Q4 2024 Pathward Financial Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the password Financial's fourth quarter and fiscal year 2024, Investor Conference call. During the presentation. All participants will be in a listen only mode. Following the prepared remarks, we will conduct a question.
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As a reminder.
Speaker Change: This conference call is being recorded I would now like to turn the conference call over to Darby Schoenfeld Senior Vice President Chief of staff and Investor Relations. Please go ahead Darby.
Darby Schoenfeld: Thank you operator, and welcome with me today are password financials, CEO, Brett par and CFO, Greg cigarettes, who will discuss our operating and financial results for the fourth quarter and full fiscal year of 2024, after which we will take your questions.
Darby Schoenfeld: Digital information, including the earnings release, the Investor presentation that accompanies our prepared remarks and supplemental slides may be found on our website at password financial Dot Com as a reminder, our comments may include forward looking statements, including with respect to anticipated results for future periods. Those statements are subject to risks and uncertainties that could.
Darby Schoenfeld: Cause actual and anticipated results to differ the company undertakes no obligation to update any forward looking statements.
Darby Schoenfeld: Please refer to the cautionary language in the earnings release investors presentation and in the company's filing with the Securities and Exchange Commission, including our most recent filings for additional information covering factors that could cause actual and anticipated results to differ materially from the forward looking statements.
Darby Schoenfeld: Today, we will be discussing certain non-GAAP financial measures on this conference call references to non-GAAP measures are only provided to assist you in understanding the company's results and performance trends, particularly in competitive analysis.
Darby Schoenfeld: Conciliations for such non-GAAP measures are included in the earnings release, and the appendix of the Investor presentation.
Darby Schoenfeld: Finally, all time periods referenced are fiscal quarters and fiscal years and all comparisons are to the prior year period, unless otherwise noted now let me turn the call over to Brett Farr our CEO.
Thanks, Darby and welcome everyone to our earnings conference call.
Brett Farr: 2024 was a great year for password.
Brett Farr: We welcome Greg to the company re certified as a great place to work and remain committed to our remote first approach announced new partnerships and extended others celebrated employees, who won multiple awards and most recently announced that our newly rebranded partner solutions team, while incentive base best banking as a service.
Brett Farr: Rider and.
Brett Farr: In addition, we continued to deliver on our purpose as we help consumers and small to medium sized businesses with access to the financial markets.
Brett Farr: The success has translated into solid financial results as well.
Brett Farr: We reported earnings per diluted share of $6 62 for the fiscal year, which was just above the high end of the guidance range, we provided last quarter and represents year over year growth of 11%.
Brett Farr: Net income for the year was $168 4 million.
Brett Farr: Our results were driven in part by an increase in net interest income of 17% when compared to last year.
Brett Farr: We also expanded our full year net interest margin and adjusted net interest margin, which includes contractual rate related processing expense to $6, 41% and 485% respectively.
Brett Farr: Performance metrics remained strong with return on average assets for the year of two 2% and return on average tangible equity of 41, 7%.
Brett Farr: We continue to focus on optimizing the asset mix of our balance sheet.
Brett Farr: With an asset limit of $10 billion in order to remain below the Durbin amendment exemption, we want to ensure that the assets, we were holding or giving us the opportunity to maximize our ROA.
Brett Farr: We've seen the results of these efforts is our loan and lease portfolio yield moved from 833% for the fourth quarter of 2023 to $8 six 7% for the fourth quarter of this year as part of the strategy during the fourth quarter, we announced the sale of our commercial insurance premium finance business and we now.
Brett Farr: Expect this transaction to close by October 31, allowing additional time for operational readiness.
Brett Farr: While we do expect this to be accretive to fiscal 2025, as we redeploy the release capital and deposits into other commercial finance loans and leases with higher risk adjusted returns, resulting in better ways. The guidance, we're giving today. He will not include the impact of the transaction.
Brett Farr: Greg will go into more detail shortly.
Brett Farr: We've also made significant inroads in the SBA market.
Brett Farr: Moving up almost 80 places to the 39th largest SBA 708 program lender in the country for the year ending September 32024.
