David Becker: What’s on the balance sheet is our risk. That’s 100% on us. That’s in the outstanding asset. As we’ve sold loans over time and during COVID there was a period where the SBA was guaranteeing 90% of the balance. So, I don’t know how that blends out between that 25, 10 number. But to give you a feel, Brett, the most current information, the SBA, like any governmental agency runs slow. We received a report last week, that’s the end of November data and what they classify as non-performing assets, anything of 90 days or more past due or on non-accrual, our ratio was 2.19% and we’re rated low risk compared to our peer group, which was 8.02%. We’re one quarter of a percent of what the industry as a whole was experiencing.
SBA is a higher delinquency and we’ll potentially have higher loss rates than we’re used to. We’ve been in the RV industry for 25 years and have a cumulative or an average of less than 75 basis points in losses. So, SBA numbers are a little high for us, but again, on industry standards, we’re on the low end of the risk spectrum as far as the SBA products. We’re diligent on the underwriting. Some people view anybody can get an SBA loan because it’s government guaranteed and you only have a 25% risk. We don’t view it that way. We still have very solid credit underwriting standards that we comply with. So again, it is high for us, but from an industry level, we’re very comfortable where our portfolio is at.
Brett Rabatin: Okay. That’s helpful. And then just lastly, you mentioned building up the FinTech from a risk perspective with back office hires with the novel activity guidance from the OCC and now from other regulators as well. Is it fair to assume that you’re going to be building capital ratios and liquidity from here? Or how should we think about maybe some of the requirements that the regulators are imposing on balance sheets?
David Becker: Well, I mean probably — I mean, just from an overall perspective, we view this year as building capital anyways, and I think, we’ve maintained pretty high levels of liquidity over the last several years. I don’t think, I mean — we think about it in the context of the overall organization, not necessarily specific to one line of business.
Ken Lovik: We can tell, we obviously can’t give you ratings, Brett, but we’ve completed the safety soundness exam for 2023 and they had no questions or concerns on our capital ratios for liquidity.
Operator: Next question will be from George Sutton at Craig-Hallum Capital Group. Please go ahead.
Unidentified Analyst: This is James on for George. Nice results and thanks for taking my question. Could you talk about the FinTech partner pipeline a little bit? That pipeline growing, how have conversations with customers that have been in the pipeline for a while kind of evolving and then longer term with sort of your vision for the FinTech franchise in terms of types of partnerships like lending versus deposit and the potential financial contribution?
David Becker: I’ll take it and Ken might give you some more color on the sales side or the pipeline end of it. We have 10 in some state of being live or in process of testing. We’ve got 10 more. We’re sending on about 20 that were in some kind of contract negotiation, some part of due diligence that we’re looking at. Our play is to kind of clean up that pipeline. There’s a lot of noise in FinTech now with synapse being acquired or in the process of being purchased. Treasury Prime has changed their operation. There’s just a lot of craziness going on. We’ve got some very solid prospects. As Ken stated, we had a nice bump up in revenue here in the first quarter. It’s not going to double down for the rest of the year every quarter, but we’ve got some really strong players in the pipeline and some nice stuff coming.
We’re getting some interesting at bat with some of the things that’s happening in the marketplace. We’re going to kind of keep our powder dry and look for really good opportunities. I would tell you in the 10 that are not live, there are some of them that now because of capital constraints on their part or ability to raise additional capital and pressure that they’re getting from their original investors. As we all know, 12 months, 18 months ago is all about growth. Nobody cared about the bottom line, and that’s done a 180 on them. Now it’s all about bottom line, not necessarily growth. And some of them are trying to figure out how to get to a positive bottom line. So, one of my philosophies for 40 years in business is when there’s the greatest chaos in the marketplace is also the greatest opportunities.
So, we’re kind of watching what’s going on and we’ll selectively pick up opportunities where we can with some of the folks will drop out and some folks will pop in. So, it’s still a good growing part of our business. Ken said, we’re going to at minimum triple down on what we did last year, which is great growth and some of the stuff on the other side, I’ll go back to the comment about staffing and compliance stuff. A lot of those part of this, Ken also mentioned, we’re installing some new tools. A lot of those things can be tracked electronically now, new tools, new services. So, it is a combination of staff. Somebody’s obviously got to run those tools, but control and operation and staying on top of the vast companies are a lot easier with some of the newer technology tools out here today.
So, a little bit of that is get the house in order, get that set up and that will allow us to even grow some of them a little bit faster. So, crazy market, but I still think it’s a good market all in all.
Unidentified Analyst : And then what percent of the loan book today is variable rate and where would you expect that mix to trend and a higher for longer scenario versus scenario where we got a couple of rate cuts?
Ken Lovik : We are kind of in the low 20% of the portfolio, probably getting closer to 25%, and look our goal and that’s probably coming from somewhere closer to 10% to 12%. I think, the higher for longer scenario, we certainly want to keep managing it, but probably just even if rates come down, it’s still just prudent to have a higher portion of the portfolio in variable rate assets. We’re trying to drive that number as high as we can here over the next couple of years.
Unidentified Analyst : And then last one for me, just what do you guys’ think is working so well in SBA? Thanks, guys.
