but as we grow that loan portfolio, there will be a non-cash provision expense to reflect expected losses on that loan portfolio, which is a normal part of a bank income statement. But when all the dust sort of settles, what you'll see is greater revenues as we have a wider net interest margin in the servicing fee that we generate today. You will see the addition of some provision expense and the other items on the income statement would be basically the same.

To reflect expected losses on that loan portfolio, which is a normal part of bank income statement, but when all of the sort of all the dust settles what youll see is greater revenues as we have a wider net interest margin in the servicing fee that we generate today you will see the addition of some provision expense and the other items on the income.

<unk> would be basically the same.

Michael Diana: Okay, great. Thank you both.

Bob Ramsey: Thanks, Mike.

Operator: And your next question comes from the line of Brian Dobson with Chardan Capital Markets. Your line is open.

Bob Ramsey: Morning, Brian.

Brian Dobson: Thanks very much, good morning. I guess pivoting over to banking service, what types of partnerships are you seeking or rather what types of companies do you think would be ideal for your service? Are you focused on consumer brands and things?

What types of partnerships are you are you seeking or rather what types of companies do you think would be ideal.

Your service are you.

<unk> focus on consumer brands and things.

Sure, I'll take this one. So I think that if you reflect back on 2021, the service has really become a buzzword in embedded finance. And I think that kind of looking back and remembering that we signed a contract back in 2016, 2017 with T Mobile and now, finally, years later coming to the forefront of how powerful is towards the business model is astounding.

So I think that if you reflect back on 2021.

The service has really become a buzzword.

And embedded in it and I think that kind of looking back and remembering that we signed a contract back in 2016 2017 with T mobile and now finally years later coming to the forefront of how powerful is towards the business model. It is astounding.

We're number one grateful that we were such a first mover in this space and really had such insight into how powerful this business model can really be for brands and for companies.

In the space and really had such insight into how powerful this business model can really do for brands and for the company.

And number two, it's been so helpful because now it's being socialized, it's being normalized. Brands, companies are realizing what a powerful engine this can be for them and it's almost like instead of us educating potential pipeline about the benefit it's coming to us and saying we recognize the benefit, how can you potentially help us execute on this?

Realizing what a powerful engine that can be for them and it's almost like instead of us educating potential pipeline.

About the benefit is coming to us and saying we recognize the benefit how can you potentially help us execute on that.

So I wanted to provide that background and insight that people understand how this business model is evolving and how that evolution is actually helping us.

Secondly, the type of generically embedded finance banking as a service can be powerful in many different business models. I think that being able to work with larger company brands is better because scale is obviously doing-- These programs take a lot of interest, a lot of work to support, and the greater the scale to really balance out some of the higher fixed cost of just getting the program started, you get that return on investment must faster.

Embedded finance banking as a service can be powerful in many different business models.

I think that.

Being able to work with larger company brand.

Is it better because scale is obviously.

Doing these programs take a lot of interest a lot of work to support and and the greater the scale to really balance out some of the higher fixed cost of just getting the program started.

So for us, we look at large brands that have access to hopefully millions of potential customers where they already have strong loyalty, strong engagement, and there is a natural sort of use case of financial services that can be embedded. Maybe some sort of transaction has already taken place between the customer and the brand and embedding this can be a very seamless customer experience and natural in nature. So those are some of the things that we're looking at and across the board I mean, retailer's e-commerce, Fintech grocers, I mean, recurring subscription model, so many different models can really benefit from the banking as a service model, so hopefully that's helpful.

Financial services that can be embedded maybe some sort of transaction is already taking place between the customer and the brand and embedded Miss can be very seamless customer experience and natural in nature and so those are some of the things that we're looking at an across the board I mean.

Retailer's e-commerce .

Fintech grocers.

I mean, so many REIT.

Our recurring subscription model. So many different model can really benefit from the banking as a service model hopefully that's helpful.

Brian Dobson: No, that's very helpful. Thank you. And then I guess looking at the big picture, roughly one in five Americans sell Bitcoin now. What are your thoughts about servicing that market as it pertains to the future of your company?

