Q4 2024 FinWise Bancorp Earnings Call
The End
Greetings and welcome to the FinRise Bank Corp. Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance, please press star zero on your telephone keypad.
As a reminder, this conference is being recorded. I will now hand the conference over to management to begin the prepared remarks. Please go ahead.
Speaker Change: Today's conference call is being recorded and webcast on the company's website investors.sinwisebankcorp.com
Speaker Change: On today's call, management's prepared remarks and answers to your questions may contain 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 management's current estimates, expectations, and beliefs, and FinWise 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.
Kent: Hosting the call today are Kent Landvatter, CEO, Jim Noone, President and Bob Wahlman, CFO. Kent, please go ahead.
Kent: Good afternoon everyone. Our solid results for the fourth quarter capped off another successful year for FinWise, highlighted by significant progress in our goal to expand and diversify our sources of revenue to enhance the company's long-term growth.
Kent: We leveraged the strength of our legacy business with our strategic initiatives and delivered solid financial performance, including a rebound in originations from existing programs.
Kent: stable revenue and continued growth of our tangible book value per share. Additionally, at the bank level, we remain well capitalized, significantly above federal regulatory standards.
Kent: We are also pleased with the number of new strategic programs we announced in 2024. Specifically, we added four new lending programs, two of which include our credit enhancement product, one payments program, and one credit card program.
Kent: We continue to see momentum in the pipeline of new programs, particularly as strategic partners are enthusiastic about the benefits that our broader banking and payments platform provides.
Kent: On the regulatory front, we remain well positioned to guide fintechs through a rigorous process to facilitate regulatory compliance, which continues to provide us with a strong opportunity to gain market share.
Kent: As part of our company culture, we have proactively invested in our compliance and risk management infrastructure for years, and have successfully managed many regulatory exam cycles.
Kent: As of the end of 2024, approximately 38% of our total staff is employed within compliance, risk management, BSE, and IT functions.
Kent: Looking ahead, we are very excited about the outlook for our business, and as of now, we expect a gradual progression in growth as we move through 2025.
Kent: Specifically, we look for our credit enhancement solution to be a meaningful incremental contributor in 2025 and also expect gradual traction in our BIN sponsorship and payments initiatives, both of which are now live.
Kent: We also look for continued stability in originations from existing programs coupled with incremental growth from programs we signed late last year that are expected to scale through the next few quarters.
Kent: Importantly, BIN sponsorship and payments provide a mid to longer term opportunity for growth, while our credit enhancement product offering represents a more immediate growth opportunity.
Kent: By having these offerings under one roof, we now have the capability to enable the majority of use cases. It also provides us with a more sticky and recurring revenue stream, which would initially start slowly, but then accelerates as our programs start to scale.
Speaker Change: Lastly, we remain laser-focused on generating positive operating leverage. We have completed most of the incremental investments in our new initiatives and expense growth going forward will be mostly production-driven. With that, let me turn the time over to Jim Noone, our president.
Thank you, Kent.
Speaker Change: We are pleased to have originated 1.3 billion dollars in loans during the fourth quarter, which brings our total originations for fiscal year 2024 to five billion dollars.
Speaker Change: This is a 16% increase compared to $4.3 billion in the prior year.
Speaker Change: The fourth quarter of 24 included a seasonal deceleration in originations from our private student lending programs and did not include any material production from the new loan programs we announced late in 24.
Speaker Change: As we have mentioned previously, this is because there is generally a lag of a few quarters from when we announce until when we start to see meaningful origination levels from new partners.
Speaker Change: Although it's early in the first quarter, through the first three weeks of January 2025, loan originations are tracking at a quarterly rate of $1.3 billion.
Speaker Change: As Kent mentioned earlier, we anticipate continued stability and originations from our existing programs and that our new programs will begin scaling up in the next couple quarters.
Speaker Change: Our SBA 7A loan originations increased again in Q4 versus Q3 as we continued to see a gradual pickup in qualified applicants driven by slightly lower rates.
Speaker Change: We remain cautiously optimistic that SBA volumes can continue to rebound modestly.
Speaker Change: We also remain very pleased with the solid growth in our equipment leasing and owner-occupied commercial real estate loans, as these portfolios continue to deliver stable interest income and solid credit quality to the bank.
