Q2 2022 Bm Technologies Inc Earnings Call

[music].

Speaker 1: again.

You may begin.

Speaker 2: Thank you, Chris. Good morning, everyone. Thank you for joining us for BN Technologies' second quarter earnings conference call. Our earnings release and investor presentation were filed this morning, and both are posted on the investor relations page of the company's website at ir.dmtxinc.com.

Thank you, Chris and good morning, everyone. Thank you for joining us for <unk> Technology's second quarter earnings Conference call. Our earnings release and Investor presentation were filed this morning, and both are posted on the Investor Relations page of the company's website at IR <unk>, Inc. Dot com.

Speaker 2: Our investor presentation includes important details that we'll be walking through on this morning's webcast. And I encourage everyone to pull up a copy.

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

Speaker 2: Before we begin, we 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. 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 law.

Before we begin we 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.

Speaker 2: 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.

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.

Speaker 2: Copies may be obtained from the SEC or by visiting the investor relations section of our website.

Speaker 2: At this time, it's my pleasure to turn the call over to Loveline Sidhu, VM Technology's Chair and CEO .

At this time, it's my pleasure to turn the call over to Walgreens to do VM technologies Chair and CEO .

Speaker 3: Thank you, Bob. Good morning, everyone. And thank you for joining VM Technology's second quarter and first half of 2022 earnings call. To begin, we are excited to report to you record results in the second quarter and strong performance for the first half of the year.

Thank you Bob Good morning, everyone and thank you for joining the <unk> technology second quarter and first half of 2022 earnings call.

Jim.

We are excited to report <unk> record results in the second quarter and strong performance for the first half of the year.

Even in this challenging environment. We are pleased to report Q2 core EBITDA of $5 9 million up 16% year over year and over 15 million on core EBITDA for the first half of 2022.

Additionally, our average service deposits increased 29% year over year totaling $2 billion on deposit.

Speaker 3: Both Bob and I will later provide more details on financials, but before that, I would like to briefly discuss more details on our strategy.

Both Bob and I will later provide more details on financials, but before that I would like to briefly discuss more details on our strategy.

Speaker 3: As a reminder, VMTX is one of the largest digital banking platforms and banking as a service providers in the country today. We pursue a B2B2C strategy, which is one of our key differentiators from other neo-banking fintechs. Our strategy enables us to acquire bank customers at low cost and at high volume.

As a reminder, the MTX as one of the largest digital banking platforms and banking as a service providers in the country today.

We pursue a beta BDC strategy, which is one of our key differentiator from other new banking and Tex our strategy enables us to acquired bank customers at low cost and at high volumes to quantify this we are acquiring customers at less than $10 today, which provides us with a tremendous competitive edge relative to <unk>.

Speaker 3: To quantify this, we are acquiring customers at less than $10 today, which provides us with a tremendous competitive edge relative to traditional banks and to most challenger banks.

Additional banks and to most challenger bank.

Speaker 3: Today we are executing our B2B2C approach in two main verticals. The first being our higher education vertical where we are dispersing over $12 billion a year in financial aid refunds while also opening several hundred thousand students' checking accounts a year with the goal of creating a customer for life.

Today, we are executing our <unk> approach in two main verticals the first being our higher education vertical where we are dispersing over $12 billion a year in financial aid refunds. While also opening several hundred thousand student checking accounts a year with the goal of creating a customer for life.

Speaker 3: The second vertical is our banking as a service business. Banking as a service has really become a buzzword in recent times and sometimes means different things to different people.

The second vertical is our banking as a service business banking as a service has really become a buzzword in recent times and sometimes means different things to different people.

Speaker 3: For us, it means enabling non-banks and brands with the technology and infrastructure to embed banking services within their existing ecosystem with the purpose of creating more value for their customers.

It means enabling non banks and brands with the technology and infrastructure to embed banking services within their existing ecosystem with the purpose of creating more value for their customers.

Speaker 3: In return, this creates for them new revenue streams, points of differentiation to attract new customers, provides access to more data, which can also be used to create more personalized experiences, all of which help build loyalty and increase customer lifetime value.

In return this creates for them new revenue streams points of differentiation to attract new customers provides access to more data.

Which can also be used to create more personalized experiences all of which help build loyalty and increase customer lifetime value.

Speaker 3: We have invested well over $60 million in building out our banking as a service technology and are proud to be one of the most competitively positioned banking as a service providers in the market today.

We have invested well over $60 million in building out our banking as a service technology and are proud to be one of the most competitively positioned banking as a service providers in the market today.

Speaker 3: With our proprietary API-driven banking as a service platform and our white label user interface, we give choice to our clients to embed banking within their own ecosystems and control the user experience fully or provide them with a ready-to-go app that reflects their brand and product position.

With our proprietary API driven banking as a service platform and our white label user interface, we get choice to our clients to embed banking within their own ecosystem and control the user experience fully or provide them when they're ready to go app that reflects their brand and product positioning.

Speaker 3: Overall, we are able to help fintechs and brands 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.

Overall, we are able to help fin techs and brands launched 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.

Speaker 3: Additionally, a key differentiator of VMTX relative to other Banking as a Service providers is that we manage the entire program end-to-end, often known as Program Management.

Additionally, a key differentiator of BMT X relative to other banking as a service providers is that we manage the entire program and to and often known as program management.

Speaker 3: This means we not only provide the technology, but also provide the back office support that is critical to launch and run these programs, including but not limited to banking operations, compliance and risk management, fraud management and investigations, and customer service support.

This means we not only provide the technology, but also provide the back office support that is critical to launch and run these programs, including but not limited to banking operation, It's compliance and risk management fraud management and investigations and customer service support.

Speaker 3: Once we become a bank, our positioning in the banking as a service space will become unparalleled with the combination of a banking as a service technology provider, program manager, and sponsor bank relationship all in one.

Once we become a bank our positioning in the banking as a service space will become unparalleled with the combination of our banking as a service technology provider program manager and sponsor bank relationship all in one.

Speaker 3: Once we are fully integrated, once we are fully vertically integrated, we can provide the best experience and perhaps the most competitive pricing in the marketplace today.

Once we are fully integrated once we are fully vertically integrated we can provide the best experience and perhaps the most competitive pricing in the marketplace today.

Speaker 3: Our Banking as a Service vertical is best exemplified today by our partnership with T-Mobile and with the launch of our checking and savings accounts called T-Mobile Money. We have a great partnership and continue to expand and grow this relationship.

Our banking as a service vertical is best exemplified today by our partnership with T mobile and with the launch of our checking and savings accounts called T. Mobile money, we have a great partnership and continue to expand and grow this relationship. Additionally.

Speaker 3: Additionally, we are thrilled to share with you that we have moved from term sheet to a signed contract with a new significant banking as a service partner. This new BAS partner has global operations and tens of millions of US customers. VMTX was awarded this relationship through a competitive RFP process, underscoring the competitiveness of its fast offerings in the marketplace.

Additionally, we are thrilled to share with you that we have moved from term sheet to a signed contract with a new significant banking as a service partner.

This new best partner has global operations and tens of millions of U S customers.

<unk> was awarded this relationship through a competitive RFP process underscoring the competitiveness of its fast offerings in the marketplace.

Speaker 3: With the addition of this partner, BMTX has expanded its roster of large, well-known brand name partners.

With the addition of this partner the MTX has expanded its roster of large well known brand name partners.

Speaker 3: This relationship may become even more valuable if BMTX is able to vertically integrate this new partnership with the addition of a banking charter.

