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spk01: Thank you, Chris. Good morning, everyone. Thank you for joining us for BM Technologies' second quarter earnings conference call. Our earnings release and investor presentation were filed this morning, and both are posted on the investor relations page of the company's website at ir.bmtxinc.com. Our investor presentation includes important details that we'll be walking through on this morning's webcast, and I encourage everyone to pull up a copy. Before we begin, we would like to remind you that some of the statements we make today may be considered forward-looking. These forward-looking statements are subject to a number of risks and uncertainties that may cause actual performance results to differ materially from what is currently anticipated. Please note that these forward-looking statements speak only as of the date of this presentation, and we undertake no obligation to update these forward-looking statements in light of new information or future events except to the extent required by applicable securities laws. Please refer to our SEC filings, including our Form 10-K and 10-Q, for a more detailed description of the risk factors that may affect our results. Copies may be obtained from the SEC or by visiting the Investor Relations section of our website. At this time, it's my pleasure to turn the call over to Lavleen Sidhu, VM Technologies Chair and CEO.
spk08: Thank you, Bob. Good morning, everyone. and thank you for joining BM Technology's second quarter and first half of 2022 earnings call. To begin, we are excited to report to you record results in the second quarter and strong performance for the first half of the year. Even in this challenging environment, we are pleased to report Q2 core EBITDA of $5.9 million, up 16% year over year, and over $15 million in core EBITDA for the first half of 2022. Additionally, Our average service deposits increased 29% year over year, totaling $2 billion in deposits. Both Bob and I will later provide more details on financials, but before that, I would like to briefly discuss more details on our strategy. As a reminder, BMTX is one of the largest digital banking platforms and banking as a service providers in the country today. We pursue a B2B2C strategy, which is one of our key differentiators from other neobanking fintechs. Our strategy enables us to acquire bank customers at low cost and at high volumes. To quantify this, we are acquiring customers at less than $10 today, which provides us with a tremendous competitive edge relative to traditional banks and to most challenger banks. Today, we are executing our B2B2C approach in two main verticals, the first being our higher education vertical, where we are dispersing over $12 billion a year in financial aid refunds while also opening several hundred thousand student checking accounts a year with the goal of creating a customer for life. The second vertical is our banking as a service business. Banking as a service has really become a buzzword in recent times and sometimes means different things to different people. For us, it means enabling non-banks and brands with the technology and infrastructure to embed banking services within their existing ecosystem with the purpose of creating more value for their customers. In return, this creates for them new revenue streams, points of differentiation to attract new customers, provides access to more data, which can also be used to create more personalized experiences, all of which help build loyalty and increase customer lifetime value. We have invested well over $60 million in building out our banking-as-a-service technology and are proud to be one of the most competitively positioned banking-as-a-service providers in the market today. With our proprietary, API-driven banking-as-a-service platform and our white-label user interface, we give choice to our clients to embed banking within their own ecosystems and control the user experience fully or effectively. provide them with a ready-to-go app that reflects their brand and product positioning. Overall, we are able to help fintechs and brands launch fully branded financial services products to their customers and to their employees at a fraction of the cost and at a fraction of the time it would take them to roll this out on their own. Additionally, a key differentiator of BMTX relative to other banking as a service providers is that we manage the entire program end-to-end. often known as program management. This means we not only provide the technology, but also provide the back office support that is critical to launch and run these programs, including but not limited to banking operations, compliance and risk management, fraud management and investigations, and customer service support. Once we become a bank, our positioning in the banking as a service space will become unparalleled. with the combination of a banking as a service technology provider, program manager, and sponsor bank relationship all in one. Once we are fully integrated, once we are fully vertically integrated, we can provide the best experience and perhaps the most competitive pricing in the marketplace today. Our Banking as a Service vertical is best exemplified today by our partnership with T-Mobile and with the launch of our checking and savings accounts called T-Mobile Money. We have a great partnership and continue to expand and grow this relationship. Additionally, we are thrilled to share with you that we have moved from term sheet to a signed contract with a new significant Banking as a Service partner. This new BAS partner has global operations and tens of millions of U.S. customers. BMTX was awarded this relationship through a competitive RFP process, underscoring the competitiveness of its vast offerings in the marketplace. With the addition of this partner, BMTX has expanded its roster of large, well-known brand name partners. This relationship may become even more valuable if BMTX is able to vertically integrate this new partnership with the