FinWise Bancorp (FINW) Q2 2026 Earnings Report, Transcript and Summary

Greetings, and welcome to the FinWise Bancorp Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press 0. on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to the speakers. Please go ahead.

Good afternoon, and thank you for joining us today for FinWise Bancorp's Second Quarter 2020 Earnings Conference Call. Earlier today, we filed our earnings release and investor deck and posted them to our investor website at investors.finwisebancorp.com. Today's conference call is being recorded and webcast on the company's investor website. As previously mentioned. On today's call, management's prepared remarks and answers to your questions may contain forward looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Forward looking statements represent management's current estimates. Expectations and beliefs and FinWise Bancorp assumes no obligation to update any forward looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward looking statements including factors that may negatively impact them contained in the company's earnings press release and filings with the Securities and Exchange Commission. Hosting the call today are CEO, James F. Noone CFO, Robert E. Wahlman and Executive Chairman, Kent R. Landvatter. Jim, please go ahead. Good afternoon, everyone. Our second quarter earnings of $0.15 per share were short of our expectations. Driven by higher provision expense on the loans where we retain credit risk. We are proactively managing these credit trends, and will continue to empower our credit and compliance teams to identify and reduce risk across the portfolio. As they did during the second quarter resulting in meaningful reductions in our NPA balances. I would like to start by giving you more detail on credit quality. Total provision for credit losses was $22.7 million for the second quarter, compared to $10.6 million in the prior quarter. Of the $39.4 million related to credit enhancement loans. Which is offset by corresponding credit enhancement income and does not affect net results. The remaining $6 million in provision reflected increased provisioning in the core loan portfolio. Driven by losses recognized on the liquidation of nonperforming loans higher reserves on nonperforming and classified, and the more conservative servicing standards we have implemented. As noted earlier, nonperforming loan balances declined in the second quarter, from nearly $50 million last quarter to approximately $38 million this quarter. A meaningful improvement driven primarily by a reduction in SBA 7(a) loans classified as non accrual. This was the result of loan collateral resolutions and paydowns. Of this $38 million approximately 19 million is guaranteed by the federal government and the remaining $19 million is unguaranteed. Total net charge offs, excluding those from loans with credit enhancement, were $5.2 million. Slightly above our guided range of 4 million to $5 million Net charge offs within the core portfolio remain concentrated in the loans with the identified attributes we discussed last quarter. Approximately 80% of this quarter's charge offs within the core portfolio came from this legacy pool. This is a finite well defined pool with approximately $50 million in performing balances outstanding. At the end of the quarter. We are proactively managing this portfolio and will provide additional updates in future quarters as we continue to make progress. Let me walk through net charge offs in each of our 3 key portfolios in more detail. First, SBA net charge offs were 2.9 million versus $2.2 million in the prior quarter. With the vast majority tied to legacy credits referenced earlier. This largely reflects specific industry and loan attributes which we have materially tightened by policy changes. These charge offs are likely to remain elevated over the next few quarters. Second, net charge offs on strategic programs with credit enhancement were 7.9 million versus $4.8 million in Q1. The sequential increase continues to reflect normal seasoning of a larger credit enhanced portfolio, and FinWise is fully reimbursed for any losses. Finally, net charge offs on strategic program loans without credit enhancement were $2.3 million in Q2, versus $2.3 million in Q1. Reflecting normal repayment behavior across the balances we manage here. To summarize, we remain very comfortable with the overall quality of our portfolio. The issues we have described are ring fenced, understood, finite, and