This relationship may become even more valuable if BMT X is able to vertically integrate this new partnership with the addition of a banking charter.

Speaker 3: To protect this partner's launch strategy, we will not identify the partner by name until commercial launch, which is expected to occur in early 2023.

To protect this partners launch strategy, we will not identify the partner by name until commercial launch which is expected to occur in early 2023 in the meantime, we have begun development work with this partner in the second quarter and expect to perform additional work through the remainder of this year Lastly, we have a third vertical.

Speaker 3: In the meantime, we have begun development work with this partner in the second quarter and expect to perform additional work through the remainder of this year.

Speaker 3: Lastly, we have a third vertical, which is our niche direct to consumer strategy, which is our most nascent vertical.

<unk>, which is our niche direct to consumer strategy, which is our most nascent vertical we continue to have high conviction in the market need and value and executing targeted direct to consumer strategies to underserved affinity groups. This will include continuing to focus on an employee demographic, but also extend beyond that.

Speaker 3: We continue to have high conviction in the market, need and value in executing targeted direct to consumer strategies to underserved affinity groups.

Speaker 3: This will include continuing to focus on an employee demographic, but also extend beyond that. We plan to execute on this vertical after we become a bank.

We plan to execute on this vertical after we become a bank.

Speaker 3: So let's get started. Flipping to slide five. I am delighted to report to you record second quarter results and strong performance for the first half of the year.

So let's get started flipping to slide five I am delighted to report to you record second quarter results and strong performance for the first half of the year.

Speaker 3: Q2 revenues increased 3% year-over-year to $23 million, up from $22.4 million in Q2 2021.

Q2 revenues increased 3% year over year to 23 million up from $22 4 million in Q2 2021.

Speaker 3: Core EBITDA increased 16% to $5.9 million from $5 million in Q2 2021.

Core EBITDA increased 16% to $5 9 million.

From 5 million in Q2 2021.

Speaker 3: Core EBITDA margin also increased to 25% in Q2 2022 from 22% in Q2 of 2021. Additionally, first half of 2022 Core EBITDA increased 8% to $15.1 million from $14 million in the first half of 2021. And core earnings increased 184% from the year-ago period to $1.9 million or $0.15 per year.

Core EBITDA margin also increased to 25% in Q2 2022 from 22% in Q2 of 2021.

Additionally, first half of 2022 Corp, EBITA increased 8% to $15 1 million from $14 million in the first half of 2021 and core earnings increased 184% from the year ago period to $1 9 million or 15 cents per diluted.

Sure.

Speaker 3: First half of 2022 core earnings increased 30% from the year ago period to $6.3 million, or 50 cents per diluted share.

First half of 2022 core earnings increased 30% from the year ago period to $6 3 million or 50 cents per diluted share.

Speaker 3: Lastly, we continue to show strength in new account origination, opening approximately 215,000 new accounts in the first half of 2022.

Lastly, we continue to show strength and new account origination opening approximately 215000, new accounts in the first half of 2022.

Moving on to slide six.

Speaker 3: You can see that our average service deposits total $2 billion in Q2 2022, a 29% increase compared to Q2 2021.

You can see that our average service deposits totaled 2 billion in Q2, 2022 and 29% increase compared to Q2 2021.

Speaker 3: Average new business service deposits increased over 50% to $1.5 billion compared to Q2 2021, which is about a half a billion dollar in capital.

Average new business service deposits increased over 50% to $1 5 billion compared to Q2, 2021, which is about a half a billion dollar increase.

Speaker 3: In our student business, refunds dispersed to students in the first half of 2022 totaled $6.9 billion, an increase of 7% from the first half of 2021.

And our student business refund refunds disbursed to students in the first half of 2022 totaled $6 9 billion, an increase of 7% from the first half of 2021.

Speaker 3: And 800 million of these disbursements were deposited into Bank Mobile Vibe checking accounts based on the student's choice to do so.

And 800 million of these disbursements were deposited into bank global Vibe checking accounts based on the student's choice to do so.

Speaker 3: In addition to this, students made organic deposits into these accounts.

In addition to the students made organic deposits into these accounts.

Speaker 3: These are deposits over and above any refund coming into the account from the school. Organic deposits totaled $925 million during the first half of the year, indicating strong primary banking behavior.

Our deposits over and above any refund coming into the account through school organic deposits totaled 925 million during the first half of the year, indicating strong primary banking behavior.

Speaker 3: Moving on to debit card spend. Debit card spend was $700 million in Q2 2022, a decrease of 12% compared to the first half of 2021, given the absence of stimulus and perhaps economic factors in the current period.

Moving on to debit card spend debit card spend with $700 million in Q2, 2022, a decrease of 12% compared to the first half of 'twenty, one given the absence of stimulus and perhaps economic factors in the current period.

Speaker 3: Despite these economic headwinds, our revenue per account growth remains strong, which Bob Ramsey will now talk through on slide 7.

Despite these economic headwinds our revenue per account growth remains strong, which Bob Ramsey will now talk through on slide seven.

Thank you Leanne.

Speaker 2: Quickly, I wanted to touch base before I begin on slide seven and talk about our progress getting back to timely filing, which is important to us. So we've gotten a lot of investor questions.

Quickly I wanted to touch base before I begin on slide seven and talk about our progress getting back to timely filing which is important to us and we've gotten a lot of industrial questions earlier. This year, we did complete the 'twenty, one restatement, which largely reflected certain noncash compensation expense from our former parent.

Speaker 2: Earlier this year, we did complete the 21 restatement, which largely reflected certain non-cash compensation expense from our former parent. It had no impact on our cumulative EBITDA cash or equity. In July , we did engage KPMG as our new auditor and we're very excited to be partnered with such a prominent firm.

No impact on our cumulative EBITDA cash or equity in July we did engage KPMG as our new auditor and we're very excited to be partnered with such a prominent firm.

Speaker 2: Additionally, in the second quarter, we did add a new director to our board who has valuable bank and audit committee experience. And today we will file our first quarter 10-Q , which had been delayed.

Additionally, in the second quarter, we did add a new director to our board, who is valuable bank and audit Committee experience and today, we will file our first quarter 10-Q, which had been delayed. Additionally, we will file our <unk> 25 filing for these second 10-Q second quarter 10-Q, which indicates that we expect to file that within the next five.

Speaker 2: Additionally, we'll file our 12B25 filing for the second quarter 10Q, which indicates that we expect to file that within the next five business days. And I hope that it's evident to everyone with us filing this earnings release this morning that we are fairly far along in our process towards that filing and feel good about our ability to file within the five-day permitted extension.

Business days and I hope it is evident to everyone with US filing. This earnings release. This morning that we are fairly.

Far along in our process towards that finally didn't feel good about our ability to fall within the five day permitted extension.

Speaker 2: After we complete that filing, our financials will again be current, and we do expect to file the 3rd quarter 10-Q on or before the November 14th filing deadline.

After we complete that filing our financials will again be current and we do expect to file the third quarter 10-Q on or before the November 14th filing deadlines and.

Speaker 2: So fortunately, this process is one that we are coming out the other end of, and very soon we will be a timely filer again.

So Fortunately this process is one that we are coming out the other end of and very soon we will be a timely filer again.

Speaker 2: With that said, I will begin on slide 17, slide seven, not 17.

With that said I will begin on slide 17.

Now 2017, so on slide seven we talk about the per account metrics that we have in the business and I think what's most important here is that we did generate 13% year over year increase in our revenue per account, which was approximately $49 in the second quarter you can see the deposits for.