Speaker Change: On a sequential quarter basis, SBA guaranteed balances increased 1.5 percent.
Speaker Change: During the quarter, we began selling some of the guaranteed portions of our SBA loans, which led to the pickup and gain-on-sale income during the quarter.
Speaker Change: We've communicated in the past that SBA loan sales are a core activity for us as long as market conditions are favorable, which was the case in Q4, and we expect those conditions to continue at least in the near term.
Speaker Change: Our overall balance sheet strategy has remained consistent with both strategic lending and SBA lending during the quarter.
Speaker Change: In strategic program lending, we mostly originate to sell within a few days, and the held-for-sale balances are primarily cash collateralized.
Speaker Change: In SBA lending, we originate loans, which includes a government-guaranteed portion, and we may retain this or sell this in the secondary market.
Speaker Change: The retention of the guaranteed portion generates interest income without credit risk.
Speaker Change: At the end of Q4, our SBA guaranteed balances and our strategic program loans held for sale, both of which carry lower credit risk, made up 45% of our total portfolio.
Speaker Change: Moving to credit quality, the provision for credit losses was $3.9 million in Q4, compared to $2.2 million in the third quarter.
Speaker Change: The increase was due primarily to $1 million in net charge-offs on the non-guaranteed portion of SBA loans, which brings total net charge-offs to $3.2 million for Q4, compared to $2.4 million in the prior quarter.
Speaker Change: As we've mentioned in the past, our strict collateral policy generally helps mitigate net charge-offs.
Speaker Change: Non-performing loan balances totaled $36.4 million this quarter versus $30.6 million in the prior quarter.
Speaker Change: The $5.8 million increase from last quarter was lower than the expected $10 million increase we communicated during last quarter's conference call.
Speaker Change: mostly due to the continued efforts of our portfolio management team in collecting payments on a handful of delinquent accounts. Importantly, of the 36.4 million in total NPL balance, 19.2 million is guaranteed by the federal government.
and $17.2 million is unguaranteed.
Speaker Change: As discussed on prior calls, a higher rate environment can lead to sporadic increases in MPLs.
Speaker Change: While some accounts are still being impacted by these higher rates, our call report delinquency table for Q4 will show a fairly material decrease in 30-plus day past-due balances.
Speaker Change: This is again due to the efforts of our portfolio management team in collecting payments and working with our customers.
Speaker Change: However, we continue to point to the higher rate environment impacting NPLs and currently expect roughly $12 million in potential NPA migration during Q1.
Speaker Change: Overall, we remain very confident in our portfolio, our underwriting process, and our portfolio management practices.
Speaker Change: And if interest rates decline further, it could have a gradual positive impact on our NPL metrics. Turning to strategic partner updates, we are very pleased with the strong year we had on new strategic partner announcements in 2024.
Speaker Change: We expect to build on that success in 2025, and we're very optimistic about our pipeline.
Speaker Change: Our expectations for two to three new lending program announcements this year remain intact and we will continue to utilize a thorough due diligence process in launching these programs.
Speaker Change: Lastly, we mentioned on previous calls that this quarter we would start to providing you with some insight into how we generate revenue in our credit enhancement product along with our cards and payments business lines.
Speaker Change: Page 5 of our updated investor deck, published today, provides a breakdown of our revenue model by product.
Speaker Change: As our new products ramp through 2025, we will be able to start providing more details on the progress and traction.
Speaker Change: To summarize, we are proud of the significant progress we made in 2024 to expand and diversify our sources of revenue through our initiatives, and we're very excited about the outlook for 2025 and beyond.
Speaker Change: I will now turn the call over to our CFO, Bob Wahlman, to provide more detail on our financial results. Thank you, Jim. Good afternoon. I will briefly review our fourth quarter performance and several key financial metrics with discussions where appropriate.
Bob Wahlman: In the fourth quarter, we generated net income of $2.8 million, or $0.20 per diluted common share, which brings our full year 2024 earnings per diluted common share to $0.93.
Bob Wahlman: One item I would like to call out for the fourth quarter.
Bob Wahlman: The fourth quarter results included an $895,000 loss resulting from calling roughly $160 million of higher yielding brokered callable CDs and replacing them with other wholesale funding at a lower rate.
Bob Wahlman: This charge for the unamortized premium on the callable CDs reduced our other miscellaneous income by $895,000. We consider this item to be a non-core reduction of income.