being actively managed. Outside of this pool, credit performance across the book remains healthy and as generally expected. In terms of originations, we delivered $1.6 billion this quarter. Ahead of our expectations for 1.4 billion and down modestly from an elevated $1.7 billion in the prior quarter. The sequential change reflects seasonally lower volume in the student loan program. Partially offset by growth across several of our established programs. This resilience in origination reflects the benefit of a more diversified partner base, which is a deliberate part of our strategy and increasingly lets us absorb variability in any single program. We are also pleased to announce on this call the contract signing of a new strategic partnership subsequent to the end of the second quarter. And we expect to share the partner's name in the coming quarters as we get closer to launching the products with them. This is a well established prepaid card provider that will use a combination of our BIN sponsorship and money rail services. The cards issued under this program will be offered on the Mastercard network. And based on the current pace of implementation, we expect the program to go live during the fourth quarter. This partner chose FinWise for our expertise in BIN sponsorship. And our disciplined approach to program execution. The same qualities that continue to differentiate us in the market. Our sales pipeline remains very strong, and we anticipate signing additional and more meaningful deals before year end. it is worth putting this in context. The pipeline we are seeing today built by our expanded sales team, and led by our Chief FinTech Officer, Sarah Greta, is materially stronger, and potentially more meaningful to our bottom line than the pipeline we had just a few years ago. This quarter, we also welcomed a new salesperson with years of industry experience, across both lending and cards. Bringing our business development team to 5 including our Chief Fintech Officer, Turning to our credit enhanced product, balances were $121 million at the end of the second quarter. As we noted in the tallied press release last week, our prior guidance of approximately $217 million in credit enhanced balances by year end 2026 no longer applies. Reflecting the change in how those balances are now structured. We are pleased with the trade off, since we retain the full and higher economics described earlier. Importantly, we still expect some further growth in credit enhanced balances in 2026. The largest partner we mentioned last quarter, whose pace had slowed is picking back up. We also remain in active discussions with several prospects. We will continue to provide quarterly updates going forward. Looking ahead, meaningful credit enhanced balance growth, beyond 2026 will come from new partner additions. The product continues to be a meaningful growth driver for our long term plans, and building that pipeline is where our focus needs to be. In closing, taken together, this quarter reinforces our conviction in the company's strong long term quarter trajectory and in our 3 key priorities. First, we will continue to empower our credit and compliance teams to prune risk proactively as you are seeing us do within the legacy pool within our core portfolio. Second, we will continue to support the momentum in our sales pipeline. that is already coming through from our business development team. And which we highlight in the investor deck this quarter. Finally, we will continue to support the multiproduct platform we have built at FinWise. Because we believe this carries enormous value for both potential partners and our shareholders. That same model that took us from $100 million in credit enhanced balances in 6 months build the infrastructure, pilot it, market it, then launch the right partners. Is now turning the corner in cards, payments, and deposit sponsorship. So in the same way that our compliance investments positioned us during a previous cycle, these product investments are positioning us for exactly the cycle we are now entering. Believe we will have a very strong period for new partnerships over the next 12 to 24 months. The strategic plan we set out on 3 years ago has not changed. what is changing is the pace of opportunity in front of us. And my job is to make sure we capitalize on it, for the long term benefit of our shareholders. I will now turn the call over to our CFO, Robert E. Wahlman, to provide more detail on our financial results.