Speaker 2: So on slide seven, we talk about the per account metrics that we have in the business. And I think what's most important here is that we did generate 13% year-over-year increase in our revenue per account, which was approximately $49.

Speaker 2: second quarter. You can see the deposits for account and spend for account in each of our businesses and on a consolidated basis.

Account and spend for account in each of our businesses and on a consolidated basis and what you do see here is growth in the deposits per account and some reduction on a year over year basis, and the spend per account, which has driven really by the absence of stimulus that we experienced in the year ago period.

Speaker 2: And what you do see here is growth of the deposits per account and some reduction on a year-over-year basis in the spend per account, which is driven really by the absence of stimulus that we experienced in the year-ago period.

Turning to slide eight.

Speaker 2: You can see the debit spend in the first half of the year was lower than a year ago. And as a reminder, in the first half of 2021, we did have approximately 250 million dollars in stimulus money that came into our.

You can see the debit spend in the first half of the year was lower than a year ago and as a reminder, in the first half of 2021, and we did have approximately $250 million in stimulus money that came into our accounts and we didn't have any of that tailwind this year and thats a big factor in the trend that you see on a year over year.

Speaker 2: And we didn't have any of that tailwind this year. And that's a big factor in the trend that you see on a year-to-year basis.

It says here.

Speaker 2: Our average service deposits did increase 29% from the year ago period, and the total amount that we dispersed to our college and university partners increased by about 7%.

Our average service deposits did increase 29% from the year ago period.

And the total amount that we disbursed to our college and University partners increased by about 7%.

Speaker 2: Five nine, I won't walk through in great detail, but it gives a five quarter view of our EBITDA as well as a revenue breakout financial statement line.

Slide nine I wont walk through in great detail, what it gives a five quarter view of our EBITDA as well as a revenue breakout financial statement line item.

Speaker 2: And then with that, before I pass it back to Lovely and I do just want to emphasize, we're excited in the 1st, half of this year. We did have a record EBITDA. We did have revenues that grew faster than expenses. We have increased our cash balances as we continue to generate positive cash flow. Lovely touched on the new Bask partner that we are really excited about and very soon our filings will all be.

And then without before I pass it back to lovely and I do just want to emphasize we're excited in the first half that you see here. We did have a record EBITDA. We did have revenues grew faster than expenses, we have increased our cash balances as we continue to generate positive cash flow, but we've touched on the <unk> part.

That we are really excited about it.

Very soon our filings will all be timeline with that I will turn it back over to Loveline to talk about slide number 10.

Speaker 2: With that, I will turn it back over to Loveline to talk about slides.

Speaker 3: Thanks, Bob. So on slide 10, I would now like to provide you with a few key accomplishments and highlights for the second quarter.

Thanks, Bob So on slide 10, I would now like to provide you with a few key accomplishments and highlights for the second quarter.

Speaker 3: First, BMTX averaged $2 billion in deposits and approximately 30% year-over-year in...

First the MTX averaged 2 billion in deposits and approximately 30% year over year increase.

Speaker 3: Second, our merger with First Sound Bank continues to progress, and we continue to expect to close the merger by year end.

Our merger with first sound Bank continues to progress and we continue to expect to close the merger by year end, we remain very excited about becoming a truth in tech bank and the current macro environment continues to underscore the value that a bank charter brings to our business model.

Speaker 3: We remain very excited about becoming a true FinTech bank, and the current macro environment continues to underscore the value that a bank charter brings to our business model. With a charter, we are able to have a sustainable, profitable business model into the future by combining our deposit acquisition strategy with an asset generation strategy.

With the charter we are able to have a sustainable profitable business model into the future by combining our deposit acquisition strategy with an asset generation strategy.

Speaker 3: Our low to no cost deposits on the student side of our business, coupled with our banking as a service infrastructure and partnerships, will create immense franchise value as a bank.

Our low to no cost deposits on the student side of our business, coupled with our banking as a service infrastructure and partnerships will create immense franchise value as a bank. Additionally.

Speaker 3: Additionally, given the changes in the current macro environment, we are considering slowing the growth of deposits on our balance.

Additionally, given the changes in the current macro environment, we are considering slowing the growth of deposits on our balance sheet, which will require us to raise significantly less capital and we'll also have valuation benefits from an EPS standpoint, we are considering brokering off deposits or partnering with additional sponsor bank.

Speaker 3: which will require us to raise significantly less capital and will also have valuation benefits from an EPS standpoint.

Speaker 3: We are considering brokering out deposits or partnering with additional sponsor banks to accomplish this. We will keep you posted as the process continues to move forward.

To accomplish this we will keep you posted as the process continues to move forward.

Speaker 3: Next, we continue to expand our banking as a service business. As shared earlier, we have signed a contract with a new significant banking as a service partner and look forward to building this partnership. We also continue to expand the T-Mobile relationship and have a robust roadmap of feature delivery.

Next we continue to expand our banking as a service business as shared earlier, we have signed a contract with a new significant banking as a service partner and look forward to building this partnership.

We also continue to expand that T mobile relationship and have a robust roadmap of feature delivery we are working on.

Speaker 3: and we continue to build a strong pipeline of future banking as a service opportunity.

And we continue to build a strong pipeline of future banking as a service opportunity.

Speaker 3: Lastly, on the higher ed side of the business, we are working on transitioning our most modern technology stack, which provides the best user experience to our students once they graduate as an upgraded experience. This will be our API-enabled platform, which will also allow us to more easily plug in new products and features, which will help with our customer-for-life strategy. These developments will take place in 2023.

Lastly on the higher Ed side of the business. We are working on transitioning our most modern technology stack, which provides the best user experience to our students once they graduate as an upgraded experience. This will be our API enabled platform, which will also allow us to more easily plug in new products and features.

Which will help with our customer for life strategy.

These developments will take place in 'twenty two 'twenty three.

Speaker 3: Additionally, once we become a bank, we expect to add credit products for the unenrolled and graduated students, which will improve retention.

Additionally, once we become a bank, we expect to add credit products for the Unenroll and graduated students which will improve retention.

Speaker 3: We have also signed agreements, as we said before, with 10 new colleges and universities year to date, providing approximately 55,000 additional students access to bank mobile disbursements, and the bank mobile vibe check.

We have also signed agreements as we said before with 10, new colleges and universities year to date, providing approximately 55000 additional students access to bank mobile disbursement and the bank mobile vibe checking account.

Speaker 3: We have also signed six colleges and universities for our vendor pay offering, which improves the overall stickiness of a college relationship.

We have also signed six colleges and universities for our vendor pay offering which improves the overall stickiness of a college relationship.

Speaker 3: Slide 11 and 12 I will skip through as I have talked through these before. These slides highlight our tremendous growth opportunities and our vision to continue expanding our digital banking platform to include a full suite of digital banking products and services.

Slide 11, and 12 I will skip through as I have talked to these before these slides highlight our tremendous growth opportunities in our vision to continue expanding our digital banking platform to include a full suite of digital banking products and services.

Speaker 3: Before moving to slide 13, I would like to acknowledge.

Before moving to slide 13, I would like to acknowledge.

Speaker 3: And that as expected, we officially terminated our relationship with customers bank effective December 31st. And we have been working hard to ensure there are no disruptions for our customers. As mentioned before, we do expect to have the first sound bank merger completed by that.

