Pathward Financial Inc (CASH) 2018 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Meta Financial Group Third Quarter Fiscal 2018 Investor Conference Call. (Operator Instructions)

As a reminder, this conference call is being recorded.

I'd now like to turn the conference call over to Brittany Elsasser, Director of Investor Relations. Please go ahead.

Thank you, and welcome to Meta's conference call and webcast to discuss our financial results for the fiscal third quarter ended June 30, 2018, released earlier this afternoon. Additional information, including the earnings release and investor presentation, may be found on our website, at metafinancialgroup.com.

Company Chairman and CEO, J. Tyler Haahr; President, Brad Hanson; Executive Vice President and CFO, Glen Herrick; as well as Mick Goik, the President of Crestmark, will be sharing some prepared remarks today before we open up the call for questions.

Today's call may contain forward-looking statements, including statements related to Meta and its operating subsidiaries, which may generally be identified as describing the company's future plans, objectives or goals. We caution you not to place undue reliance on these forward-looking statements, which are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated or that we otherwise discuss today. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

For further information about the factors that could affect Meta's future results, please see the company's most recent annual and quarterly reports filed on Forms 10-K and 10-Q and its other filings with the Securities and Exchange Commission.

Forward-looking statements speak only as of the date on which they are made. Meta expressly disclaims any intent or obligation to update any forward-looking statements on behalf of the company or its subsidiaries, whether as a result of new information, changed circumstances, future events or for any other reason.

At this time, I would like to turn the call over to CEO, Tyler Haahr.

Thank you, Brittany, and thank you to everyone joining us on today's earnings call.

We're very pleased with the continued success of Meta's highly differentiated and diversified financial services model. As our teams work to expand their business, implement innovative programs for our partners and maintain rigorous discipline around risk management and underwriting, these efforts paid off in the third quarter.

Meta grew total loans, deposits, net interest income, noninterest income and revenue to new third quarter record levels. Compared to the same quarter of last year, Meta grew gross loans by 31%, net interest income by 14%, noninterest income by 8% and total revenue by more than 10%.

We reported GAAP earnings of $6.8 million, or $0.70 per diluted share, despite several meaningful charges that Glen will elaborate on further in his prepared remarks.

The third quarter earnings also reflect investments to support the continued growth of Meta. We recognize the need to balance these investments with appropriate management of noninterest expense. As we've said since earlier this year, we expect opportunities for accelerating operating leverage in Fiscal 2019 and even more so in Fiscal 2020.

As our teams continued to execute our organic growth strategy during the fiscal third quarter, we also made great progress toward closing the acquisition of national commercial lender, Crestmark Bancorp. During the fiscal third quarter, we obtained all necessary shareholder and bank regulatory approvals and expect to close the transaction on August 1, 2018.

We expect this strategic and transformational deal will provide Meta with access to Crestmark's national commercial lending platform, while offering complementary cross-selling opportunities for our existing commercial insurance premium finance division. We believe this deal will also provide further flexibility when it comes to managing the combined company's balance sheet, given that Crestmark has historically been fully funded by wholesale deposits and its loan are highly salable.

With the transaction expected to close next week, the Meta and Crestmark teams continue to work efficiently and effectively together to prepare for a seamless integration. I've been extremely pleased with how these integration efforts have progressed, as well as with the strong pipeline of opportunities we see in Crestmark's various loan categories.

Upon closing, one of the many outstanding Crestmark team members joining us will be Mick Goik. Mick has more than 25 years of banking and lending experience and rose through the ranks at Crestmark, through underwriting, credit, new business and new product development. He also served as Crestmark's Chief Financial Officer for 4 years before assuming his current role as Crestmark's President and Chief Operating Officer in 2012.

Since we first met Mick and over the last 7 months, in particular, his detailed understanding of Crestmark's national commercial lending business, people and commercial clients has impressed us greatly. After the transaction closes, Mick will be an executive vice president of MetaBank and president of Meta's new national commercial finance division, and we expect that Crestmark will be the foundation of that division.

We invited him to join us this afternoon in order to give you a very brief update on Crestmark as we approach next week's anticipated closing.

Thank you, Tyler, and good afternoon to everyone.

On behalf of the Crestmark family, we could not be more excited to be joining Meta and becoming a part of this innovative company. At Crestmark, we're proud to have built a long record of very profitable growth by making it our mission to help small and medium sized businesses. For most of the entrepreneurs and operators Crestmark serves, no matter their industry or geography, their business is their life's work, and our world revolves around helping them succeed.