Thanks, Jim, and good afternoon, everyone. FinWise reported second quarter net income of 2.1 million and diluted earnings per share of $0.15 Results were driven by strong loan originations growth in net interest income and disciplined expense management, partially offset by a large provision for credit losses in our traditional banking portfolio. Net interest income, was 28.7 million for the second quarter of 2020 compared to 28.1 million for the prior quarter. The increase from the prior quarter was primarily due to growth the credit enhanced loan portfolio and a decrease in non performing loans. Which resulted in a lower reversal of interest on non accrual loans and contributed to an increase in the average yield on loans held for investment. Net interest income also improved as a result of a decrease in average interest bearing liabilities and the related cost of funds. These increases were partially offset by a decline in average balances within the traditional loan portfolio. Net interest margin for second quarter of 2020 was 13.69% compared to 12.90% for the prior quarter. This sequential quarter increase is in line with growth in the credit enhanced loan portfolio a decrease in nonaccrual loans, and a decrease in the yield on interest bearing liabilities. As we have said before, we suggest thinking about net interest income and net interest margin in 2 ways. Including and excluding excess credit enhanced income. Noninterest income 25.6 million versus $14.6 million in the prior quarter, primarily due to an increase in credit enhancement income. Which corresponds to the provision for credit losses on credit enhanced loans and resulted from the credit enhancement portfolio growth. In addition, the company prevailed in litigation with an off boarded strategic partner, which resulted in an increase in miscellaneous income of 450 thousand and a decrease in other expenses of 300 thousand. Noninterest expense was 28.9 million versus 28.3 million in the prior quarter. Primarily due to increases in credit enhancement guarantee and servicing expenses largely resulting from an increase in interest income attributable to the credit enhanced loan portfolio growth. Otherwise, operating expenses were flat quarter over quarter. The efficiency ratio was 53.1% versus 66.3%. Excluding the offsetting credit enhanced accounting effects, the efficiency ratio was 63.9% in the second quarter versus 65% in the first quarter of 2020. Let me briefly review the financials of the Tallied acquisition. As noted in last week's release, we expect roughly $4 million in total integration and transition costs over the coming year. Weighted toward the next 2 quarters and narrowing thereafter. As we eliminate duplicative vendor and platform expenses. These estimates exclude amortization of the acquired platform intellectual property, and customer relationships. These are noncash items requiring that the assets be mark to market and amortized. We expect to complete the initial purchase accounting including the asset valuations by the end of the third quarter of 2020 and we will provide an update then. Total assets were 925 million up from 899 million primarily due to increases in the company's credit enhancement loans the credit enhancement asset, and the loans held for sale portfolio. Partly offset by a decrease in other loans held for investment. Deposits increased to 694 million versus 675 million. Driven by growth in interest bearing demand deposits and time certificates of deposit. Partially offset by a decrease in noninterest bearing demand deposits. Reflecting a shift in customer partner balances toward the interest bearing products. We also continue to operate from a very strong capital position, with a bank leverage ratio of 18.1%. Over double the well capitalized minimum. And a holding company leverage ratio of over 22%. Finally, as of 06/30/2026, the company has repurchased a total of 29.7 thousand shares for approximately $400 thousand under the company's share repurchase program announced in May 2026. Which provides for the purchase of up to 685 thousand of the company's issued and outstanding shares. Outside of blackout periods, we prioritize repurchases when our shares trade below tangible book value. Reflecting our conviction that this is an attractive use of capital at those levels. Let me provide forward outlook on some key metrics as we have done in prior quarters. Loan originations for second half of 2020, While there may be variability quarter to quarter, we believe originations can come in around $1.6 billion in the third quarter reflecting the typical seasonal pickup in student lending. For the fourth quarter, we are comfortable with a baseline estimate of 1.4 billion. SBA loan sales. We will continue to follow our strategy of selling guaranteed portions of our SBA loans as long as market conditions remain favorable. The average gain on sale of loans over the past 2 quarters is a reasonable proxy for the quarterly run rate we would expect for the remainder of the year. Quarterly net charge off. We anticipate an approximate range of 4 million to 5 million in net charge offs for noncredit enhanced loans as a good quarterly number to use in your models for the remainder of this year. Nonperforming loan balances for Q3 2020. We anticipate a migration to non performing loans of approximately $7 million in the third quarter. Net interest margin. We are maintaining our prior outlook that when including credit enhanced balances, the net interest margin is expected to increase. Driven by growth in credit enhanced balances and efforts to lower funding cost. Conversely, excluding excess credit enhanced income, we anticipate a gradual decline in margin consistent with our ongoing risk reduction strategy. Efficiency ratio. We remain focused on driving sustainable positive operating leverage. With a long term goal of steadily lowering our core efficiency ratio. Which excludes credit enhancement accounting effects. That said, there may be periods in which the efficiency ratio may increase. Tax rate. While multiple factors may influence the actual tax rate, we suggest using 27% in your modeling. With that, we would like to open the call for questions and answers. Operator?