Bob Wahlman: Average loan balances, including both held-for-sale and held-for-investment loans, totaled $522.2 million for the quarter, compared to $492.9 million in the prior quarter. This increase included growth from our SBA 7A commercial leases and consumer programs.
Bob Wahlman: Average interest-bearing deposits were $355 million compared to $341.2 million in the prior quarter. The sequential quarter increase was driven primarily by an increase in interest-bearing demand deposits, money market accounts, and broker time certificates of deposits.
Bob Wahlman: Moving to the income statement, net interest income for the quarter was $15.5 million compared to $14.8 million in the prior quarter, driven by increased volumes in loans held for sale and lower cost of funds, resulting from replacing over $160 million of callable CDs with lower cost CDs as interest rates declined.
Bob Wahlman: partly offset by increased interest-bearing deposits generated to support the asset growth.
Bob Wahlman: Net interest margin was 10.0% this quarter compared to the reported 9.70% in Q3-24.
Bob Wahlman: We expect the net interest margin to gradually compress over time, driven by our proactive strategy to reduce credit risk in the portfolio.
Bob Wahlman: It is worth noting that our SBA portfolio generally floats with prime and resets at the beginning of each quarter, so changes in prime can also affect our net interest margins.
Bob Wahlman: Non-interest income was $5.6 million in the quarter compared to $6.1 million in the prior quarter.
Bob Wahlman: The sequential quarter change was driven primarily by decline in other miscellaneous income associated with the previously mentioned $895,000 loss from calling our callable brokered
Bob Wahlman: and again on the sale of the guaranteed portion of SBA loans as we reinitiated selling limited amounts of the guaranteed portion of SBA loans.
Bob Wahlman: Positively, strategic program fees were relatively flat quarter over quarter, even as we experienced a seasonal deceleration in originations in our student lending programs, which highlights the benefits of our efforts to improve diversification among our strategic programs.
Turning to operating expenses.
Bob Wahlman: We are pleased with the continued deceleration in the pace of growth and expenses as we had called out in our prior calls.
Bob Wahlman: Non-interest income expense in the fourth quarter declined to $13.6 million compared to $14 million in the prior quarter. The sequential quarter decline was primarily due to the bonus accrual reversal as performance rewards were determined to be less than previously estimated.
Bob Wahlman: Our efficiency ratio improved to 64.2% from 67.5% in the prior quarter.
Bob Wahlman: We remain committed to generating positive operating leverage as we move through 2025 and continue to expect incremental headcount related expenses to be more aligned with increases in production.
Bob Wahlman: That said, due to the substantial infrastructure build of the past 18 months, we anticipate the efficiency ratio will remain somewhat elevated until we begin to realize revenue associated from the new programs being developed.
Bob Wahlman: Regarding taxes, our effective tax rate was 24.3% for the fourth quarter compared to 25.1% in the prior quarter. We expect the effective tax rate for 2025 to run around 25.0% to 25.5%.
Bob Wahlman: One final item I'd like to call out. This quarter we began including balance sheet and income statement accounts related to loans with credit enhancement as well as non-GAAP disclosures at the end of our earnings release and our investor deck.
Bob Wahlman: The additional accounts and disclosures are included to show the impact of our credit enhancement products on the financial statements and various financial metrics.
Bob Wahlman: While the amounts are currently immaterial, these disclosures will be helpful in understanding FinWise's financial performance as the product likely becomes more material as we move through the year. With that, we would like to open up the call for questions and answers. Operator?
Thank you.
Speaker Change: Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad and the confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your headset before pressing the start button.
Speaker Change: And our first question comes from the line of Andrew Leash with Fiber Sandler. Please proceed.
Hey guys, good afternoon.
Speaker Change: I wanted to ask about the end-of-period loan growth in the quarter. It looked like several different portfolio types increased. Was there anything specific driving that on what you decided to retain or client growth?
the driver between, but for the 7% growth.
Speaker Change: Yeah, I would say, Andrew, hey, this is Jim, I would say you got, you know, a minimal increase quarter over quarter in SBA
Speaker Change: In the SPHFI, you got a little bit of the same trend that you saw the last quarter over quarter, which is, you know, it ticked up a little bit. But you do see, you know, some growth in our leasing portfolio. You also see some growth in the owner-occupied commercial real estate portfolio. And we feel really good about the credit quality there.
and the overall types of assets that we're generating there.