And as expected we officially terminated our relationship with customers Bank effective December 31, and we have been working hard to ensure there are no disruptions for our customers as mentioned before we do expect to have the first south bank merger completed by that time that being said, even with the expected closing of the <unk>.

Speaker 3: That being said, even with the expected closing of the merger, we are not planning to bring on all of our deposits on day one. We are considering brokering out deposits or partnering with additional sponsor banks to accomplish this. As mentioned before, this will significantly reduce our need to raise capital to close the bank deal.

We are not planning to bring on all of our deposits on day, one we are considering broker deposits or partnering with additional sponsor banks to accomplish this as mentioned before this will significantly reduce our need to raise capital to close the bank deal.

Speaker 3: In preparation for this, we have done a tremendous amount of planning and have several partner bank options available to us and are confident by the end of the year we will have a strong backup plan for our deposits if needed.

In preparation for this we have done a tremendous amount of planning and have several partner bank options available to us and are confident by the end of the year. We will have a strong backup plan for our deposits if needed.

Moving on to slide 13.

Speaker 3: I would like to end by summarizing our key investment highlights. We continue to have strong financial performance with record second quarter 2022 results.

I would like to end by summarizing our key investment highlights.

We continue to have strong financial performance with record second quarter 2022 results.

Speaker 3: We continue to show expansion in our banking as a service business, most recently with the addition of a new significant fast relationship, expanding our roster of well-known brand name partners.

We continue to show expansion in our banking as a service business. Most recently with the addition of a new significant fast relationship expanding our roster of well known brand name partners.

Speaker 3: We have solid account growth and are opening over 450,000 accounts on an annualized basis.

We have solid account growth and are opening over 450000 accounts on an annualized basis.

Speaker 3: We are demonstrating strong customer engagement. Our revenue per active account increased 13% year over year to approximately $50 in the second quarter. Remember, this is an unannualized revenue number that is driven by solid average balances and spend.

We are demonstrating strong customer engagement, our revenue per active account increased 13% year over year to approximately $50 in the second quarter remember this isn't an annualized revenue number that is driven by solid average balances and spend.

Speaker 3: We have strong existing partnerships with over 750 university partners, T-Mobile, and now our new FAST partner.

We have strong existing partnerships with over 750 University partners T mobile and now our new partner.

Speaker 3: We have heavily invested and developed a proprietary banking as a service platform, which is API enabled and ready to roll out quickly and integrate with partners easily, and also is available in a white label capacity.

We have heavily invested and developed a proprietary banking as a service platform, which is API enabled and ready to roll out quickly and integrate with partners easily and also is available in a white label capacity.

Speaker 3: 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 excited about our future and our growth prospects once our merger is complete and we become a true fintech bank.

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

Speaker 3: Once again, I want to thank our investors and shareholders for their continued support and also to all the BMTX team members who make this journey possible.

Once again I want to thank our investors and shareholders for their continued support and also to all the B M. T X team members, who make this journey possible.

Speaker 3: Thank you. Operator, we would now like to open the line for questions.

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

Speaker 4: Thank you. As a reminder, if you'd like to ask a question, please press star then 1 on your telephone keypad. And we'll pause for just a moment to compile the Q&A.

Thank you.

A reminder, if you'd like to ask a question. Please press Star then one on your telephone keypad.

For just a moment to compile the Q&A roster.

Speaker 4: Our first question is from Chris Sekai with Singular Research. Your line is open.

Our first question is from Chris Sakai with singular research your line is open.

Hi, good morning.

Speaker 5: Can you comment on how much development work for the new BAS partner has already been expensed and how much you anticipate it costing for the first year?

Can you comment on.

How much.

Development work.

For the new Baas partners already been expense and how much you anticipated cross into the year.

Okay.

Speaker 2: So I'll take that one, Chris. So I will tell you, we're not going to get into sort of what the development work is related to any individual partner. I will tell you that the amount that has been spent to date is not significant. You do see it in our financials as reported, but we're not going to sort of break it out separate from others.

So I'll take that one Chris So I will tell you, we're not going to get into sort of what the development work is related to any individual partner I will tell you that.

Now that has been spent to date is not significant you do see it in our financials as reported.

But we're not going to go to sort of break it out separate from other.

Speaker 5: Can you mention, you know, what category bucket this new partner falls into and looking at, are you guys still looking at the same categories?

Can you mention what category bucket.

New partner falls into.

Looking at are you guys still looking at the same.

Categories.

Yeah.

Speaker 3: I'll answer that one. So we will not be commenting on the bucket of our banking as a service partner. As we shared before, we have shared as much as we can. We're so excited about, they're a global company with tens of millions of customers in the US. And we have provided enough information for the markets really understand that this is a significant partner and we see so much potential here.

Oh Wow.

I'll answer that one so we will not be commenting on the bucket of our banking as a service partner as we shared before we.

We have shared as much as we can we're so excited about them. They are a global company with tens of millions of customers in the U S.

And we have provided enough information for the market's really understand that this is a significant partner and we see so much potential here.

Speaker 3: But out of respect for the privacy and the excitement over the commercial launch, we will not be able to share more. Initiative Jed, is this your opportunity to create thept. using the AI to update other features to make our store Georg infectious as a whole?

But out of respect for the privacy and the excitement over the commercial launch we will not be able to share more of that being said we have continue to have strong banking as a service pipeline and the opportunities that we see for embedded finance continue to expand exponentially.

Speaker 3: continue to have a strong banking as a service pipeline and the opportunities that we see for embedded finance continue to expand exponentially as players begin to even learn what banking as a service is. As I said in my remarks...

Players begin to even learn with banking as it services as I said in my remarks, you know this has become a buzzword and a buzzword is helpful. Because now industries are seeing this opportunity and are knowledgeable about it and are actually coming to us.

Speaker 3: this has become a buzzword. And a buzzword is helpful because now industries are seeing this opportunity and are knowledgeable about it and are actually coming to us to discuss, to learn, to see how they can incorporate this into their business model.

To discuss to learn to see how they can incorporate this into their business models. So the areas continue to be areas such as E Commerce retailers Grocers Airlines gaming.

Speaker 3: So the areas continue to be, you know, areas such as e-commerce, retailers, grocers, airlines, gaming, but not limited to these opportunities. And also, to add to your first question.

But not limited to these opportunities and also to add to your to your first question about.

Speaker 3: about development work. We're a fintech that happens to be a charter. And so being a technology company, we do development work. We try to keep our costs low. We've invested over $60 million in our technology over the years already. And so customizing and developing, that cost remains relatively low. And it ends up being margin opportunity for us to serve as development providers to our clients.

About development work, where a fintech that happens to be a charter and so being a technology company, we do development work.

Try to keep our costs low we've invested over $60 million and our technology over the years already and so.

Customizing and developing that cost remains relatively low and it and it ends up being margin opportunity for us to serve as a development providers to our partners. Thank you.

Okay.

Speaker 5: Okay, thanks. And lastly, in an increasing rate environment, how is this affecting your probability and what are you seeing in regards to

Okay, Thanks, and lastly.

And then <unk>.

Kris and rate environment, you know how is this affecting.

Your problem and you know what are you seeing in regards to our base rates.

Speaker 2: I'm sorry, Chris, what was the last part of that where we've seen in regards to what? Banking rates.

I'm sorry, Chris what was the last part of that we've seen in regards to what.

Banking rates.

You know are maintaining them.

<unk>.

So we have seen the market begin to move market deposit pricing right. So I think as expected during the initial movement from the fed banks.

