Q1 2025 FinWise Bancorp Earnings Call

Greetings welcome to finalize Bancorp's first quarter 2025 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.

Operator: Greetings, welcome to Finwise Bancorp's first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode.

Operator: This is a question and answer session.

Operator: We'll follow the If anyone should require operators press star zero on your telephone. As a reminder, this conference is being recorded. Thank you.

Conference is being recorded. Thank you you may begin your presentation.

Good afternoon, and thank you for joining us today for spin wife's Bancorp's first quarter 'twenty 25 earnings conference call.

Operator: Good afternoon and thank you for joining us today for Finwise Bancorp's first quarter 2025 earnings conference call. Earlier today, we filed our earnings release and investor deck and posted them to our investor website at investors.finwisebancorp.com. Today's conference call is being recorded and webcast on the company's website, investors.finwisebancorp.com.

Earlier today, we filed our earnings release and Investor deck posted to our Investor website at investors thought send wise Bancorp dotcom.

Today's conference call is being recorded and webcast on the company's website investors dot spend wife's bancorp dotcom.

Operator: 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. 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. 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.

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.

Forward looking statements represent managements current estimates expectations and beliefs and thin wise Bancorp assumes no obligation to update any forward looking statements in the future we.

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 Landvatter: Posting the call today are Kent Landvatter, Chairman and CEO, Jim Noone, Bank CEO, and Bob Wahlman, CFO. Kent, please go ahead. Good afternoon, everyone. The Finwise business model remained resilient in its first quarter, even amidst a more uncertain macro environment. Loans originated totaled at approximately $1.3 billion and we also posted solid asset growth and encouraging credit quality performance as both NPL balances and net charge-offs declined versus the prior quarter. Furthermore, we continue to migrate our loan portfolio to a lower risk profile, while still growing profitably and increasing tangible book value. Specifically, our tangible book value per common share ended the quarter at $13.42 versus $13.15 in the prior quarter.

Hosting the call today are Kent land batter, chairman and CEO, Jim Noon Bank, CEO and Bob Waldmann CFO Kent. Please go ahead.

Good afternoon, everyone.

<unk> business model remained resilient in its first quarter, even amidst a more uncertain macro environment.

Loans originated totaled approximately $1 3 billion and we also posted solid asset growth and encouraging credit quality performance as both NPL balances and net charge offs declined versus the prior quarter.

Furthermore, we continue to migrate our loan portfolio towards lower risk profile, while still growing profitably and increasing tangible book value.

Specifically, our tangible book value per common share ended the quarter at $13 42 versus $13 15 in the prior quarter.

Kent Landvatter: We also remain well capitalized, significantly above regulatory guidelines with a tangible shareholders equity to assets ratio of 22% down from 23.3% a year in 2024. As we have discussed in the past, we expect our capital ratios to decline due to the planned growth in assets.

We also remain well capitalized significantly above regulatory guidelines with the tangible shareholders equity to assets ratio of 22% down from 23, 3% at year end 2024.

As we have discussed in the past, we expect our capital ratios to decline due to the planned growth in assets.

We also remain focused on executing our business strategy, including announcing a new strategic program agreement with Fintech backed subsequent to the end of Q1.

Kent Landvatter: We also remain focused on executing our business strategy, including announcing a new strategic program agreement with FinTech BACT, subsequent to the end of Q1. As part of our relationship with BACT, Finwise will provide business installment loans to small and medium-sized businesses, and we will also provide access to our low-risk, credit-enhanced balance sheet program. While we will continue to closely monitor the economic environment, we remain very excited about the long-term outlook for our business, particularly as our existing and potential strategic partners are enthusiastic about the benefits that our broader banking and payments platform provides them. For 2025, we continue to look for gradual progression and growth as we move through the year, driven by originations from existing programs, as well as incremental growth from programs that were signed late last year and more recently.

As part of our relationship with backed fin wise will provide business installment loans to small and medium sized businesses and we will also provide access to our low risk credit enhanced balance sheet program.

While we will continue to closely monitor the economic environment. We remain very excited about the long term outlook for our business, particularly as our existing and potential strategic partners and as soon as he asked about the benefits that our broader banking and payments platform provides.

For 2025, we continue to look for gradual progression and growth as we move through the year driven by originations from existing programs as well as incremental growth from programs that were signed late last year and more recently.

Kent Landvatter: We also continue to expect our Credit Enhanced Balance Sheet program, including a similar extended Helds for Sale product, to be a meaningful contributor to our earnings in 2025, with most of the growth coming in the second half of the year, as we had discussed on our prior earnings call.

We also continue to expect our credit enhanced balance sheet program, including a similar extended held for sale product to be a meaningful contributor to our earnings in 2025.

With most of the growth coming in the second half of the year as we had discussed on our prior earnings call.

Jim Noone: With that, let me turn the call over to Jim Noone, our bank CEO. Thank you, Kent. As mentioned, our businesses are healthy. We originated approximately $1.3 billion in loans during the first quarter, and we were pleased that several of the strategic programs we announced in 2024 began to contribute. That said, in the second half of the quarter, we saw some seasonal softening in demand from our higher yielding partners, and this seasonality is in line with our expectations from prior years. Our largest student lending program had a strong seasonal quarter on originations, but we expect this contribution to decelerate in line with school calendars during the second quarter.

Jim: With that let me turn the call over to Jim There are bank CEO.

Jim: Thank you Kent as mentioned our businesses are healthy we originated approximately $1 $3 billion in loans during the first quarter and we were pleased that several of the strategic programs, we announced in 2024 began to contribute.

Jim: That said in the second half of the quarter, we saw some seasonal softening in demand from our higher yielding partners and their seasonality is in line with our expectations for prior years.

Jim: Our largest student lending program had a strong seasonal quarter on originations, but we expect this contribution to decelerate in line the school calendars during the second quarter.

Jim Noone: Although the lending market could change through the first four weeks of April 2025, loan originations are tracking at a quarterly rate of $1.2 billion. We remain comfortable in the outlook for Originations for the year, particularly as the four new programs from 2024 begin to mature more meaningfully with us. Our SBA 7A loan originations ticked down a little quarter over quarter. This was driven primarily by average loan size coming in slightly lower in the quarter as we have continued to see stable demand with our SBA lending. We also had solid growth in our equipment leasing and owner-occupied commercial real estate line.

Jim: Although the lending market could change through the first four weeks of April 2025.

Jim: Bone originations are tracking at a quarterly rate of $1 $2 billion.

Jim: We remain comfortable on the outlook for originations for the year, particularly as the four new programs from 2024 begin to mature more meaningfully with us.

