Bancorp Inc (TBBK) 2019 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to The Bancorp First Quarter 2019 Earnings Conference Call.

(Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Mr. Andres Viroslav.

Sir, you may begin.

Thank you, Bridget.

Good morning and thank you for joining us today for The Bancorp's First Quarter 2019 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 1496107.

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 the results of any revisions to the 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.

For the first quarter of 2019, The Bancorp earned $0.32 a share on revenue of $64 million and expenses of $39 million.

Per share earnings grew 27% over the first quarter of 2018, reflecting an increase in revenue of 9%, while expenses remained approximately flat.

Net interest income improved to $34 million from $30 million year-over-year.

Reflecting this increase, the net interest margin improved to 3.41% from 3.12% year-over-year and 3.32% quarter-over-quarter.

Annualized ROE for the quarter was 17.3%, while the Tier 1 leverage ratio was maintained at approximately 10%.

In 2018, we sold our Safe Harbor IRA business that generated approximately $1.5 million in fees in the first quarter of 2018.

Excluding that impact, revenue was up 12% year-over-year with non-interest income climbing 10%.

Non-interest income reflected a significant improvement in year-over-year GDV growth from our payments business.

Year-over-year GDV grew 26% and prepaid fees increased 13%.

Volume increases came not only from our prepaid and debit programs, but also our Rapid Funds Push to Card partners.

ACH card and other payment processing fees increased 36% to $2.3 million, reflecting Rapid Funds growth.

In addition, net interest income growth was led by our CRE securitization business, for which average quarterly balances grew 51% year-over-year.

Our nonpurpose security binding activities and SBA period-end balances grew 4% and 16% year-over-year, respectively.

It also contributed significantly to net interest income growth.

We also realized an approximate $11 million gain on a first quarter securitization of approximately $518 million of CRE floating rate assets.

This was our largest securitization to-date, and the significant gain was driven by better deal economics due to size, offsetting some deterioration in market spreads.

Looking forward, our strategic agenda for 2019 encompasses 9 items that should further position our institution for revenue growth and profitability.

Most of the initiatives focus on new products or the re-engineering of our platform to be best-in-class and highly efficient.

Our other strategic initiatives include finishing our remediation process with our regulators and building a stronger community with all our Bancorp partners.

Impacts from these initiatives should mostly be felt in increased revenue growth as expenses remain rigorously managed, while re-engineering has improved productivity and reduced unit costs in many areas.

I now turn the call over to Paul Frenkiel, our CFO, who will detail more about the first quarter.

Thank you, Damian.

A 27% increase in year-over-year net income to $17.9 million from $14.1 million reflected an increase of $3.9 million in net interest income.

The increase reflected continuing growth in Bancorp's largest lending lines including CRE loans originated for securitization.

Average CRE loan balances, which peak in the quarter they are securitized, increased approximately $184 million or 51% to $546 million.

As a result of the related increase in originations, Bancorp securitized $518 million of loans in Q1 2019 compared to $304 million in Q1 2018.

The 2019 securitization gains were approximately $11 million, which slightly exceeded in 2018 as a result of higher spreads at that time.

Growth in other lending lines reflected respective 4% and 16% increases over prior year balances for SBLOC and SBA loans.

The $3.9 million or 13% increase in net interest income to $34 million reflected an increase in interest income on commercial real estate loans for securitization of $3.3 million to $8.6 million.

Interest on SBLOCs increased $2.2 million to $8.6 million, and interest on SBA loans increased $1.4 million to $6.6 million.

We anticipate that second quarter 2019 will show a decrease in CRE interest income as securitized loans are replaced with new originations for the next securitization.

That securitization is planned for September 2019.

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

Approximate yields on the loan portfolios were 4.4% for SBLOC, 5.6% for SBA, and 6.3% for leasing.

While the yield on CRE loans originated for securitization has recently approximated 5.9%, that yield varies with market spreads and timing of securitizations.

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

Overall cost of funds increased 46 basis points to 98 basis points in Q1 2019 compared to 52 basis points in Q1 2018 and 87 basis points in Q4 2018.