addition of a banking charter. To protect this partner's launch strategy, we will not identify the partner by name until commercial launch, which is expected to occur in early 2023. In the meantime, we have begun development work with this partner in the second quarter and expect to perform additional work through the remainder of this year. Lastly, we have a third vertical, which is our niche direct to consumer strategy, which is our most nascent vertical. We continue to have high conviction in the market need and value in executing targeted direct-to-consumer strategies to underserved affinity groups. This will include continuing to focus on an employee demographic, but also extend beyond that. We plan to execute on this vertical after we become a bank. So let's get started. Flipping to slide five, I am delighted to report to you record second quarter results and strong performance for the first half of the year. Q2 revenues increased 3% year-over-year to $23 million, up from $22.4 million in Q2 2021. Core EBITDA increased 16% to $5.9 million from $5 million in Q2 2021. Core EBITDA margin also increased to 25% in Q2 2022 from 22% in Q2 of 2021. Additionally, first half of 2022 core EBITDA increased 8% to 15.1 million from 14 million in the first half of 2021. And core earnings increased 184% from the year-ago period to 1.9 million, or 15 cents per diluted share. First half of 2022 core earnings increased 30% from the year-ago period to 6.3 million, or $0.50 per diluted share. Lastly, we continue to show strength in new account origination, opening approximately 215,000 new accounts in the first half of 2022. Moving on to slide six, you can see that our average service deposits total $2 billion in Q2 2022, a 29% increase compared to Q2 2021. Average new business service deposits increased over 50% to $1.5 billion compared to Q2 2021, which is about a half a billion dollar increase. In our student business, refunds disbursed to students in the first half of 2022 totaled $6.9 billion, an increase of 7% from the first half of 2021. And $800 million of these disbursements were deposited into Bank Mobile Vibe check-in accounts based on the student's choice to do so. In addition to this, students made organic deposits into these accounts. These are deposits over and above any refund coming into the account from the school. Organic deposits totaled $925 million during the first half of the year, indicating strong primary banking behavior. Moving on to debit card spend, debit card spend was $700 million in Q2 2022, a decrease of 12% compared to the first half of 21, given the absence of stimulus and perhaps economic factors in the current period. Despite these economic headwinds, our revenue per account growth remains strong, which Bob Ramsey will now talk through on slide seven.
spk07: Thank you, Loveline.
spk01: Quickly, I wanted to touch base before I begin on slide seven and talk about our progress getting back to timely filing, which is important to us, and we've gotten a lot of investor questions. Earlier this year, we did complete the 21 restatement, which largely reflected certain non-cash compensation expense from our former parent. It had no impact on our cumulative EBITDA cash or equity. In July, we did engage KPMG as our new auditor, and we're very excited to be partnered with such a prominent firm. Additionally, in the second quarter, we did add a new director to our board who has valuable bank and audit committee experience. And today, we will file our first quarter 10Q, which had been delayed. Additionally, we'll file our 12B25 filing for the second quarter 10Q, which indicates that we expect to file that within the next five business days. And I hope that it's evident to everyone with us filing this earnings release this morning that we are fairly confident far along in our process towards that filing and feel good about our ability to file within the five-day permitted extension. After we complete that filing, our financials will again be current and we do expect to file the third quarter 10-Q on or before the November 14th filing deadline. So fortunately this process is one that we are coming out the other end of and very soon we will be a timely filer again. With that said, I will begin on slide seven. So on slide seven, we talk about the per account metrics that we have in the business. And I think what's most important here is that we did generate 13% year-over-year increase in our revenue per account, which was approximately $49 in the second quarter. You can see the deposits per account and spend per account in each of our businesses and on a consolidated basis. And what you do see here is growth of the deposits per account and some reduction on a year-over-year basis in the spend per account, which is driven really by the absence of stimulus that we experienced in the year-ago period. Turning to slide eight, you can see that debit spend in the first half of the year was lower than a year ago. And as a reminder, in the first half of 2021, we did have approximately $250 million in stimulus money that came into our accounts. And we didn't have any of that tailwind this year. And that's a big factor in the trend that you see on a year-over-year basis here. Our average service deposits did increase 29% from the year-ago period. And the total amount that we disbursed to our college and university partners increased by about 7%. Slide nine, I won't walk through in great detail, but it gives a five-quarter view of our EBITDA as well as a revenue breakout by financial statement line item. And then with that, before I pass it back to Lovleen, I do just want to emphasize we're excited in the first half of this year. We did have record EBITDA. We did have revenues that grew faster than expenses. We have increased our cash balances as we continue to generate positive cash flow. Loveleen touched on the new BAS partner that we are really excited about, and very soon our filings will all be timely. With that, I will turn it back over to Loveleen to talk about slide number 10.