Brett Farr: We continue to see strong pipelines, particularly in SBA USDA and working capital.
Brett Farr: Our consumer lending pipeline has also grown as we continue to focus on partners, who are aligned with our risk and compliance philosophy.
Brett Farr: Purpose of powering financial inclusion.
Brett Farr: In September we celebrated our 20th anniversary in the payments industry and announced the renaming of our banking as a service businesses to partner solutions.
Brett Farr: We think it's an important distinction to reflect our business model.
Brett Farr: Which is founded on our commitment to helping our partners grow their business innovate solutions and create new products and services.
Brett Farr: The new name includes a refreshed emphasis on our core value propositions defined by time tested industry experience operational excellence that streamlines, the making processes and a mature risk and compliance infrastructure that promotes program sustainability.
These elements are critical to enabling our partners success in today's rapidly evolving marketplace.
Brett Farr: Ultimately partnership is the heart of what we do we believe our two decades of experience in this space positions us as a forward thinking bank with the scale and capability to help our partners expand across multiple solutions, providing them with a one stop shop for their banking needs.
Brett Farr: We built strong relationships and are deeply invested in seeing our partners succeed.
Brett Farr: We also believe that we have the right people and the right tools to support our partners and their programs delivering financial solutions today to a wide range of tomorrow's customers.
Brett Farr: This success means that we are living up to our purpose of delivering financial inclusion for all.
Brett Farr: It is this commitment that helped us earn the 2024 innovate award for best banking as a service provider, which recognizes a financial institution that excels in making banking and financial services available to non financial institutions.
Brett Farr: As we mentioned before our position in the industry has created a strong pipeline for us and we are starting to see results during the fourth quarter, we extended our contract with one of our current partners and I am pleased to announce that after the quarter closed we extended our contract with H&R block to June of 2027 and <unk>.
We're proud to be the partner, enabling their efforts to provide their customers with banking products that take their financial experience beyond the annual tax return.
Brett Farr: We signed the DDA sponsorship agreement with rain the card will serve as a disbursement card option for earned wage access programs administered by rain.
Brett Farr: We signed an additional extension with an existing partner.
Brett Farr: And we launched a new secured credit product with our existing partner Oro by.
Brett Farr: By launching a new product that allows expanded utility password is demonstrating our commitment to financial inclusion and meeting additional needs for our partner and its customers.
Brett Farr: As you can see we are providing a series of embedded finance solutions to our partners, where we bundle together a number of products that help them meet their customers' needs. As I mentioned. This is an example of how we can be the one stop shop for our partners.
Brett Farr: Last quarter, we introduced our strategy to be the trusted platform that enables our partners to thrive.
And I want to take a moment to delve a little deeper into that.
Brett Farr: First we've talked a lot about the right sized balance sheet with an optimized asset mix.
Looking ahead, we intend to continue to favor asset rotation to areas, where we believe we have a competitive advantage to deliver a higher return on assets.
This includes not only higher risk adjusted return categories, but also assets that provide us with optionality.
Brett Farr: For example.
Brett Farr: And USDA loans have active secondary markets and we could benefit from underwriting and eventually selling the guaranteed portion of these.
Brett Farr: This allows us to recognize additional fee income, which can boost our ROA and gives us the ability to then reinvest those funds into additional loans without growing the balance sheet.
Brett Farr: Second we are constantly working to deliver scalable solutions for our partners faster. We continue to invest in technology that will allow us to quickly adapt to the needs of our partners ultimately, enabling their programs to thrive and we are always investing in our people and talent specifically aligned to that technology.
Brett Farr: For example, we continue investing in modern infrastructure with heavy emphasis on our data and other transactional platforms, helping support partner integration automation and scaling of our business and improving partner experiences.
Brett Farr: We also continued to invest in our data platforms to leverage our data assets and further bolster our risk and compliance posture.
Brett Farr: And we continue to evolve through adoption of technology operating models and norms that help us build operating discipline and a culture that ensures a successful return on our investments.
Brett Farr: Third we are incredibly proud of our people and culture here at password.