On behalf of Crestmark, we believe our business and entrepreneurial culture are a solid match for Meta's. Crestmark's national commercial lending business should immediately benefit from Meta's significant low-cost funding capabilities, access to capital as well as its higher legal lending limits. We also believe this transaction will provide outstanding opportunities to share expertise and talent across the combined company.

Crestmark provides creative and flexible working capital solutions to a myriad of businesses who sell or provide services to other businesses through a variety of products. We pride ourselves on helping organizations access the working capital they need, no matter where they are in the business life cycle. From startups to turnarounds to mature enterprises and everything in between, Crestmark is well positioned to help them succeed.

At June 30, 2018, Crestmark's total loans and leases grew to approximately $1.065 billion, increasing 14% from balances at December 31, 2017. Yields on the gross loan and lease portfolio for the June quarter were approximately 12.6%. Crestmark's extensive offerings in asset-based lending, equipment financing, factoring and government-guaranteed lending provide diversified businesses from which we operate.

Asset-based lending provides a line of credit based on a company's eligible accounts receivable, inventory and machine and equipment. It offers greater availability than many other methods of financing and is a fast and cost-effective way to obtain working capital. At June 30, 2018, Crestmark's asset-based lending business had an aggregate loan balance of approximately $388 million.

Crestmark also offers factoring of receivables, which provides businesses with immediate cash to fund the day-to-day operations of the business. Many companies need cash flow to support seasonal demands, growth and more. As of June 30, 2018, Crestmark's factoring business had an aggregate loan balance of approximately $318 million.

Another business line Crestmark has been growing over the past 3 years is government-guaranteed loans, either through the SBA or USDA. This is one of the ways we have developed expertise in certain asset niches that are underserved. Crestmark is an SBA-preferred lender and has an experienced team dedicated to providing SBA loans. As of June 30, Crestmark's government-guaranteed loans had an aggregate balance of approximately $77 million.

Crestmark also provides flexible lease financing programs for most equipment types in today's market, ranging from IT hardware to yellow iron and everything in between. Crestmark equipment finance sales team works directly with businesses to create a fixed-rate leasing solution to acquire equipment from one or multiple manufacturers. Also a part of Crestmark equipment finance, we have Crestmark vendor finance, where our sales team works with various vendors throughout the United States to provide small-ticket leasing solutions to their customers. At June 30, 2018, Crestmark equipments leasing business had an aggregate balance of approximately $230 million.

In addition, Crestmark provides hospital-guaranteed consumer medical loans. This product offers patients flexible options to pay medical bills while providing healthcare organizations a consumer-friendly simple way to reduce bad debt and accelerate their cash flow. At June 30, Crestmark's patient loan business had an aggregate loan balance of approximately $52 million.

Over the past 5 years, Crestmark has also expanded into the sale-leaseback structure for solar and fuel cell projects that qualify for federal investment tax credits. Since its inception in late 2013, we have completed 20 deals totaling $60 million in project financing for alternative energy. Crestmark believes there is a good opportunity to significant grow this segment of the business.

Crestmark is pleased with its performance and growth across its national commercial lending platform. We look forward to joining forces with Meta and are excited for the opportunities ahead of us.

With that, I'll turn it back to Tyler.

Thank you, Mick. I'd like to add that we remain confident in the financial upside and growth opportunities of the combined companies that we laid out when the deal was originally announced. We continue to anticipate that the deal will be immediately accretive to 2018 earnings, excluding merger-related expenses.

Now to provide a brief update on our Payments and national consumer lending businesses, I'll now turn the call over to Meta's President, Brad Hanson.

Thanks, Tyler. During the third fiscal quarter, our team was successful in extending several third-party agreements, piloting 2 new consumer loan programs and hiring key resources in product development and loan operations while continuing our efforts to expand project management and software development capacity, consolidating systems and operations in our tax business and identifying key opportunities for cost savings and operational efficiencies throughout our shared services units.

Last month, we announced the extension of our net relationship with Global Cash Card through 2022. As part of our relationship with this leading provider of pay card solutions, we will begin supporting Wisely by ADP, a brand new pay card providing innovative financial management tools like instant pay and digital wallet.

In addition, we've negotiated extensions with 2 more long-standing relationships: 1 prepaid company and 1 company who uses virtual card technology to settle provider claims on behalf of health insurance companies.

