Q4 2023 FinWise Bancorp Earnings Call
Greetings and welcome to the fin West Bancorp fourth quarter 2023 earnings Conference call.
This time, all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
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Speaker Change: At this time I would now like to turn the floor over to the fin West Bancorp team. Thank.
Speaker Change: Thank you you may begin.
Speaker Change: Good afternoon, and thank you for joining us today, and why Bancorp fourth quarter 2023 conference call.
Speaker Change: Earlier today, we filed our earnings release and posted to our Investor website at investors <unk> been wise Bancorp dotcom.
Speaker Change: Today's conference call is being recorded and webcast on the company's website.
Baxter's thought been wise backward dot com.
Speaker Change: On today's call management's prepared remarks and answers to your question.
Forward looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today.
Speaker Change: Forward looking statements represent managements current estimates expectations and beliefs and been washed Bancorp assumes no obligation to update any forward looking statements in the future.
Speaker Change: We encourage listeners to review the more detailed discussions related to these forward looking statements contained in the company's earnings press release and filings with the Securities and Exchange Commission.
Speaker Change: Hosting the call today are Kent land better.
Kent: And president that's been why Bancorp.
Kent Landberg: Jim noon, President I've been wise Bank, and Travis Jacobson Chief Financial Officer.
Kent Landberg: With that I will turn the call over to Ken.
Kent Landberg: Good afternoon, everyone and thank you for joining us on our fourth quarter 2023 earnings conference call.
Kent Landberg: Twenty-three was another successful year as our differentiated business model, coupled with a disciplined approach and strong execution continued to demonstrate resilience. We produced solid loan originations and delivered positive returns specifically for the fourth quarter, we had approximately 1.2 billion.
Kent Landberg: And loan originations.
Kent Landberg: Credit quality continued to perform as expected and generally in line with industry trends notwithstanding an increase in nonperforming loans in the fourth quarter.
Kent Landberg: This increase was driven primarily by the continued impact of higher rates on our SBA loan portfolio.
Kent Landberg: Our collateral and portfolio management processes continue to service well the level of net charge offs increased quarter over quarter.
Kent Landberg: We continue to feel positive about the SBA portfolio its growth and credit characteristics.
Kent Landberg: Level of net charge offs at the bank, which have been generally in line with our expectations.
Kent Landberg: Turning to capital at the end of the fourth quarter, our bank leverage ratio remained significantly above well capitalized regulatory guidelines, which we believe provides us with sufficient capital to continue to support growth.
Book value per common share also continued to increase this quarter.
Speaker Change: I would now like to provide a brief update on our key objectives for 2024 and beyond.
Speaker Change: Our previously communicated strategy expanding into an integrated banking as a service bank or bask bank continues to make meaningful progress.
Speaker Change: To that end, we are very excited about our payments hub and bin sponsorship platforms, which are expected to be operational later in the year.
This provides us with key pieces for any integrated bass offering.
Speaker Change: We firmly believe that an integrated bass infrastructure, coupled with the strength of our regulatory due diligence and oversight functions are key differentiators in the market.
Longer term. We also believe this expansion could create stickier relationships with our strategic platforms and offer multiple benefits to our business model.
Speaker Change: This could include additional recurring revenue.
Speaker Change: Diversifying both revenue and deposit composition more tools to manage our cost of funds through relationship banking and providing additional flexibility to manage our loan mix.
Speaker Change: This past quarter. We also completed an internal core system conversion as part of our overall business evolution.
Speaker Change: We believe this conversion should increase our operational efficiency and better position us to meet the needs of our growing organization.
Speaker Change: Our team worked diligently to complete this process by quarter end and I want to thank them for their effort.
Turning to our SBA seven loan program. We are pleased that the business continues to grow and perform as we expected, particularly amidst the higher rate environment. At these credits have been managing through.
