Bancorp Inc (TBBK) 2018 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to The Bancorp's Fourth Quarter and Full Year 2018 Earnings Conference Call.

(Operator Instructions) As a reminder, today's conference call is being recorded.

I would now like to turn the call over to Mr. Andres Viroslav.

Sir, you may begin.

Thank you, Chelsea.

Good morning, and thank you for joining us today for The Bancorp's Fourth Quarter and Full Year 2018 Financial Results Conference Call.

On the call with me today are Damian Kozlowski, Chief Executive Officer; and Paul Frenkiel, our Chief Financial Officer.

This morning's call is being webcast on our website at www.thebancorp.com.

There will be a replay of the call beginning at approximately 12 p.m.

Eastern Time today.

The dial-in for the replay is (855) 859-2056 with a confirmation code of 1896377.

Before I turn the call over to Damian, I would like to remind everyone that when used in this conference call, the words believes, anticipates, expects and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated or suggested by such statements.

For further discussion of these risks and uncertainties, please see The Bancorp's filings with the SEC.

Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

The Bancorp undertakes no obligation to publicly release results of any revisions to forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Now I'd like to turn the call over to The Bancorp's Chief Executive Officer, Damian Kozlowski.

Damian?

Thank you, Andres.

Good morning, and thank you for joining us today.

This quarter capped a very important year for The Bancorp.

We moved the institution ahead on many fronts and created environment to innovate and create expanded client opportunities through new and enhanced products and services.

In the fourth quarter, Bancorp earned $0.13 a share on net revenue of $47 million, while total noninterest expense for the quarter was $38 million.

For the year, Bancorp reported GAAP earnings per share of $1.55.

Our CFO, Paul Frenkiel, will go into detail concerning our quarterly and yearly financials in a moment.

In 2018, we substantially completed the process started in 2016 to transform our run rate operating performance, derisk our institution and exit noncore activities.

I would like to highlight 5 of the major accomplishments and events for 2018 that will propel our organization forward in 2019.

Number one, our capital base is strong and supports our planned growth.

The company has grown the leverage ratio to over 10% from less than 8% at the end of 2017.

Our book value per share now stands at $7.22 compared to $5.81 at the end of 2017.

Two, asset quality has continued to improve with the reduction of noncore assets and discontinued Walnut Street.

The exposure has been reduced from $379 million to $257 million this year, a 32% reduction.

We will continue to pursue an aggressive strategy to retain and recover value in those portfolios.

Number three, earnings.

Continue to build with core revenue growth and the controlled expenses, even as we invest in new initiatives and platform reengineering.

For 2018, core revenue, which excludes gains and losses on securities of Walnut Street and onetime sales, increased 8% while expenses decreased 2%.

Four, the creation of new capabilities in 2018 will lead to an increased potential for revenue growth and we believe higher productivity in 2019 and beyond.

Our rapid funds payment capability utilizes the credit card network rails of Visa and MasterCard to facilitate disbursements and our proprietary to lay out automated lending platform are just 2 examples.

Both of these platforms will be significantly expanded and enhanced in 2019.

Number five, we completed the creation of our financial crimes center of excellence.

This provides the bank with an integrated and robust capability to meet BSA/AML requirements, but equally important, a scalable platform that supports the growth of volumes and new products and services.

In 2019, our strategic agenda is squarely focused on enhancing our ability to rapidly innovate in a safe and sound manner by building and strengthening our core capabilities.

Our team is very excited about the future potential of our organization with a common objective to innovate for our clients and create value for our shareholders and everyone in The Bancorp community.

I now turn the call over to Paul Frenkiel, our CFO, who will detail more about the first (sic) [fourth] quarter.

I

Thank you, Damian.

Net interest income for the fourth quarter increased $3.9 million compared to Q4 2017.

However, the quarter was impacted by several items, which decreased pretax and after-tax income.

The largest item was $1.3 million in legal and document production expenses related to the company's continued cooperation with an SEC investigation into the 2014 financial statement restatement.

In the quarter, the prepaid division incurred $672,000 of expenses related to the exit of one relationship and atypically wrote off $739,000 of its receivables.

Additionally, a valuation charge of $708,000 resulted from a single loan in Walnut Street, which represents the company's investment in the securitization of loans from its discontinued operations.