Looking at the Big picture roughly one in five Americans pointed out what are your thoughts about servicing that market.

In the future.

A good chunk of your company.

Luvleen Sidhu: Sorry, I coughed when you said that. You said Bitcoin?

Brian Dobson: Yes, I did say Bitcoin [inaudible] that one in five Americans. What's your thought about servicing that market as you intend to grow your company?

Corning.

That.

One in five Americans.

What's your thought about servicing that market is to protect all of your company.

Luvleen Sidhu: Yes, so for us, going back to that one slide we had in the deck for the last maybe two quarters, where we understand that financial service is kind of moving from an unbundling to a re-bundling that's happening over the last 12 months 24 months, which really means the expectation and that the consumer, number one, wants to have more convenience under one umbrella to be able to access all types of financial services products that really enable them to have a strong financial foundation. And I think that there is no doubt that one in five Americans are owning Bitcoin for example, now. And so as a financial services provider, you kind of have to look at that and be like, "Hey, how can we provide the best, most compelling customer experience to our customers and if 20% of Americans own this and they are incorporating this into their financial planning, it's on us to begin to see how we can provide that value and that opportunity to our customer." And so how we think about it is it is one of many product features that we are looking at being able to round out our product offering over the next six to 18 months.

Going back to that one slide we'd had in the deck for the last maybe two quarters, where we understand.

That financial services kind of moving from.

Bundling to a re bundling that's happening over the last 12 months 24 months, which really means the expectation.

And that the consumer number one wants to have more convenience under one umbrella to be able to access all types of financial services products that really enable them to have a strong financial foundation and I think that there is no doubt.

That one in five American.

Our owning bitcoin for example, now and so as a financial services provider you kind of have to look at that and be like hey.

How can we provide the best most compelling customer experience to our customers and a 20% of Americans own nib.

And they are incorporating this into their financial planning.

On us to begin to see how we can provide that value and that opportunity to our customer and so how we think about it as one of many product features that we are looking at being able to round out our product offering over the next.

Six to 18 months.

And I think that we also have to be mindful of the regulatory environment, and as the regulation sort of comes up to speed with the innovation, making sure that we're respectful of that and mindful of that in terms of anything that we would bring to market. I hope that's helpful.

We also have to be mindful of.

The regulatory environment, and and as the regulation comes up to speed with the innovation, making sure that we're respectful of that and mindful of that in terms of anything that we would bring to market.

Hope that's helpful.

Brian Dobson: Yes, that's great. Thanks. And then just one final housekeeping question. You mentioned the stimulus tailwind last year, do you think you can quantify that so we can look at a kind of core on apples-to-apples growth for the coming year?

That's great. Thanks, and then just one final housekeeping question you mentioned the stimulus tailwind last year do you think you can quantify that so we can look at kind of a core apples to apples growth for the coming year.

Bob Ramsey: Yeah, so I would say there are gives and takes. It certainly was a bit of a tailwind, but it's not significant relative to our overall revenue. So we certainly expect to be able to continue to grow revenues off of last year's numbers and grow them materially, so I wouldn't put too much emphasis on them.

Wouldn't put too much emphasis on them.

Brian Dobson: Great. Thank you very much.

Bob Ramsey: Thank you.

Operator: And your next question comes from the line of Chris Sakai with Singular Research. Your line is open.

Bob Ramsey: Good morning, Chris.

Chris Sakai: Good morning. Just had a question about the DTC strategy. Does this mean that you're dropping the workplace banking idea or just rebranding it?

Just had a question about the DTC strategy.

Does this mean that youre dropping the workplace banking idea or just for rebranding it.

Luvleen Sidhu: Yeah, I'll take this, and thanks for bringing this up.

So.

Thanks for bringing this up.