We are very proud of the long-standing relationships we have with our partners and are working harder than ever to expand our capabilities and provide best-in-class sponsorship support to ensure continuity of these relationships long into the future.

We have announced 3 new national consumer lending programs since January of 2018 and launched 2 pilot programs during the fiscal third quarter: Liberty Lending and Health Credit Services, or HCS. MetaBank provides consumer loans to Liberty Lending customers to facilitate debt settlement, while loans marketed by HCS and their providers help consumers finance elective medical procedures.

In addition, we've negotiated a 3-year agreement with one of the nation's largest mortgage companies to originate up to $1 billion of consumer installment loans over the term of the contract. We expect this program to launch during fiscal fourth quarter.

The structure of these relationships leverages the marketing, servicing and financial strength of each party, allowing MetaBank to efficiently grow our consumer loan portfolio while maintaining strict control over underwriting, compliance and risk management. During the quarter, our national consumer lending platform had $27 million in originations from Liberty Lending and HCS programs. We expect to originate over $45 million in the fourth fiscal quarter from these 2 programs and up to a total of $2.5 billion over the next 3 years, including the new installment program mentioned earlier.

We believe that MetaBank has the capacity to scale, the sophisticated underwriting and decision science capabilities, the customer service resources and experience needed to create programs that address the needs of our partners and their consumers while mitigating risk, managing compliance and generating earnings.

In addition to this, we've -- Curo is a leader with 20 years' experience in providing short-term credit to underbanked consumers. We expect that later this quarter Curo and MetaBank will also be piloting an innovative new line of credit product designed to allow underbanked consumers to borrow with a flexible timeline for repayment, as well as controlling borrowing costs through transparent fees. In the first 3 years of this program, we expect Meta to hold up to $350 million in product receivables on our balance sheet.

As a reminder, new programs require startup costs, primarily in compensation, legal expense and loan loss provisioning during the ramp-up periods. This process also includes the financial modeling of various stress scenarios and severities to ensure appropriate credit enhancements are present. Accordingly, in order to generate future higher earnings each of the new agreements announced in Fiscal 2018 is expected to require meaningful upfront investments over the first 3 to 6 months of each program. We expect the onboarding and ramp-up of future programs to become more efficient as our resources and capabilities continue to expand.

As these programs ramp up and additional partnerships and programs are launched, we expect a significant increase in the volume of consumer credit products over time. Given the cycles of the loan products and the controlled manner in which we intend to grow originations, we continue to anticipate some positive earnings from these programs in Fiscal 2019 and more material benefits to earnings from these programs beginning in Fiscal 2020.

As the rush of another successful tax season dissipates, we have turned our attention to consolidating the technology platforms, operations and customer service functions of our 2 tax businesses. This effort also requires investment and significant use of project management and technology resources in the third quarter of Fiscal 2018 through the first quarter of Fiscal 2019. But the expected resulting synergies will mean simplification, consistent processes, better service quality, more effective compliance management and lower operating costs in 2019 and beyond.

Throughout the organization, we are working to eliminate operating silos, increase capacity by hiring experienced management talent, consolidating our operations, increasing training and looking for appropriate outsourcing opportunities throughout the company. New management is experienced in implementing agile transformation in large companies, and we have hired agile consultants to help us accelerate the process and expand our project management and software capacity.

We have also significantly improved our product development capabilities by expanding talent and hiring experienced team members to help us bring valuable solutions to market. These efforts are leading to improved partner relationships and creation of new revenue opportunities for the bank.

Once again, these efforts increase overhead in the short term, though we expect to see noticeable results in 2019, providing a more scalable platform to effectively manage increasing complexity, support long-term growth opportunities and the viability of our business.

Now I'd like to turn the call over to Glen Herrick, our CFO, to provide a brief review of our consolidated financials.

Thank you, Brad, and good afternoon, everyone. As you heard in previous comments, we are pleased with our core operating results in the third quarter of Fiscal 2018.

On a GAAP basis, we reported net income of $6.8 million in the third quarter, compared to $9.8 million in the prior year period.

Diluted earnings per share were $0.70 in the fiscal third quarter of 2018, compared to $1.04 in the fiscal third quarter of 2017. Reported earnings reflect some meaningful expenses recognized during the 2018 fiscal third quarter, including $3 million of initial provision expense associated with the previously disclosed notice of insolvency received for ReliaMax Surety, which insured our purchased student loan portfolios; $2.4 million of merger-related expenses; and an $800,000 expense related to the company's early termination of a vendor contract. In addition, GAAP earnings also included $1.7 million of amortization of intangible assets and $1.3 million of noncash executive officer compensation expense.