Speaker Change: While some market participants expect a potential economic softness we believe uncertainties remain at least through the first half of 'twenty or show any poor, which could impact the industry wide loan originations across all of the bank's lending products.
Speaker Change: The external environment notwithstanding.
Speaker Change: We will remain disciplined and continue to actively manage areas of the business, we can control, including our strict underwriting and collateral management processes as.
Speaker Change: As we move ahead, we believe we're at an inflection point in the evolution of our model with the potential to enhance the company's long term earnings power.
Speaker Change: We plan to continue our efforts to expand the business towards integrated bass, Oxford, and coupled with continued focus on our existing lending programs.
In line with our culture, we will be patient and disciplined in our approach to rolling out to new businesses and expect the benefits to accrue over time.
Speaker Change: With that let me turn the call over to Jim <unk>, Our bank President.
Jim Noon: Thank you Ken.
Jim Noon: I will now walk through some additional detail on the quarterly originations.
Jim Noon: And the performance of our loan portfolio and credit quality, and then discuss progress on our business initiatives.
Jim Noon: Total loan originations were $1 2 billion in Q4 versus $1 1 billion in Q3.
Jim Noon: Our fintech lending continued a gradual recovery in origination levels during the fourth quarter.
Jim Noon: Our SBA seven loan originations during the fourth quarter were lower on a sequential quarter basis, primarily due to reduced application demand.
Jim Noon: The types of transactions, we generally finance.
Jim Noon: As well as our continued adherence to disciplined underwriting.
Jim Noon: We did not chase loan volume as we always focus on balancing loan growth with credit quality.
Jim Noon: And as a result.
Jim Noon: All of our SBA pipeline.
Jim Noon: Contract some quarter over quarter.
Jim Noon: Moving to our portfolio.
Jim Noon: Growth in earning assets has continued according to plan.
We continued to retain the guaranteed portion of our SBA loans, given the current dynamics, where the underlying note rates remained high and secondary market loan sale premiums remained low.
On a sequential quarter basis, and 17, 1% increase in guaranteed balances of our SBA loans what's.
Jim Noon: It was the primary driver of the <unk>.
Jim Noon: 10, 2% growth in total loans held for investment.
Jim Noon: Overall, we continued to be successful and identifying and funding credit worthy businesses in both our SBA and leasing lines and.
Jim Noon: Both contributed meaningfully to our growth in earning assets.
Turning to credit quality.
Jim Noon: Provision for credit losses was $3 2 million in Q4 compared to $3 1 million in the prior quarter.
Jim Noon: The sequential increase in provision was driven primarily by strict adherence to our seasonal methodology.
Jim Noon: An increase in net charge offs and our SBA portfolio.
An increase in the qualitative factor overlay that was implemented during Q3 and which remained in place.
Jim Noon: Due to the increase in special mentioned nonaccrual and nonperforming assets.
Jim Noon: During Q4 net charge offs were $3 4 million compared to $2 2 million in the prior quarter.
Jim Noon: The increase was primarily related to our SBA portfolio.
Jim Noon: As a reminder, during Q3, we had a large recovery of $390000.
Jim Noon: The net charge off rate as a percentage of average loans held for investment was three 8% in Q4.
Jim Noon: Compared to two 8% in the prior quarter.
Jim Noon: We continue to believe we are well reserved for potential loan losses.
Jim Noon: Within the allowance as a percentage of total loans held for investment of three 5% at the end of Q4.
Nonperforming loans at the end of Q4 were $27 1 million.
Compared to $10 7 million at the end of the prior quarter.
Jim Noon: Of the $27 1 million <unk>.
Jim Noon: $15 million is guaranteed by the SBA.
Jim Noon: $12 1 million as the balance of loans, which do not carry SBA guarantees.
Jim Noon: The increase in mpls versus the prior quarter related primarily to our SBA portfolio.
Jim Noon: As this program continues to be impacted by the higher interest rate environment.
Jim Noon: As a reminder, our SBA note rates adjust calendar quarterly.