At December 31, 2018, the balance of the company's investment in that securitization, which we refer to as Walnut Street, amounted to $59.3 million, compared to $74.5 million at the prior year-end.

Service charges on deposit accounts were down from Q4 2017 by approximately $1.9 million, primarily as a result of the sale of the IRA portfolio in the third quarter.

Salary expense was $2.7 million higher during the quarter and reflected higher BSA, temporary employment and incentive compensation expense compared to Q4 2017.

Our goal for 2019 is to keep noninterest expense relatively flat from current levels and below $40 million per quarter.

Quarterly results reflected continuing revenue growth in Bancorp's major lending lines, with that growth led by respective 17% and 8% year-over-year increases in SBA and SBLOC loans.

The $3.9 million or 15% increase in net interest income reflected an increase in interest income on SBLOC of $2.4 million or 40% to $8.3 million.

Including loans held for sale, interest on SBA loans increased $1.8 million or 38% to $6.5 million.

Interest on loans held for sale into securitizations increased $300,000 to $3.6 million compared to Q4 2017 and was down from $4.7 million from third quarter '18 as a result of the most recent securitization.

We anticipate that first quarter 2019 will show an increase as loans continue to be originated for the next securitization planned for March 2019.

In addition to loan growth, the increase in net interest income reflected the impact of the Federal Reserve increases in 2018.

The positive impact to the most recent December increase should be realized in future quarters.

Approximate yields on the loan portfolio are 4.2% for SBLOC, 5.7% for SBA and 6% for leasing.

These lines of business have historically had low charge-offs.

Overall cost of funds grew 42 basis points to 87 basis points in fourth quarter 2018, compared to 45 basis points in fourth quarter 2017 and 83 basis points in Q3 2018.

Prepaid card deposits are our largest funding source and should continue to adjust to only a portion of future increases and market rates.

The net interest margin was 3.32% for the quarter compared to 3.11% in fourth quarter 2017 and 3.22% for third quarter 2018.

Compared to fourth quarter 2017, the yield on interest-earning assets and continuing operations increased 66 basis points, while as noted, the cost of funds increased 42 basis points.

Noninterest income on all payments-related fees, which consists of prepaid fees and ACH card and other payment fees, increased 2% over Q4 2017, after considering the impact of a $739,000 write-off in Q4 2018.

For full year 2018, total payment fees increased 6%.

Prepaid card accounts, our largest funding source, are also the primary driver of noninterest income.

Fee income on prepaid cards was $13.1 million in fourth quarter 2018.

And after consideration of the aforementioned write-off, was slightly below Q4 2017, reflecting timing differences in fees assessed and earned and changes in programs.

Card payment and ACH processing fees include the rapid funds revenue, which Damian discussed earlier, and increased 38% to $2.4 million.

Gross dollar volume, which is the total amount spent on cards, increased 23% over fourth quarter 2017.

After adjustment for a $672,000 prepaid exit expense, noninterest expense for fourth quarter 2018 was $36.9 million or 2% higher than fourth quarter 2017.

Additional expense reduction opportunities in various categories continued to be pursued.

As a result of our 2018 earnings, including the gain on the IRA sale, the consolidated leverage ratio increased over 10% and book value per share increased to $7.22.

Our increased capital provides a solid base from which to conduct our operations and take advantage of opportunities in our lending and payments space.

Our goal for 2019 is to significantly increase loan growth over 2018 levels through initiatives which are specific to each lending line.

Net interest income will also benefit by the most recent December rate hike.

Our goal for payments revenue is to achieve at least mid-single-digit growth.

We anticipate that in 2019, FDIC insurance rates will be lower as a result of the impact of higher capital levels on those rates.

The overall goal for 2019 noninterest expense is to keep those expenses, in total, relatively flat.

The combination of flat noninterest expense against higher loan interest from lending lines, which have historically low losses and growing payments revenue, will be key in achieving our return on asset goals.

Our short term return on asset goal is 1.2%, with a multiyear objective of 1.75% as presented on Bancorp's website.

Excluding the $48 million tax effected gain on IRA sale, ROA was 0.95% and ROE was 11.1% in 2018.

That include -- that concludes my comments, and I will turn the call back to Damian for questions.

Okay, operator, would you please open the line for questions?

(Operator Instructions) And our first question comes from the line of William Wallace with Raymond James.