spk08: Thanks, Bob. So on slide 10, I would now like to provide you with a few key accomplishments and highlights for the second quarter. First, BMTX averaged $2 billion in deposits an approximately 30% year-over-year increase. Second, our merger with First Sound Bank continues to progress, and we continue to expect to close the merger by year-end. We remain very excited about becoming a true fintech bank, and the current macro environment continues to underscore the value that a bank charter brings to our business model. With a charter, we are able to have a sustainable, profitable business model into the future, by combining our deposit acquisition strategy with an asset generation strategy. Our low to no cost deposits on the student side of our business, coupled with our banking as a service infrastructure and partnerships, will create immense franchise value as a bank. Additionally, given the changes in the current macro environment, we are considering slowing the growth of deposits on our balance sheet, which will require us to raise significantly less capital and will also have valuation benefits from an EPS standpoint. We are considering brokering off deposits or partnering with additional sponsor banks to accomplish this. We will keep you posted as the process continues to move forward. Next, we continue to expand our banking as a service business. As shared earlier, we have signed a contract with a new significant banking as a service partner and look forward to building this partnership. We also continue to expand the T-Mobile relationship and have a robust roadmap of feature delivery we are working on. And we continue to build a strong pipeline of future banking as a service opportunities. Lastly, on the higher ed side of the business, we are working on transitioning our most modern technology stack, which provides the best user experience to our students once they graduate as an upgraded experience. This will be our API-enabled platform, which will also allow us to more easily plug in new products and features, which will help with our customer for life strategy. These developments will take place in 2023. Additionally, once we become a bank, we expect to add credit products for the unenrolled and graduated students, which will improve retention. We have also signed agreements, as we said before, with 10 new colleges and universities year-to-date, providing approximately 55,000 additional students access to bank mobile disbursements and the bank mobile VIBE check-in account. We have also signed six colleges and universities for our vendor pay offering, which improves the overall stickiness of a college relationship. Slide 11 and 12, I will skip through as I have talked through these before. These slides highlight our tremendous growth opportunities and our vision to continue expanding our digital banking platform to include a full suite of digital banking products and services. Before moving to slide 13, I would like to acknowledge that as expected, we officially terminated our relationship with Customers Bank effective December 31st, and we have been working hard to ensure there are no disruptions for our customers. As mentioned before, we do expect to have the First Sound Bank merger completed by that time. That being said, even with the expected closing of the merger, we are not planning to bring on all of our deposits on day one. We are considering brokering out deposits or partnering with additional sponsor banks to accomplish this. As mentioned before, this will significantly reduce our need to raise capital to close the bank deal. In preparation for this, we have done a tremendous amount of planning and have several partner bank options available to us and are confident by the end of the year we will have a strong backup plan for our deposits if needed. Moving on to slide 13. I would like to end by summarizing our key investment highlights. We continue to have strong financial performance with record second quarter 2022 results. We continue to show expansion in our banking as a service business, most recently with the addition of a new significant BAS relationship, expanding our roster of well-known brand name partners. We have solid account growth and are opening over 450,000 accounts on an annualized basis. We are demonstrating strong customer engagement. Our revenue per active account increased 13% year over year, to approximately $50 in the second quarter. Remember, this is an unannualized revenue number that is driven by solid average balances and spend. We have strong existing partnerships with over 750 university partners, T-Mobile, and now our new FAS partner. We have heavily invested and developed a proprietary banking as a service platform, which is API enabled and ready to roll out quickly and integrate with partners easily. and also is available in a white label capacity. We have a very attractive valuation, which today is at a deep discount relative to both private and public peers. And lastly, we couldn't be more excited about our future and our growth prospects once our merger is complete and we become a true fintech bank. Once again, I want to thank our investors and shareholders for their continued support and also to all the BMTX team members who make this journey possible. Thank you. Operator, we would now like to open the line for questions.