Jim: Our SBA seven loan originations ticked down a little quarter over quarter.

This was driven primarily by average loan size coming in slightly lower in the quarter. As we have continued to see stable demand with our SBA lending.

Jim: We also had solid growth in our equipment leasing and owner occupied commercial real estate loans.

Jim Noone: both of which have been meaningful contributors to portfolio growth. During the quarter, we continued to sell some of the guaranteed portions of our SBA loans. as we have previously discussed. We plan to continue to sell SBA loans as long as market conditions remain favorable. Our SBA Guaranteed Balances and our Strategic Program Loans held for sale, both of which carry lower credit risk, an aggregate made up 44% of our total portfolio at the end of Q1. Moving to credit quality, the provision for credit losses was $3.3 million in Q1, compared to $3.9 million in the prior quarter.

Jim: Both of which have been meaningful contributors to portfolio growth.

Jim: During the quarter, we continued to sell some of the guaranteed portions of our SBA loans as.

Jim: As we have previously discussed.

Jim: We plan to continue to sell SBA loans as long as market conditions remain favorable.

Jim: Our SBA guaranteed balances and our strategic program loans held for sale, both of which carry lower credit risk in aggregate made up 44% of our total portfolio at the end of Q1.

Jim: Moving to credit quality the provision for credit losses was $3 3 million in Q1 compared to $3 9 million in the prior quarter.

Jim Noone: The decrease was driven by lower charge off. Quarterly MCOs were $2.2 million this quarter versus $3.2 million in the prior quarter. Regarding NPAs, while we continue to expect roughly $12 million in potential NPA migration during Q2 as a result of higher rates, During Q1, we were successful in reducing our MPA balances to $29.9 million versus $36.5 million balance in the prior quarter. The decline in MPAs was driven by consistent collection efforts by our portfolio team. of the 29.9 million in total MPAs. $15.1 million is guaranteed by the federal government and $14.7 million is unguaranteed.

Jim: The decrease was driven by lower charge offs.

Jim: Quarterly Ncos were $2 $2 million this quarter versus $3 $2 million in the prior quarter.

Jim: Regarding M P. As well, we continue to expect roughly $12 million in potential NPA migration during Q2 as a result of higher rates.

Jim: During Q1, we were successful in reducing our NPA balances to $29 9 million versus $36 $5 million balance in the prior quarter.

Jim: The decline in M. P. As was driven by consistent collection efforts by our portfolio team.

Jim: Of the $29 9 million in total M P as <unk>.

Jim: $15 1 million was guaranteed by the federal government and $14 $7 million is on guaranteed.

Bob Wahlman: I will now turn the call over to our CFO, Bob Wahlman, to provide more detail on our financial results. Thanks, Jim. And good afternoon, everyone.

Jim: I will now turn the call over to our CFO, Bob woman to provide more detail on our financial results.

Bob woman: Thanks, Jim and good afternoon, everyone.

Bob Wahlman: For the first quarter, we generated net income of $3.2 million, or $0.23 per diluted common share. Key items that drove our results were softer net interest income, including a sequential NIM decline, driven mainly by a change in the mix of originations during the quarter, and adjustment of our variable rate SBA loans for the two Q4 rate reductions, partly offset by solid fee income. Average loan balances, including both held-for-sale and held-for-investment loans totaled $565 million for the quarter, compared to $522 million in the prior quarter. This increase included growth from our SBA 7A Commercial Leases and Consumer Program.

Bob woman: The first quarter, we generated net income of $3 2 million or 23 cents per diluted common share key items that drove our results were softer net interest income, including a sequential NIM decline driven mainly by a change in the mix of originations during the quarter and adjustment of our variable rate SBA loan.

Bob woman: <unk> for the two Q4 rate reductions, partly offset by solid fee income.

Bob woman: Average loan balances, including both held for sale and held for investment loans totaled $565 million for the quarter compared to $522 million in the prior quarter. This increase included growth from our SBA seven a commercial leases and consumer programs.

Bob Wahlman: Average interest-bearing deposits were $430 million compared to $355 million in the prior quarter. The sequential quarter increase was driven primarily by an increase in interest-bearing demand deposits and broker time certificates of deposits to meet our funding needs. Net interest income was $14.3 million versus the prior quarter's $15.5 million, primarily due to the previously referenced change in the mix of loan originations, repricing the prime-based variable rate loans, and lower rates on additions to the held-for-investment loan portfolio, partially offset by an increase in interest-earning assets. Our net interest margin declined to 8.27% from 10% in the prior quarter, driven primarily by a seasonal decline in origination volume from our three highest-yielding held-for-sale programs, the addition of $40 million of lower-risk and lower-yielding loans to our held-for-investment portfolio, and a decrease in yield in our SBA and other variable-rate loans as the 50 basis point Q4 market interest rate reductions took effect.

Bob woman: Average interest bearing deposits were 430 million compared to 355 million in the prior quarter.

Bob woman: The sequential quarter increase was driven primarily by an increase in interest bearing demand deposits and brokered time certificates of deposits to meet our funding needs.

Bob woman: Net interest income was $14 3 million versus the prior quarters $15 5 million, primarily due to the previously referenced change in the mix of loan originations repricing, the prime based variable rate loans and lower rates on additions to the held for investment loan portfolio Park.

Bob woman: Offset by an increase in interest earning assets.

Bob woman: Our net interest margin declined to 8.27% from 10% in the prior quarter, driven primarily by a seasonal decline in origination volume from our three highest yielding held for sale programs. The addition of $40 million of lower risk and lower yielding loans to our held for investment.

Bob woman: Folio and a decrease in yield and our SBA and other variable rate loans as the 50 basis point Q4 market interest rate reductions took effect.

Bob woman: This overall decline in our net interest margin, while significant is directionally consistent with our expectations and commentary on prior earnings calls that we would see the NIM declined as we continue to migrate our loan portfolio to a lower risk profile.

Bob Wahlman: This overall decline in our net interest margin, while significant, is directionally consistent with our expectations and commentary on prior earnings calls, that we would see the NIM decline as we continue to migrate our loan portfolio to a lower risk profile. We continue to expect the net interest margin to decline over time due to our risk reduction strategy. So the downward progression could be slower in future periods if we have a stronger origination from higher yielding health or sale loans. or quicker if we fund large amounts of lower risk but lower yielding assets such as the Crescent Enhanced Loan Portfolio.

Bob woman: We continue to expect the net interest margin to decline over time due to our risk reduction strategy, though the downward progression could be slower in future periods. If we have stronger origination from higher yielding held for sale loans.

Bob woman: Our quicker if we.

Bob woman: Fund large amounts of lower risk, but lower yielding assets such as the closet enhanced loan portfolio.