Maybe let's start with the prepaid relationship that you exited that resulted in some excess expense and some write-downs of receivables.

Can you talk a little bit about the nature of this exit?

Why there was expense associated?

And why those write-down of receivables?

Yes.

The program wasn't successful.

So it was a program that -- we have over 100 programs.

And depending on their own business proposition, in the FinTech space especially, some will be successful and some won't.

And so we do try to work with them because they do have clients of the bank on it over long periods of time.

But at the end of the day, this program was not successful in getting the client -- profitable clients that they needed.

Therefore, we concluded the relationship and shut down the program.

When you do that, and it has happened very seldom over the last 5 years for this company, when you do that, sometimes you have to incur expenses in order to close it down in an orderly way.

And that's exactly what happened.

We also had to take -- work out accrual of revenue that was due us in order to close it down in an orderly fashion.

This was not a big client to us, but you have to take the steps necessary in order to make sure everything is done properly.

So just to make sure I understand, so the write-off of receivables, that was revenue that had been booked in prior periods?

Yes.

So it's actually -- yes, in fairly recent periods.

Okay.

And then what is the nature of the expense that's associated with closing a program?

Well, there are shutdown expenses in terms of indirect and direct expenses.

Those were expenses that they pay us through our providers.

So we have other providers.

So that expense is things that they hadn't paid us.

That what -- that's what triggered a review of this over the last 6 months, where it was clear -- we look at each of our programs to see if there -- the financial stability.

But in this space, too, you've got a lot of money raising going on across all these programs.

Some of these are start-ups.

So you've got to work with them in order to make sure your client's protected, the people who have deposits on our bank.

And if you -- this seldom happens to us.

This hasn't happened since I've been here.

Sometimes when you think that the best thing is to incur the expense and not go into litigation or something, just shut the program down.

That's what we did in this case.

Okay.

So your mid-single-digit target for growth in the prepaid revenue line, what kind of GDP growth does that assume?

Yes, so we're -- we want the -- see, this is very hard to predict.

So last year, if you look at the fourth quarter, we had an incredibly good fourth quarter on fee income.

However, the GDP growth did not grow as much.

This quarter, we had tremendous growth in GDP.

That's usually a good sign for fees.

We have so many different programs.

We want at least to have 5% growth from the prepaid side.

So when you look at the prepaid and all the payment activities, we still want high single-digit growth from the whole envelope of activities of payments, which we think we will get from both the ACH side, the solution side and the prepaid side.

So I think we'll -- we're still targeting that GDP growth over 10% and the fee growth just below 10% for 2019.

Okay.

Right.

And then on the ACH side, I did notice that the growth in that line, it slowed a little bit in the quarter.

Is there seasonality in that business?

Or how should we think about that?

Because that's been a pretty good grower this year.

Well, there's 2 -- well, it's over a much bigger base, of course.

So -- and it's primarily through one program through that Venmo program.

So there's 2 -- when I talk about enhancing that platform, today we do it only indirect, which means our partner, a big company like a PayPal, needs to integrate the platform, okay, with the Visa rails or the MasterCard rails.

Now what's happening for 2019 is that we're doing the direct model, so we haven't even rolled that out.

That will be rolled out over the next year, and we're going to do it in 5 different industries.

Let me -- there's a big difference between the two.

When we do it in the direct way, we're actually the integrating force with a processing company so that we can go direct to companies, and they don't have to integrate themselves into the Visa rails.

It's a big deal.

So there is a -- while there's only a few Venmos in the world that could actually do the integration on the indirect route, on the direct route, we literally open up that product to everybody who wants to issue payments, any company in the world because we're doing the integration into the rails with a partner.

So that's -- that when I say we're going to greatly expand that, that's what we mean by that for that product, that rapid funds product, payment product.

And so -- I mean, do you think that, that could continue to drive growth in '19 and '20 and maybe even into '21 at levels?

Yes.

We can't give you guidance because the pricing is -- there's -- the market is so much larger, and the pricing is very different.

The pricing is quite, quite -- when we're not the integrator, the pricing is really up to the big person with all the pricing power.

When we're the integrator, it totally changes because payment companies that are issuing large payments are -- have a different price sensitivity.

So it all depends on what the use case is.

Each use case is different in each industry, so that's what we're doing in 2019.

We'll see it if it -- I can't give guidance because we -- we're not even sure what the potential is.