spk05: Thank you. As a reminder, if you'd like to ask a question, please press star then 1 on your telephone keypad, and we'll pause for just a moment to compile the Q&A roster.
spk07: Our first question is from Chris Sekai with Singular Research. Your line is open. Hi, good morning.
spk06: Can you comment on, you know, how much development work for the new BAS partner has already been expensed and how much you anticipate it costing for the year?
spk01: So, I'll take that one, Chris. So, I will tell you we're not going to get into sort of what the development work is related to any individual partner. I will tell you that the amount that has been spent to date is not significant. You do see it in our financials as reported, but we're not going to sort of break it out separate from other.
spk06: Can you mention, you know, what category bucket this new partner falls into? And are you guys still looking at the same categories as previously?
spk08: I'll answer that one. So we will not be commenting on the bucket of our banking as a service partner. As we shared before, we have shared as much as we can. We're so excited about they're a global company with tens of millions of customers in the U.S., and we have provided enough information for the market to really understand that this is a significant partner and we see so much potential here. But out of respect for the privacy, and the excitement over the commercial launch. We will not be able to share more. That being said, we have continued to have a strong banking as a service pipeline and the opportunities that we see for embedded finance continue to expand exponentially as players begin to even learn what banking as a service is. As I said in my remarks, you know, this has become a buzzword and a buzzword is helpful because now industries are seeing this opportunity and are knowledgeable about it and are actually coming to us to discuss, to learn, to see how they can incorporate this into their business models. So the areas continue to be, you know, areas such as e-commerce, retailers, grocers, airlines, gaming, but not limited to these opportunities. And also to add to your first question about development work, you know, we're a fintech that happens to be a charter. And so being a technology company, we do development work. We try to keep our costs low. We've invested over $60 million in our technology over the years already. And so, you know, customizing and developing, you know, that cost remains relatively low, and it ends up being margin opportunity for us to serve as development providers to our partners. Thank you.
spk06: Okay, thanks. And lastly, in an increasing rate environment, you know, How is this affecting your profitability and what are you seeing in regards to bank rates?
spk01: I'm sorry, Chris. What was the last part of that? What are we seeing in regards to what?
spk06: Banking rates. Are you seeing them increase?
spk01: So we have seen the market begin to move market deposit pricing rates. I think it's expected during the initial movements from the Fed, banks as they do, really were able to stand tight and lag pricing if they moved it at all. But as the cumulative amount of increases has sort of added up, we have begun to see competitors in the market begin to adjust deposit pricing. And so recognizing that the deposit pricing is moving and that that is having an impact on customer-driven activity, we did increase some rate in the month of July.
spk08: Yeah, I'd like to add to that. So as Bob said, we did see some runoff of more rate-sensitive deposits, as we mentioned in our earnings release, and we evaluated you know, our positioning in the market, as Bob said, and decided to increase our rate in mid-July and have seen balances stabilize somewhat since that time. But we did say that depending on interest rates, our total deposits can, you know, fluctuate in future periods. But the important thing is, is that we believe reducing rate-sensitive deposits in our portfolio increases our franchise value and will benefit us as we become a bank. And also, so that's one side of a rising interest rate environment, but we've also talked about, you know, given this rate change and given the changes in the current macro environment, the other flip side of it that's also positive is that we're considering slowing the growth of deposits on our balance sheet once we become a bank, which will require us to raise significantly less capital. And we'll also have, you know, valuation benefits from a more attractive EPS standpoint. So we've seen the interest rate environment affect us in different ways, some positives, some slightly negatives. But even for the negatives, it creates immense franchise value over time for us if we have core deposits rather than rate-sensitive deposits.
spk06: Hope that's helpful. Yes. Okay, great. Thanks for the answer.
spk05: The next question is from Mike Grondahl with Northland Security. Your line is open.
spk04: Hey, thank you. Hey, guys. Hey, Mike.
spk08: Good morning.
spk04: Maybe, Loveline, this first one for you maybe. Can you talk a little bit about the 3% revenue growth, which I guess I would have expected more, but is it the higher ed side? Is it the new business side or is it sort of lack of retention of customers? Why is revenue growth only running at 3%?