Based on a spread over the Wall Street Journal Prime rate in place at quarter end.
Jim Noon: We expect to see additional increases in our NPL balances, while the prime rate remains elevated.
Jim Noon: Further while $12 1 million of our NPL balances do not carry SBA guarantees.
Jim Noon: We believe our strict collateral policies in this portfolio should continue to help mitigate net charge offs.
Speaker Change: Finally, let me give you an update on our business initiatives.
Speaker Change: Within strategic program lending yes.
Speaker Change: Executed program agreements with Ernest a subsidiary of Navient.
Speaker Change: And a leader in the private student lending market.
Speaker Change: We are humbled by the trust the team at Ernest placement been wise to support their growth plans I believe this is a testament to the strength of our offering in the market.
Speaker Change: We look forward to working with the <unk> team and welcome them to the <unk> family.
Speaker Change: We're also quite proud of our continued investment in the compliance and risk management infrastructure at the bank.
Speaker Change: We believe this focus which is at the core of our offering is embedded in our systems processes and culture.
Speaker Change: It allows us to continue to provide strong support to our fintech lending platforms.
Speaker Change: Lastly in anticipation of our further expansion into bass.
Speaker Change: We continue to make progress on our payments hub and bin sponsorship products.
Speaker Change: As Ken mentioned earlier.
Speaker Change: Anticipate them being operational later in the year.
Speaker Change: We will continue to provide you with additional details on these initiatives at certain milestones are achieved.
Speaker Change: Now.
Speaker Change: Let me turn the call over to our CFO <unk> Jacobsen.
Jacobsen: To provide more detail on our financial results.
Jacobsen: Thank you and good afternoon for the fourth quarter, we generated net income of $4 2 million or 32 cents per diluted common share.
Jacobsen: Posted solid profitability with a return on average assets of two 9%.
Jacobsen: And our return on average equity of 10, 8%.
Jacobsen: These results were achieved while continuing to invest in infrastructure to support growth in key strategic initiatives.
Jacobsen: Average loan balances comprising held for sale and held for investment loans were $396 2 million.
Jacobsen: During the quarter compared to $354 6 million last quarter.
Jacobsen: This increase was primarily driven by continued growth in our SBA seven eight and commercial loan program.
Jacobsen: Average interest bearing deposits were $303 4 million.
Jacobsen: Compared to $255 8 million in the prior quarter.
Jacobsen: The sequential quarter increase was driven primarily by an increase in brokerage certificates of deposit.
Jacobsen: As of the end of the quarter approximately 87% of the bank deposits are either insured.
Jacobsen: Our own capital or our contractually required in our strategic lending business.
Jacobsen: Now turning to the income statement.
Jacobsen: Net interest income for the quarter was $14 4 million nearly flat versus last quarter.
Jacobsen: Positively the increase in average balances of loans held for investment substantially offset the impact of higher interest rates and average interest bearing liability balances.
Jacobsen: Net interest margin was 10, six 1% this quarter compared to 11, seven 7% last quarter decrease.
The decrease was mainly due to a loan mix shift towards loans carrying lower yields in the held for investment portfolio.
Jacobsen: And an increase in the volume of Cds.
Jacobsen: Non interest income was $6 million in the quarter compared to $5 2 million in the third quarter.
Order over quarter increase was primarily due to the change in fair value of our investment in BHG.
Jacobsen: Partially offset by a decline in other miscellaneous income related to the resolution of a forbearance agreement last quarter.
Jacobsen: Building, an income which did not recur in Q4.
Jacobsen: Noninterest expense in Q4 was 11 4 million compared to $10 1 million in the prior quarter.
Jacobsen: The sequential quarter increase was primarily driven by an increase in salaries and employee benefits.
Jacobsen: Two an increase in the head count as well as higher professional service expenses.
Jacobsen: We continue to build out infrastructure to accommodate our growth.