Bob Wahlman: Fee income was $7.8 million in the quarter compared to $5.6 million in the prior quarter. The sequential quarter increase was primarily driven by a modest pickup in strategic program fees, a favorable change in the fair value of our investment in BFG, and an increase in miscellaneous income. The increase in other miscellaneous income was due to increased revenue growth from our operating lease portfolio, increased distributions received from BFG, and the $900,000 reduction of prior quarter miscellaneous income due to the write-off of the called CDs on amortized premiums that we described in January. Non-interest expense in the first quarter was $14.3 million compared to $13.6 million in the prior quarter.

Bob woman: Fee income was $7 8 million in the quarter compared to $5 6 million in the prior quarter.

Bob woman: The sequential quarter increase was primarily driven by a modest pickup in strategic program fees, a favorable change in the fair value of our investment in DFT and an increase in miscellaneous income the increase in other miscellaneous income was due to increased revenue growth from our operating lease portfolio increased distributions received from <unk>.

Bob woman: BSG and the $900000 reduction of prior quarter miscellaneous income due to the write off of the called CES Unamortized premiums that we described in January.

Bob woman: Noninterest expense in the first quarter was $14 3 million compared to $13 69 in the prior quarter. The increase was primarily due to an increase in salaries and employee benefits and an increase in professional services expense, resulting from reduction in accruals for legal services. During the three months ended December 31 2024.

Bob Wahlman: The increase was primarily due to an increase in salaries and employee benefits and an increase in professional services expense resulting from reduction in accruals for legal services during the three months ending December 31, 2024. Our efficiency ratio was relatively flat quarter over quarter at 64.8% versus 64.2% in the prior quarter. We remain committed to generating positive operating leverage as we move through 2025 and begin to realize revenue associated with the new programs that have been developed. Future increases in incremental headcount will primarily be related to increased production and we do expect to see future decreases in the efficiency ratio.

Bob woman: Sure.

Bob woman: Our efficiency ratio was relatively flat quarter over quarter at 64, 8% versus 64, 2% in the prior quarter.

Bob woman: We remain committed to generating positive operating leverage as we move through 2025 and began to realize revenue associated with the new programs that have been developed future.

Bob woman: Future increases in incremental head count will primarily be related to increased production and we do expect to see future decreases and the efficiency ratio.

Bob Wahlman: Our effective tax rate was 28.1% for the first quarter compared to 24.3% in the prior quarter. The change from the prior quarter was due primarily to permanent differences related to executive compensation. We expect an effective tax rate of roughly 27.5% for 2025.

Bob woman: Our effective tax rate was 28, 1% for the first quarter compared to 24, 3% in the prior quarter. The change from the prior quarter was due primarily to the permanent differences related to executive compensation.

Bob woman: We expect an effective tax rate of roughly 27, 5% for 2025.

Bob Wahlman: Lastly, we remain comfortable with the outlook provided on last quarter's conference call for the credit enhanced balances to increase by $50 to $100 million by year-end 2025. Positively, we have been working proactively with many of our programs over the last six months, and conversations continue to go well. We went live with two credit enhancement balance sheet programs by the end of 2024, and additional discussions continue.

Bob woman: Lastly, we remain comfortable with the outlook provided on last quarter's conference call for the credit enhanced balances to increase by $50 million to $100 million by year end 2025.

Bob woman: Positively we have been working proactively with many of our programs over the last six months and conversations continue to go well. We went live with two credit enhancement balance sheet programs by the end of 2024 and additional discussions continue.

Bob woman: During the first quarter. We were also pleased to see material growth and an extended held for sale program.

Bob Wahlman: During the first quarter, we were also pleased to see material growth in an extended held-for-sale program. In this case, our strategic partner needed balance sheet access, but for a period less than the full term of the underlying loans, which varies from our credit enhancement program, where Finwise typically holds the loans to maturity or payoff. That said, this enhanced held-for-sale structure also generates incremental bank earnings for Finwise through a yield split model with low credit risk, and the bank is happy to initiate the program. This is another example of how Finwise delivers innovative lending products that support our strategic partners' growth and further enhances our revenue opportunities.

Bob woman: In this case, our strategic partner needed balance sheet access, but for a period of less than the full term of the underlying loans, which varies from our credit enhancement program. We're thin lies typically holds the loans to maturity or pay off.

Bob woman: That said this enhanced held for sale structure also generates incremental bank earnings per 10 lives through us yield split model with low credit risk and the bank is happy to initiate the program.

Bob woman: This is another example of how thin wise delivers innovative lending products that support our strategic partners growth and further enhances our revenue opportunities.

Bob Wahlman: With that, we would like to open the call for Q&A. For your information, Kent had to step away as he has a travel conflict. But Jim and I are here to answer your questions.

Speaker Change: With that we would like to open the call for Q&A for your information Kent had to step away as he has a travel conflict with Jim and I are here to answer your questions operator.

Operator: Operator. Thank you. If you would like to ask a question, please press Star 1 on your telephone. 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Bob woman: Thank you.

Speaker Change: Ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question friendly Q for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, while we poll for questions.

Rhett Rabotin: One moment while we pull for Our first question is from Rhett Rabotin with Horvath Group, please proceed. Hey, good afternoon, everyone.

Bob woman: <unk>.

Brett Robinson: Our first question is from Brett Robinson with <unk> Group. Please proceed.

Brett Robinson: Hey, good afternoon, everyone wanted to start on the expense run rate you know and it seems like despite a possible easing of regulatory.

Bob Wahlman: Wanted to start on the expense fund rate, you know, it seems like despite possible easing of regulatory the FinTech space as people continue to spend money and just wanted to get a sense of if the build rate may have changed at all if in terms of thinking about what you have to deal with expense levels for either technology or people, or back off. Good afternoon. Thanks for your question. Yeah, we saw Well, we're coming in right now at about a 65% efficiency ratio, 64.8%, which is relatively flat to what it was last period. From our perspective, the bill that we had in terms of the VIN sponsorship and the payments business are substantially complete.

Brett Robinson: Levels that you know the Fintech space people continue to spend money and just wanted to get a sense of if the bill rate may have changed at all in terms of thinking about what you have to do with with expense levels for either technology or people or a back office from here.

Brett Robinson: Okay.

Brett Robinson: Yes.

Brett Robinson: Good afternoon.

Brett Robinson: Thanks for your question.

Brett Robinson: Yeah, we saw.

Brett Robinson: Well, we're coming in right now at about a 65% efficiency ratio 64, 8%, which is relatively flat to what it was last period.

Brett Robinson: Our perspective, the build that we had in terms of the bin.