spk08: I'll begin and then Bob, if you want to please chime in. And so for us, you know, firstly, this is a challenging environment that we're operating in. And I think that we're very proud that despite the headwinds of the macro environments, we have seen growth and significant growth in certain areas. And from a revenue standpoint, when you look back at our revenue, what drives revenue? Our deposits, our spend, and then our university business fees. And we talked about already that one side of the coin of the rising interest rate environment is that you have these rate-sensitive The beauty of our student business is that it is not rate sensitive, which is unheard of. So about 600 million of our deposits on average are in our student business. And no matter what the rate environment is, the cost of deposits doesn't change. That is true franchise value. So we're very lucky for that. In our new business side of the business, a portion of those deposits are more rate sensitive. And so the revenue is, you know, is affected by the fact that there was, you know, some runoff of these more rate sensitive deposits. But as I said, Mike, that was a conscious decision. We could have changed the rate earlier. We could have changed it higher. But for us, we're not rate cheaters. That is not franchise value. And so we're willing to let some of those run off. And really, and also a preparation of becoming a bank where there's less capital available. You know, the less deposits, you know, especially if they're not contributing to franchise value, the less capital that will have to be raised, which we are cognizant is very important to our current investors. The student business continues to be strong. We see opportunity to strengthen that even further. Account acquisition remains strong. retention remains an opportunity for us. And I think in my remarks, I was very clear about some of the transformational steps that we are taking to help with that engagement retention piece going forward. So I hope that's helpful.
spk01: And Mike, let me remind you as well, you know, the first and second quarter this year are tough comps because the first half of last year, we really did have a tailwind from stimulus. We talked about that at the time and We didn't have any stimulus dollars in the first half of this year. And so, you know, we're coming off a real period of strength. And I think that's part of what you see in the year-over-year change.
spk04: Got it. With the new customer win on the BAS side, congrats on that. Was there any development revenues in 2Q recently? or do you expect any in 3Q related to that? I know prior times you've had some revenue related to development.
spk01: Yeah, so again, we're going to really steer away from answering that type of question on a specific customer, but I think we do say in our earnings release that we did begin work under the agreements in the second quarter, and there is some impact there. So There's a little bit in the consolidated numbers, but we're not going to say any more detailed than that.
spk04: Okay, okay. And then several quarters ago, you guys were talking to a large grocer, a big box retailer, and an international bank. Are those three still active? Was this when one of those happened?
spk08: I'll take that one. So I don't want to, as we're becoming more of experts in the banking as a service business, we're realizing that these scaled opportunities are very secretive in nature and they pride themselves in being confidential and really having strong commercial launches. And so with that in mind, Mike, I would say that our existing pipeline remains strong. Some opportunities come and go. But overall, the pipeline and opportunities remain in the categories that I've talked about. And some of those that you mentioned still remain in the pipeline as opportunities going forward.
spk04: Got it. Okay. And then lastly, you've talked a little bit on this call about some slowing deposit growth, tweaking some prices, letting... some low value deposits run off and maybe some new partner banks or sponsor banks, you know, paying you for deposits. How are you guys thinking about the NIM or kind of replacing that 3% deposit rate, you know, early 23 and how that NIM, whether it's, you know, you generating with loans and deposits, Or, you know, partner sponsor banks paying you for? What's your latest thinking there?
spk01: Yeah, sure, Mike. I'll take that one first. You know, I don't think our view has changed that as a bank with a bank balance sheet with loans offsetting the deposits. that we think a net interest margin between 3% and 4% over time is reasonable and likely near the higher end of that range, given our consumer-business mix. Certainly in a rising or high-rate environment, we think it could even be at the top or above that, potentially, depending on the rate environment. So I think over time that range still applies, and we'd be at the higher end of that for what's on balance sheets. It will, of course, take a little bit of time to grow into that and build out the loan strategy. And how quickly that can be done really will depend on when we're able to close the acquisition, which we still are targeting to close by year end. On the off-balance sheet side of things, I don't think we'll ever earn off-balance sheet the same amount that we do earn on-balance sheet, which is really the value and the benefit of pursuing a bank charter. But the flip side of that, which Loveline has alluded to, is that it's a much more capital-efficient business where you don't have to hold or have as much capital on balance sheet. And quite frankly, at current share prices and levels, it can be a lot more creative earnings per share to earn a little bit less off balance sheet than to raise capital to do more on balance sheet. And then you have the ability to transition that business over time as you generate capital organically. Off-balance sheet, what we earn on that will be market-driven, but again, will be something less than we can earn as a bank with a full net interest margin.