Brett Farr: In fiscal 2024, we had several employees who were recognized by external parties, including the coal price is one of the most influential women in payments by American banker Shannon Stetson named to SaaS net 40 under 40 list.
Brett Farr: And Brittany Kelley named to American Banker's list for most influential women in payments next.
Brett Farr: Finally, our experience in the industry has allowed us to build our risk and compliance framework. What we believe is a competitive advantage and.
Brett Farr: In fact, the recently announced extension of our partnership with Moneyline through 2029 was driven in part by their acknowledgment of our mature compliance culture and deep knowledge of the regulatory landscape.
Brett Farr: We've done a lot of work in fiscal 2024 to execute on our strategy and we believe this has laid the groundwork for a successful future as.
As a result, we are increasing our fiscal 2025 guidance for earnings per diluted share to $7 10 to $7 60.
Brett Farr: Which does not include the impact of the sale of our commercial insurance premium finance business.
Brett Farr: Now I'd like to turn it over to Greg who will take you through the financials and guidance in more detail.
Greg Cigarettes: Thank you Brad net income for the quarter ended September 30 was $33 $6 million or $1 35 per diluted share as has been the case all year net interest income in the quarter was the driver of our results growing 10% when compared to the prior year quarter.
Greg Cigarettes: For the full year net interest income grew 17%.
Greg Cigarettes: The fourth quarter net interest margin of 666% and adjusted net interest margin of five 5% both expanded sequentially from the third quarter of 2024.
Greg Cigarettes: This was largely due to an increase in our loan and lease yields combined with the continued rotation from the securities portfolio, which contributed to a mix shift into higher earning assets.
Greg Cigarettes: The new production yield on all commercial finance loans and leases in the quarter was $8 eight 2% compared to the quarter the yield on the same portfolio from last quarter at 839%.
Greg Cigarettes: This performance is a direct result of our focus on risk adjusted returns and ROE as we are very pleased with what the team has been able to accomplish and look forward to continuing to benefit from this focus moving into 2025 provision.
Greg Cigarettes: Provision for credit losses was approximately $800000 and compares to $9 million for the same quarter last year.
Greg Cigarettes: With the decrease primarily stemming from reductions in the commercial finance portfolio and the tax services portfolio.
A portion of the commercial finance reduction is related to the sale of our insurance premium finance business. During the quarter. We moved these loans into a held for sale status from an accounting perspective, which reverses the provision for credit losses and.
Greg Cigarettes: And tax services the provision benefited from work we did prior to last year's tax season to enhance data analytics underwriting and monitoring.
Greg Cigarettes: For the year provision for credit loss was $42 6, million% to 26% decrease from the prior year, demonstrating our ongoing discipline and strengthened our collateral managed credit process and enhancements made within our independent tax business.
Greg Cigarettes: Noninterest income declined when compared to the prior year's quarter, primarily due to a decrease in card and deposit fee income. This was largely driven by lower servicing fee income due to lower average levels of off balance sheet custodial deposits during the quarter as we said AIP funds back to the U S treasury throughout the year the.
Greg Cigarettes: The decline in noninterest income in the fourth quarter.
Was partially offset by an increase in gain on sale of other <unk>.
This was driven by our decision to sell some of our structured finance loans, reflecting our balance sheet velocity strategy.
Greg Cigarettes: For the full year noninterest income also declined primarily due to lower servicing fee income from off balance sheet custodial deposits.
Greg Cigarettes: Total noninterest expense increased versus the same quarter last year, primarily due to increases in compensation and benefits and higher rate related card processing expenses the.
Greg Cigarettes: The year over year increase in comp and benefits was partially driven by adding nearly 50 ftes.
Greg Cigarettes: The sequential increase in compensation and benefits was primarily due to net new ftes during the quarter and several onetime items, including true ups.
Greg Cigarettes: On a go forward basis after adding in the impact of annual compensation adjustments for 2025.
Greg Cigarettes: We expect the quarterly compensation of benefits expense run rate to settle in and roughly $1 million lower than the fourth quarter.
Greg Cigarettes: The second quarter will be elevated due to the seasonal impact of tax season.