Jacobsen: The efficiency ratio was 55, 8% in Q4.
Jacobsen: Paired to 51, 3% for the prior quarter.
Jacobsen: We continue to expect the efficiency ratio to remain elevated as we further build out our infrastructure to move forward.
With our strategic initiatives that position the company for long term growth.
Jacobsen: With a 27% leverage ratio the bank's capital remains significantly above the 9% well capitalized requirement.
Jacobsen: The company's tangible book value per common share continued to increase to $12.41.
Jacobsen: The $12.04 at the end of the prior quarter.
Jacobsen: Lastly, the effective tax rate was 28, 5% for Q4.
Jacobsen: Compared to 26, 1% in the prior quarter.
With that we would like to open the call for Q&A operator.
Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
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Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment. Please.
Thank you. Our first question comes from the line of Andrew <unk> with Stephens. Please proceed with your question.
Hey, good afternoon.
Speaker Change: Andrew.
Speaker Change:
Maybe if I could start just on credit quality and.
Andrew: Any allowance I guess I was surprised to see a modest move down in the allowance this quarter just given.
Andrew: We did see a lift in the non performers and Jim I. Appreciate the commentary I think about $15 million of the Npls were are guaranteed by the SBA looks like if I, if I back that $15 million out you're essentially.
Andrew: In your allowance covered one for one on Npls.
Andrew: Versus kind of the non guaranteed portion I guess, one is that fair and then number two if charge offs are running at call. It.
Andrew: Three 8% or so this quarter, a why not build the reserve to a level kind of higher than 350 basis points.
Speaker Change: Yeah no problem. So let me just kind of piece that apart quickly. So yeah generally the reserve at the end of the quarter is going to be slightly higher than that $12 1 million dollar on guaranteed balance on guarantee NPL balance, but it's close right. It's like 12.
Speaker Change: 12, nine in the reserve versus 12, one in on guaranteed NPL balances.
Speaker Change: And then just as far as the like the trend. This quarter you know the NPL balances were up the primary figure to point out is the UN guaranteed balances increased by $6 1 million in the quarter.
Speaker Change: That was similar to the $6 million incremental increase in on guaranteed NPL balances that we saw in Q3.
Speaker Change: And it's you know that quarterly increase was primarily attributable to the SBA portfolio, Andrew It's really a repricing issue.
Speaker Change: Remember these are adjustable rate loans that.
Speaker Change: That reprice them in calendar quarterly basis, and the speed of those rate increases has been impacting that portfolio.
Speaker Change: So we will expect to see continued normalization here until the prime rate starts declining.
Speaker Change: But then your question about the ACL rate.
Speaker Change:
Really there's two there's two reasons there first is the.
Speaker Change: We've been disciplined in our seasonal methodology.
Speaker Change: And then the second is because it is a lower risk portfolio than the same time last year as lower risk because of the remixing of the portfolio. That's happened throughout 2023 and the two examples that I'd give you are the SBA guaranteed balances are now 35% of the portfolio.
Speaker Change: 21% at the end of last year.
And then the S. P H F I balances, which carry a much higher reserve rate that's.
Speaker Change: That's the Fintech lending balances that were team have declined from about 10% of the portfolio to about 5% of the portfolio over the last year. So that's why that three 5% figure on the ACL reserve is the right figure for the current portfolio.
Speaker Change: Understood, Yes, I guess, that's a lot of moving pieces there I didn't I wasn't totally contemplating the they've got a positive credit mix shifts seen throughout the year. So that that makes sense I appreciate it.
Speaker Change: If I could ask on bad just loan origination volumes is it good to see a little bit of a step up in the fourth quarter can you remind us any kind of seasonality.
Speaker Change: Within any of your businesses, specifically some of the larger.
Speaker Change: Partners and in the fourth quarter, and then just kind of outlook as you look into 2024.
Speaker Change: From an origination perspective does it feel like we've kind of had a relative trough here and we could still see some modest declines moving forward.