So we did sort of rebrand this vertical you can say and it's because we didn't want it to be so limiting in nature. I think it's become very clear that sort of mass-market, widespread, direct-to-consumer strategy is pretty saturated and that people are looking for a more personalized experience relative to what is important to them, what is unique to them. And so where I do think or where the BMTX thinks that there continues to be an opportunity is in sort of niche market certain segments, where they are currently still potentially being underserved or can be better served by taking a more nuanced personalized approach. And so to your direct question about the workplace banking and employees, employees will continue to be an angle that we take within this vertical. So in no way is that going away, but we didn't want to limit it because we think that there's actually opportunity beyond an employee angle and just solving for that pinpoint. Is that helpful?

What is unique to them and so where do you think or where the MTX thinks that there continues to be an opportunity is in sort of niche market.

Certain segments, where they are currently still potentially being underserved or can be better served by taking a more nuanced personalized approach and so to your direct question about the workplace banking and employee.

<unk> will continue to be an angle that we take within this vertical so in no ways that going away, but we did want to limit it because we think that there's actually opportunity beyond an employee angle and just solving for that pinpoint.

Is that helpful.

Chris Sakai: Yeah, great. I had a question about the vendor pay option. Do you think you can market to all universities or just a subset?

I had a question about the vendor.

Vendor pay option.

Do you think you can market to all universities are just a subset.

Luvleen Sidhu: Yes, definitely to all.

Multiple speakers: Go ahead. We'll definitely be marketing to all.

Chris Sakai: Okay. Can you comment on Q1 2022 enrollment numbers? How have they been compared to a year ago?

Mhm.

And can you comment on.

Q1, 'twenty two enrollment terms, how they've been compared to a year ago.

Bob Ramsey: I would tell you that the enrollment numbers are significantly lagged and it is very difficult to get reliable statistics. Even though Q1 is technically over, it's too early to say. I will say that there's a broader trend since COVID-19 there was some reduction in overall enrollment. I would expect that as things normalize that that would be moving back in the other direction, but it's just too early to have reliable data.

Reliable statistics.

Even though Q1 is technically over its too early to say I will say that the broader trend since COVID-19 is that there was some reduction in overall enrollment I would expect that as things normalize that that would be moving back in the other direction, but it's just too early to have reliable data.

Chris Sakai: Okay, great. Well, thanks.

Bob Ramsey: Thank you, Chris.

Operator: And your next question comes from the line of Bill [inaudible] with [inaudible] capital. Your line is open.

Unknown Speaker: Thank you. Good morning. First question is relative to your comment about the non-enrolled and graduated students. Would you talk more about your strategy there please?

Hi, Good morning first question is relative to your comment about the non enrolled and graduated students would you talk more about your strategy there. Please.

Luvleen Sidhu: Yeah, I think that this is a really important area that we as a company need to focus on and are committed to focusing on. And so for us, we have an amazing funnel where we get access to a replenished group and a replenished market every single year of new students coming in. And they really see the value of being able to use our account as a low-to-no-fee way for them to get access to their funds and to also be able to segregate the refund from their other potential primary banking relationships elsewhere. And I think the onus on is now we're not just at the front of that funnel, which is hey, we're a great way for you to get access to your refund and you have this great bank account, that's low-to-no-fee, great money management tools, discounts, et cetera that are really value additive. And I think a lot of these students may be using this account with the thinking that, "Hey, well I might have a bank account elsewhere, but this is my refund money, let me spend, let me save, and let me segregate it here."

Need to focus on and are committed to focusing on and so forth.

For us.

We have an amazing funnel, where we get access to our planet group and a replenished market every single year of new students coming in.

And they really see the value of being able to use.

Our account as a low to no fee way for them to get access to their funds and to also be able to segregate the refund from.

And there are other potential primary banking relationships outwear and I think the onus on us as now we're not just at the front of that funnel, which is hey, we're a great way for you to get access to your refund and you have this great bank accounts, that's low to no fee great money management tools discounts.

Et cetera that are really value additive and I think a lot of these documents may be using this account.

What are you thinking that hey, well I might have a bank account elsewhere, but this is my refund money, let me spend let me save and let me segregate. It here and I think that what is so important for us to do and that is what our focus is is going to be in the next 612 months 18 months is really building out a very cohesive strategy.