Greg Cigarettes: The remaining noninterest expenses also include transaction costs associated with the sale of our commercial insurance premium finance business and some in period technology expenses that we would not expect to recur deposits on balance sheet at September 30 totaled $5 9 million a decrease of over $700 million from a year ago. However, if you.
Greg Cigarettes: Look at average deposit balances over the quarter. The change was nearly flat versus last year's quarter as ending spot balances were impacted by normal flows and some of our programs.
Greg Cigarettes: Our balance sheet custodial deposits, how the partner banks at September 30 totaled $202 million compared.
Compared to $268 million last year.
Greg Cigarettes: This declined approximately $150 million from the end of the June quarter, primarily due to the normal seasonal trend downward with the end of the September quarter, typically being the lowest point.
Greg Cigarettes: Total loans and leases at September 30 were $4 1 billion.
Greg Cigarettes: The decrease of $290 million from a year ago.
Greg Cigarettes: During the quarter, we moved approximately $600 million of loans associated with our insurance premium finance business to held for sale decreasing this balance.
Greg Cigarettes: If you exclude the commercial insurance premium finance business loan balances when comparing this quarter to the September quarter of fiscal 'twenty, three we grew loans and leases by over $500 million.
Greg Cigarettes: This was primarily due to growth in structured finance and working capital.
Greg Cigarettes: Compared to the end of last quarter total loans decreased approximately $500 million.
Greg Cigarettes: Again.
Greg Cigarettes: If you exclude the impact of the insurance premium finance sale total loans and leases increased approximately $80 million.
Greg Cigarettes: Our liquidity remains in a strong position with approximately $2 $1 billion in available liquidity.
Greg Cigarettes: And this is typically our seasonal low point from a deposit perspective, we feel very good about where we sit today.
Speaker Change: As Brent mentioned optimizing the balance sheet will continue as a result of our desire to stay below 10 billion in assets.
Finally during the quarter, we repurchased approximately 236000 shares.
Speaker Change: At an average share price of $63 44.
Speaker Change: Bringing us to just over one 5 million shares repurchased during the fiscal year.
Speaker Change: We are increasing our fiscal year 2025, GAAP earnings per diluted share guidance to a range of $7 10 to.
Speaker Change: To $7 60.
This includes a number of assumptions.
Speaker Change: We have built into 25 basis point rate cuts one in November and the second in December.
Speaker Change: In addition, we have incorporated the September 30th consensus rates for the middle part of the interest rate curve, which is roughly 50 basis points below where rates are today. As you know there has been much volatility along the curve. So our guidance anticipates a range of possible rate scenarios, we expect net interest margins to exceed those of fiscal 'twenty four as a <unk>.
Speaker Change: As all of our strategy to optimize the balance sheet.
Speaker Change: We expect an effective tax rate of 18% to 22% for the year based on lower expected investment tax credit volumes, we are seeing more volumes in this area due to an evolving market and increased competition.
Speaker Change: As Brett mentioned this guidance does not include the impact of the sale of our insurance premium finance business, we expect the transaction to be accretive to fiscal year 2025, and intend to update our guidance following the close of the transaction.
Speaker Change: In addition, it is still our intent to utilize the gains to optimize our securities portfolio.
Speaker Change: The combination of these two actions could be as much as 40 accretive to earnings per diluted shares in years. After fiscal 2025 as redeployment of the capital and liquidity should take between 12 months to 18 months the impact of fiscal 2025, we will obviously be less than the full year impact and depends on a number of factors, but again, we will update you on that.
After the close of the transaction.
Speaker Change: Guidance also includes expected share repurchases we.
Speaker Change: We have started to see the pull through of our partner solutions pipeline, but remember these contracts have an implementation timelines. So any deal signed now would likely impact the latter part of this fiscal year.
Speaker Change: And into 2026 and beyond.
Speaker Change: As a result, we expect our quarterly results to follow our typical seasonality, but growth in earnings will be more weighted towards the back half of the year.
Speaker Change: This concludes our prepared remarks, operator, please open the line for questions.
Speaker Change: Of course, we will.
Speaker Change: We now begin the question and answer session.