Speaker Change: Got it. So for the full year, the held for investment portfolio was up about 24%. Is that a repeatable number? It sounds like you're getting good traction with originations overall. Just kind of curious how we should be looking at the growth of the unbalanced sheet loan portfolio.
Speaker Change: kind of stepped up and stabilized now for a few quarters. But some of that HFS balance increase that came through last quarter, you know, we said, you know, we do expect this again next quarter, and that in fact happened here in Q4.
Speaker Change: As far as growth rates going forward, a lot of the growth in the portfolio over the last 18 months, Andrew, has come from the
Speaker Change: You also, you know, are aware from previous calls and now kind of our plans with the Credit Enhanced Balance Sheet.
Speaker Change: So, I think that overall we do feel really good about, you know, the continued growth rate of the portfolio. The mix may shift a little bit as that credit enhanced balance sheet product, you know, continues to gain traction here in 25.
Speaker Change: Got it. That's really helpful. Thanks. And then on the strategic program fees, holding flat quarter to quarter, even though originations were down, is there anything unique there that kept it up or was it really just the strong business development effort that you guys have taken on?
Thank you.
Speaker Change: Yeah, the strategic program fees were flat, quarter over quarter, up slightly. There was nothing particularly to note in regards to the behavior. You saw that originations were down a little bit, but yet the strategic program fees were increased. So, you know, nothing really specific to note in there. It's the behavior we continue to expect in the future.
and just the
Speaker Change: Add on to that, you know, all strategic partners, or not all strategic partners, have the exact type of pricing metrics and the pricing structures. And so, as Bob said, you know, in his comments, the diversification of partners helped actually shore that up.
Speaker Change: Got it. Yep, that was my follow-up question to that. I will step back. Thanks for covering all that.
Speaker Change: The next question comes from the line of Joe Yanchunas with Raymond James. Please proceed.
Good afternoon.
Good afternoon.
Speaker Change: I'm going to start at a high level here. So what would you say the company is going to look like in say three to four years? I'm trying to understand the potential revenue ramp from your new card and payments initiatives.
Speaker Change: as well as get a better understanding on how the risk profile of the company will evolve from your credit enhancement program.
There's going to be...
Speaker Change: The next three or four years, we're thinking, are going to be very exciting times. We've really built what we think is a strong franchise.
to start with.
Speaker Change: And there are certain elements that we're particularly excited about, of course, the new products that we've been building for the last couple of years with the bin and the payments.
Speaker Change: But also I think that when we're looking at the balance sheet, we do expect the Credit Enhanced Balance Sheet to grow substantially as we move forward. And particularly in 2025, there's great interest in this product by our current and prospective partners.
Speaker Change: We piloted that product and tested it, and now the program is fully launched.
We anticipate substantial growth in the product in 2025.
Speaker Change: While we do not normally provide guidance on individual financial statement line items, for this credit enhanced product for 2025, we're going to make an exception.
Speaker Change: We're thinking that just for 2025, and that's not talking about how we think it will behave in 2026 and forward. But for 2025, we think the credit and health balances by year-end, 2025, will increase by $50 to $100 million.
I appreciate that. That was very helpful.
and, you know, incredibly good strategic partners.
Speaker Change: How do you pick between partners today? What's your criteria for partner selection? Should we expect future partners to be involved in the card or payment program?
I can take that one, Joe. This is Kent.
Speaker Change: The position we're finding ourselves in is we have a very strong pipeline, and the programs that we're currently looking at now are very much more in the mature, stronger, established fintechs.
Speaker Change: The pipeline and I think it's bodes well for the program
Got it. And then just one more pivot here.
Speaker Change: So the chassis seems to be built, the business model seems to be progressing, you're very excited about what's on the come. So my question is, what kind of keeps you up at night right now?
What's kind of the cheek, you know, concern?
You know, there's...
Speaker Change: There are a lot of things that keep us up, but I think, you know, that...
Most...
All of them are addressed by just vigilance, right?
Speaker Change: You're always concerned about proper oversight of the FinTechs. You're always concerned about regulatory issues and making certain that our product aligns with FinTechs needs.
Speaker Change: The way we've handled that in the past, there are certain things, of course, that we can't...