The increase reflected the impact of the Federal Reserve's 2018 rate increases.

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

The net interest margin was 3.41% for the quarter compared to 3.12% in Q1 2018 and 3.32% for fourth quarter 2018.

Compared to Q1 2018, the yield on interest-earning assets in continuing operations increased 74 basis points, while as noted, the cost of funds increased 46 basis points.

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

Fee income on prepaid cards was $16.2 million in Q1 2019 compared to $14.3 million in Q1 2018.

Card payment and ACH processing fees include Rapid Funds revenue and increased 36% to $2.3 million.

Non-interest expense for first quarter 2019 was $39.2 million, which approximated first quarter 2018.

Salary expense was $2.8 million higher during the quarter and reflected higher BSA and compliance, commercial real estate, institutional and incentive compensation expense compared to Q1 2018.

That increase was largely offset by reductions in legal, data processing and other expenses.

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

Additional expense reduction opportunities in other categories continue to be pursued.

Book value per share increased to $7.70, primarily reflecting the $0.32 of earnings per share and the increased value of investment securities resulting from lower longer-term market interest rates.

The consolidated leverage ratio was maintained at approximately 10% notwithstanding seasonal balance sheet increases from first quarter tax refund and gift card balances.

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 balances over 2018 levels through initiatives which are specific to each lending line.

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

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

The combination of flat non-interest expense, higher loan interest from lending lines with 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 multi-year objective of 1.75% as presented on Bancorp's website.

Q1 2019 return on assets was 1.65%, reflecting the impact of CRE loans originated for securitization.

Their impact on net interest income and non-interest income is greatest in the quarter these loans are securitized as average balances peak and any gains are recognized.

These securitizations have occurred in the first and third quarters of the year with the next securitization planned for September 2019.

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

Okay, thanks a lot, Paul.

Operator, could you open the line for questions?

(Operator Instructions) Our first question comes from the line of Frank Schiraldi with Sandler O'Neill.

Just want to ask about the -- couple of things.

First on the Rapid Funds product.

Obviously, very strong growth year-over-year.

Is that more seasonal in nature?

Or have we just reached sort of a level where -- kind of a more mature level of -- with the current partners you have in terms of revenues?

Yes, we do have 1 new partner, but the indirect Rapid Funds product really can only be done by very large institutions that can't integrate into networks -- the credit card networks.

But the big news for that is direct Rapid Funds, which I've noted before, which we're building out.

And should have this -- we don't know what that impact will be, but that market is many multiples the size and that's when we are the -- with a partner, we are the people integrate into the network.

And so we right now have beta tests going on.

We think that's going to be a significant growing product set for us that will far in -- surpass what we do with on the indirect, but we don't have any guidance yet.

We're still in the -- we're trying to get 5 use cases, we have 4 partners now, we have beta testing going on.

And we think that will -- we don't have any guidance for it, but we think that will be -- increase growth in that area.

But the indirect is correct.

You're seeing now that we have several big partners, you're having normal growth from them, instead of explosive growth we experienced 2 years ago.

We have 1 additional partner that we've added.

So you'll see growth, but you won't see it 5,000%, because it's off a much larger base.

But once again, that's just a drop in a -- that's 1 drop in a very large bucket for the Rapid Funds product once you go to the direct side.

And for that business, do you guys have the barrier to entry of [Durban]?

I mean, is it based on interchange rates to direct transfer?

No, it's not.

It's a push.

It's literally a product that was developed, really by the networks themselves, where the use case was just not accepted until very recently, 2 years ago.

But it was -- it existed for multiple years at places like MasterCard.

But it wasn't -- these Push To Cards weren't accepted by the banking institutions.

So now this is more of a standard product.

So there isn't a barrier to entry, but obviously, the first mover in this space, and having the largest partners, there really is a value in that as people add -- people don't want to experiment with somebody.

Obviously, if someone is going to join Push To Card, they're going to want people with experience who understand how to do that.

So it's the direct side, though, that has a real large potential for the future.

And that's more of a -- in terms of revenue, is more of a 2020 or is that a 2019 story?