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using the speaker equipment, it may be necessary to pick up the handset before Our first question will come from Joseph Yanchunis with Raymond James.

Hey, good afternoon. Thanks for taking my questions. The 1 is on credit. So NPL declined by $12 million this quarter. Was just curious how much of that improvement came from collateral liquidations versus upgrades or payoffs? And then should we expect a similar pace of resolution over the next few quarters? Thanks.

Yeah. No problem, Joe. We were really happy to have reduced by roughly a quarter our NPA balances during the second quarter. It reflects active resolution work it is not a onetime swing. So I think just generally, the direction of is favorable there. You know, our total risk exposure at quarter end was 19 million. Of the total 38 million in NPA balances. And similar to our NCO comments, you know, we know the loans at risk. Restricted the attributes, and we are actively managing that segment of the portfolio. As far as guidance, I would just point to Bob's comments on, you know, $7 million of potential net migration in Q3. Okay. Brett. And then just another question for me. Are thinking about the $50 million credit card portfolio you acquired from the Tallied acquisition? As your thinking evolve regarding retaining versus selling those receivables, Yeah. So since going public, Joe, you know, we have talked a number of times about our interest acquiring technology platforms that kind of fit our suite of services that we take to market with fintechs You know, the Tallied acquisition fits this strategy really well. And credit card processors do not come up on the market very often. So, you know, as you saw in the press release, we acquired the platform and the related assets of Tallied. Owning the credit card operating system, you know, provides the core component for the tech stack, like the credit card tech stack. And it fits really neatly with you know, what we have built historically with FintechConnect for lending and MoneyRails for payments. So, you know, we look at this really as a technology platform acquisition, rather than a business acquisition. And, you know, it fits pretty well with kind of the scope of services that we offer our partners. Okay. Brett. Thank you for taking my questions. I will step back. No problem.

Next, we will hear from Andrew Terrell with Stephens Inc.

Hey. Good afternoon.

Hey, Andrew.

Hey. Just to start, Bob, I think you mentioned 3 million to $4 million of charge offs in the prepared remarks was the kind of expectation. 1, was that correct? And then 2, is that relative to the core portfolio? I think it was $2.93 million charge-off for this quarter. Yeah.

I can take it, Andrew. The NCOs-- most of the $2.9 million in NCOs in the core portfolio came from the legacy pool. That had those, defined attributes, and cohorts. We anticipate that will continue to have NCOs from that group until we like, fully work through them. As we have noted, you know, we expect elevated charge offs over the next few quarters, you know, as we work through those loans. As far as guidance, the you know, in this quarter, the non credit enhanced NCOs did come in slightly above the high end of the range. Which was the 4 to $5 million number I think you are referencing. it is kind of normal quarter to quarter timing on individual resolutions rather than a deterioration there. So we still see 4 to 5 million as kind of the right normalized run rate. For that segment. Okay.

So $4 million to $5 million is the core portfolio plus strategic loans without credit enhancement?

that is correct. Okay. Brett.

And, you know, as you are working through some of these portfolios, I know you are giving kind of explicit backup guidance. It does not necessarily imply it. But just help us think about like when you feel like you have reached when you feel like you have kind of worked through the majority of this portfolio? Like, when should we start anticipating you know, improvement sequentially in credit quality?

So, you know, I cannot put a this is Bob. I cannot put a specific quarter count or point to a quarter when we will be through that. Now we have guided to the 4 to $5 million of noncredit enhanced charge offs per quarter. The remainder of 2026, and we expect the SBA vintage-driven elevation to persist over the next few quarters as those vintages consider continue to season and we work through. But the pool is finite and identified, you know, roughly about $50 million. And that is what informs this guidance. So it is a bounded pool with a guided range. But I cannot give you a fixed number of quarters. Or amount. But I would say it is a lot of it is going to come through in the next couple quarters and taper on as we go into 2027.

Yep. Okay.

Brett. I appreciate it. And then can you talk about just with the Tallied acquisition, is that included? And they are obviously moving from a credit enhanced position to non credit enhanced, would assume, with the acquisition. Are loss rates against that portfolio baked into your guidance here? Or would that be incremental? And just talk about the credit quality of loan portfolio that you will be acquiring.

Yeah. The credit quality is really high, Andrew. We have experience with this in including during the due diligence of when we onboarded that portfolio that extended back to the original US Bank loan tapes and there is a couple decades worth there of performance. So we know the performance really well. it is really high quality. there is not meaningful charge offs in that portfolio. So, you know, is it baked into the NCO guidance Yes. But it is not-- it is not material to that number.