Speaker Change: most of the risks, and so I hope that answers your question.
No, that was great. I appreciate you taking my questions.
Speaker Change: And the next question comes from the line of Andrew Terrell with Stevens. Please proceed.
Thank you. Thank you. Thank you.
Have a good afternoon.
And you're up.
Hey, um...
Speaker Change: You know, as I think about, I appreciate the color around, you know, the mix of incremental growth in a loan portfolio.
Speaker Change: For instance, SBA loans that most recently were the biggest contributor to growth. Is there much net economic difference in those portfolios, or are they relatively similar?
Speaker Change: My short answer to that is they are relatively similar. As you can imagine, the SBA portfolio has a very low credit risk attached to it, as does the Credit Enhanced Loan portfolio.
Speaker Change: very low credit risk that is attached to it and so I think that it's similar.
Speaker Change: Yeah, low credit risk, but just from like an income yield perspective, it's also similar.
Thank you.
Speaker Change: That's correct. I think that our pricing is based upon risk and we view that risk as being similar.
Understood. Okay.
Speaker Change: Can you help me out with when the brokered change happened this quarter? I'm just trying to get a better sense of, you know...
Speaker Change: whether there's much more relief from that deposit cost. You reported this quarter, I think it was 321, 3.21% total deposit costs. I'm just trying to get a sense maybe of where that kind of exited the quarter or how we should think about the progression of that in the 1Q.
Speaker Change: Roughly $80 million during the month of October where we received the biggest bump down.
Speaker Change: It was about the middle of the month. In October, we did approximately another $80 million. The bump down was not as much, but again, it happened in the middle of the month. So the benefit from those callable CD programs, you should still see continue somewhat into the...
Speaker Change: into the first quarter, the benefit will not be as great as what we saw in the first quarter, but we will receive the full benefit in the, I mean what we received in in the fourth quarter, but we'll receive that and see that full benefit coming through in the first quarter. So we'll see some continuing decrease, I believe.
Speaker Change: Okay, got it. And then I think in the prepared remarks you mentioned, you know, the expectation still kind of remains the same around adding two to three new lending partners.
Speaker Change: in 2025, I guess is, when you say lending partners, do you mean, um...
Speaker Change: FinTech partners also focused on, you know, been sponsorship payments, credit enhanced lending, or is that, or do you view that kind of pipeline separately? And can we actually see more than kind of two to three incremental new programs added during the year?
Speaker Change: So the two to three target is consistent, Andrew, and that's on lending programs. It may be a mix of credit-enhanced and
Speaker Change: kind of like the historical held for sale model, but two to three lending programs is the target. The card and or payment programs would be additive to that two to three.
Got it. Okay, understood. And just out of curiosity,
Speaker Change: You know, as you talk about, it's really exciting news to hear that, you know, when you when you look across your pipeline now, you're seeing
Speaker Change: more maturity, you know, stronger, more established kind of FinTechs coming into the into the funnel, if you will.
Speaker Change: As you guys look to onboard these maybe more established fintech partners, what's the difference in time versus maybe a smaller partner in terms of complexity and kind of time to onboard? Is there much difference?
Speaker Change: and if you could maybe help quantify just like how much longer does it take to add a more mature partner versus a less mature?
Speaker Change: Sure. I can give you some examples, right? I would say that the worst case scenario of taking a partner through, you know, full launch process and getting them live was 12 months.
Speaker Change: And I would say, you know, best case scenario was probably two and a half months, something like that. More mature partners do tend to, you know,
Speaker Change: towards the lower end of that range, Andrew. 12 months was by far the longest. I would say on average they kind of run six months-ish, seven months-ish. And it does.
really depend
Speaker Change: on two things. First, the maturity of the partner as far as a bank product and the staffing levels that that partner has.
Speaker Change: And second, the complexity of the product, you know, regulatory disclosures around the product and how unique it might be versus kind of a more standard or vanilla product, those matter too.
Speaker Change: So, I would say the maturity of the partner, but also kind of the...
Speaker Change: The standardization or uniqueness of the product, both of those are contributing factors.
Got it. Okay.
Speaker Change: And then, Jim, really quick on your comment around the potential for NPL lift. I think you said it was $12 million potentially in the first quarter.
Speaker Change: And I just want to make sure I heard that correctly, and could you quantify how much is guaranteed SBA and what kind of the driving factor is behind that number?