Speaker Change: Sure. So on the seasonality piece, that's been pretty difficult for us to get a baseline on just over the last couple of years, because there's been so much movement. Both on the upside and then you know with some of the larger partners on the downside so really pulling out the seasonal factor is hot.
Speaker Change: For us to do.
Speaker Change: But just generally on the originations in the quarter.
Speaker Change:
Speaker Change: That rebound in demand that.
Speaker Change: That we saw from the Q1 origination levels. It was a little more sustained than we than we expected.
Speaker Change: Originations were up a little quarter over quarter and generally stable over the last three quarters. We would just point out it's still too early to say that it's likely to continue at that level throughout 2024, and the reason is that delta from Q1 is mostly related to a sustained rebound from the one program we spoke about in <unk>.
Speaker Change: You too.
Speaker Change: And we don't see broad enough strength across all of our platforms and just the industry in general to change our outlook there.
Speaker Change: Okay got it I appreciate it.
Speaker Change: If I could maybe.
Speaker Change: Just take your temperature on.
Speaker Change: Maybe just wanted to maybe I appreciate your line of thinking around retaining incremental strategic.
Speaker Change: Program.
Speaker Change: Credit is being generated today it feels like Theres, maybe a broader narrative.
Speaker Change: In the market today that got into late 'twenty three our current origination vintage paper might end up being some of the better performing.
Speaker Change: From a credit standpoint, just is on the horizon underwriting has tightened with higher rates relative to prior years.
Speaker Change: So Jim I kind of appreciate your thoughts on that and kind of narrative in the market and what do you do you agree and then any appetite right now I know youre seeing a lot of success in the.
The SBA business and it's it's really driving higher spread there any appetite to bolster the strategic program our personal loan portfolio.
So the loan composition that we've been trending towards or that you've seen over the last you know call. It year. Andrew I think you should continue to expect from US you know over the next few quarters I don't think you'll see any material change. There you know the S. D. H F. <unk> portfolio has been fairly stable as.
Speaker Change: Far as dollar balances over the course of the last year.
The question that you had about vintages.
Speaker Change: It.
Speaker Change: It's hard to answer like.
Speaker Change: Like so simply and the reason is it varies across programs there are programs where.
I would say generally yes.
Speaker Change: Yes, you know mid 'twenty, two new vintages.
Speaker Change: To make a general statement or you know.
Speaker Change: Some of the worst performing generally than what you saw.
Speaker Change: I'm kind of a Q1 Q2 of 'twenty three and I think a lot of the reason for that is the tightening in underwriting.
Speaker Change: But it varies markedly across programs.
And as just as far as outlook from Austin, our portfolio I don't think that you'll see anything different over the next few quarters as far as you know our strategy.
Okay, perfect. So really the incremental balance sheet growth, we should expect should still be more SBA driven.
Speaker Change: Yes.
Okay.
Speaker Change: In Java, So if I could ask a couple just on the expense space.
Speaker Change: One it sounds like there was a core system conversion in the fourth quarter I'm just curious it looks like the other expense line was up a decent amount sequentially anything one time from the core system conversion or or anything else either in the other operating expense or.
Speaker Change: Even in the salary and employee benefits in the fourth quarter. We should appreciate and then it looks like expense growth from an operating standpoint was about 10% in 2023.
Speaker Change: Is that the right level of operating expense growth you would expect moving forward just understanding that there's continued kind of reinvestment in the business.
Speaker Change: Yeah, Andrew I think.
Speaker Change: We've been talking for the last several quarters now about.
Speaker Change: Making additional investments to improve our business infrastructure and what youre seeing in the.
Speaker Change: In the noninterest expense now investments in personnel systems processes, and the new core you mentioned.
Speaker Change: You know this dose those expenses arent going to go away and we're not quite there yet.