Ben sponsorship and the.

Brett Robinson: On the payments business are substantially complete we will continue to see some some additional expenses or.

Bob Wahlman: We will continue to see some additional expenses. Our expenses in the period came from really in compensation related to FICA income taxes and the fact that we didn't have to pay FICA income tax to those people that had already compensation already exceeded $168,600. We didn't have that in the fourth quarter, and yet that clock restarts this quarter. Then we also had just a normal fluctuation, some cleanup of accruals in Q4 that came through this year. I think that we are, as we said in the past, we're expecting our expenses to be relatively flat and increase as we see revenues increase.

Brett Robinson: Our expenses in the period.

Brett Robinson: Came from really and compensation related to FICA income taxes, and the fact that the.

Brett Robinson: We didn't have to pay FICA and contacts and those people that had already compensation already exceeded $168600 and we didn't have that in the fourth quarter and yet that clock starts this quarter and then we also had just a normal fluctuation some cleanup of accruals in Q4 that came through this year. So.

Brett Robinson: That we are you know as we said in the past, we're expecting our expenses to be relatively.

Brett Robinson: Relatively flat and increase as we see revenues increase.

Brett Robinson: Okay. That's great color and then just wanted to get a little better sense of the product.

Unknown Executive: Okay, that's great, Keller.

Unknown Executive: And then just wanted to get a little better sense of the path on the margin from here, and maybe a different way to tackle it might just be thinking about top line and II growth, and just thinking about, you know, the margin continuing to atrophy with the risk reduction. Can you still have? You know, can NII growth can be a high single digit this year, you know, given what's transpired? Yeah, sure, sure. So yeah, we did see a significant drop in debt interest income, and that's been reflected in the NIM.

Brett Robinson: On the margin from here and maybe a different way to tackle it might just be thinking about.

Brett Robinson: Top line NII growth and just thinking about the margin continuing to atrophy with the risk production can you still have.

Brett Robinson: Okay NII growth can be high single digits. This year, you know given what's transpiring with the margin.

Brett Robinson: Yeah sure sure. So yes, we did see a significant drop in net interest income and that's been reflected.

Brett Robinson: The NIM.

Bob Wahlman: And I can, to answer your question, I think directly, the expected growth that we have in NII will come from, as we move forward into the second quarter and throughout the year, comes really from two sources. First of all, there was the seasonal decline in the, amongst the three highest earning partners that we have, and that held for sale portfolio. The total originations in the quarter were down approximately $47 to $50 million for quarter one. That has an outsized effect because of the higher yields on those portfolios. That traditionally has been seasonal, and we do expect that to come back.

Brett Robinson: And I can.

Brett Robinson: To answer your question I think directly the expected growth that we have in NII will come from as we move forward into two into the second quarter and throughout the year. It comes really from.

Brett Robinson: Two sources.

Brett Robinson: First of all there was the seasonal decline in the among.

Brett Robinson: Amongst the three highest earning.

Brett Robinson: Partners that we have in that held for sale portfolio. The total originations in the quarter were down approximately 47 and $40 million to $50 million for quarter. One that has an outsized effect because of the higher yields on those on those portfolios.

Brett Robinson: That traditionally has been seasonal and we do expect that to come back. So we do accept expect to see net interest income up come up as that origination production returns to migrates towards its normal level. The second area that we would see net interest income come up.

Bob Wahlman: So we do expect to see net interest income come up as that origination production returns to, migrates towards its normal level.

Bob Wahlman: The second area that we would see net interest income come up, that you did not see this period, will be from increase in the loan portfolio. And the loan portfolio growth will come from what we call, what I call the traditional banking products, particularly owner-occupied commercial real estate and lease portfolio, which we saw growth in both of those books this quarter. But you'll also see, you know, we also, as we move forward through the year, you'll see the growth in credit-enhanced portfolio. Now, all three of those products that I mentioned, their yields are below the average yield, so those will have a dilutive effect on the NIM.

Brett Robinson: You did not see this period will be from increase in the loan portfolio.

Brett Robinson: Loan portfolio growth will come from what we call what I call the traditional banking products, particularly owner occupied commercial real estate and lease portfolio, which we saw growth in both of those books this quarter.

Brett Robinson: But you'll also.

Brett Robinson: We also as we move forward through the year, you'll see the growth in the credit enhanced portfolio now all three of those products that I mentioned their yields are below the average yield. So those will have a dilutive effect on the NIM. So your question wasn't specifically about the NIM, but was about NII.

Bob Wahlman: So your question wasn't specifically about the NIM, but was about NII. So you'll see NII grow. We expect to see NII grow, but we will continue to see, particularly from the increase in the volume of loans, we'll see NIM come down from that, offset in part, or maybe, you know, depending upon how much of those we do in the next quarter, the next few quarters, you know, there'll be the balance between those two in terms of what actually happens to the overall NIM rate.

Brett Robinson: So you'll see NII grow well, we expect to see NII grow, but we will continue to see.

Particularly from the from the increase in the volume of loans, we'll see we'll see NIM come down from that offset impart or maybe depending upon how much of those we do in the next quarter or the next few quarters there'll be the balance between those two in terms of what actually happens to the overall NIM right.

Brett Robinson: Okay.

Unknown Executive: Okay, that's helpful.

Brett Robinson: That's helpful and if I could sneak in one last one just around the buyback you guys didnt buyback any stock this quarter.

Unknown Executive: And if I could sneak in one last one just around the buyback. You guys didn't buy back any stock this quarter. You know, we were closer to tangible book, you know, at certain parts of the quarter.

Brett Robinson: We're closer to tangible book you know certain parts of the quarter is there or is there a level that you would start to think about using the buyback more or is this the growth that you're anticipating in the next few years is just too much of an opportunity relative to maybe doing some accretive buyback.

Bob Wahlman: Is there levels that you would start to think about using the buyback more? Or is this the growth that you're anticipating in the next few years is just too much of an opportunity relative? may be doing some accretive bypass. Yeah, I think that's a great question. And what we have tended to do in terms of our buyback is exercise that buyback option. If we were to see the share price drop below what our current book value is, and it hasn't done that for some time, and maybe it would even go to a discount. So we haven't been active for that reason.

Brett Robinson: Yeah, I think that's a great question and what we have tended to do in terms of a buyback is exercise that that buyback option.

Brett Robinson: We were to see the share price dropped below what our current book value is and it hasn't done that for some time and maybe you can even go to a discount. So we haven't been active for that reason plus we also try to balance that against the need to maintain liquidity in our stock and.

Bob Wahlman: Plus, we also try to balance it against the need to maintain liquidity in our stock. And enough shares out there. So we don't want to... bring in too many shares, not leave enough out there for active trading.