Speaker Change: Yeah, sure. So, you know, we had $5.8 million in quarter-over-quarter increase in the NPL balances during Q4, Andrew. That was lower than the expectations that we had set for $10 million, you know, on the last call.
Speaker Change: This is mostly from the lingering stress with the higher rate environment. There's no broad-based, you know, water issue in the portfolio.
was fully guaranteed by SBA.
Speaker Change: And I think what we were trying to call out there and to help you model, you know, you will see a meaningful drop.
Speaker Change: in 30-plus day past-due balances come through when the call report comes out.
Speaker Change: in a couple days, and what you'll see there is, you know, you saw about 9 million there last quarter, and we had talked, you know, on our call to expect about 10 million of migration, and then 5.8 came through.
Speaker Change: What you'll see this quarter is about 4 million. And so there is a meaningful drop there, which is certainly very positive and speaks to our portfolio management teams kind of actively working with customers.
Speaker Change: but you know we still have lingering you know stress from the higher rate environment and what we felt comfortable with with giving you guys was kind of a 12 million dollar potential migration in Q1.
Speaker Change: Thank you. Thank you. Have a good night. Good night. Good night.
Speaker Change: Got it. Okay. And then, actually if I could just, I'm sorry for the continued questions, but one more just around capital.
Speaker Change: You know with with the the growth of the balance sheet incrementally from here coming from sources that you you carry very low credit risk on either SBA or credit enhanced lending
Speaker Change: Do you have, you know, more comfortability now in managing either the TC or the leverage ratio at below kind of this 20% level you've historically run at?
Speaker Change: Well, I'll take that question. So yeah, we've been running at, at the bank it's been 20% and running about there for the last...
Speaker Change: you know, for the past year at the holding company, it's been 25 or 26%.
Speaker Change: And we do feel comfortable with growth coming onto the balance sheet and letting that ratio run down, probably into the mid-teens level. That's the number we've given in prior calls, and I think we'll be comfortable with that.
Mid-teens, bank-level leverage.
Speaker Change: Mid-teens, leverage ratio, yeah, at the bank and holding company, yeah. Okay, perfect. Okay, thank you for taking the questions.
Speaker Change: Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: And now I would like to hand the floor over to Juan Arias to address questions we have received via email.
Thanks operator. You had a few questions come in.
Speaker Change: via email. First one, when would you anticipate seeing a ramp in business from new initiatives that you launched in BIN sponsorship and payments?
So
We think that the bins
and Carte.
Great. Second question...
Speaker Change: Netting out the one-time item you called out on the call, $895,000 loss from calling of CDs, is it fair to assume your core EPS number for 4Q was closer to 25 cents?
I'll take that one.
Well...
As you know, Core EPS is a non-GAP concept.
Speaker Change: In this particular case, I think it's pretty straightforward how to calculate the core VPS, the tax effect, the $895,000.
Speaker Change: cost of terminating those CDs for strategic purposes. Add that to income and divide by the average shares outstanding and 25 cents a share is how we look at it too.
Speaker Change: Two more questions came in. Do you have significant exposure to LendingPoint?
Thank you very much.
Speaker Change: 2017, when they launched with us, we don't give any more specific partner guidance and you know we're sensitive to confidentiality. As far as financial impact to FinWise, we have an immaterial amount of credit or revenue risk with LendingPoint and we continue to support them as a partner.
Thank you.
All right, and the last one...
Speaker Change: Can you remind us of the benefits to fintechs of using a credit enhancement product?
Sure.
Thank you. Bye.
Speaker Change: Yeah, so we've, you know, we've historically had one, you know, really two options in our SP lending business.
Speaker Change: HFS and then HFI with with full coupon and full credit risk. The credit enhanced balance sheet product really kind of fills a gap.
Speaker Change: where we can provide capacity for asset generation with our partners, but do it in a way that builds stable interest income, you know, here at the bank. And it also minimizes credit risk at the bank.
It helps diversify the funding sources for our fintech partners.
Speaker Change: You know, it also reduces the number of parties that they have to align with from an administrative standpoint since, you know, we're the sponsor bank already. So I'd say, you know, those are the kind of key benefits to our partners.
No more questions, operator.
Speaker Change: Thank you everybody. This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.
The