And I think that what is so important for us to do and that is what our focus is going to be in the next 6, 12, 18 months is really building out a very cohesive strategy where it's not just bringing in a strong funnel, but engaging and retaining them. And I don't want to downplay how good we have been because if you look at the numbers, and you look at the spend, you look at the average balances, I mean, we're doing well, but we can do a lot better, which is also exciting because it's so much more opportunity for us. And what does that look like? It is about going back to that digital banking platform and continuing to add more products, more features that are unique, that are value additive for our students while they are students and then once they become non-enrolled or graduated to be able to build on credit products, for example, and being able to be there when they need us with those products and services. So that is something that we recognize, that we are committed to, and have done the first important steps to get that started.

How good we have been because if you look at the numbers and you look at the spend you look at the average balances I mean, we're doing well, but we can do a lot better which is also exciting because it's so much more opportunity for us and what does that look like it is about going back to that digital banking platform and continuing to add more products more.

Features that are unique that are value additive.

For our students while their students and then once they become non enrolled are graduated to be able to build on credit products for example.

And being able to be there when they need us with those products and services. So that is something that we recognize that we are committed to and have done.

First the important steps to get that started.

Unknown Speaker: Okay. So I'm going to take this one step further. If we're hearing you correctly that you currently do not address or have not been highly successful at retaining the graduated and non-enrolled students and that's where you see the opportunity is to have them continue with your account after they've left school. Is that essentially kind of the net of it?

So I'm going to take this one step further if we're hearing you correctly that.

Hugh you currently do not address or have not been highly successful at retaining the graduated and non enrolled students and that's where you see the opportunity is to have them continue with with your account after things left school.

Essentially kind of the net of it.

Luvleen Sidhu: What I would like to say is I want to be excited about the future and our opportunity and I think that we have great opportunity to improve upon engagement and retention. But I also simultaneously said that I want to do full recognition of the account openings that we have as well as the increase in deposits and average balance and steady spend that we have seen over the years. But yes, there is room for improvement, which to me is so exciting because as a standalone, this business is already profitable, doing super well, we're growing the college and university relationships substantially, and so there is still much untapped potential here and we will continue to focus on how we can drive greater engagement and greater retention, which is all icing on the cake from where we are today.

In deposits and average balance and steady spend that we have seen over the years, but yes. There is room for improvement, which to me is so exciting because as a standalone business is already profitable doing super well, we're growing the college and university relationships substantially and so.

So there is so much untapped potential here and we will continue to focus on how we can drive greater engagement and greater retention, which is all icing on the cake from where we are today.

Unknown Speaker: Thank you, Luvleen. And then a couple of additional questions tied with T Mobile. Are they now focusing on growing the Mobile Money product? It seems as though there is something, it looks like in the numbers something is changing under the covers.

A couple of additional questions tied with T mobile.

Now focusing on growing that.

Mobile money product it seems as though there is something.

Looks like and the number is something is changing under the covers.

Luvleen Sidhu: I mean, absolutely and they are a public company and they make it very clear to us every earnings call and we agree with them. We have to be really respectful of what granularity we share about their program, this is their program. But to be able to generically answer your question, the new business segment is a way to look at a proxy for the T Mobile Money performance because it is a big portion of that new business vertical, and I am proud to say that to be able to grow that new business bucket by approximately a $1 billion in deposits over the last year, and in addition to that new business segment, we talked about how active transactors, which are those who direct deposit to at least five transactions a month or on an annualized basis spending $17,000 and have over $4,000 in average balances in our account. That is amazing, amazing primary banking behavior proxy and that is about I think 17, 18% of that new business portfolio, which is substantial.

What granularity we share about their program. This is their program but.

To be able to generically answer your question the new business segment is a way to look at.

Our proxy for the T mobile money performance because it is a big portion of that new business vertical and.

I am proud to say that to be able to grow that new business bucket by approximately a $1 billion in deposits over the last year.