Importantly, we believe the student loan provision expense is not a reflection of the underlying asset quality in that portfolio. While we expect to ultimately recover a substantial portion of unearned insurance premiums, we cannot predict the timing and amounts of any such recovery. But it could easily take a year or longer and, thus, further provisioning may be required.

Absent any recoveries, we currently estimate additional provisioning of $600,000 to $750,000 in each of the next 5 quarters related to the insurer's insolvency on the student loan portfolio. The expected sources of recoveries include assets from the liquidation of ReliaMax, a state guarantee fund as well as other potential sources of recovery.

Looking at the top line, revenue grew 11% year-over-year and totaled $61.6 million for the third fiscal quarter.

Net interest income was $28.4 million in the fiscal third quarter of 2018, a 14% increase over the same period last year due to an improved interest-earning asset mix primarily driven by significant loan growth.

Net loans totaled $1.6 billion at June 30, 2018, an increase of 30% from a year prior. Growth was bolstered by a 31% increase in our commercial insurance premium finance portfolio and an increase of 25% in our community bank portfolio where commercial real estate continues to be particularly strong along with increases in consumer and residential mortgage loans.

The strength and discipline of our underwriting and risk management practices continues to be of utmost importance here at Meta. As such, we maintain very strong asset quality metrics in our third fiscal quarter. Nonperforming assets represented just 86 basis points of total assets at June 30, 2018. Outstanding NPAs were primarily related to a nonperforming agricultural loan relationship that we've discussed with you previously. We continue to expect to receive all principal, note interest and related expenses from that relationship.

Excluding the reserve increase related to the insolvency of ReliaMax, Meta's provision expense was $2.3 million in the third quarter of 2018, compared to $1.2 million in the third quarter of 2017.

Approximately $1.2 million of Meta's third quarter provision supports the growth of tax services lending during this past filing season. Taxpayer refund advance loans show continual repayment activity throughout the calendar year. So the charge-off period extends through December 31, 2018. Management views the overall 2018 tax season positively, given the loss of a significant tax partner that provided roughly half of the company's 2017 refund advance loans.

Turning to funding, we continue to view our growing low-cost core deposit base as a differentiator in the banking space, particularly in a rising-rate environment. While Meta's average cost of funds increased to 62 basis points in the fiscal third quarter, we maintained our advantage relative to the average cost of funds for similarly sized financial institutions.

Our cost of deposits during the quarter was 29 basis points and just 4 basis points excluding wholesale deposits. Increased funding costs reflect Meta's strategic utilization of wholesale deposits alongside Meta's large stable noninterest-bearing deposit base, compared to the same period last year, to support continued organic loan growth.

Meta's net interest margin was 3.23% in the fiscal third quarter of 2018 on a tax-equivalent basis. During the quarter, the company sold longer-term tax-exempt municipal securities and replaced them with floating-rate government-related asset-backed securities. We also reduced our overall level of securities in anticipation of the Crestmark closing and accelerating growth in consumer lending.

Because of this, we anticipate a slight decrease in overall investment portfolio yield for the fourth quarter of fiscal 2018 but expect to benefit in the quarters to follow, as short-term rates are expected to continue to increase. This decrease in the overall portfolio yield, in addition to seasonal increases in the prepayment speeds of the MBS and mortgage-related municipal portfolio, will likely result in a slightly lower NIM when excluding the effects of the pending Crestmark acquisition in the fourth fiscal quarter of 2018 and a slightly better relative NIM in the immediate succeeding quarters.

Noninterest income also continues to grow, expanding 8% year-over-year to $33.2 million. Income from refund transfer product fees in the quarter increased 27% year-over-year, in part due to payment processing timing as anticipated IRS delays flowed into April and shifted some of that revenue into our third quarter.

While deposit fees grew $1.1 million compared to the third fiscal quarter of last year, the increase was primarily related to a transition of some card fee income to deposit fee income. This income statement geography change also contributed to the slight decrease in card fee income. In addition, we do expect growth in card fee income to be moderated by declining residual fee income throughout Fiscal Year 2019.

I also wanted to comment briefly on Meta Capital, LLC, our corporate venture capital arm which we mentioned in our earnings release this quarter. This wholly owned subsidiary of MetaBank was formed in April of 2017 and established to help drive innovation by investing primarily in financial technology companies. We consider direct and indirect investments to complement or serve as an alternative to de novo and strategic M&A growth.