spk04: And can you comment on roughly what is market today if you had an off-balance sheet relationship with a sponsor bank?
spk01: Yeah, I'm not going to comment on what market is today. What I will point you to is, as Loveline said, we are evaluating what we are going to do at the end of this year and knowing that there will be opportunity to put some of these deposits with a partner bank or off balance sheet, even if we close the acquisition of First Sound Bank or merger with First Sound Bank. And so we are exploring those options. And once we have finalized the deal, we'll be willing to share some of that information with you. I don't think it helps our competitive position to set pricing expectations in advance of having something inked.
spk04: Got it. And, hey, I do think it's a good decision to go with a hybrid approach instead of trying to put all those deposits to work in 23. So good to hear that.
spk00: Thank you, Mike.
spk05: The next question is from Greg Pendy with Chardon. Your line is open. Hi, Greg.
spk03: Good morning. And for Brian Dobson, can you just remind us, I guess, as we look now to the second half, what normalized seasonality is? And I appreciate you calling out the stimulus impact in 2Q of last year. But as we look at the compares for 3Q of last year and 4Q of last year, Were there any kind of puts or takes stimulus impact last year that we should be thinking about as we look at the back half and then what the normal seasonality would be on the back half?
spk01: Yeah, so I'll take that. So certainly as you think about the stimulus lift, you know, the last round of federal checks that were mailed was, I think it was the end of March, maybe it's April, now I got to double check, it was really the end of the first quarter. And so the stimulus tailwind that you saw was definitely concentrated in the first half of last year. I do think that there was some tapering benefit in the back half of the year as balances remained a little bit higher and spend sort of trickled out. But the lion's share of that benefit really was effective in the first half of the year. So I think you're not going to see the same sort of drop of stimulus tailwind in the back half of this year. I do think that the normal seasonality in the business, which you asked about, keep in mind that only affects the student side of the business. The white label bass business is not a seasonal business, or at least not nearly the same degree of seasonality would be what you see in any banking related servicing business. In the student business, the first quarter is our strongest quarter. And that really is because the entire sort of semester peak falls within that quarter. The second quarter is going to be the weakest because it's where you're sort of between those semesters. The third and fourth quarters tend to be in between the first and second because what you've got is a semester peak that sort of straddles the third and fourth quarter. So you get some benefit in both. it does sort of peak around, you know, July, August, September timeframe. And then it does taper. And when you get to the month of December, even though we don't report monthly numbers, that's sort of really when you're at the weakest point of the year, but you do have some of the fall peak benefit in the fourth quarter.
spk07: So hopefully that helps. That helps a lot. Thanks a lot. Sure.
spk05: Again, that's star one to ask a question. The next question is from Bill DeZellum with Titan Capital. Your line is open.
spk02: Thank you. Good morning. Relative to the new banking as a service customer, would you talk about how integration with the banking charter could add value, and maybe not even specifically to this customer, but just in general, how that may be the case? I don't think... I think we can get our head wrapped around that concept.
spk01: Well, do you want to start with that one or do you want me to take it?
spk08: Sure. I think that, you know, we talked about, sorry, there's a lot of background. I'm going to mute your line while we're answering. Thank you. So, you know, we talked a little bit about vertically integrating and really being the technology provider, the servicer or program manager, right? as well as the sponsor bank. That is the ideal sort of ecosystem to be the most competitively positioned banking as a service provider. And today, you know, in this most current deal where we really stand strong in our delivering is in the technology side as well as servicing of those accounts in that program managed capacity. And so development revenues and technology, you know, software as a service revenues, are really where the biggest drivers of revenue are in the current deal. As opportunities expand, new opportunities come, existing opportunities develop or evolve, as we get a charter, being able to acquire those deposits and to be able to then deploy them into asset generation opportunities really expands the opportunity for us to multiply the profitability of these programs. It's a multiplier effect to have that charter and to be able to take those deposits and then deploy them in assets. So I hope that's helpful that as the evolution of the relationship from a technology and program manager evolves to a sponsor-bank relationship, you can see that effect of the deposits and really creating more more profitability for these programs.
spk07: That makes a lot of sense. Thank you. Thank you.
spk05: Thank you. We have no further audio questions. I will turn it back over to Mr. Ramsey.