And in addition to that new business segment, we talked about how active transactors, which are those who direct deposit to at least five transactions a month or on an annualized basis spending $17,000 and have over $4,000 in average balances in our account. That is amazing, amazing primary banking behavior proxy and that is about I think 17, 18% of that new business portfolio, which is substantial.

That new business segment, we talked about how active <unk>, which are those who direct deposit to at least five transactions a month or on an annualized basis spending $17000 and have over $4000 in average balances in our account that is amazing amazing.

<unk> primary banking.

Behavior.

Proxy and that is about I think 17, 18% of that new business portfolio, which is substantial.

So I would say in addition to what we did talk about and are able to share the true name feature rollout in Q1 of this year, the savings account rollout for T Mobile Money in Q1 of this year, I think everything is speaking to the great momentum we have in this program.

Unknown Speaker: And that's a great, great segue to my last question, which is the T Mobile savings account. Would you discuss that and when that began and how much traction you're seeing there?

Great segue to the my last question, which is the T mobile savings account would you discussed.

<unk> that and when that began in and how much traction you're seeing there.

Luvleen Sidhu: Yes, again everything T Mobile-related we need to answer generically and I think that it's fair out of respect for our partner. The savings account is doing well. I mean, the way that you could think about it is, "Hey, customers want more than a checking account. We're going back from the unbundling to re-bundling. Customers want more under one umbrella and the savings account enables that and so we're very proud and excited to have been able to roll that out together.

To answer generically and I think that it's fair out of respect for our partner.

<unk> account is doing well I mean, the way that you could think about it is pay customers want more than a checking account where going back from the unbundling and re bundling customers want more under one umbrella and the savings account enable that and so we're very proud and excited to have been able to roll that out together.

Unknown Speaker: Thank you.

Multiple speakers: Thank you, Bill. Thank you.

Luvleen Sidhu: We're getting close to time. I don't know how many more questions we're able to take, but how many more are in the queue? I just want to be respectful of time.

To time.

I don't know how many more questions.

April to take but how many more are in the queue I just wanted to be respectful of time.

Operator: Alright, sure. We have one question and then one follow-up from Mike.

We have one question and one follow up for Mike.

Luvleen Sidhu: Okay.

Operator: Alright, so your next question comes from the line of Bob Evans with Pennington Capital. Your line is open.

Bob Ramsey: Good morning, Bob.

Bob Evans: Hi, Good morning, Congrats on a nice quarter and great year. Can you elaborate a little bit, I know you had said EBITDA accretive on the first acquisition. Can you comment a little bit more, how should we think about capital structure from just trying to model it out in terms of share count and everything? I'm kind of getting somewhere between 50% to 100% more shares. Is that the right way to think about it? How should we think about it in terms of debt versus equity?

<unk>.

On the first on the acquisition can you comment a little bit more how should we think about capital structure from a just trying to model it out in terms of.

Share count and everything.

I'm kind of getting somewhere between 50% to 100% more shares is that the right way to think about it how should.

How should we think about it in terms of debt versus equity.

Bob Ramsey: Yes, so I'll take that one Bob. So look, I think one of the ways to think about it is we have flexibility in terms of the timing as we onboard deposits and capital we need to raise. We obviously don't have appetite to raise a lot of capital where the stock sits today and we have the flexibility to delay or defer and bring the deposits on balance sheet at a more gradual pace. And so that will help us sort of manage the process.

We obviously don't have appetite to raise a lot of capital where the stock sits today and we have the flexibility to.

Delay or defer and bring the deposits on balance sheet at a more gradual pace and so that will help us sort of manage the process.

We you going to say something there? Sorry Bob, I felt like I cut you off.

Bob Evans: I'm sorry, no I'm good. Okay, thank you. I appreciate it.

Okay. Okay. Thank you I appreciate it.

Okay. Thank you I appreciate it.

Bob Ramsey: Sure.

Operator: Alright, and we have a follow-up question from Mike Grondahl with Northland Securities. Your line is open.

Securities Your line is open.