Through June 30, 2018, Meta Capital has invested a total of $5 million in early- to mid-stage financial technology companies, with an additional $500,000 in outstanding investment commitments. While not a material driver to our earnings, we have been pleased with the opportunities we have evaluated and, in some instances, pursued thus far and see further prospects to diversify investments in new and emerging technologies.

Total operating expense, excluding merger-related costs in Fiscal 2018 and 2017, was $46.7 million in the third quarter of this year, compared to $42 million in the same period last year. The year-over-year increase primarily reflects additional compensation costs, which are related to hires made to support our national consumer lending initiatives and the pending Crestmark acquisition and, to a lesser degree, to support other business line expansions.

As we continue to invest to support the growth of our company, we are focused on expense management wherever possible. For example, we are leveraging enhanced efficiencies in the tax space as we continue to integrate our tax divisions. Over all, we continue to expect opportunities for improved efficiencies in Fiscal 2019 and even more so in Fiscal 2020.

We believe our third quarter results leave us well positioned to deliver continued strong financial performance in the fourth fiscal quarter and beyond.

With that, I'll turn the call back over to Tyler for any closing comments before we take your questions.

Thank you, Glen, Mick and Brad, for your comments and participation today.

I continue to be extremely pleased with Meta's performance across the board and the meaningful contributions made by each of our business lines, from our annuity-like and high fee-generating tax services and Payments businesses to our national lending platform and community banking operations. We are in a very strong financial position with a much more diverse and growing suite of products and services that together help us achieve our vision of financial inclusion for everyone.

That concludes our prepared remarks. Brad, Glen and I will be available to answer any questions. Operator, please open the line for any questions.

(Operator Instructions) Our first question comes from Michael Perito, with KBW.

I wanted to maybe just get a quick update on the Crestmark deal. I appreciate all the color in the prepared remarks, but just curious if you could give us what the latest is on kind of, like, a good quarterly expense run rate to be assuming gets added in once the deal closes August 1.

I think a good metric would be to use what was disclosed in the merger proxy in the pro forma financials for that, along with some growth from those levels.

And I would say it's a little hard to pin down today given there's a fair amount that will be variable growth that will depend on how fast the loan portfolio and the opportunities to continue to grow once the 2 companies have come together.

I guess, how much of their expense is variable, like, depending on growth, et cetera?

We haven't disclosed that at this point. There's certainly a fair amount of fixed expense, but there's certainly some variable expense that come along with the different collateral classes of loans.

Okay. And then on the provision, you (inaudible) a few of the specific pieces. But if I'm just thinking about the whole here, how is it that -- there's obviously going to be probably a pretty big step up to where you've historically been just because of Crestmark, right? So how are you guys thinking about the reserve, which I know it moves around a bit? And then you have this deal coming on which is going to on a percentage basis just lower it even more, at least for the next 6 quarters before CECL kicks in. But I guess, what kind of provisioning, incremental provision rates, do you expect on the Crestmark portfolio as it continues to grow?

Well, the reserve levels now are -- what is that number, Glen? Is it (inaudible), something like that?

So it's a little over 1% now. And so again -- and the charge-up rates have historically been 57 basis points. That kind of gives you the rationale behind what we expect it to be.

Okay. And then just 1 last question for me, on net interest income. I think if we go back a year and a half, or so, I think that the thought was that you guys had a balance sheet that was well positioned for higher rates. It still kind of looks like that's the case. But NII really for the last 6 quarters, or so, has hovered in this $29 million to $31 million range. And I guess I'm curious, has -- obviously, the prepaid deposit base and some of the loans are all well positioned, but has the tax business kind of ate away the asset sensitivity of the company because of all the temporary funding that needs to come on? And I guess, is there any expectation for the margin and NII to kind of move up with rates, going forward? Or is that kind of the reality that we're in at this point?

So one of the things you've got to reflect back on is the tax act. So because we have the large muni portfolio. So the NIM this quarter was 3.23%. Without the tax act, it would have been 3.42%. So the NIM has gone up from where it was last year, again by, frankly, almost 20 basis points if you also factor in 2 or 3 basis points because we have more tax loans on the books at the end of the quarter.

So if the tax loans are 2 to 3 basis points and then, again, the tax act itself in round figures is another 21, 22 basis points, the NIM has actually gone up on an apples-to-apples basis, excluding the difference in the tax loans and excluding the tax act, has gone up from 3.25% to 3.45%.