I think we'll start seeing some of that revenue -- I just really don't have guidance.

I think we'll see some of that revenue at the end of 2019.

But that's more of a -- I think we'll have more guidance in 2019 about it at the end of the year, once we develop all the use cases.

And we'll understand better the pricing.

The pricing is much higher on the direct side, because we really control -- the disbursements can be very, very large.

If you're looking at a Venmo product, the Push To Card might be $5.

But with disbursements -- corporate disbursements and stuff, you could be paying a $1 million bill, a $10,000 bill.

So the pricing of these transactions are very different.

And so we -- once again, that's a great -- we have -- we don't have an outlook, but we have a lot of encouragement that this will be a good source of revenue for the future.

Okay, good.

And then do you guys have handy the expenses that were tied to the securitization in terms of the variable comp?

Yes, so we -- it depends on -- we have a formula, and we've said this before, based on 2 parts of these transactions.

It's a market-based spread, based on the loans we hold, but then, there's a calculation that we do.

It's a subjective calculation.

It's quantitative, but it's within our discretion.

And it's based on the gain.

And we accrue fully for that as we go through the year.

So we put in approximately -- relating to that, we put about $3 million additionally into our bonus accrual for the first quarter.

But that $3 million -- okay, so that $3 million was expensed in the first quarter or it will go through the year?

No, it was -- we're having a bonus accrual that runs the entire year, but we put $3 million extra into the bonus accrual related to the securitization activities in the first quarter.

Got you, okay.

And then just finally, I know there can be some disconnect, there seemed like a pretty -- a really big disconnect this quarter between GDV -- gross dollar volume, growth year-over-year and prepaid card growth year-over-year.

So is there any sort of color you can give on that front, just given the -- how outsized the differences were?

Well, we had -- we also had good growth in the -- we're getting a lot of growth.

So even in -- I can give you some insights.

For the first 20 days of April even, we're still having 20% plus growth.

So fees are very bumpy.

So it's very good that the GDV is growing, but it depends on which programs, at what times and there's not only interchange fees, there is things like incentive fees that get paid.

Some of those might go over a quarter, because they have to be trued up.

We try to accrue for it but that's not always the case.

So once again, our guidance is that this market, if you look at the market in aggregate, it's growing -- the prepaid market is growing around 11%, 12% in total use.

In fees, we think long-term is still in the 7% to 9% range.

So we're getting an outsized portion of that right now.

And to be honest, our pipeline right now is probably -- from what my team is telling me, we've got the strongest pipeline we've had in the last 5 years.

So what you're seeing is really what's happening.

There's only a few large prepaid players.

Three dominate the market.

You've got a lot of program -- new programs coming on or people who want to develop these type of, either debit or prepaid card products, and they're going to a few providers.

So some of those providers, including ourselves, are getting the majority of the volume.

And that's what we had said before, but as a market, we may get -- if we're competitively advantaged, obviously, we might get more of that market volume, we think we will, but the market is growing around 11%, 12% a year.

And if you look at sources like Nielsen that will be validated by what their statistics are for the marketplace.

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

I just wanted to get a little bit of color around deposit flows this quarter.

In the last couple of years, we've seen the first quarter actually be a down year for your deposits.

This year it was up quite a bit.

And so I just wanted to get some insight as to how the seasonal aspects of your deposit flows are, or might be changing?

Yes well, the first quarter is usually the quarter, where we get significant gift card and then tax related deposit flows.

So I'm not sure -- that's -- usually our balance sheet balloons a bit with deposits and they go out of the bank during the latter part of the quarter and then in the second quarter, okay?

This year, because of the GDV growth, we had a lot of deposit growth.

It's that simple.

And so that was great because we lost $400 million of safe harbor deposits.

And we were growing our securitization business, $300 million.

So we had a $700 million deposit funding gap that we were, we -- the reason that in some cases we didn't grow some of our lending businesses aggressively, if you look at our average assets, is because we had that funding gap.

And we wanted -- we managed to bank an aggregate and we didn't want to balloon certain businesses.