Okay. Brett. I appreciate it. If I could ask 1 more, the appreciate the Slide 12 in the presentation, the pipeline for FinTech partners and despite you giving it this quarter, I will have to ask a question still. Just since it is the first quarter you have shown this, like, can you just characterize for us, Jim, how robust this kind of pipeline that we can now see how robust it is compared to, you know, the past couple of quarters where we could not necessarily see this level of disclosure?

Yep. Yeah. So we thought that would be a helpful slide this quarter. You know, I had mentioned last quarter, Andrew, that the pipeline was stronger. Than I had seen it in the 8 years I have been at the bank. and it is just continuing to compound right now. We added that slide to the investor deck to give you some detail on what it looks like. expected launch dates, and kind of the breadth of product. You know, it does give some color, I think, on why I was so bullish on fintech sales last quarter. I expect that to continue to grow both in number and in breadth of product. You know, Sarah Greta and her team are doing a really great job and we intend to keep executing to convert those into contracts and announcements. And, you know, this announcement that we did with the prepaid partner as part of our earnings call, This quarter is really just the first 1, and you will have more coming in the back half of the year here. Brett.

Thank you so much for taking the questions.

Yep. You are welcome.

And as a reminder, if you do have a question, please press 1 on your telephone keypad. Next, we will move to Manuel Navas with Piper Sandler.

I also appreciate the Slide 12 Are the new partner types considered kind of new partner additions or extra programs with current partners?

So they are-- they are both shown there, Manuel, If you look on that far left hand column, you can see we put that partner type And so while a majority are certainly new partners, Right? Like new fully new partners to the bank. There are 2 existing partners on there where we are adding new products for those 2 new partners. And those are kind of slots 2 and 3 there.

And the launch dates on here you have a you have 3 programs in the fourth quarter of this year. Would that mean revenue would hit in the launch date? Or would it be a little bit after?

Yeah. So launch means we are operationally live. Revenue would begin accruing, you know, at that point. But 2 things I would point out to you. Just make sure you guys, you know, kinda have this on your radar. 1 is when we make the announcement, that is typically upon contract signing. There might be a few weeks, generally, between when we sign a contract and when we are ready to go live because all of the due diligence is happening kind of concurrent to the contract negotiations. So that is number 1. Number 2, while we are live and kind of revenue-producing day 1 of the launch, there is generally a piloting period and certainly a scaling period with the fintech as their volumes pick up. And, generally, there is at least a few quarters that between when we go live. And when we are comfortable kind of updating whether it is origination guidance or other stuff with you guys. Because we have more of a track record to point to and, you know, more evidence to point to.

So that is since you have you have announced 1 new partner, at the beginning of this call. This has Yep. 5 further partners in the pipeline that are just on the term sheet side, but that should hopefully pull through. And that would be 5 more additions. Is that the right way to read that?

Yeah. I think 4 of them are signed term sheets. Like fully new partners. Another 1 is where we have got commercial terms agreed to, but not necessarily a time signed term sheet by the time we went to press with the deck. But, yes, generally.

Tallied just happened. Has its improved product offering platform for you has that enhanced your ability to compete or land any of this pipeline of deals? Is it, like is it is it already relevant, or is it that is still too to help you for down the road?

it is already relevant. it is not demonstrated in the slide that we are referencing. So as far as conversations and calls, is definitively relevant, but it is not part of what is on that slide.

Awesome.

How quickly could you act on the buyback? You said you are tangible book value is key Can you start as soon as when can you start from today?

So we will have a short period to allow the earnings to disseminate But this is Wednesday, and I believe we start on Friday.

Originations were solid. Can you break down the way it built and kind of beat expectations a little bit this quarter? And why not a little bit higher origination progression going forward?