And with Crestmark, obviously, with the much higher yields, we will have more wholesale funding, but again those are also very short loans in nature. So you saw the yields on the Crestmark portfolio go up from early in the year. So that will continue to drive it up.

Now I will say with our new higher legal lending limit, just like we saw with AFS, we will do some larger deals that -- probably, frankly, larger and higher quality deals, that while the stated interest rate will be a little lower than what they're getting on their current deals, the profitability will be roughly the same because there will be higher quality and lower administrative costs for doing bigger deals instead of smaller deals.

But yes, we still feel like there's opportunity for NIM to move up. Crestmark will add a lot to that. Frankly, the consumer lending that we will do will add a lot to that. And again, both of those are going to be very short term in nature. So when the front end of the curve moves up, it will move up the yields as well as some of the wholesale funding costs. So yes, we still think we have opportunity on the margin. And in fact, if you compare apples to apples, year-over-year we are up 20 basis points on the NIM.

Great. And as the Crestmark deal, it's still probably, I'm sure it moves around a bit, but somewhere north of 100 bps. It's all-in going to add to the margin once you get a full quarter's worth in there. Is that still kind of a decent number to be thinking about?

That's correct, Mike.

(Operator Instructions) Our next question comes from Steve Moss, with B. Riley FBR.

On the Crestmark acquisition here, just want to check loan balances. It kind of looks like it's about close to $1.1 billion if my math is correct for balances as of June 30?

That's correct.

Yes, it was $1.065 billion.

Okay. And so obviously growth has been strong. Could you just talk a little bit about the growth you're seeing there and how sustainable that is, going forward? Or will it slow down a little bit?

I think we put some guidance out there when we did the acquisition with the assumptions on the growth rates. We're very comfortable, as I said on the call, with the assumptions that we put in there, both with respect to the cost saves, the growth rates. We're not prepared to put higher numbers out there, but you're correct: they had a good first 6 months to the year.

Okay. Sounds good. And then with regard to the cost saves that you plan on in the tax business, could you just go into that a little further, maybe give some quants and timing on that?

Sure, Steve. I think we've been talking about actually since we've acquired the various tax divisions that our first goal is to make sure they operated smoothly through the upcoming tax seasons given the once-a-year shot at these businesses. But we also talked about we saw synergies in the future from combining platforms and technologies, how we go to market strategies, all the things you might consider around synergies.

That said, we're not yet prepared to provide guidance on specific numbers that will fall out of there, but hope to provide additional guidance or updates on that in our next quarterly conference call.

Okay. And then on the asset-backed loan that was disclosed in the press release, just kind of wondering what is the type of receivable that's being secured there and duration, if you could give a little color there.

Short-term consumer loan.

Low loan to value and with (inaudible).

And it's going to be, I guess, an -- it's an ongoing business that will be hanging around for hopefully a longer period of time than? Is that a fair way? Or is it just literally for the quarter? Kind of like timing.

No, it's on -- we're viewing this, frankly, as a way to enhance earnings while we are building up the existing portfolio of consumer loans. So again, we've talked about another program, another consumer lending program that we are going to be implementing this year. And so there are those upfront costs. We talked about that last quarter, $800,000 to $1 million as a proxy for the first 3 and, again, presumably something close to that for the one that we're announcing today.

So while we have the pilot program and the ramp-up, by putting that portfolio, which is, again, very well secured, significant credit enhancements and, again, we're the first-out deal, it puts significantly higher earning assets than securities on the books, in essence, to offset some of that startup cost associated with the consumer lending portfolios. As those continue to go up, we will continue -- that portfolio will continue to attrite over time.

Now that doesn't mean there might not be other portfolio opportunities that we might have, as well, but that individual portfolio was a portfolio purchased, again, that at this point is $65 million. And again, by buying that portfolio or potentially other portfolios, again, that would be something that would give us balance sheet flexibility, as well.

Thank you. And I am showing no further questions in the queue at this time. This concludes the question-and-answer session. I would now turn the call back over to CEO Tyler Haahr.

Thank you. And thank you to everyone who participated in Meta's quarterly investor call today. We're hard at work to deliver a strong finish to our 2018 fiscal year, including the close of our transformational acquisition of Crestmark in just a short while. I look forward to updating you again on our October investor call.

Thank you, again, and have a great evening.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude your program, and you may all disconnect. Everyone, have a great day.