The good thing is, things like SBLOC, we could take the throttle off a bit -- through the integration process of the Talea platform.

So you'll see huge growth, I think, double-digit growth over the next year in the SBLOC business, probably 20% or more.

But we couldn't really add all those assets at once.

So that's kind of the color around that.

Yes.

And I was looking at period--end deposits, not average -- average balances.

Yes.

The other question I had was just on the securitization.

I understand the next one is in September.

But as we think about the balances held for sale, it's quite a bit higher than you usually do post a securitization.

And the most recent one you noted was the largest one you've had to-date.

So just wanted to get a sense for the trend inside of securitizations, and with that, should we expect more robust fees as it seems like these things are getting larger?

So what's happened in the market place, first of all, our securitizations were not at the right size.

So when we started this business, our capital base was much lower, as you know.

We've had a lot of good capital accretion events, earnings plus the sale of the safe harbor.

So we really -- where you want to be in that market is above $600 million, but more like $700 million or $800 million, because of institutional investors and rating agencies like a lot of deals, right?

And they like them put in and they like diversity.

And so, our decision in the latter part of 2018 was to -- now that we had more capital was to get to the size that's necessary to rule that -- run that business correctly.

So our average balances will be double -- up to double, they were in 2018 and 2019.

In fact, giving you some guidance in April, we already sit on $300 plus million of floating rate loans in April already, because we had $90 million of loans that weren't quite ready to go into the securitization in the first quarter.

So it was at $518 million.

But we were targeting $600 million, we just didn't close them in time.

So those sit on our balance sheet with those other loans, so it'll be much higher.

We're targeting for the second securitization, at least $600 million and hopefully $700 million, which we think is the sweet spot in the market.

As for the gain, that's a lot to do with how market spreads behave.

Now, we had a very outsized gain in the first quarter of 2018 based on market movements.

We do not expect that in 2019, even with the larger size, but we did get very good levels from the rating agencies because of the deal economics, that was somewhat offset by spread compression.

Okay.

So in other words, you're telling me there's other dynamics here and size does not correlate -- the size of the securitization does not correlate to the size of the fee?

Well, everything if you add, obviously, if it's $600 million versus $300 million, it does.

But the fees move around based on a whole bunch of dynamics including market spreads, levels set by regulate -- yes, set by rating agencies.

And then what people purchase our bonds for depending on market conditions.

So all those things get fed into that model, which values the security that we hold on our balance sheet, which creates that fee.

So the guidance for -- a good guidance for the third quarter, once again, is the guidance we gave you for the first quarter: we think it'll be around $7 million, $8 million, potentially $9 million for the third quarter, but it could be less and it could be more depending on how the market moves.

Understood, okay.

Last question, just around the margin trajectory or the change in margin trajectory given the change in stance from the Fed, your bank is quite asset sensitive.

Does the pace of margin expansion change with the change in Fed stance here?

Well we still, we have the opposite.

Banks who have -- we're kind of an opposite bank, so that we have the interest rates for our deposits reprice immediately and then our assets reprice in the future.

You usually have the opposite happen, where you -- you can lag the deposit rates.

So you'll see a continued spread NIM expansion over this year as the lag occurs, and we do more of the CRE securitization loans.

So I believe that you'll see that go through 350.

We had talked about this last year, we did a little bit better than we thought we were going to do.

And I know that the analysts on the phone also predicted a lower NIM for us.

And we -- but we did too.

But we've got some good conditions for -- and we're seeing repricing in our loan portfolio.

So you'll see a drift up if there's no interest rates by the Fed hikes; and that should go through 350 throughout the year, and hopefully it'll settle above the market average.

I think we're about at the NIM average for the banking industry, and I think we will be above it, which is historic for this bank, because we've traditionally been much lower than it.

And our next question comes from the line of William Wallace with Raymond James.

Quick follow-up on the securitization.

Paul, you said it in the prepared remarks, but I couldn't write fast enough.

What was the interest income on the loans that were sold in the quarter for the yield or however you put it?