Speaker 2: So we have seen the market begin to move market deposit pricing rates. I think it's expected during the initial movements from the Fed, banks as they do, really were able to stand tight and lag pricing if they moved it at all. But as the cumulative amount of increases has sort of added up, we have begun to see competitors in the market begin to adjust deposit prices.

Banks as they do really were able to stand tight and lag pricing if they moved at all but as the cumulative amount of increases has sort of added up we have begun to see competitors in the market began to adjust deposit pricing.

Speaker 2: And so, recognizing that the deposit pricing is moving and that that is having an impact on customer driven activity. We did increase some rate in the month of July . Yeah, I'd like to add to that.

So recognizing that the deposit pricing is moving and if that is having an impact on customer driven activity. We did increase some rates in the month of July .

Yeah.

So.

And as Bob said, you know we did you know.

Speaker 3: You know, we did see some runoff of more rate sensitive deposits, as we mentioned in our earnings release, and we evaluated our positioning in the market, as Bob said, and decided to increase our rate in mid July .

We did see some run off of more rate sensitive deposits as we mentioned in our earnings release and reevaluate. It you know our positioning in the market as Bob said and decided to increase our rate and in mid July and has seen balances stabilize somewhat since that time, but we did say that depending on interest rates our total deposits.

Speaker 3: and have seen balances stabilize somewhat since that time.

Speaker 3: But we did say that depending on interest rates, our total deposits can fluctuate in future periods. But the important thing is that we believe reducing rate-sensitive deposits in our portfolio increases our franchise value and will benefit us as we become a bank.

Can fluctuate in future periods, but the important thing is is that we believe reducing rate sensitive deposits in our portfolio increases our franchise value and will benefit us as we become a bank.

Speaker 3: And also, so that's 1 side of it rising interest rate environment, but we've also talked about. You know, given this rate change, and given the changes in the current macro environment, the other flip side of it that's also positive is that we're considering.

And also so that's one side of the rising interest rate environment, but we've also talked about you know given this rate change and given the changes in the current macro environment. The other flip side of it. That's also positive is that we're considering slowing the growth of deposits on our balance sheet. Once we become a bank, which will require us to raise significantly less.

Speaker 3: slowing the growth of deposits on our balance sheet once we become a bank, which will require us to raise significantly less capital.

Speaker 3: and will also have valuation benefits from a more attractive EPS standpoint. So we've seen the interest rate environment affect us in different ways, some positive, some slightly negative, but even for the negative, it creates immense franchise value over time for us if we have core deposits rather than rate sensitive deposits. Hope that's helpful.

Capital and we'll also have valuation benefits from a more attractive EPS standpoint, so we've seen the interest rate environment affect us in.

In different ways some positives.

Some slightly negative, but even for the negatives accrete it creates a and then franchise value over time for us if we have core deposits rather than rate sensitive deposits I hope that's helpful.

Yes, okay, great. Thanks for the answers.

Thank you Ross.

Speaker 4: Sorry, the next question is from Mike Grandal with Northland Security. Your line is open. Hey Mike. Hey, thank you.

Sorry. The next question is from Mike Grondahl with Northland Securities. Your line is open.

Thank you.

Hey, guys good morning.

Speaker 6: maybe, Loveline, this first one for you, maybe, can you talk a little bit about the 3% revenue growth?

Maybe loveline. This first one for you maybe can you talk a little bit about the 3% revenue growth.

Which.

Speaker 6: I guess I would have expected more, but is it the higher ed side? Is it the new business side or is it?

I guess I would've expected more but is it the higher Ed side is is it the new business side or is it.

Speaker 6: sort of lack of retention of customers. Why is revenue growth only...

Sort of lack of retention.

<unk> of customers.

Why is revenue growth only running at 3%.

Speaker 3: I'll begin and then Bob, if you want to please chime in. And so for us, you know, firstly, this is a challenging environment that we're operating in. And I think that we're very proud that despite the headwinds of the macro environment, we have seen growth and significant growth in certain areas. And from a revenue standpoint, you know, when you look back at our revenue, what drives revenue, our deposits, our spend, and then our university business fees.

I'll begin and then Bob if you want to please chime in and so for US you know firstly this is a challenging environment that we're operating in and I think that we're very proud that despite the headwinds of the macro environment, we have seen growth and significant growth in certain areas and.

From a revenue standpoint, you know when you look back at our revenue what drives revenue our deposit our R. R.

Our spend.

And then our University business fees.

Speaker 3: And we talked about already that one side of the coin of the rising interest rate environment is that you have these rate sensitive deposits. The beauty of our student business is that it is not rate sensitive, which is unheard of. About 300 million of our deposits on average are in our students.

And we talked about already that one side of the coin of the rising interest rate environment is that you have these rate sensitive.

Pause at the beauty of our student business is that it is not rate sensitive which is unheard of so about 600 million of our deposits on average are in our student business and no matter what the rate environment is the cost of deposits doesn't change that is true franchise value. So we.

We're very lucky for that and our news business side of the business a portion of the deposits are more rate sensitive and so the revenue.

You know is affected by the fact that there was you know some runoff of these more rate sensitive deposits, but as I said, Mike that was a conscious decision we could have changed the rate earlier.

Could've changed it higher but for us we're not reaching that is not franchise value and so we're willing to let some of those run off and and really and also preparation of becoming a bank where there's less capital.

Deposits.

Especially if they're not contributing to franchise value the west capital that'll have to be raised which we're cognizant is very important to our current investors.

The student business continues to.

Speaker 3: be strong. We see opportunity to strengthen that even further. Account acquisition remains strong. Retention remains an opportunity for us. And I think in my remarks, I was very clear about some of the transformational steps that we are taking to help with that engagement retention piece going forward. So I hope that's helpful.

B B strong, we see opportunity to strengthen that even farther account acquisition remains strong.

Retention remains an opportunity for us and I think in my remarks, I was very clear about some of the transformational steps that we're taking.

To help with that engagement retention piece going forward. So I hope that's helpful.

And Mike, Let me remind you as well.

The first and second quarter this year, our tough comps because of the first half of last year. We really did have a tailwind from stimulus we talked about that at the time, we didn't have any stimulus dollars in the first half of this year and so we're coming off a real period of strength and I think thats part of what you see in the year over year change.

Got it.

Speaker 6: with the new customer win on the bass side. Congrats on that.

With the new customer win on the Bath side congrats on that.

Speaker 6: Is was there any development revenues in 2Q or do you expect any in 3Q related to that? I know at prior times you've had some revenue related to development.

Is was there any development revenues.

Into Q or do you expect any in <unk> related to that I know in prior times, you've had some revenue related to development.

Speaker 2: Yeah, so again, we're going to really steer away from answering that type of question on a specific customer. But I think we do say in our earnings release that we did begin work under the agreements in the 2nd quarter. And there is some impact there. So there's a little bit in the consolidated numbers. We're not going to say any more detailed. Okay. Okay.

Yeah. So again, we're going to really steer away from answering that type of question on a specific customer, but I think we do say in our earnings release, we did begin work under the agreements in the second quarter and there is some impact there so.

There's a little bit in the consolidated numbers, but we're not going to say any more detailed numbers.

Okay. Okay.

Then.

Speaker 6: Several quarters ago, you guys were talking to a large grocer, a big box retailer, and an international bank. Are those three still active? Does this win one of those?

Several quarters ago, you guys were talking to a large grocer, a big box retailer and an international bank.

Or are those three still active with this win one of those.