Speaker Change: I would like to ask a question. Please press star followed by one on your telephone keypad.
Speaker Change: Any reason you would like to remove that question. Please press star two.
Speaker Change: Hi, Dan asked a question Thats Star one.
Speaker Change: As a reminder, if you are using a speaker phone. Please remember the paperboard answered before asking a question.
Speaker Change: Can you briefly ask questions all right.
Speaker Change: Our first question comes from the line of David Feaster with Raymond James.
David Feaster: Hey, good afternoon everybody.
David Feaster: Good afternoon everybody.
Speaker Change: Doing great.
David Feaster: Let's start on kind of your last commentary on the updated guidance I'm curious maybe.
Speaker Change: What are some of the key factors from your standpoint to get you to the top or the bottom and then assuming additional cuts how do you think that would impact guidance.
Speaker Change: And does the guidance include that securities restructuring like you were talking about or is that part of the.
Speaker Change: The premium finance salvage that's excluded.
Speaker Change: Well I'll try to take all 14 of those questions all right. It's a lot in there I think the rate.
Speaker Change: Let me, let's start with let's start with the rates right I mean, as I said, we had two <unk>.
Speaker Change: Front end curve rate cuts.
Speaker Change: This fiscal year's calendar year, still and we pulled into consensus curve from.
Speaker Change: I think it was effectively October one and that as you know most of our loans are going to reprice in a lot of the work we're doing on balance sheet strategy is going to reprice, along the middle part of the curve that three to five year, which frankly.
Speaker Change: Pretty substantially higher today than we were when we versus occur we used and you've heard me say many times the bond market has been wrong pretty consistently for the last couple of years.
Speaker Change: So which is why we run a number of scenarios here now the way I think about the short end of the curve as we are still pretty close to neutral but.
Speaker Change: Each 25 basis point rate cut does have a modest negative impact to us and it's not completely linear we do have some consumer finance.
Speaker Change: Programs that actually hit breakpoints after each like for example, 100 basis points down, but the point, though is.
Speaker Change: The pace of cuts will matter. If there are more cuts later in the year is obviously muted impact on this year, but typically though the overnight cuts we can mitigate that just through ongoing balance sheet management, including some of the balance sheet velocity work, we're doing which includes gain on sales of the structured finance book.
Speaker Change: The middle part of the curve again as long as we stay above where the rates were a lot of those loans are put on the remaining loans in 2021 and 2022, we've got a pretty long runway there from a from a rate perspective so.
Speaker Change: Part of this is going to depend upon the rate curve for the things, we can control, which in part includes.
Speaker Change: The pipelines pipelines are strong commercial.
Speaker Change: Pipeline, we're very pleased with it.
Speaker Change: Really across all the verticals, we talk about and I think <unk> touched on the successes we've had so far this quarter.
Speaker Change: Even once just in the last couple of days last week or so around pulling through on the partner solutions pipeline. David. So again I think it's just part of it is the timing on when the pipeline set particularly on the partner solution side and then.
Speaker Change: Where the rate environment goes, but again, we have we feel like we have all the tools, we need from a balance sheet strategy perspective to keep pushing it up.
Speaker Change: And David I think you had a question about securities portfolio as well so key to understand this guidance does not include.
Speaker Change: The IPO of sale, nor the impact from the securities portfolio associated with that.
Speaker Change: That being said.
Speaker Change: Listen carefully to Greg's comments.
While we know there's going to be an EPS benefit over time does not immediate because you are taking the assets off the balance sheet, and then you will appropriately and with great stewardship add them back.
Speaker Change: Think we're talking about a 12 months to 18 months cycle before we get the full benefit of that but none of that is in our guidance.
Speaker Change: Our slight guidance increase is related to the pipeline and interest rates and just the general momentum that generally are starting to see the higher all businesses, which is great.
Speaker Change: Okay.
Speaker Change: That is terrific color.
Speaker Change: And then I guess to that.
Speaker Change: That point I mean.
Speaker Change: Let's touch on the pipeline of partners and is the strength that youre seeing is that from the existing partners that you have and then just kind of what does the pipeline of new partners with pace of inquiries.