Brett Robinson: Shares out there so we don't want to.

Brett Robinson: Bring in too many shares not leave enough out there for active trading.

Brett Robinson: Okay, Great appreciate all the color.

Unknown Executive: Okay, great. Appreciate all the color.

Speaker Change: Our next question is from Joe <unk> with Raymond James. Please proceed.

Joe Yanchunis: Our next question is from Joe Yanchunis with Raymond James, please. Good afternoon.

Speaker Change: Good afternoon.

Speaker Change: Hum.

Joe Yanchunis: and I'm John. So if I start off here, sorry if I missed this, but what were the credit enhanced loan balances exiting the quarter? And then can you reach that $50 to $100 million year end target with your current partners? And tacking on to that, how long will it take for, you know, BAPT to be able to generate or begin to generate, you know, credit?

Speaker Change: So I'll start off here, so sorry, if I missed this what was the credit enhance loan balances exiting the quarter.

Speaker Change: And then can you reach that $50 million to $100 million a year end target with your current partners and I'm kind of.

Speaker Change: Tacking on to that how long will it take for back to be able to generate or to begin to generate a handful loans.

Jim: So I can take the first two Joe this is Jim and I'll, let Bob take the balance figure.

Jim Noone: I can take the first two, Joe. This is Jim.

Bob Wahlman: And I'll let Bob take the balance figure. So how quickly or can I think the first question was, you know, how quickly can we get to that guidance of 50 to 100 million with the existing partners? Yes, we absolutely can. As far as you know, how quickly back specifically scales up, I would say that that's more of a, all of our programs, it typically takes one to two quarters, you know, of, you know, after we've launched them and made the announcement before meaningful volumes start coming through. So how BACT plays into that $50 to $100 million guidance, I would just say that that's a back-end number, BACT is probably, you know, scaling up more in Q4 with us, but we do have other partners that we expect to contribute to that $50 to $100 million balance by the end of the year.

Jim: How quickly can I think the first question was how quickly can.

Jim: Can we get to that guidance of $50 million to $100 million with the existing partners yes.

Jim: We absolutely can.

Jim: As far as how quickly backed specifically scales up I would say that that's more of a.

Jim: All of our programs. It typically takes one to two quarters.

Jim: Uh huh.

Jim: After we launch them and made the announcement before meaningful.

Jim: <unk>.

Jim: Volumes start coming through so how back to plays into that $50 million to $100 million guidance I would just say that that's a backend number back there's probably.

Jim: Scaling up more in Q4 with us, but we do have other partners that we expect to contribute to that $50 million to $100 million balanced by the end of the year and then Bob I don't know.

Bob Wahlman: And then, Bob, I don't know if you want to touch on what the balance was. So at the end of the year, the balance of the Credit Enhanced Portfolio was slightly under $2 million as we were developing the application and, you know, making sure everything was working right. It takes a while to bring on the new partners, and so we're working with the older partners that were in the tech mode, and the balance is probably around, is about $2 million at this point in time.

Speaker Change: If you want to touch on what the balance was so I'd say ended the year the balanced with a slight credit enhanced portfolio was slightly under $2 million as we were developing the application in may.

Jim: Making sure everything was working right.

Jim: It takes a while to bring on new partners and so we're working with the with the older partners that were in the test mode and the balance is probably around about $2 million at this point in time.

Got it okay. So.

Joe Yanchunis: Got it, okay, so...

2 million exiting the March quarter and then.

Joe Yanchunis: Unknown Executive, Kent Landvatter, James Noone, Unknown Executive, Robert Wahlman, I'm sorry. No, no, I'm sorry. Yeah, the help yourself product, you know, kind of give me your focus to de-risk the balance. Why would you sell these loans and what's that demand for that type of product? Sorry, say that again, Joe, as far as why do we sell the loans? Yeah, the credit enhanced loans, if the focus is on de-risking the balance sheet, wouldn't you want to load up on those a little bit more? So as I think you might be referring to the extended help for sales in the prepared remarks, the extended help for sales with a partner, you know, like when we first developed the Credit Enhanced Balance Sheet product, you know, obviously, we're going to existing partners, you know, that have good profiles for us to offer this to whether it's through loan performance or kind of their capital strength, etc.

Jim: This like for me in your prepared remarks, you discussed the credit again kind of balance sheet held for sale product.

Jim:

Jim: Great I'm, sorry, no no I'm, sorry that he had to held for sale product.

Speaker Change: Given your focus to Derisk the balance sheet.

Speaker Change: Why don't you sell these loans and what is the demand for that type of product.

Speaker Change: Yeah.

Speaker Change: I'm, sorry, you said.

Speaker Change: Say that again, Joe as far as why do we sell the loans.

Joe: Yeah, the credit and flows.

Joe: So derisking the balance sheet, when you want to load up on those a little bit more.

Joe: So I was I think you might be referring to the extended held for sale in the prepared remarks, the extended held for sales with a partner.

Joe: Like when we first of all the credit enhanced balance sheet product you know, obviously were going to the existing partners.

Joe: You know that has a good profiles for us to offer this to whether it's through loan performance or their capital strength et cetera.

Jim Noone: And so one of those partners was very interested in the product, but they're a regular user of the securitization markets. And so in that case, we tailored for them this extended help for sale product, because it's not their intention to leave those loan accounts or those loan balances with us, you know, through payoff charge off on the underlying loan, but they did need this balance sheet capacity for a period of time. And that period of time is really, you know, during a consolidation period for credit card balances and the refinancing thereof. And so they needed a little bit more than what we typically do, which is, you know, a two to four day help for sale period.

Joe: And so one of those partners was very interested in the product, but there are regular user of the securitization markets.

Joe: So in that case, we tailored for them. This extended held for sale product because it's not their intention to leave those those loan accounts of those loan balances with us through pay off charge off on the underlying loan, but they didn't need this balance sheet capacity for a period of time.

Joe: And that period of time is really.

During a consolidation period for credit card balances and the refinancing thereof, and so.

Joe: They needed a little bit more than what we typically do which is 2% to four day held for sale period.

Joe Yanchunis: And, but they didn't need the full life of loan balance sheet capacity. So this extended help for sale model worked for them, it worked for us with the yield split. So it was a good product to roll out. I would add just as a note that it still carries a very low risk because the purchase price is all contractual principle and interest. got it appreciate that.

Joe: And but they didnt need the full life of loan balance sheet capacity. So this extended held for sale model worked for them. It works for us with the yield split so it was a good product rollout.

Joe: I would add just as a note.

Joe: It still carries a very low risk because the purchase price is all contractual principal and interest.