Speaker 3: I'll take that one. So I don't want to, as we're becoming more of experts in the Bank of Minnesota Business, we're realizing that these scaled opportunities are very secretive in nature, and they pride themselves in being confidential and really having strong commercial launches. And so with that in mind, Mike, I would say that our existing pipeline remains strong. Some opportunities come and go, but overall,

I'll take that one so I don't want to.

We're becoming more of experts in the banking as a service business. We're realizing that these scaled opportunities are very secretive in nature and they pride themselves in being confidential I'm really having strong commercial launches and so with that in mind, Mike I would say that our.

Our existing pipeline remained strong.

Some opportunities come and go but overall.

Speaker 3: that the pipeline and opportunities remain in the categories that I've talked about, and some of those that you mentioned still remain in the pipeline as opportunities going forward.

The pipeline and opportunities.

And the categories that I've talked about and and some of those that you mentioned still remain in the pipeline as opportunities going forward.

Got it okay.

And then.

Speaker 6: I, lastly, you've talked a little bit on this call about some slowing deposit growth, tweaking some prices, letting some low value deposits run off, and maybe some new partner banks or sponsor banks paying you for deposits. How are you guys?

Lastly, you've talked a little bit.

On this call about some slowing deposit growth tweaking some prices leading to low value deposits run off.

And maybe some new.

Partner banks are sponsor banks paying you for deposits.

Or are you guys thinking about.

Speaker 6: the NIM or kind of replacing that 3% deposit rate.

The NIM or kind of replacing that 3% deposit rate.

Speaker 6: you know, early 23 and how that NIM, whether it's, you know, you generating with, with, with loans and deposits, or, um, you know, partner sponsor banks paying you for. What's your latest thinking there?

Early 'twenty, three and how that NIM, whether it's you know you are generating with with with loans and deposits.

Sure.

Partner sponsor bank paying you for what's your latest thinking there.

Yeah sure, Mike So I'll I'll take that one first.

Speaker 2: Yeah, sure, Mike, I'll take that one first. Um, you know, I don't think our view has changed that as a bank with a bank balance sheet with loans offsetting the deposit.

I don't think our view has changed as a bank with a bank balance sheet with loans offsetting the deposits that we think of net interest margin between three and 4% over time is reasonable and likely near the higher end of that range, given our consumer business mix certainly in a rising we're hiring.

Speaker 2: that we think a net interest margin between 3% and 4% over time is reasonable and likely near the higher end of that range given our consumer business mix.

Speaker 2: certainly in a rising or high rate environment. We think it could even be you know at the top or above that potentially depending on the rate environment.

Environment, we think it could even be at the top or above that potentially depending on the rate environment. So.

Speaker 2: Um, you know, I think over time that that range still applies and we'd be at the higher end of that for what's on balance sheet. It will, of course, take a little bit of time to grow into that and build out the loan strategy and how quickly that can be done really will depend on when we're able to close the acquisition, which we still are targeting to close by year end.

I think over time.

That range still applies when we'd be at the higher end of that for what's on balance sheet.

Of course take a little bit of time to grow into that and build out the loan strategy and how quickly that can be done and it will depend on when we're able to close the acquisition, which we still are targeting to close by year end.

Speaker 2: on the off balance sheet side of things.

On the off balance sheet side of things.

Speaker 2: You know, I don't think we'll ever an off balance sheet. The same amount that we do are an on balance sheet, which is really the value and the benefit of pursuing a bank charter.

Well ever in off balance sheet. The same amount that we do on an on balance sheet, which is really the value and the benefit of pursuing a bank charter, but the flip side of that which Lobeline has alluded to is that it's a much more capital efficient business, where you don't have to hold.

Speaker 2: But the flip side of that, which Lovelina has alluded to, is that it's a much more capital efficient business where you don't have to hold.

Speaker 2: or have as much capital on balance sheet. And quite frankly, you know, at current share prices and levels, it can be a lot more creditorial for shared or earn a little bit less off balance sheet than to raise capital to do more on balance sheet. And then you have the ability to transition at business over time as you generate capital organic.

Or have as much capital on balance sheet and quite frankly.

At current share prices levels. It can be a lot more accretive to earnings per share to earn a little bit less off balance sheet and to raise capital to do more on balance sheet and then you'll have the ability to transition that business over time as you generate capital organically.

Speaker 2: Off balance sheet what we earn on that will be market driven But again would be something less than we can earn as a bank with a full net interest mark

Off balance sheet, what we earn on that will be market, driven but again will be something less and we can earn as a as a bank with a full net interest margin.

Speaker 6: And can you comment on roughly what is market today? If you had an off-balance sheet relationship with a sponsor bank.

And can you comment on roughly what is market today.

If you had an off balance sheet relationship with the sponsor bank.

Speaker 2: Yeah, I'm not going to comment on what market is today. What I will point you to is as Loveline said, we are evaluating what we are going to do at the end of this year and knowing that there will be opportunity to put some of these deposits with a partner bank or off balance sheet. Even if we close the.

Yes, I'm not going to comment on what market is today, what I would point you to those lovely and so we are evaluating what we are going to do at the end of this year and knowing that there will be opportunity to put some of these deposits with a partner bank were off balance sheet, even if we close the deal.

Speaker 2: the acquisition of First Sound Bank or merger with First Sound Bank. And so we are exploring those options. And once we have finalized the deal, we'll be willing to share some of that information with you. I just, I don't think it helps our competitive position to set pricing expectations in advance of having something.

The acquisition of first South bank, our merger with <unk> Bank.

And so we are exploring those options on once we have finalized the deal will be willing to share some of that information with you I don't think it helps our competitive position to set pricing expectations in advance would have something inked.

Speaker 6: Got it. And hey, I do think it's a good decision to go with a hybrid approach instead of trying to put all those deposits to work in 23. so good to hear that.

Got it.

I do think it's a good decision to go with the hybrid approach instead of trying to put all of those deposits to work in 'twenty three.

Good to hear that.

Thank you Mike.

Speaker 4: The next question is from Greg Pendi with Chardon. Your line is open. Hi, Greg Pendi.

The next question is from Greg <unk> with Chardan. Your line is open.

Hi, Greg.

Info, Brian Dobson can you just remind us I guess as we looked out to the second half what normalized seasonality is and I. Appreciate you calling out the stimulus impact in <unk> of last year, but as we look at the compares for <unk> of last year and <unk> of last year.

Speaker 5: Can you just remind us, I guess, as we look now to the second half?

Speaker 5: what normalized seasonality is and I appreciate you calling out the stimulus impact in 2Q of last year. But as we look at the compares for 3Q of last year and 4Q of last year.

Speaker 5: Were there any kind of puts or takes stimulus impact last year that we should be thinking about as we look at the back half and then what the normal seasonality would be on the back?

Were there any kind of puts or takes stimulus impacts last year that we should be thinking about as we look at the back half and then what the normal seasonality would be on the back half.

Speaker 2: Yeah, so I'll take that. So certainly, as you think about the stimulus lift, the last round of.

Yeah, So I'll take that so certainly as you think about the stimulus lift.

The last round of <unk>.

Speaker 2: Federal checks that were mailed was I think it was the end of March. Maybe it's April now I got a little check was really the end of the first quarter And so the stimulus tailwind that you saw was definitely concentrated in the first half of last year I do think that there was some tapering benefit in the back half of the year as Balances remained a little bit higher and spend sort of trickled out But the lion's share of that benefit really was effective in in the first half the year So I think you're not going to see the same

Federal check so were mailed was I think it was the end of March maybe its April Naga.