Speaker Change: It's also great to see the extension of some of these you talked about.
Speaker Change: The tax business and we saw multiline.
Kind of curious just how some of those negotiations are going.
Speaker Change: Yeah.
Speaker Change: Upon renewal and just kind of a pipeline for for partners.
Speaker Change: Yes, so I mean.
Speaker Change: This is coming both from existing partners wanting to do more programs.
Speaker Change: New products with their same customers, which has been a migration that's been going on the last several years and is really really important but it's also come from new people coming to us who already have a book of business.
Speaker Change: And we've talked for a while about the dislocation that's occurring in the third party delivery banking services.
Speaker Change: And that impact.
Speaker Change: We've been saying for several quarters, our pipeline is stronger than it's ever been and we're adding to that not only is the pipeline is stronger than it's ever been but we've closed some transactions and thats. The difference this quarter you should recognize.
Speaker Change: Okay.
Speaker Change: Okay, that's great.
Speaker Change: And then.
Speaker Change: I just wanted to touch on the plans.
Speaker Change: Post the.
Speaker Change: The loan sale.
Speaker Change: Move moves the timeline back a little bit.
Speaker Change: But has there been any change to talk to the 12 to 18 months.
Speaker Change: What are some of the I mean.
Speaker Change: Where do you see the most opportunity.
Speaker Change: To deploy that liquidity.
And.
Speaker Change: Kind of the pace to do it and then.
Speaker Change: How does how does the change in rates impact that.
Speaker Change: If we start seeing gain on sale margins starting to improve like an SBA. It does look like your SBA held for sales started to increase a little bit.
Speaker Change: I didn't know if your thoughts on selling production versus retaining it had shifted at all just kind of given some of that so just kind of another big question sorry.
Speaker Change: Yes, I mean, I think there's a lot of a lot of a variety there.
Speaker Change: Perfect World, our commercial finance pipeline delivery and other asset deliveries will give us higher yielding assets that we can put on the balance sheet over time with appropriate credit structures et cetera, and we will do that well.
Speaker Change: We will look at the securities portfolio will do things there.
Speaker Change: We need to where appropriate.
But I'm most excited about the opportunity to put on some of our higher yielding assets with all the appropriate capabilities and controls that we have.
Speaker Change: During this timeframe. So that's what I'm talking about but as you know it takes time to build that and go through it and that's why we're not going to go run out and immediately try to put a bunch of assets on the balance sheet.
Speaker Change: We're doing this as part of an active asset rotation. The other thing I would say about SBA, USDA, where increasingly wanting to create a flow business.
Speaker Change: I know, sometimes it depends on rates and markets and all those things that will make those appropriate decisions by being able to have a balance sheet that you can expand or contract based on opportunities.
Speaker Change: To take things in the flow market, that's a key part of our future.
Speaker Change: The only other thing I would add is the outcome around what Brent had mentioned on terms of the opportunities.
Speaker Change: We'd be swapping out what is effectively a short duration asset the loan book for IPF those loans reprice inside of 12 months and over time.
Speaker Change: To a large degree protecting duration in the loan book So from an IRR perspective, David I think there is part of how we intend to manage rates on a longer term basis here, which gives us a bit more comfort that particularly if the short end of the curve is going to come down in the middle part of the curve stays within a relative range, it's going to give us a bit more tailwind in terms of managing.
Speaker Change: NIM.
Speaker Change: Then otherwise we otherwise would have.
Okay.
Speaker Change: That's helpful. Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Ken.
Speaker Change: Our next question comes from global warming.
Speaker Change: French <unk> with Piper Sandler.
Speaker Change: Your line is now.
Speaker Change: Hi, good afternoon, just one.
Speaker Change: Wanted to follow up on a couple of those.
Speaker Change: In terms of the.
Speaker Change: I'll make sure I understood in terms of the partner solutions growth.
Speaker Change: So the pipeline is really strong but.
Speaker Change: You've added.
Some new business and so I guess the idea would be that the bottomline impact or bottom line growth in this business should accelerate a bit in the back half of 2025 of those.
Partnerships start driving revenue.