We're excited about the progress we've made so far and are about our plans to help position. The company for long term growth I wouldn't really call out anything in the fourth quarter as one time.
Speaker Change: Understood. Okay, and then thoughts on just the overall level of expense growth going forward.
Speaker Change: Again.
Speaker Change: No when we're thinking about the right run rate for expenses.
Speaker Change: We continue to build and we're not there yet so.
Speaker Change: 23 has been a build year for us we expect that to continue in 'twenty four.
Speaker Change: No.
Speaker Change: I don't think it's unreasonable to think about increasing expenses in 'twenty four.
Speaker Change: Okay.
Speaker Change: I appreciate it I will stepped back in the queue. Thank you.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Our next question comes from the line of Andrew Liesch with Piper Sandler. Please proceed with your question.
Andrew Liesch: Hey, everyone. Good afternoon.
Andrew Liesch: Just wanted to talk about the bin sponsorship and kind of how that's going to ramp up and signing up partners can take some time and it sounds like it will be operational late this year, but when do you think we can start seeing revenue hit the bottom line and I guess, if you can provide it at a high level what sorts of partners are you targeting for that business.
Andrew Liesch:
Andrew Liesch: Okay.
Andrew Liesch: Jim do you want to take that one.
Jim Noon: Yes, no problem.
Jim Noon: So right now Andrew where.
Jim Noon: We're looking to be operational later in the year, we don't have a timeline and kind of point to as far as.
Jim Noon:
Identifying when to really be looking at.
Jim Noon: No meaningful revenue contribution a lot of the work that's been done so far is really on the infrastructure and staffing side.
Jim Noon: And that'll continue you know over the course of this year, we do expect to have our first.
Jim Noon: Handful of customers later this year, but it's really probably in 2025 that that becomes a more meaningful revenue item for us.
Jim Noon: Yeah.
Yeah.
Speaker Change: Got it.
Speaker Change: And then just the.
Just on the origination I know, it's hard to say that this is.
Speaker Change: The environment has improved but you still continue to put up decent numbers and the strategic program fees Don.
Speaker Change: I'm pretty solidly I mean.
Speaker Change: I guess I'm, just trying to figure out like where do you think the lull for that fee income item could be like what we saw in the first quarter of that this year. It just seems like there's a lot of there's moertel ends out there that you guys might be.
Speaker Change: Exactly.
Speaker Change: Okay.
Speaker Change: Yeah, I can touch on the originations I'll give Jonathan do you want to touch on some of the fee side of that so it's like the delta that you've seen between Q1.
Jonathan: And the subsequent three quarters of 'twenty three Andrew.
Speaker Change: You know really came from a rebound with one specific program in our Fintech lending.
Speaker Change: Your line.
Jonathan: That was that rebound was sustained throughout the course of the year and that was you know.
Jonathan: So.
Jonathan: Certainly something that you know was good for us, but it wasn't something that we were expecting throughout the course of the year and I think right now you know while rate expectations have improved and some of the other like macro clouds have had been lifting we still don't see broad enough strength across all of our platforms and kind of the industry.
Jonathan: Free in general the change our outlook and so this is why we've continued continued to build our pipeline and launch new partners.
Speaker Change: I'd point you to Ernest.
Speaker Change: Navient this quarter in Q4 as really.
Speaker Change:
Speaker Change: One of the.
Speaker Change: Goals that we really were trying to hit before the end of the year. So again as.
Speaker Change: As far as origination levels over the course of the next couple of quarters.
Speaker Change: Pointing you to Q1 as a a good barometer is still something that we would do near term.
Speaker Change: And Andrew as far as.
Hum.
Speaker Change: The fee income goes you know I just point you to the high correlation between this strategic program fees and the line item.
Speaker Change: The original the originations.
Speaker Change: We're pretty close to last last year fourth quarter and you know those fees are pretty similar and the trend is there you know a little higher this quarter than last quarter and that trend exists as well on the this strategic program fees line item in other income.