spk01: All right. Thank you very much. We do have a few questions online from the web, and I will run through a handful of these in our final minutes here. We've got a couple that do ask about capital and about what is going to be needed to support the deposits. I think we've touched on this a few times, so I'll just sort of reiterate that our view, it has never been that all of our deposits would come on balance sheet on day one. We always had a plan that some of these deposits were going to be held off balance sheet, either through broker networks or with partner banks. Additionally, given some of the shifts in market dynamics, most notably that the value of off-balance sheet deposits is higher in a higher rate environment and that our cost of capital is also higher given where our stock trades today, we are really looking at what can we do to maximize earnings per share and minimize any potential dilution. So as we think about the capital needs of the business today as compared to a year ago, we are looking at it through a different lens today. We certainly are very mindful of investor concerns around dilution, and we're all shareholders here and don't want to do anything that would be dilutive either. I know there's a question in here that talks about fintech citing a decline in deposits due to tax season, and did that play any role in our deposit trends? I will tell you that in the month of April, we did see right around the tax filing deadline some outflows which were to the IRS and clearly were directly related to tax filing. I will tell you that that overall was a short-lived phenomenon, and I don't think it's something that – really is probably very apparent in the numbers. But when we look at it at a much more granular level, we did see some deposits that moved to pay taxes in the month of April. As I look through here, there is a question about whether customer deposits all have full FDIC insurance today with our current partner bank. Some other fintechs have had some mishaps, it says here. Yes, all of our customer deposits are insured today with our partner bank up to the full FDIC limit. And we certainly understand how important FDIC insurance is in the future, either as a bank or as we work through additional partner banks, we will continue to ensure that we are able to offer our customers full FDIC insurance. is a question here that talks about will we be expanding into small business after the first sound bank merger after the first sound bank merger we're really excited about being able to offer additional products and services particularly on the lending side first sound bank already is a very strong community bank with with good small business and commercial lending. I think that's part of what we really like about that franchise is the high quality loan portfolio, the strength of the management team, their existing relationships. This is gonna be an opportunity that we see to expand on the good business that they have already. And given their size and their legal lending limits, they are limited and do have to participate out some of the small business commercial lending that they do. And as part of a larger institution, they wouldn't run into those same caps as quickly. And so there's a natural ability for them to expand this business. And as we have looked at, you know, sort of plans together as one institution, we are looking to augment their commercial lending team as well and build that business out. So it's definitely an area that we are excited about and see opportunity for growth. There are a couple of questions here about balance partnerships. One of them asked why we couldn't sort of roll out 7 to 10 a year if the infrastructure was in place. I think what I would say there is that that really has not been our model. We have been really focused on big, meaningful, significant brands. And quite frankly, 10 a year at the size we're looking at, I just don't think is a realistic expectation. I think we do continue to still believe and expect. that we can add one significant banking as a service partner every 12 to 18 months. And then last question I'll take is there are a couple questions here that pertain to capital and how are we thinking about the warrants and do we have any plans for a share buyback? You know, the first piece there in terms of a share buyback with our stock trading where it is, I would love to be in the market and buying back stock. As we are headed into the bank merger, which we do think is the right business decision, the last thing we would want to do here is buy back stock and then find that we needed more capital later. And so we're just not at a strategic position where I think buybacks make sense, but we definitely consider the share price attractive. And if we weren't looking into potentially needing capital in the future, I think we would be more open to a share buyback situation. In terms of the warrants, it's very much the same. We're continually looking at what can we do to clean up and reduce any potential dilution from the warrants. We are mindful of how valuable capital is to us as well. And I think for that reason, it's tough at any scale to justify going out and spending a lot of capital to clean up warrants. But we do continue to look at, hey, are there opportunities to affect a tender or otherwise sort of reduce that dilution pretty significantly without depleting capital. So it's an area we continue to look at and are looking for opportunistic ways that we may be able to do something there. That sort of sums up the Q&A that we had online. Sorry to do that lightning round, but I know we're about out of time. But with that, I'll be happy to turn it back over to Loveleen to handle any closing remarks.
spk08: Thanks, Bob. You know, as I mentioned before, we couldn't be more excited than where we are today. I think we're at the precipice of such exciting opportunities around becoming a FinTech bank, expanding our banking as a service opportunities, being able to really invest and transform our student business from not just an acquisition engine, but really creating a customer for life. So we're very grateful to have your support along this journey. and look forward to touching base next quarter. Thank you.
spk05: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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