Mike Grondahl: Yeah, hey. Bob and Luvleen, when you talked about the lending strategy after you acquired the bank, can you provide any more color on what type of loans you're considering making? Because the 3% I think from customers' bank goes away at the end of the year and I'm just trying to think through what type of loans can get you greater than a 3% margin.

When you talked. Bob and lovely when you talked about the lending strategy. After you acquired the bank. Can you provide any more color what type of loans, you're considering making because. The 3% I think from customers' bank goes away at the end of the year. I'm just trying to think through what type of loans can get you. Greater than a 3% margin.

Bob and lovely when you talked about the lending strategy. After you acquired the bank. Can you provide any more color what type of loans, you're considering making because. The 3% I think from customers' bank goes away at the end of the year. I'm just trying to think through what type of loans can get you. Greater than a 3% margin.

After you acquired the bank. Can you provide any more color what type of loans, you're considering making because. The 3% I think from customers' bank goes away at the end of the year. I'm just trying to think through what type of loans can get you. Greater than a 3% margin.

Can you provide any more color what type of loans, you're considering making because. The 3% I think from customers' bank goes away at the end of the year. I'm just trying to think through what type of loans can get you. Greater than a 3% margin.

The 3% I think from customers' bank goes away at the end of the year. I'm just trying to think through what type of loans can get you. Greater than a 3% margin.

I'm just trying to think through what type of loans can get you. Greater than a 3% margin.

Greater than a 3% margin.

Bob Ramsey: Yes, so I'd be happy to take that one, Mike. I will tell you that we are planning now very thoughtfully, in a way that we anticipate having a diversified loan portfolio that's not overly concentrated in any one asset class. We certainly are going to begin with for some banks, sort of core competencies. They are a commercial bank and they have got a commercial loan portfolio and they've got some ability to grow the amount of originations they are doing as part of a larger institution that has a higher legal lending limit. So some of it will be the natural expansion in their own business, which just means they will have to participate less out and that they could do more if they have the balance sheet capacity today, which we will post transaction close.

In a way that we anticipate having a diversified loan portfolio, that's not overly concentrated in any one asset class. We certainly are going to begin with for some banks sort of core competencies. They are a commercial bank and they have got a commercial loan portfolio and they've got some ability to grow the amount of originations.

They are doing as part of a longer larger institution that has a higher legal lending limit. So some of it will be the natural expansion in their own business, which just means they will have to participate with us out and that they could do more if they have the balance sheet capacity today, which we will post.

Additionally, we're looking at ways to augment that and a big piece of the sort of new loan strategies will be consumer lending. We will look at ways that we can grow consumer lending in again, a diversified manner. So we're looking at having some unsecured consumer lending, some potentially home improvement type consumer lending, other types of credit card consumer lending, we've announced some of the secured. So there's going to be a number of ways we will approach consumer lending, but that is going to be one of the tools, so it helps us bring that blended loan yield up. We're also looking to add [inaudible] mortgage and home equity. It is a diversified portfolio approach, but on the whole when we look at the banking industry, if you take out kind of the big four banks, the banking industry does have net interest margins that are exceeding 3%, and as interest rates rise, the expectation is that bank margins will expand as well. Certainly with us being an entirely deposit-funded balance sheet, we expect to have a low cost of funds and we will be able to yield into a loan mix that's probably a little bit above average because of that consumer weight.

We will.

Look at ways that we can grow consumer lending again diversified manner. So we're looking at having some unsecured consumer lending some potentially home improvement type consumer lending.

Other types of credit card consumer lending, we've announced some of the secured so theres going to be a number of.

Ways, we will approach consumer lending, but that is going to be one of the tools. So it helps us bring that blended loan yield up we're also looking to add whereas the mortgage and home equity.

A diversified portfolio approach, but on the whole when we look at the banking industry. If you take out kind of the big four banks. The banking industry does have net interest margins are exceeding 3% and as interest rates rise. The expectation is that bank margins will expand as well.

Certainly would be.

A entirely deposit funded balance sheet, we expect to have a low cost of funds will be able to yielded into alone mix of quality is a little bit above average because of that consumer weight.