Joe: Yeah.

Joe: Got it.

Jim Noone: And then just one more for me, you know, given the current market uncertainty, how do you characterize the healthier strategic partners at this time is, you know, is there any concern that you have about, you know, particular one, you know, about naming names. No concerns right now, Joe. I'd say, you know, origination levels continue to be healthy and we're comfortable with the guidance, which is a gradual pickup, you know, from newer partners throughout 25. As far as macro related stuff, you know, there's, there's a fair amount of stuff going on. But a lot of this we've been through at some point in the past, whether it's, you know, economic interruption with COVID, whether it's the significant and quick succession of rate increases and, you know, the effects that that has.

Joe: And then just one more for me.

Joe: Given the current market uncertainty how would you characterize the health of your strategic partners at this time as you know.

Joe: Is there any concern that you have about now.

Joe: <unk> you know without naming names.

Joe: No concerns right now Joe I'd say origination levels continue to be healthy and we're comfortable with the guidance, which is a gradual pick up from newer partners throughout 'twenty five.

Joe: As far as macro related stuff.

Joe: Sure.

Joe: Theres, a fair amount of stuff going on but a lot of this we've been through at some point in the past whether it's.

Joe: Economic interruption with Covid, whether it's the significant in quick succession of rate increases in the.

Joe: The effects that that has.

Joe Yanchunis: I would say, you know, one impact that I don't think any of us have control over is just a meaningful slowdown in consumer spending and the impact that that could have kind of across the board and lending, whether it's, you know, demand within our FinTech originations, whether it's, you know, delinquencies in SBA or other portfolios. And we're not seeing any of that right now. But if you're talking about, you know, macro risks that are out there, you know, that's certainly something we keep an eye on. Perfect. I appreciate it. Thank you for taking my question.

Joe: I would say.

Joe: One impact.

Joe: That I don't think any of us have control over is just a meaningful slowdown in consumer spending.

And the impact that that could have kind of across the board in lending whether it's.

Demand within our Fintech originations whether it's.

Joe: You know delinquencies in SBA or other portfolios I mean were not seeing any of that right now.

Joe: But if you're talking about macro risks that are out there that's certainly something we keep an eye on.

Joe: Perfect I appreciate it.

Joe: Thanks for taking my questions.

Joe: No problem.

Unknown Executive: No problem.

Andrew Terrell: Our next question is from Andrew Terrell with Stephen Zink. Please proceed. Thank you, good afternoon. Hey, Andrew. Um, maybe just to start on, on margin, um... specifically the held for sale yields. Thank you for calling out the I think it was a half a million dollar impact from it sounds like more seasonal drop in originations from a few partners. Does that come back in the second quarter? Is there any reason it would not come back in the second quarter? And then, you know, there's I think you called out 300,000 or so outside of that, there was kind of a net net yield impact from sounds like lower rate somewhere but higher volume.

Speaker Change: Our next question is from Andrew <unk> with Stephens, Inc. Please proceed.

Speaker Change: Hey, good afternoon.

Speaker Change: Andrew.

Speaker Change: Maybe just to start on on margin.

Speaker Change:

Speaker Change: So presuming that the held for sale yields.

Speaker Change: Thank you for calling out that I think it was a half a million dollar impact from it sounds like more seasonal drop in originations from a few partners does that come back in the second corner and is there any reason it would not come back in the second quarter and then you know there is I think you called out.

Speaker Change: So outside of that it was kind of a net net yield impact from.

Speaker Change: It sounds like lower rate somewhere but higher volumes.

Bob Wahlman: Can you just explain what drove the rest of the Delta there we're seeing in the drop in HFS yield?

Speaker Change: Can you just explain what drove the rest of the Delta there we're seeing in the drop in Hff's yachts.

Speaker Change: Certainly.

Bob Wahlman: Certainly. So in regards to the expectations as to how the how the help for sale for those three higher yielding partners will behave here, as we move forward to the second quarter of the year, I would expect roughly two quarters, two thirds, sorry, to three quarters of that to come back during the second quarter, and then the remainder to ramp up during the third and fourth quarter. As it relates to the other activity that drove that that move that them down, there was in the investment in the health investment portfolio, we have a significant part of the Federal Reserve, a significant part of Florida.

Speaker Change: In regards to the expectations as to how the.

Speaker Change: How the.

Speaker Change: Held for sale for those three higher yielding partners will behave as we move forward through the second quarter of the year I would expect roughly two quarters. Two thirds 10, sorry to three quarters of that to come back during the second quarter and then the remainder to ramp up during the third and fourth quarter.

Speaker Change: As it relates to the other activity.

Speaker Change: That drove that.

Speaker Change: I move that the NIM down.

Speaker Change: There was in the investment in the held for investment portfolio, we have a significant part of the federal reserve.

Speaker Change: So I think Empire, Florida.

Speaker Change: That's a cute I'm sorry, the small business lending.

Bob Wahlman: The small business lending, the SBA loans are largely variable rate and the Federal Reserve dropped 50 basis points during the Q4 and those repriced at the beginning of each quarter. So we had that flow through during the entire quarter, which accounted for a significant piece of it. And then there was a reduction in yield related to our strategy to diversify our loan portfolio with a lower risk, lower yielding loans. And you see that happen, particularly as related to the owner-occupied commercial real estate and the lease portfolio and the held for investment portfolio. And then also there was the effect in the held for sale portfolio of the program that we brought on, which was the extended held for sale program.

Speaker Change: The SBA loans.

Speaker Change: Are largely variable rate and the federal reserve dropped 50 basis points during the Q4 and those will reprice at the at the beginning of each quarter. So we had that flowed through during the entire quarter, which accounted for a significant piece of it.

Speaker Change: And then there was a reduction in yield.

Speaker Change: Related to our strategy to diversify our loan portfolio with a lower risk lower yielding loans and.

Speaker Change: And you see that happen, particularly as it related to the.

Speaker Change: Owner occupied commercial real estate and the lease portfolio in the held for investment portfolio and then also there was in the effects in the held for sale portfolio of the.

Speaker Change: The program that we brought on which was the the.

Speaker Change: The extended held for sale program that also came in at a lower rate and diluted that.

Bob Wahlman: That also came in at a lower rate and diluted that. Got it. Okay. But the SBA and the diversification of the lower risk would all be an HFI. I guess specifically there was a note on... The HFS yields in the release 0.5 million for what sounds like the seasonal drop and then 0.3 million from Just a decrease in yields outside of that. So I guess I was just trying to figure out what the 0.3 million there was referenced. Well, actually, it comes from, you know, the $500,000. And then in the retained portfolio, the drop related to those, those three higher yielding partners was about an additional $250,000.