Of course, we have our idea of what it is, but that should continue to drive that side of the business quite substantially for the next few years.

So...

Okay.

Good.

Shifting gears a little bit to the expense line.

You called out $1.3 million in legal related to the SEC investigation.

Is that $1.3 million -- how does that compare to the last quarter and maybe the first half of the year relative to this quarter?

Unfortunately -- Yes.

It's not a consistent number.

It can vary.

So I don't...

So the last quarter, it was nothing?

No, we -- it's been relatively significant in each quarter.

I'm going to -- if you look at our Qs and our Ks, we talk about that in the legal expense, but we actually have some of the expense in other -- in another category.

So I'm going to put that in the 10-K.

I'm going to break that out and give more detail.

Yes.

That's one of the areas.

We have a bunch of areas where we think we can maintain flat expenses.

From FDIC insurance, this is another area.

We don't -- we believe we're at the end of many of these processes.

So we don't think the expense will be -- well, this is, of course, up to the investigators, but we believe that expense will be trailing off in 2019.

So that will be one of the sources of our ability to invest in the business and control expenses.

That's why we think we can keep -- depending on revenue growth, I want to have 10% spread between revenue and expense growth.

So we're able to do that this year, which was a big deal.

We had 8% continuing revenue growth and then we had 2% lower on expenses.

We'd love to be able to continue to do that.

If I do that next year, I'd rather have 8 negative 2 than 10 and 5. I just would.

I mean, that's -- and I think we're going to do -- I think we're going to have more like -- I think we'll be over 10 revenue growth, and I think we'll be a few percentage in expense growth or flat if we get less than that for 2019.

Okay.

Yes.

Because Paul said in the prepared remarks, I believe, averaging less than $40 million a quarter is your target.

Relatively flat.

When we say relatively flat, we mean as a proportion of revenue.

So we're very cognizant.

We do have ability to -- we do have a lot of investment going into the business in 2019 and still we think we'll be -- we can keep it to 0% if we need to by pulling some of those back depending on the -- we see the revenue growth.

So we all get the revenue growth.

It could be 150.

If you get the revenue growth, you'd hope it end up around 160.

Is that a fair way of categorizing what you're saying?

We want the spread to be 10.

So we were able to get to 10 this year.

With all the onetimers, the revaluation of certain Walnut Street, we were able to keep ourselves to a good spread.

We want to continue.

As those things fall away, that's the last noncore thing we do, are the discontinued Walnut Street.

We want to maintain the discipline.

We think we can do it for the next 3 years of this, what is an unlikely spread in the banking industry of this 10%.

And we still believe we have the room to do that at least for the next couple of years.

Depending on the revenue growth, if you get too much revenue growth, of course, you have to -- it will -- it could lead to an expansion of expenses if there's significant amount of revenue potential.

But the last thing we want is 20% revenue growth 1 year and 15% expense growth because you're probably not going to get 20% revenue growth the next year, but you're going to have the 15% expenses.

So that's what a lot of companies do.

We don't want to do that.

We're in the process of reengineering almost every part of our company.

We really want to set this up to be of much higher value in 2 to 3 years rather than worrying about quarter-over-quarter.

We're just maintaining expense discipline, depending on the revenue growth.

Okay.

My last question, and I'll hop out and let somebody else ask.

As far as the -- your SBA businesses, with the SBA not processing applications, can you talk a little bit about the impact to you guys and how we should think about the mechanics of that?

I assume you continue to take that -- take applications and process them, but you just have to wait until they open back up to submit them into the similar balance sheet can...

Yes, exactly right.

And we have deals that can be funded, so we're waiting for the door to open again.

We've had no lessening of the pipeline, and so we have deals stacking up, ready to approve.

We have about 4 deals that we could execute on, we believe, if we have to if this turned into a multi-month.

But otherwise, it will impact the business.

If this continued 6 months, of course, it will impact the business.

Luckily, it's, as you know, a small percentage of our sources of revenue.

So it wouldn't have a devastating impact on the whole company, but we want to keep them -- we've had very good momentum in 2018 building out parts of that business.

The last thing we want is that to be lessened.

But it's -- if it's 30 more days, it should be fine.

If it's 60 more days, maybe it's going to start impacting the growth of the portfolio a little bit.

But as of yet, it has not impacted the business.