And when you put that all together, we expect to have net interest margin, little blend out between three and 4%, arguably to the higher end of that range as we were able to deploy to consumer lending strategy. And so you may not start there, but we expect that we can get the net interest margin in time closer to 4%. The servicing fee that we earn today is approximately 2.75%. So there is a fair amount of lift, if you will, as we go from a $2.75 yield on deposits today to generating something that is between three and four and closer to 4%.

You may not start there, but we expect that we can get the net interest margin in time closer to 4%.

The servicing fee that we earn today is approximately 275%. So there is a fair amount of lift if you will as we go from a $2 75 yield on deposits today to generate and something that is between three and four and closer to 4%.

Mike Grondahl: Got it. And then I guess I thought your deposit servicing fee is at 3%. It's at $2.75 now. Did I miss that?

Bob Ramsey: The fee is 3% gross but there a couple of adjustments that run through that line and so we come out to about a $2.75 net. I think if you look at our income statement and just divide by our average deposits you can pretty easily calculate it.

I think if you look at our income statement and just divide by our average deposits you can you can.

Pretty easily calculated.

Mike Grondahl: Got it. Then lastly, the previous caller asked it a little bit, but it just seems like you are buying the bank in the second half of the year, you're going to need some capital for that. And then, whether it's six months or a year and a half transition, to bring $2 billion and by then it might be $3 billion into deposits, how do you want investors to think about the capital needs over the next call it two years?

Then lastly.

The previous caller asked it a little bit, but it just seems like.

You are buying the bank in the second half of the year youre going to need some capital for that.

Then, whether it's six months or a year and a half.

Transition.

To bring 2 billion and by then it might be $3 billion of deposits.

It just seems like how do you want investors to think about the capital needs.

Over the next call it two years.

Bob Ramsey: Yes, so we are committed to bringing on sufficient capital to support those deposit balances. Now as you say, deposits on day one we have to bring them all over, we can bring them all over. We have enough cash on the balance sheet to pay for the transaction close price, right? The cost of [inaudible] bank is $23 million and we've got over $25 million of cash on the balance sheet today, and we will continue to generate cash in capital through retained earnings from now until the time of close. Once we close the transaction, we do want to bring a significant amount of those deposits onto our balance sheet, and we'll evaluate raising additional capital to support those deposits, so that is a piece of what we plan to do. We believe that the incremental earnings and the return on the capital that we get will support and justify that need for capital and we'll get that capital raise. And so we are committed to earning a reasonable return on that incremental capital.

Deposits on day one.

We have to bring them all over we can bring them all over we have enough cash on the balance sheet to pay for the transaction closed price right.

So first sound bank is $23 million and we've got over $25 million of cash on the balance sheet today, and we will continue to generate cash in capital through retained earnings from now until the time of close once we close the transaction, we do want to bring a significant amount of those deposits onto our balance sheet.

And we'll evaluate raising additional capital to support those deposits. So that is a piece of what we plan to do we believe that the ink.

Incremental earnings and the return on the capital that we get will support and justify that need for capital and that capital rates and so we are committed to earning a reasonable return on that incremental capital.

Mike Grondahl: Got it, thank you.

Bob Ramsey: Thanks, Mike.

So I think that brings us to the top of the hour and Mike looks like he was the last question that we had in queue. I know we did additionally have a few questions online but I do think that we have answered most of those. I will certainly tell people, if you do have follow-up questions or want to dig into anything in greater detail, I'm certainly accessible and we'll be happy to take follow-up questions offline.

but I do think that we have answered most of those. I will certainly tell people, if you do have follow-up questions or want to dig into anything in greater detail, I'm certainly accessible and we'll be happy to take follow-up questions offline.

Luvleen Sidhu: Great. Well, thank you so much for joining today and we really appreciate your continued support and interest in BM Technologies. And I hope you all have a wonderful weekend. Thank you.

And I hope you all have a wonderful weekend. Thank you.

Bob Ramsey: Thank you, everyone.

Operator: Thank you, and that concludes today's conference. Thank you all for joining. You may now disconnect.

Okay.

[music].

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