Well in total, the CRE loans, the increase over the last year was $3.3 million...

$7.5 million, it was around $7.5 million, wasn't it?

No, he's asking about the interest.

Not the gain.

No, wasn't it about -- we had 2.5 -- did we actually give that number out?

Yes.

(multiple speakers)

I think when you gave the yield I can't --

I gave the yield.

And if you look at, also I mentioned the interest -- the increase in interest on each of the loan segments --

$8.6 million.

Yes, it was --

(multiple speakers) about $8.6 million, Wallace.

Okay.

For the interest part, and then the gain was about 10.

11.

11.

And then if -- you were talking about how when you securitize, the fees are going to vary depending on a bunch of different stuff.

Does the variable comp associated with that also vary based on whatever the fees are that you collect?

Yes.

Okay.

So but I think a good estimate to put in is kind of what our guidance was, 8-ish, maybe a little bit higher than that.

But we keep on saying this.

We've been surprised in the positive side for the last 4 securitizations.

So I guess we're going to be surprised negative at some point.

But the deal -- we still have an advantage in the way we issue our securities.

They've been very well received in the market.

And we had 5 -- in the last go around for securitization, we had 5 tightenings with our partners who bought the bonds.

So we -- the spreads came in substantially and which really increased our gain.

So our bonds are being very well received by the investors who buy them.

Yes, that's -- certainly that's great.

So in the prepared remarks you talked about a goal for keeping expenses flat, from where they were in the first quarter, but shouldn't they come down by the $3 million and whatever you said, the $3 million that you had for the additional bonus accrual associated with the loan sales, and then they'll jump back up in the third quarter when you do the next one?

And then come back down -- so maybe $3 million less, not flat to $39 million?

On a run rate basis, yes.

However, we've got a bunch of initiatives supporting new products sets that we're building and reengineering that we are doing.

So it may not be a one-to-one, but you're correct when you said that.

Okay, it'll be somewhat --

It should be on a run rate basis our expenses were more like 37 than they were 40 or 36 if you look at the run rate expenses on the continuing side.

Okay.

Right, but you continue to invest in the franchise?

Yes, and it's -- we got a lot going on here, it's because we're trying to build out.

We're finishing our remediations, we're totally restructuring our payments business to look at what the market should be in 5 years.

We're building out new products in SBLOC, we have an IBLOC product now based on insurance-backed loans.

We're creating a card for the SBLOC product much like a debit card that will be based on the collateral held in IBLOCs.

There is just a lot of investment going into the business and now that we have the capital and the people to do it and running through the remediation there is a lot of growth opportunities out there for us.

And we don't want to -- we could harvest but we really want to plant right now.

So we might spend a few million dollars really planting new seeds.

Understood.

Damian, you said something about be able to take your foot off the gas on the SBLOC and that you think that with the implementation of Talea that you can -- 20% growth in SBLOC loans, is that -- and it was a two different things?

Yes, we're targeting double-digit growth in the SBLOC product (multiple speakers) this year.

So you'll see balances go up I think pretty aggressively during the year.

And that's -- we have a great pipeline.

If you think about the bank as a whole, though, we did -- we had a softer quarter in the fourth quarter and that is partly year-over-year because we lost those fees in deposits.

We've already -- we were worried about not having -- we didn't want to borrow a lot of money to grow our businesses at the wrong time.

We look at the bank as an aggregate.

And so if you take that SBLOC deposits we lost and you take the fact that we needed to get our average assets up in the securitization business, we timed the investment in new sales force and everything to go with Talea to really start being realized in the second quarter of 2019, not the first quarter, because of the liquidity issues and it worked out very, very well.

So I think we've got the right pipeline right now to grow the business in high teens, 20% plus for the next year.

We have very aggressive plans, new product sets going into the SBLOC platform.

So it's -- we think it is going to be -- this is -- once again, this is our opinion, but we think we are going to show good growth in that business over the next year -- well, over the next 3 years but we'll see.

Make that claim next year and it won't be as believable.

But I think we really we'll see balances start to go up nicely.

Okay.