So as you know, premiums on the SBA market, all those things, if we hadn't -- we keep those things on our balance sheet and it has impacted large and small players in the SBA market for various reasons.

Right.

But you guys balance sheet everything, so the premiums don't impact you at all, right?

I mean, you're not clear about the premiums.

Okay.

Well, we (inaudible) the data and we would, but we don't.

And our next question comes from the line of Frank Schiraldi with Sandler O'Neill.

Just first, Damian, on the rapid funds business.

Sounds like -- I mean, is it fair to say that the direct business that you're building out is more of a 2020 revenue event?

Or is it going to start picking up, you think, in -- are you going to see -- could you see meaningful revenues in 2019 from that?

Yes.

We could see meaningful -- we're ready to go to market, and what we want to do is set the platform up.

So we're trying to get 5 use cases in different industries for 2019 throughout the year, and that could result in significant revenue.

We just don't have any guidance on it because when you go to market with something like this, the adaption of it, we think there's real benefits of it, and the pricing haven't all been worked out.

But it could be meaningful contributor to the company over a very short period of time.

But 2020, it should be -- it will be totally set up and should be -- we should be having multiple partners and be able to expand at a greater rate.

I mean, it just seems like the addressable market, right, that you point to is just so much larger.

You don't have to rely -- I mean, Venmo is a big player, but you don't have to rely on one player.

And there's a lot of different uses.

So I mean, would you hazard a guess that this would be a bigger overall revenue generator than the rapid funds -- the indirect business?

Does that make sense?

Well, yes.

The indirect, there's only a few players that -- you've got to remember they -- you have to be a big sophisticated players to do the integration.

So if we're doing that with a partner ourselves, that's a huge difference, right?

Because many people wouldn't be able to get access to those -- to that process, unless there is somebody like us.

So the potential is enormous.

Whether we are able to execute on the potential, we'll find out during 2019.

We just don't have any guidance as to -- and if we don't think that, that potential will play out, we'll report it back to you and let you know.

But we think this is -- the market is, I don't know, it's enormously larger.

And it's -- the pricing could be very different, so -- but that has to be proved out -- that concept has to be proved out as we go to market with -- we already have beta type of things set up for testing this so we're far down the lane -- the road.

Okay.

And then just in the business -- the indirect business, I guess, Venmo seems like the primary partner there for you.

Is that -- do you have visibility now into that partnership where you can say that you think the growth rate in that line item is a reasonable expectation of what we'll see with the indirect business in the near term here?

Or is that still ramping up significantly, do you think?

Yes, I don't have visibility.

It totally depends on what their strategy is for that product and everything.

The -- it's -- I think you can look at the fees over the last couple of years.

And it's off a much bigger base.

This started with practically no fees 1.5 years ago.

So I don't have visibility on that.

I think we'll continue to support that product, but changes in programs happen.

It could happen.

But we're not waiting around, and we're not waiting for another big partner.

So we think the direct is by and far, the much larger opportunity.

So I think the future growth of that product would be dwarfed by that opportunity, but we don't know.

Totally honestly, we don't know yet as to what will come of that.

We don't have -- it's not like a lending portfolio.

We have to really get into the market and prove out the concept.

We think it will -- everything we know about the payments industry, it should be substantial, but we don't have guidance on that as of yet.

Okay.

And then just on deposit costs.

If you know -- if you look at the demand and interest checking line, deposit costs were up 11 basis points linked quarter, which makes perfect sense from what you guys, I think, have talked about 40% to 50% betas around there.

I just want to confirm with you now.

If through -- obviously, we got the one in December, but through the rest of 2019, if we don't see the Fed -- if we don't see any additional Fed hikes, is it reasonable to think that those betas are basically -- have all gone through at this point and they're going to be essentially 0 in light of no rate hikes?

Yes, so we'll have a slight uptick, but it will be to our net benefit in net interest margin, but we will have a slight uptick from the last one in December.

But yes, generally, I would characteristic that -- I would characterize that conclusion as accurate.

There are mixes in deposits.

There are changes in the balances of individual programs.

And remember, we have a large number of programs that are key to different rates.

So you could see some changes.

But as of right now, we're not really expecting big changes.

You'll get the CD repricing happening with pretty much every other bank our size over the next year and that will change obviously their funding costs.

That's just not going to happen with us since we have no CDs.