Speaker Change: Got it alright, that's helpful and you've covered a bit the questions I had I'll step back here.
Speaker Change: Thanks, Andrew.
Thank you we have a.
Speaker Change: Follow up question from Andrew <unk> with Stephens. Please proceed with your question.
Yeah.
Andrew Liesch: Hey, Thanks for the the follow up I'm just had one around the.
Andrew Liesch: The capital position it looks like for the past past year or so I mean, you've obviously had really impressive balance sheet growth it looks like the the leverage ratios down about.
Andrew Liesch: 450 basis points or so just throughout the year.
Andrew Liesch: I think if I recall the around the high teens low twenty's levels, where do you like to operate from a leverage perspective.
Andrew Liesch: Can you just talk about one comfort the ability with the current capital position today, and then maybe tie it into the discussion of.
Andrew Liesch: What do you see your inorganic capital as a solution or is the slowdown in the cadence of near term near term balance sheet growth a more likely outcome.
Andrew Liesch: Yeah.
Speaker Change: So let me take a stab at that one.
Speaker Change: Andrew the capital as you know last year, we did some repurchases and we thought those were good for the values for the shareholders because we bought it less than tangible book value.
Speaker Change: But we were always trying to walk the balance between the amount of capital that we need to sustain our growth and keep regulators.
Speaker Change: Comfortable with with our growth and capital cushion.
Speaker Change: So we continually look at that right now we feel we've got the right level of capital to burn through this while still allowing regulators the comfort of our capital levels being sufficient so whether whether this is organic or inorganic for future capital needs.
Speaker Change: We're not to that point, yet that we feel comfortable with the capital position, we have right now and and we'll keep keep you posted as if our thinking changes.
Speaker Change: Great I appreciate it and you answered I think the second part of that question I was going to be on the buyback. So I appreciate it Ken.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Are there any further questions in the queue.
There are no further questions over the phone.
Operator: Operator, we actually received a few questions via email as we are now, allowing investors to ask questions that way as well.
Operator: So if there are no further questions on the call I'll just read out a couple of questions.
Operator: The first question reads regarding the agreement and you just announced with Ernest.
Operator: When do you think that will start to contribute and how big can that be.
Sure. Thanks Lauren.
Operator:
Speaker Change: I think.
Speaker Change: First with <unk>, we're really excited about the relationship we think it highlights the strength of our offering.
Speaker Change: And we're humbled that Ernest.
Speaker Change: <unk> us to spearhead. This road plans, we're not going to provide any contact details today and we generally don't disclose details of our program agreements for competitive purposes.
Long term, though we think earnings could be a meaningful contributor.
That relationship will take some time to ramp up but we think we continue to have a strong opportunity to take share, particularly given our compliance and regulatory regulatory strength right now.
Speaker Change: Okay, and then just one more.
Speaker Change: What's the opportunity in banking as a service, especially given their regulatory issues with some of your peers and across the industry.
Speaker Change: Yeah, that's a that's a very good question.
Speaker Change: We've been watching this and as the industry evolves. So do the regulations that go along with it and we see this evolution is a very positive outcome, that's going to better protect the industry and the customer.
Speaker Change: We've always focused heavily on it.
Speaker Change: Inappropriate compliance management system at the bank and we've tried to.
Speaker Change: Make certain that we're monitoring all of our relationships and their compliance with laws and regulations.
Of course, it's almost impossible to be 100% immune from compliance issue is there some bad actors in the industry, but I think having a very proactive oversight is something that shirt will further evolve the industry and specifically the space.
Speaker Change: Bank 'cause it banks it will come out on top will have strong due diligence processes when they bring the partners on board that is invested in building a strong compliance and regulatory processes and I think for us.
Speaker Change: We've worked on this for a lot of years and these actually create competitive opportunities for us.
Speaker Change: No more questions via email.
Speaker Change: Thank you.
With that this concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
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