Really the end of the first quarter and so the stimulus tailwind that you saw was definitely concentrated in the first half of last year I do think that there was some tapering benefit in the back half of the year as balances remained a little bit higher in spend sort of trickled out, but the lion's share of that benefit really was effective in.

In the first half of the year, So I think youre not going to see the same.

Speaker 2: sort of drop of stimulus tailwind in the back half of this year.

Sort of drop of stimulus tailwind in the back half of this year.

Speaker 2: I do think that the normal seasonality in the business, which you asked about, keep in mind that only affects the student side of the business. The white label BAS business is not a seasonal business, or at least not nearly the same degree of seasonality would be what you see in any banking related servicing business. In the student business, the first quarter is our strongest quarter. And that really is because the entire sort of...

I do think that the normal seasonality in the business would you asked about keep in mind that only affects the students side of the business the.

White label bass business is not a seasonal business or at least not nearly the same degree of seasonality that would be what you see in any banking related servicing business in the <unk>.

<unk> business. The first quarter is our strongest quarter and that really is because the entire sort of semester peak falls within the quarter. The second quarter is going to be the weakest, because it's where you're sort of between those semesters, the third and fourth quarters tend to be in between the first and <unk>.

Speaker 2: semester peak falls within that quarter, the second quarter is going to be the weakest because it's where you're sort of between those semesters. The third and fourth quarters tend to be in between the first and second because what you've got is a semester peak that sort of straddles the third and fourth quarters. So you get some benefit in both.

Because what you've got is a semester peak that sort of straddles the third and fourth quarter. So you get some benefit in both.

Speaker 2: It does sort of peak around July , August , September timeframe, and then it does taper. And when you get to the month of December , even though we don't report monthly numbers, that's sort of really when you're at the weakest point of the year. But you do have some of the fall peak benefit in the 4th quarter. So hopefully that helps.

It does sort of peak around July August September timeframe, and then it goes paper I mean, when you get to the month of December even though we don't report monthly numbers that sort of really when you're at the weakest point of the year, but you do have some of the fall peak benefit in the fourth quarter. So.

Hopefully that helps.

That helps a lot thanks a lot.

Sure.

Speaker 4: Again, that's star one to ask a question. The next question is from Bill DeZellum with Titan Capital. Your line is.

Again, Thats star one to ask a question. The next question is from build to sell them. We've tightened capital. Your line is open.

Speaker 7: Thank you. Relative to, good morning, relative to the new Banking as a Service customer, would you talk about how integration with the banking charter could add value and maybe not even specifically to this customer, but just in general.

Relative to good morning relative to the new banking as a service customer would you talk about.

How integration with a banking charter could add value and maybe not even specific to this customer but just in general how is that maybe in case you don't think.

Speaker 8: how that may be in place. I don't think we can get our head wrapped around that concept.

We can hit our head wrapped around that concept.

Speaker 2: Well, then you want to start with that 1 or do you want me to take it?

Yeah.

Well, Dan do you want to start with that one or you want me to take.

Speaker 3: Sure, I think that you know we talked about sorry there's a lot of background Thank you

Sure I think that you know.

You talked about sorry, there's a lot of background.

Your line forward.

Thank you.

Speaker 3: So, you know, we talked a little bit about vertically integrating and really being the technology provider, the servicer or program manager, as well as the sponsor bank. That is the ideal sort of ecosystem to be the most competitively positioned banking as a service provider. Let's hear it foricing over the next 20 minutes. Six minutes. Perfect.

So.

We talked a little bit about vertically integrating and really being the technology provider the service or our program manager as well as the sponsor bank that is the ideal sort of ecosystem to be the most competitively positioned banking and service provider.

Speaker 3: And today, in this most current deal, where we really stand strong and are delivering, is in the technology side, as well as servicing of those accounts in that program managed capacity. And so development revenues.

And and today.

In this most current deal where we really stand strong and are delivering.

Is in the technology side as well as servicing of those accounts and that program managed capacity and so development revenues.

Speaker 3: and technology, you know, software as a service revenue are really, you know, where the biggest drivers of revenue are in the current deal.

And technology.

Software as a service revenues are are really.

Were the biggest drivers of revenue are in the current deal as.

Speaker 3: As opportunities expand, new opportunities come, existing opportunities develop or evolve. As we get a charter, being able to...

<unk> expand new opportunity comes you know existing.

Opportunities.

We develop our evolve as we get a charter being able to acquire those deposits and to be able to then deploy them into assets.

Speaker 3: acquire those deposits and to be able to then deploy them into asset generation opportunities really expands the opportunity for us to multiply the profitability of these programs. It's a multiplier effect to have that charter and to be able to take those deposits and then deploy them in asset.

Alpha generation opportunities really expands the opportunities for us to multiply.

The profitability of these programs, it's a multiplier effect to have that charter and to be able to take those deposits and then deploy them and assets. So I hope that's helpful that as the evolution of the relationship from a technology and program manager evolved to a sponsor bank relationship you can see that effect.

Speaker 3: So I hope that's helpful that as the evolution of the relationship from a technology and program manager evolves to a sponsor bank relationship, you can see that effect of the deposits and really creating more profitability for these programs.

The deposits.

And really creating more more profitability for these programs.

That makes a lot of sense. Thank you.

Thank you.

Speaker 4: We have no further audio questions. I will turn it back over to Mr. Ramsey.

We have no further audio questions I will turn it back over to Mr. Ramsey.

Speaker 2: All right, thank you very much. We do have a few questions online from the web and I will run through a handful of these in our final minutes here. We've got a couple that do ask about capital and about what is going to be needed to support the deposit.

Alright. Thank you very much we do have a few questions online from the web and I will run through a handful of these in our final minutes here.

We've got a couple that do ask about capital and about what was going to be needed to support the deposits I think we've touched on this a few times. So I'll just sort of reiterate that our view. It has never been that all of our deposits will come on balance sheet on day, one we always had a plan that is.

Speaker 2: I think we've touched on this a few times, so I'll just sort of reiterate.

Speaker 2: that our view it has never been that all of our deposits would come on balance sheet on day one. We always had a plan that some of these deposits were going to be held off balance sheet either through broker networks or with partner banks. Additionally given some of the shifts in market dynamics most notably that the value of off balance sheet deposits is higher in a higher rate environment.

Some of these deposits, we're gonna be held off balance sheet, either through broker networks or with partner banks.

Additionally, given some of the shifts in market dynamics, most notably that the value of off balance sheet deposits is higher in a higher rate environment and that our cost of capital is also higher given where our stock trades. Today. We are really looking at what can we do to maximize earnings per share and minimize any potential delay.

Speaker 2: And that our cost of capital is also higher given where our stock trades today. We are really looking at what can we do to maximize earnings per share and minimize any potential dilution. So as we think about the capital needs of the business today as compared to a year ago, we are looking at it through a different lens. We certainly are very mindful of investor concerns around dilution and we're all shareholders here and don't want to do anything that would be dilutive either.

So as we think about the capital needs of the business today as compared to a year ago, we were looking at it through a different lens.

We certainly are very mindful of investor concerns around dilution and we're all shareholders here and don't want to do anything that would be dilutive either.

Speaker 2: I know there's a question in here that talks about

I know there is a.

A question in here that talks about fintech, citing a decline in deposits due to tax season and did that play any role in our deposit trends.