But -- you're going to get that -- you definitely will have a lag in banking on funding cost over the next year.

We're just not going to have that.

Right.

I mean, your partners, I mean, it's contractual.

So you don't have people coming to you and saying, "Well, there is going to be a little bit more."

Yes.

There will be a little bit more from the lag from when the last increase was.

But with the current market conditions and stuff, maybe the Fed -- I -- there's a great disparity of opinion as to what the Fed will do this year.

There's a lot of ambiguity whether they will raise a couple of times or they won't.

So even some people are predicting lowering the rate, I don't think that will happen, but you just don't know.

Right.

Okay.

And then just, finally, just on the -- just for modeling purposes, just on the comp line.

Paul, you mentioned some of the reasons for comp being up year-over-year.

What was the greatest driver of comp linked quarter?

If I pull out the variable costs -- of variable comp, I should say, related to the gain on the securitization, it seems to me that comp was still up linked quarter.

I'm just wondering what was sort of the biggest driver there, if you can give that.

I -- we do give some detail in the 10-K.

I don't really -- I did review the changes and so forth.

They're in a number of categories, but I'd rather wait to the 10-K, so I'm going to put you off on that one.

Okay.

But is that a fair -- is it fair to say that ex that variable rate comp that comp was up significantly linked quarter?

Or am I wrong?

Comp has -- yes.

Comp has increased.

Not that dramatically.

But not that dramatically.

And the way we look at it is that, in terms of your model, you're probably better off looking at it the way we do, which is total noninterest expense.

So there's some interplay between the salary expense and other expense categories.

So in our management, the way we manage expenses can have an impact on salaries.

So salaries might go down, but other expenses go up.

So we look at it as total noninterest expense.

That's what I would focus on.

So we -- you can see like -- things like our processing, there's been some dramatic decreases in several of those categories and part of that is to really make sure that we're managing the total pie.

And our next question comes from the line of Matthew Breese with Piper Jaffray.

I wanted to focus on the ACH line item.

Not to beat a dead horse here and just understanding the components behind it.

So the $2.4 million of revenues this quarter, I'm assuming that it was based on gross dollar volume and some margin behind that.

Is that correct?

The $2.4 million is a function of the rapid funds transfer income, and that's been the main driver of the increase.

It also includes our other ACH.

The second-biggest driver is our ACH income, where we process large volumes of ACHs for companies, for instance payroll companies is the largest and bill payment companies.

So it's really a function contractually set with various -- and each contract is different.

So you can't really -- and because of the rapidly changing character of the rapid funds income, you can't -- it's very similar to the prepaid when you try to establish a relationship between gross dollar volume and apply a percentage against that and relate that to income.

It really depends on the individual contracts.

I think, as Damian said, you really have to look at that income really year-over-year, gives you the best idea of how you should treat that in your model.

Okay.

And then maybe just turning to the loans held for sale.

It was a pretty sizable increase this quarter.

And I think you said that there's going to be some growth there into March before the next securitization.

So just from a dollar's perspective, it looks bigger than usual.

And with that, should we expect a larger-than-usual securitization gain?

Well, the securitization will be larger.

We've been running 3, 3.25 on the securitizations.

These are small for -- they're actually of a small size.

It's kind of a starter size for these type of securitizations for institutional investors.

It's going to be larger.

We don't know how much larger.

It doesn't necessarily mean the gain will be larger though.

So we really have to see how that plays out in the first quarter.

It's -- we probably will have a larger securitization, but we just don't know yet, and that will happen at the end of March.

And we can't give you guidance on the gain because once again, the gain is really the result of spreads in the marketplace, levels that are set by rating agencies, the expenses of each securitization.

So it will be driven by the size and where the market is at the point where this is -- was issued from the securitization trust.

So...

Okay.

And you said it will be at the end of March.

So is that to say that the gain will be in the first quarter?

Or will it bleed into the second?

It will be first quarter.

We're planning to have at end of -- so you'll get the full interest.

So we're at a high level now.

So you'll get that full interest income for the first quarter.

I think after the first quarter, it will set the model for you for the rest of the year, so you'll have another securitization probably at the end of September like we've done last year.

We tend -- because of the way the market is set, we'll go for -- instead of having 3 securitizations and have to incur the expense 3 times of actually doing the securitization, we'll have 2 larger, which are more compatible with how the market wants it to be with more diversity of individual loans and then larger dollar amounts for institutional investors and our other partners.