Speaker Change: Yeah.

Speaker Change: Got it got it okay, but then the SBA and the diversification to learn the rest of it would all be in H F. I guess, specifically there was a there was a note on.

Speaker Change: Yes, hff's yields in our release zero point $5 million for what sounds like the seasonal drop and then zero point $3 million from.

Speaker Change: No decrease in yields outside of that so I guess I was just trying to figure out what to 0.3 million there was referencing.

Well actually it comes from.

Speaker Change: The $500000 and then in the retained portfolio the drop related to those.

Speaker Change: Three higher yielding partners was about an additional $250000 and then the residual was as I said the dilution.

Unknown Executive: And then the residual was, as I said, the dilution. Um, okay. Got it.

Speaker Change: Yeah.

Speaker Change: Okay got it.

Andrew Terrell: Um... If I could move on, just the, um... On the commercial real estate portfolio, I mean, it's kind of, it's a little bit interesting, the pace of the CRE growth right now, when it sounds like, you know, loan growth for the credit enhanced piece can go from, you know, basically zero this quarter to, to reach that 50, 100 million over the next three quarters is obviously a pretty big pace of balance sheet growth. But I'm curious, like specifically, what, what are you, what are you growing commercial real estate wise? And you know, we're not seeing too much commercial real estate or loan growth broadly out there right now.

Speaker Change: If I can move on just the.

Speaker Change: On the commercial real estate portfolio I mean, it's kind of it's a little bit of interesting that the pace of the CRE growth right now and it sounds like.

Speaker Change: Loan growth for the credit enhanced piece can go from basically zero this quarter too.

Speaker Change: To reach that 50 to 100 million over the next three quarters.

Speaker Change: As I say have a pretty big piece of our balance sheet growth, but I'm curious like specifically what.

Speaker Change: What are you what are you growing commercial real estate wise and you know what we're not.

Speaker Change: Do you watch commercial real estate or volume growth broadly out there right now so I'm curious you know, what's what's driving the CRE growth and what specifically asked that our industry wise or are you putting on.

Jim Noone: So I'm curious, you know, what's what's driving the CRE growth? And what specifically asset or industry wise? Are you putting on?

Speaker Change: Yes.

Jim Noone: Yes, Andrew, this is Jim. I'd say, you know, the just to be clear, these are always this is owner occupied commercial real estate. So it's not going to be the same asset or loan product type that you know, when banks reference commercial real estate loans, this is different. These are always going to be, you know, at minimum 51% owner occupied by the small business. Generally, they're very similar profiles to what we have in SBA. In some cases, actually, originally, this was almost a defensive product, right? As we saw SBA borrowers refinancing out, we wanted to get a product out there that met their needs.

Speaker Change: Andrew This is Jim I'd say just.

Speaker Change: Just to be clear. These are all this is owner occupied commercial real estate. So it's not going to be the same.

Speaker Change: Asset or a loan product type that you know when banks reference commercial real estate loans. This is different these are always going to be at minimum at 51% owner occupied by the small business.

Speaker Change: Generally.

Speaker Change: They are very similar profiles to what we have in SBA.

Speaker Change: In some cases actually originally this was almost a defensive product right as we saw SBA borrowers refinancing out.

Speaker Change: We wanted to get a product out there that met their needs.

Jim Noone: It's going to be for a better LTV, they're going to get a better rate. And so that was the original, you know, impetus for the product, why we've been successful with it, I think, you know, I would point to, you know, our relationship with business funding group, their ability to continue to deliver qualified applicants, both in SBA and in owner occupied commercial real estate. You know, we did have a pretty big pickup this quarter. I would tell you that generally will we have that type of pickup in every quarter throughout 25? No. It will probably be a little bit more sporadic, but we feel really good about the product.

Speaker Change: It's going to be for a better LTV, they're going to get a better rate.

Speaker Change: So that was the original <unk>.

Speaker Change: It is for the product why we've been successful with it I think you know I.

Speaker Change: I would point to our relationship with business lending group.

Speaker Change: Their ability to continue to deliver qualified applicants both in SBA and in owner occupied commercial real estate.

Speaker Change: We did have a pretty big pickup this quarter.

Speaker Change: <unk>.

Speaker Change: I would tell you that generally when we have that type of pickup in every quarter throughout 25 now.

Speaker Change: It will probably be a little bit more sporadic.

Speaker Change: But we feel really good about the product it's a good quality product for us with low credit risk. Good ltvs similar business profiles to what we do in SBA, where we stay out of certain industries.

Jim Noone: It's a good quality product for us with low credit risk, good LTVs, similar business profiles to what we do in SBA, where we stay out of certain industries. So we're very happy about it. Yep, understood.

Speaker Change: So we're very happy about it.

Speaker Change: Yep understood, what's the yield youre, putting that Oh gosh her own owner occupied CRE on the books that relative to.

Jim Noone: What's the net yield you're putting that commercial owner occupied CRE on the books at relative to? I'd say the net yield on credit-enhanced lending. On gross yield, the credit enhanced, let me think about the difference here, it's probably The owner occupied commercial real estate is likely going to be 300, 350 basis points below. Credit Enhanced. But again, both of those products are newer, so it's hard for me to go. It's hard for me to say what the... Stabilized difference there will be, you know, with the credit enhanced product, that's something that we're still rolling out and we feel good about the numbers we put out there for 25.

Speaker Change: Let's say the net yield.

Speaker Change: On a credit in Atlanta.

Speaker Change: On the wall.

Speaker Change: On gross yield.

Speaker Change: Credit enhanced let me pick up the difference here.

Speaker Change: It's probably.

Speaker Change: The owner occupied commercial real estate is likely going to be.

Speaker Change: 300, 350 basis points below.

Credit enhanced but again both of those products are newer so it's hard for me to go.

Speaker Change: It's hard it's hard for me to say what the.

Speaker Change: Stabilized difference there will be.

Speaker Change: The credit enhanced product, that's something that we're still rolling out and we feel good about the numbers, we put out there for 25 as far as what that yield looks like it's a little bit still TBD, but it would certainly be higher than the owner occupied commercial real estate.

Andrew Terrell: As far as what that yield looks like, you know, it's a little bit still TBD, but it would certainly be higher than the owner occupied commercial real estate. Yeah, okay. Understood. Yeah, and I'm sure it even, you know, differs partner to partner.

Speaker Change: Yes, okay.

Speaker Change: Yeah, and I'm sure it even differs pardon a partner.

Unknown Executive: If I could also just sneak another one in around, just I heard, you know, Kent's not here anymore, but you mentioned the Prepare2Markz, you know, comments about leveraging capital further. You guys have obviously brought TCE down a bit, your leverage ratios come in a bit.