Speaker 2: FinTech citing a decline in deposit due to tax season and did that play any role in our deposit trends. I will tell you that in the month of April we did see right around the tax filing deadline, some outflows which worked the IRS and clearly were directly related to tax filing.

We will tell you that in the month of April we did see right around the tax filing deadline. Some some outflows which were to the IRS and clearly were directly related to tax filings I will tell you that that overall was a short lived phenomenon and I don't think its something that.

Speaker 2: I will tell you that that overall was a short-lived phenomenon, and I don't think it's something that really is probably very apparent in the numbers, but when we look at it at a much more granular level, we did see some deposits that flew, that moved to pay taxes in the month of April . When

<unk> really is probably very apparent in the numbers when we look at it at a much more granular level. We did see some deposits that fits flu that did move to pay taxes in the month of April .

Speaker 2: As I look through here, there is a question about whether customer deposits all have full FDIC insurance.

As I look through here there is a question about whether customer deposits all have full FDIC insurance today with our current partner bank. Some other fintech some had some some mishaps associate or yes.

Speaker 2: today with our current partner bank. Some other fintechs have had some mishaps, it says here. Yes, all of our customer deposits are insured today with our partner bank up to the full FDIC limit. And we certainly understand how important FDIC insurance is in the future, either as a bank or as we work through additional partner banks, we will continue to ensure that we are able to offer our customers full FDIC insurance.

Yes, all of our customer deposits are insured today with our partner bank up to the full FDIC limits and we certainly understand how important FDIC insurance is.

In the future either as a bank or as we work through additional partner banks. We will continue to ensure that we are able to offer our customers full FDIC insurance.

Speaker 2: There is a question here that talks about will we be expanding into small business after the first sound bank merger?

There is a question here that talks about will we be expanding into small business. After the first sound bank merger. After the first sound Bank merger, we're really excited about being able to offer additional products and services, particularly on the lending side for some bank already is a very strong community.

Speaker 2: After the first down bank merger, we're really excited about being able to offer additional products and services, particularly on the lending side.

Speaker 2: First Sound Bank already is a very strong community bank with good small business and commercial lending. I think that's part of what we really like about that franchise is the high quality loan portfolio, the strength of the management team, their existing relationships. This is gonna be an opportunity that we see to expand on the good business that they have already. And given their size and their legal lending limits, they are limited and do have to participate out some of the small business commercial lending that they do.

Bank with good small business and commercial lending I think thats part of what we really like about that franchise is the high quality loan portfolio the strength of the management team and our existing relationships.

This is going to be an opportunity that we see to expand on the good business that they have already and given their size and their legal lending limits. They are limited and do have participated out some of the small business commercial lending that they do and as part of a larger institution.

Speaker 2: And as part of a larger institution, they wouldn't run into those same caps as quickly. And so there's a natural ability for them to expand this business.

Who do you run into the same counts as quickly and so there is a natural ability for them to expand this business and as we have looked at sort of plans together as one institution. We are looking to augment their commercial lending team as well and build that business out. So it's definitely an area that we are excited about.

Speaker 2: And as we have looked at, you know, sort of plans together as one institution, we are looking to augment their commercial lending team as well and build that business out. So it's definitely an area that we are excited about and see opportunity for growth.

And see opportunity for growth.

Speaker 2: There are a couple questions here about BAMF partnership.

There are a couple of questions here about bounce partnerships.

Speaker 2: One of them asked why we couldn't sort of roll out 7 to 10 a year if the infrastructure was in place.

One of them ask why we couldn't sort of rollout seven to 10, a year if the infrastructure was in place.

Speaker 2: I think what I would say there is that that really has not been our model. We have been really focused on big, meaningful.

I think what I would say there is that that really has not been our model. We have been really focused on big and meaningful.

Speaker 2: significant brands and quite frankly 10 a year at the size we're looking at.

Significant brands and quite frankly 10, a year at the size we're looking at.

Speaker 2: I just don't think it's a realistic expectation. I think we do continue to still believe and expect that we can add one significant banking as a service partner every 12.

I just don't think is a realistic expectation I think we do continue to still believe and expect that we can add one significant banking as a service partner every 12 to 18 months.

Speaker 2: And then last question I'll take is there are a couple questions here that pertain to capital and are we, what are we, how are we thinking about the warrants and do we have any plans for a share bye bye

And then last question I'll take as there are a couple of questions here that pertained to capital at are we what are we how are we thinking about the warrants. So do we have any plans for share buyback.

Speaker 2: You know, the 1st piece there in terms of a share buyback with our stock trading where it is, I would love to be in the market and buying back stock. As we are headed into the bank merger, which we do think is the right business decision. The last thing we would want to do here is buy back stock and then find that we needed more capital later. And so we're just not at a. Strategic position, or I think buybacks make sense.

The first piece there in terms of a share buyback with our stock trading where it is I would love to be in the market and buying back stock.

As we are headed into the bank merger, which we do think is the right business decision. The last thing we would want to do here is buyback stock and find that we needed more capital later and so we're just not at a strategic position or I think buybacks make sense, but we definitely consider the share price.

Speaker 2: but we definitely consider the share price attractive. And if we weren't looking into potentially needing capital in the future, I think we would be more open to a share buyback situation.

Tractive and if we werent looking into potentially needing capital in the future I think we'd be more open to a share buyback.

Situation in terms of the warrants it's very much the same we're continually looking at what can we do too.

Speaker 2: In terms of the warrants, you know, it's very much the same. We're continually looking at what can we do to clean up and reduce any potential dilution from the warrants. We are mindful of how valuable capital is to us as well. And I think for that reason.

Clean up and reduce any potential dilution from the warrants. We are mindful of how valuable capital is to us as well and I think for that reason, it's tough at any scale to justify going out and spending a lot of capital to cleanup warrants, but we do continue to look at hey are there opportunities to us.

Speaker 2: It's tough at any scale to justify going out and spending a lot of capital to clean up warrants. But we do continue to look at, hey, are there opportunities to...

Speaker 2: affect a tender or otherwise sort of reduce that dilution pretty significantly without depleting capital. So it's an area we continue to look at and are looking for opportunistic ways that we may be able to do.

Fact of tender or otherwise sort of reduce dilution pretty significantly without depleting capital. So it's an area. We continue to look at and.

Are looking for opportunistic ways that we may be able to do something there.

Speaker 2: That sort of sums up the Q&A that we had online. Sorry to do that lightning round, but I know we're about out of time. But with that, I'll be happy to turn it back over to Loveline to handle any closing remarks.

That sort of sums up the Q&A that we had online sorry to do that lightning round, but I know, we're about out of time, but with that I'll be happy to turn it back over to lovely to handle any closing remarks.

Speaker 3: Thanks, Bob. As I mentioned before, we couldn't be more excited than where we are today. I think we're at the precipice of

Thanks, Bob as I mentioned before we couldn't be more excited than where we are today I think we're at the precipice.

Speaker 3: Such exciting opportunities around becoming a Fintech bank, expanding our banking as a service opportunities, being able to really invest and transform our student business from not just an acquisition engine, but really creating a customer for life. So we're very grateful to have your support along this journey and look forward to touching base next quarter. Thank you.

That's exciting opportunities.

Around becoming a fintech bank expanding our banking as a service opportunity is being able to really invest and transform our student business from not just an acquisition engine, but really creating a customer for life.

So we're very grateful to have your support along this journey and look forward to touching base.

Next quarter. Thank you.

Yes.

Speaker 4: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now...

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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