So I think we'll -- I think the first quarter will set where we're targeting for the second securitization, too.

And that will give you a very good idea as to the spread revenue, too, that will be generated from the building of that loan book to the end of the third quarter.

Okay.

Last one.

Just on the savings and money market line item, it was down quite a bit this quarter.

What happened there?

Was it tied to the exit of the prepaid relationship?

No, it was actually the sale of the Safe Harbor in the third quarter.

Yes, so there were 2 -- yes, we lost those deposits.

We actually -- we had 0 borrowings at the end of it.

We actually replaced the deposits through other means, not at a very high rate, which was lucky, through the rest of our business.

So the liquidity -- it didn't impact liquidity at all, but what it does is we lost those deposits from Safe Harbor and we lost the fees.

So if you look at our line, we lost the fees.

You can see our fees down from that business year-over-year.

I think we're going to have no problem replacing it, but it does have a near term, like we said before, it would have a fourth quarter impact or a near-term impact on our financials, and it did have a slight impact.

And the onetime items made it a little noisy, too.

So...

Okay.

No, I'm sorry.

Just one more.

If you could just give us updates on where you stand on the consent orders, the SEC investigation and then on the mall sale as well?

Okay, the mall sale, we're working with 2 individuals who have plans for that property.

So we're trying to -- the complexity, as I said before, there's a ground lease and there's someone who owns the ground lease and we own the mall.

So we're trying to work with all the parties to get something done.

Really good for the Orlando community.

We have our business down there.

It's right adjacent to the mall.

So we're trying to work with every -- all the constituencies to get our money back, but also to do something nice for the community.

We think it's our responsibility.

And we said we would participate in if we can get the right deal, I think it would actually earn us money.

But we're trying to do the right thing for the -- for Orlando, but also right thing to get our money back.

But I think we'll resolve it.

Sooner or later, we're still income positive on the mall, so it's not a drag today on our income or anything, we take small gains every once in a while.

What was the second?

I'm sorry.

[I think that's I'm looking 2 months] -- yes?

The consent order?

Okay.

So we've made -- obviously, if you look at our financials and you look at our capital levels and earnings, we've made just tremendous progress.

So usually, as you -- when you have a company that was underperforming like we were with centers of risks, like whether it was the -- the asked quality questions around discontinued and everything.

There's a process you go through to make yourself safe and sound.

The last part of that is usually if you had an order, an informal or formal order, a consent order, anything like that, that's usually the end of the process.

So I think we've made tremendous progress.

We set up the center of excellence here in Wilmington, and that's made, I think, a world of difference on the way -- you have to ask them, but the regulators view our ability to not only meet the guidelines, but also sustain a growing business.

So I think whether they remove the consent order now or 6 months from now or next time they come in to examine us, I can't speak to that.

I know it's not -- I would like it.

Obviously, I don't want it there.

It's not -- I don't think it's substantially impacting our business.

It makes it a little clumsy to go into new product areas.

But I think we're clearly in a very different place than we were last year and a dramatically different place than we were 2 years ago.

So it's part of the process of making the bank stronger.

If you look at the bank in its entirety and you think about what's happened in the marketplace, I think you go back to last year and 2 years ago, and you say banks are actually in a worse shape than they were.

They're less stable because of interest rates because of some of the concentrations in real estate and business finance, et cetera, et cetera.

And you look at our business.

And you can actually say, we're much stronger than we were a year ago or 2 years ago.

We have a long-term model that we think is sustainable.

We're not a one-trick pony and one business line or one area.

And we're continuing to diversify our product set.

So I think we're much stronger than we were last year, and I think that we have -- we're not going to be affected as much by the current market conditions.

And I think we still have substantial growth opportunities that will be realized.

Thank you.

I'm showing no further questions at this time.

I would now like to turn the call back to Mr. Damian Kozlowski for closing remarks.

I would like to thank everyone for joining us today.

We're really looking forward to 2019.

We're going to be investing a lot in the business.

We think we -- while doing that, we can really maintain our expense discipline, and we will adjust if necessary in order -- with our revenue in order to maintain the increase in margins.

So I look forward to talking to you at the end of the first quarter.

And thank you for joining us today.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude the program.

You may all disconnect.

Everyone, have a great day.