Speaker Change: If I could also just sneak another one in around I'm, just saying I heard and I can start anywhere, but you mentioned in the prepared remarks comments about leveraging capital further you guys have.

Speaker Change: Obviously brought TCE today out of bed.

Speaker Change: Ratios come in a bit remind us our capital go goalposts.

Bob Wahlman: Remind us capital goalposts. And then, you know, specifically, whether you're comfortable, if a majority of the growth later this year is coming from credit enhanced, where you're not taking risks. if you're willing to leverage capital further given the risk-free nature of that growth. So what we've what we've consistently talked about over the last three, four quarters, and we're still staying with is that we have a a floor that we could be comfortable with, which would be around 14%. And, and we would like to maintain our capital with some cushion in excess of the 14%. So that gives us on our balance sheet, with our existing capital, that gives us the balance sheet to grow our portfolio and maintain that leverage ratio at that level of in excess of $1 billion.

Speaker Change: And then specifically whether youre comfortable.

Speaker Change: Majority of the growth later this year is coming from credit enhanced where you're not taking risk.

Speaker Change: If youre willing to leverage capital further given the rest of the nature of that graph.

Speaker Change: So what we've what we've consistently talked about over the last three or four quarters, and we're still staying with us that we have.

Speaker Change: Yeah.

Speaker Change: A floor that we would be comfortable with which would be around 14%.

Speaker Change: And if and we would like to maintain our capital with some cushion in excess of 14%.

Speaker Change: So that gives us on our balance sheet with our existing capital that gives us the balance sheet to grow.

Speaker Change: Our portfolio and maintain that leverage ratio at that level.

Speaker Change: In excess of $1 billion, so still a lot of a lot of room to go yet.

Bob Wahlman: So still a lot of room to grow yet.

Speaker Change: Okay. Thanks, taking my questions.

Unknown Executive: Okay, thanks for taking my question.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Alright. Our next question is from Andrew Liesch with Piper Sandler. Please proceed.

Andrew Liesch: Our next question is from Andrew Liesch with Piper Sandler, please. Hey everyone. Thanks for taking the questions. Just sticking with the commercial real estate there, do you have the yield on what those loans were added at, the owner-occupied CRE? You're sorry, Andrew, you're saying what's the gross yield on the owner occupied commercial real estate portfolio? Yeah, just curious what that came on. Yeah, I would tell you in general, it's gonna be a prime minus product. So it's probably prime, you know, minus 100.

Andrew Liesch: Hi, everyone.

Andrew Liesch: Thanks for taking the questions.

Andrew Liesch: Just sticking with the commercial real estate there do you have the yield on what goes on for Ed.

Speaker Change: Owner occupied CRE.

Speaker Change: Yeah.

Your sorry, Andrew you're saying, what's the gross yield on the owner occupied commercial real estate portfolio, just curious what that came on at.

Speaker Change: Yeah, I would tell you in general it's gonna be a prime minus products, so its probably prime.

Speaker Change: <unk> 100.

Speaker Change: Got it and then so and then the resource from BFG is that.

Jim Noone: Got it. And then these were sourced from BFG, is that what I heard? Correct. Okay, got it. Um, but you know, it also looks like these were funded with brokered CDs. So the spread on that, and I look at the balance sheet wrong, just looks like the spread on that's pretty narrow. Is it is it worth it to grow this owner occupied CRE? Yeah, I agree that the margins there are tighter than most of our other products. I think we point to the credit risk there also being meaningfully different. But yes, we hear you on the margin being tighter than the other products and some certainly something that we keep an eye on and make sure that we're booking good loans.

Speaker Change: Is that what I heard.

Speaker Change: Correct.

Speaker Change: Okay got it.

Speaker Change: But it also looks like these are funded with brokered Cds so the spread on that.

Speaker Change: The balance sheet, Ron just looks like the spread on that is pretty narrow is it is it worth it to grow this owner occupied CRE.

Speaker Change: Yeah, I agree that the margins there are tighter than most of our other products I think we'd point to the credit risk, they're also being meaningfully different.

Speaker Change: <unk>.

Speaker Change: But yes, we hear you on the margin being tighter than the other products and some certainly something that we keep an eye on and make sure that we're booking good loans.

Jim Noone: And, you know, that's going to be The growth trajectory that's, you know, I would say Meaningful, but it's not going to be the entire it's not going to be where the primary asset growth of the bank is It's a good way to capture good customers that might be refinancing out, or good referrals that are coming in to BFG and to our existing borrowers. We can make good margins, but those certainly aren't the highest margins at the bank.

Speaker Change: And that's going to be.

Speaker Change: The growth trajectory that's.

Speaker Change: I would say.

Speaker Change: Meaningful, but it's not going to be the entire it's not going to be where the primary asset growth of the bank is.

Speaker Change: It's a good way to capture a good good customers that might be refinancing out or.

Speaker Change: Good referrals that are coming in to <unk>.

Speaker Change: <unk> into our existing borrowers.

Speaker Change: We can make good margins, but they are certainly arent the highest margins at the bank.

Speaker Change: Got it Okay put us just think about like the funding side than not only for this product with other products going forward. When the bin sponsorship really gets going or is there opportunities there to bring on deposits.

Andrew Liesch: Got it. Okay.

Jim Noone: So just think about like the funding side then, not only for this product, but for other products going forward. When the BIN sponsorship really gets going, are there opportunities there to bring on deposits? And it's how do you look at funding over the course of maybe the next year, rather than looking at the brokered funds, brokered... So that is the that is the plan. We expect to see significant deposit growth as relates to both BIN sponsorship, and we also look for deposit growth from the payments business. In addition to that, we are close to launching our online account opening, which will also give us another source of non-brokered funding, more core funding.

Speaker Change: If you look at funding over the course of maybe the next year rather than looking at the brokered funds brokered sources.

Speaker Change: Yeah.

Speaker Change: So that is the that is the plan, we expect to see significant deposit growth as it relates to both been sponsorship and we also look for deposit growth from the payments business.

Speaker Change: In addition to that we are.

Speaker Change: Close to launching our <unk>.

Speaker Change: Online account opening which.

Speaker Change: It will also give us another source of non brokered funding more of core funding.

Speaker Change: Great.

Jim Noone: Great. That's good to hear.

Operator: Looking forward to seeing that product and I will step back. There are no further questions at this time. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

Speaker Change: Good to hear I'm looking forward to seeing that product and I will step back thanks for taking the questions.

Speaker Change: There are no further questions at this time. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

Speaker Change:

Speaker Change: Okay.

Speaker Change: [music].