Yes, that's right and as we said it takes a little time for it to come on in.
Speaker Change: Our guidance assumes.
Speaker Change: A good chunk of that comes into the back half of the year as these revenue producing programs come online.
Speaker Change: Okay.
Speaker Change: And then just in terms of obviously, you've got the the premium finance sale and.
Looking to grow.
Speaker Change: The book.
Speaker Change: And around that over 12 to 18 month period.
Speaker Change: And I guess I'm, just trying to want to make sure I understand that the pipeline in the commercial finance book.
Speaker Change: Would you say that is that still sort of high single digits low double digits is that sort of.
Speaker Change: The range of growth you anticipate in that.
Speaker Change: Initial book.
Yes, I mean, where we are today I think we're low single digits and I think we're probably at least 10, but potentially 10 to 15 is the range I'm looking at right now I think we have a lot of opportunities there but.
Speaker Change: Even if we don't close or if a transaction wasn't on the table I think that the pipelines are pretty full so as part of the reason why the transaction itself is going to take 12 to 18 months and it goes back to Bretts point, you can't you can't push the pipelines, particularly over the next couple of months to be any bigger than they already are you need to be prudent with it but just to tie the two concepts together, it's going to be I think low double digits, but it's good.
Speaker Change: To take some time just to have that consistent trajectory of building a pipeline out later into the year after the ICF transaction closes.
Speaker Change: Okay, and I guess.
Speaker Change: It looked like structured finance was a big driver this quarter.
Speaker Change: I guess that should be a blend going forward of working capital and structured finance is those are the two biggest drivers.
Speaker Change: Yes that and the SBA is in there too.
Speaker Change: Okay and then just.
Speaker Change: And I think you mentioned.
Speaker Change: Secured credit products so.
Speaker Change: I know the consumer side of things.
Speaker Change: There's a lot smaller piece of the pie.
Speaker Change: What do you think what do you think that looks like in a year's time in terms of sort of similar piece of the pie and.
Speaker Change: That secured credit product and maybe some other growth kind of helps that keep pace.
That sub 10% of the total book I think it is.
Where should we expect to see maybe a consumer finance footings in a year or two.
Speaker Change: Yes.
Speaker Change: Consumer loan marketplace lending kinds of products.
We've had some pretty good growth in that arena now again, reminding you about all the waterfall creditor protections and all those elements that are in there.
Speaker Change: And our third party delivery there is very careful compliance kinds of controls in that space that are important.
But yes.
Speaker Change: I could see it going up some from where it is but not becoming a materially larger part of our total balance sheet.
Okay, Great and then if I could just sneak in one last one just on the updated guide seven 7% to 760.
Speaker Change: In terms of thinking about levers to get you to the bottom or the top end of that is the.
Speaker Change: The biggest lever the just that middle part of the curve and and.
Greg Cigarettes: And Greg It sounds like you have baked in essentially 50 basis points of reduction in the middle part of that curve I guess that sort of mid year.
Speaker Change: So with it's less you kind of get.
Speaker Change: All else equal towards the higher end, if it's more contraction towards the lower end is that the best way to think about.
Speaker Change: Drivers in terms of drivers of that range, yes.
Speaker Change: Yes, particularly the drivers we can't control I think we are kind of your take on that one but.
Speaker Change: The slopes our friend right to the extent, we have there is an increasing slope in the curve and that sustained in the short end comes down that's really the key here and if that trend continues you look at the right rates today versus a month ago or four months ago that continued trend towards slope is what's going to drive us higher in the range versus lower relative to.
Speaker Change: The rate environment, then I think the pace of pulling through the pipelines.
Speaker Change: Frankly, both commercial finance as well as in partner solutions is the other lever that we again to a large degree have some control over but those are the ones that come to my mind.
Okay, Alright, great. Thank you.
Speaker Change: Thank you thanks Ryan.
Speaker Change: Sure.
Speaker Change: Thank you for your question.
Speaker Change: That concludes the financial fourth quarter and full fiscal year 2020 Investor Conference call.
Speaker Change: Thank you you may now disconnect your lines.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yes.