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01/10 16:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents mixed signals: strong loan growth, increased net interest income, and fintech partnerships are positive, but significant noninterest income decline, franchise finance challenges, and elevated loan loss provisions are concerning. The Q&A reveals management's reluctance to provide clear guidance, which adds uncertainty. The share buyback intention could support the stock price, but economic uncertainties and operational challenges balance the outlook. Overall, the sentiment remains neutral.
Net Interest Income $25,100,000, up 6.6% from the fourth quarter and 22% year-over-year, driven by strong loan growth and declining deposit costs.
Net Interest Margin 1.82% to 1.91% on a fully taxable equivalent basis, up 15-16 basis points from the linked quarter, due to higher yields on loans and securities.
Total Operating Revenue Over 2% growth from the prior quarter and more than 22% year-over-year, reflecting strong performance across various revenue streams.
Pretax, Pre-Provision Net Income $12,000,000, up 10.8% over the prior quarter and almost 50% over the first quarter of 2024, attributed to revenue growth.
Net Income $900,000, with diluted earnings per share of $0.11, impacted by elevated provision for loan losses.
Provision for Loan Losses $11,900,000, compared to $7,200,000 in the fourth quarter, driven by elevated net charge-offs and specific reserves.
Net Charge-Offs $9,700,000, with net charge-offs to average loans totaling 92 basis points, primarily related to franchise finance and small business lending.
Deposits Average balance increased by $111,000,000 or over 2%, with total deposits from FinTech partners up 37% from the fourth quarter.
Noninterest Income $10,400,000, down $5,500,000 or 35% from the fourth quarter, primarily due to lower net servicing revenue.
Noninterest Expense $23,600,000, down $400,000 or 1.7% from the fourth quarter, mainly due to a decrease in salaries and employee benefits.
Allowance for Credit Losses 1.11% of total loans, up four basis points from the fourth quarter, reflecting specific reserves taken on problem loans.
Loans to Deposit Ratio Increased to 86% from 84.5% at the end of the fourth quarter, reflecting modest deposit growth and loan growth.
FinTech Partnership Revenue Over $1,100,000 in the first quarter, up 30% from the fourth quarter, driven by scaling contributions from key partnerships.
New Loan Origination Yields: The weighted average rate on funded originations was 7.78%, which was up 50 basis points over the prior quarter.
FinTech Partnerships: Thanks in part to the success of our embedded finance FinTech partnerships growth, we have been able to pay down higher cost brokered deposits.
SBA Loan Sales: We remain the eighth largest SBA 7 program lender for the SBA’s twenty twenty five fiscal year to date.
FinTech Partnership Revenue: Total FinTech partnership revenue was over $1,100,000 in the first quarter, which was up 30% from the fourth quarter.
Net Interest Income Growth: Net interest income continued to grow and net interest margin continued to expand, achieving our sixth consecutive quarter of net interest income and core revenue growth.
Deposit Growth: The average balance of deposits increased by $111,000,000 or over 2% during the first quarter.
Loan Portfolio Shift: Approximately 30% of our loan book is variable rate today compared with 16% three years ago, demonstrating tangible evidence of our commitment to reduce interest rate risk.
Expense Management: We maintain a keen focus on controlling the controllable, which includes responsibly managing expenses.
Credit Issues in Lending Portfolios: The company is facing credit issues in its small business lending and franchise finance portfolios, leading to elevated provisions for loan losses and net charge-offs of $9,700,000, primarily related to these portfolios.
Economic Uncertainty: The company has expressed concerns regarding elevated economic uncertainty, which has prompted proactive measures to address potential problem loans.
Regulatory Changes in SBA Loans: Changes in the Small Business Administration's (SBA) policies are expected to impact the loan sale process, resulting in a temporary decline in gain on sale revenue.
Loan Charge-Offs: The company has recognized a significant level of charge-offs, particularly in the franchise finance and small business lending sectors, which may continue if economic conditions do not improve.
Interest Rate Risk: The company is managing interest rate risk as it shifts its loan portfolio towards higher yielding variable rate loans, with 30% of the loan book currently variable rate.
Noninterest Income Decline: Noninterest income for the quarter decreased by 35% from the previous quarter, primarily due to lower net servicing revenue and the impact of SBA loan sales.
Operational Challenges in Franchise Finance: The company has encountered operational challenges in its franchise finance portfolio, with specific loans facing stress due to borrower-specific issues and economic factors.
Future Economic Conditions: The company anticipates that prolonged economic uncertainty may lead to additional losses in the second quarter, although there are signs of a slowdown in new delinquencies.
Loan Origination: The company aims to achieve $600,000,000 of loan originations over the course of 2025.
FinTech Partnerships: The company is focused on expanding existing FinTech partnerships, which have contributed to noninterest income and are expected to continue driving revenue growth.
Credit Quality Management: The company is actively managing credit quality, with a focus on addressing problem loans in the franchise finance and small business lending portfolios.
Loan Portfolio Shift: The company is shifting its loan portfolio towards higher yielding variable rate loans, with 30% of the loan book currently being variable rate.
Net Interest Income Growth: The company expects full year net interest income to increase by approximately 40% or more over 2024's full year amount.
Net Interest Margin: The fully taxable equivalent net interest margin is expected to be in the range of 2.35% to 2.45% by the fourth quarter of 2025.
Deposit Costs: The company anticipates deposit costs to continue declining due to the significant CD repricing gap and the pay down of higher cost brokered deposits.
Noninterest Income: A temporary decline in noninterest income is expected in Q2 due to changes in the SBA loan sale process, but normalization is anticipated in the second half of the year.
Expense Growth: Annual noninterest expense is expected to increase by 10% to 15% over the full year 2024 amount.
Provision for Credit Losses: The company expects the provision for credit losses to moderate in the second half of the year, depending on economic conditions.
Share Buyback Program: The management indicated they are preparing to look back at the share buyback market, especially if the stock price remains below 50% of book value. They expressed a willingness to initiate buybacks if the stock price stays low.
The earnings call highlights strong financial performance with a significant increase in income and yield on assets. Positive developments include a decrease in delinquencies, proactive loan management, and optimistic credit outlook. The company's strategic focus on higher-yielding opportunities and share buyback plans further boost sentiment. However, increased credit loss allowances and nonperforming loans are concerns. Overall, the positive financial metrics, strategic initiatives, and shareholder return plans suggest a positive stock price movement.
The earnings call presents a mixed picture. Positives include improved loan metrics, strong net income growth, and promising fintech partnerships. However, noninterest income decline, cautious provision guidance, and unclear management responses on key issues like charge-offs and stock buybacks temper enthusiasm. The market may react neutrally due to these conflicting signals, with no significant partnerships or guidance changes to sway sentiment strongly.
The earnings call presents mixed signals: strong loan growth, increased net interest income, and fintech partnerships are positive, but significant noninterest income decline, franchise finance challenges, and elevated loan loss provisions are concerning. The Q&A reveals management's reluctance to provide clear guidance, which adds uncertainty. The share buyback intention could support the stock price, but economic uncertainties and operational challenges balance the outlook. Overall, the sentiment remains neutral.
The earnings call reveals increased losses, elevated net charge-offs, and operational challenges, which are concerning. The Q&A section highlights management's avoidance of direct answers on critical issues and economic uncertainties impacting SBA. Despite some positives like FinTech partnerships and improved NIM, the lack of a share repurchase program and increased credit losses weigh negatively. Without a market cap, the overall sentiment leans towards negative due to financial health concerns, overshadowing moderate growth in certain areas.
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