And then on the provision expense, it looks like you guys built your reserve relatively meaningfully, did anything drive that decision?

Yes.

I don't see any (multiple speakers).

Yes, unfortunately we're still dealing with a couple of little issues from the past.

In 2015, in early 2016 a lot of our SBA business was franchise lending to small franchises.

So they are franchises -- well though we have a guarantee but the problem is that when you take some of these franchises back you get basically a meat slicer or a barber chair.

And we don't do these now but we had to -- once you -- it's in the seasons part of the portfolio.

So we adjust -- there was some loss factors that had to be adjusted.

That's why you've got that extra bit.

We probably won't have that again in the next couple of quarters but we had to adjust those loss factors to account for higher losses in that franchise lending, which we don't do anymore.

But I don't think it will be a long-term impact to our reserve.

How big is the -- what's the balance of those franchise loans on the books?

It's not high.

I think they -- and this is -- I think it is around $70 million.

But most of them are good, we're talking about certain types of franchises and stuff.

So we made the proper adjustments.

I don't make those adjustments myself.

I'm one of those people who approve those, the reserve.

But I let our modelers have great independence with our auditors and stuff in setting our reserve correctly.

And so when they believe that the loss norms have changed and regardless whether it's an increasing or decreasing part of the portfolio.

I'm a very conservative person as you know when it comes to credit risk.

Any updates on the Florida mall property?

And I believe there was a lawsuit around the Fort Lauderdale hotel (multiple speakers).

Yes, well that's -- well there was a -- we really believe there won't be anything coming out of the Florida hotel thing.

That was -- that's got to do with the EB5 money, which we're not -- it's not our -- we didn't take the money.

The money was taken by the sponsors.

We believe there is no basis whatsoever, legal basis, to claim that we would owe anybody any money in that area.

So we don't think that's an impact at all.

The mall is in negotiations.

We believe we have a path now.

It includes the -- remember, the mall has a ground lease.

And so it's all -- there is 4 parties involved in trying to get this thing done.

But it includes the ground lease.

That was the sticking point before, was people who owned the ground lease didn't want to sell it.

Or didn't have a price in mind of how they would sell it.

We believe that's been solved.

So we think we have a path over the next 6 months to sell the mall without any investment from ours, at par.

And when you say par, you talk about the par, the new par that you are carrying it at today, right?

Correct, it's an OREO, so whatever the value of OREO is, we think we'll get that back right now.

And the mall is still income producing even though -- it might be the only mall in America, income producing.

But it's still income producing so it's not a drag on us.

So we should -- we will continue to run it.

And hopefully, we'll be able to -- I think the -- the property is a massive property that really should be developed by somebody who really understands the market.

And I think there is real value there.

Somebody should get the ground lease plus our property, I think they got a great deal and they could have quite a good project.

But getting all these disparate parties together with a ground lease and terminating that ground lease is always a tough thing to do in a real estate transaction.

All right, Damian, I think I might be last, so I will just ask the question, if you could update on the order -- where you stand?

Where you feel like you stand, any kind of updates that you can provide us around the orders?

Okay.

So we have made, I would say -- and I don't think I'm disclosing anything the regulators would disagree with -- great progress in building a best in class BSA capability and an appropriate and best in -- future best in class consumer compliance capability.

The BSA center of excellence that we developed here in Wilmington I believe has been extremely well received.

There's a few things we need to finish up on.

We had some conversions and stuff we still need to finish.

And certain areas, where we have to -- we're talking about, I would say -- and this is a pure estimate.

We're talking about -- of the total sum of the universe that needed to get done, converted, changed we're down to the last 3% or 5% of things we need to get done.

I think that's been recognized by our partners.

And that we have a clear path, over the next year, to be removed from the order on the BSA side.

Thank you.

And I'm not showing any further questions.

So I'll now turn the call back over to Mr. Damian Kozlowski for closing remarks.

Okay.

Thank you everyone for joining us today.

Have a good weekend.

Thank you, operator.

You are welcome.

Ladies and gentlemen, this does conclude the program.

You may now disconnect.

Everyone have a great day.