Sure. Yeah. So the originations were, you know, pretty strong here, Manuel, at $1.6 billion in the quarter. It exceeded our guidance of 1.4 it is up roughly 8% year over year As far as the composition this quarter, you know, the student lending seasonality is the only program level change that was material. And that reduction in Q2 you know, was offset by kind of more measured increases across the board with our programs. So all in all, we are really happy with originations in the quarter. And there is 1 other comment I think I would just make here, which is you know, in March 2023, our originations troughed out at $850 million. And kinda what we told folks at the time was, you know, the fundamentals of the business were sound. The issues at the time were not gonna alter the trajectory. And, you know, we are consistently originating at kinda twice those levels now. So I think it is important to point out it is also important to remember you know, those types of times as we work through the this legacy SBA portfolio.

You know, we know what it is. We have gone through this before, whether it is with fintech credit, that we retained and some of the NCOs, back in 2022. Or the origination, you know, trough out in 2023 with some of our fintech partners. None of this alters that you are trajectory of the company, and we are very comfortable with kinda how things are trending and managing through whether it is originations or the legacy SBA pool.

I appreciate that. My last question for me is you kind of break up expectations for new loan growth You kinda chick pulled the guide on the credit enhanced loan growth because a portion of it is tallied. Where should balance sheet loan growth go going forward? And describe if you can, some of the credit enhanced growth on a quarter to quarter basis? What are kind of some of your plans for balance sheet growth?

Yes. So I think we are seeing you know, let's say, more measured growth in a number of our portfolios. Although, you certainly did see our SBA balances were down quarter over quarter. Some of that was loan sales. Some of it was working through, nonperformers. As far as credit enhanced balance sheet, you know, we grew that from 0 to 100 million in a couple quarters. We withdrew the guidance like you said, mostly related to tallied and that having that portfolio having been 1 of the growth engines there and then converting that the direct portfolio as part of the acquisition. Just make guidance there more difficult, I would say. We so we got off to a quick start. We beat expectations. And we have to bring in additional partners to grow meaningfully from here. But we do have some growth you know, in the other partners. it is just more gradual And so that is part of why we pulled guidance on the Credit Enhanced this quarter. Thank you for the commentary.

Yes, you are welcome.

And we do have a question that has come in via email. And we will let Juan Arias handle that. Please go ahead, sir.

Thanks, operator. The question think this is for Bob. How should we think about the earnings trajectory in the second half of 2020 and into 2027, relative to the first half of 2020, what are the key earnings and growth drivers investors should be focused on.

Well, that is a great question. it is driven by a lot considerations, key assumptions, and variables as to what drives our revenues and what drives our expenses. And maybe that is the best way to approach it. I will go through what I think of being the key assumptions first, the key drivers first, and that is the first 1 we oftentimes talk about is originations. And we provided color there today. Originations for Q3, we expect to be around 1.6. In Q4, we expect to be baseline of 1.4. But variables that can affect that include how the strength of the lending season and, of course, the economy always significantly influences the originations. The second item and was also talked about here that when I think about the key driver is what is happening with the credit portfolio, which is 1 of our key areas of growth. Now while we lose tally from credit enhancement, it does move into the core portfolio where we actually pick up additional revenue related to tally on the on the interchange. You know, we do not pick up any additional interest income, but we pick up all the interchange. But in addition to that, we just Jim was just talking about what is going to be growth in the credit enhanced portfolio. You know, we expect it to be more muted than what it was a year ago, but we do expect the existing partners to continue to expand their portfolio. So we will see some growth there. Third key item, and we spent a lot of time talking about that, is the provision for loan loss. We have said that it is about 4 to $5 million. On the noncredit enhanced portfolio. With the with the strategic partner retained portfolio running just over $2 million. So and that is pretty steady over time. But the core but the core or traditional portfolio has been running high this year, but we do see that as we talked about tapering as we leave 2026 and we hit into 2027. So some benefits there. And expenses is, I guess, the fourth key item. And, again, you know, it has been steady. For some period, pretty consistent for several quarters now. And excluding the tally transition expenses, we expect that the operating expenses will remain very flat or flattish through 2026. But grow as we move forward as we bring on additional partners. So when you take a look at that, I mean, our core business is a core business Our core businesses and our activities are generating a consistent level of profitability. What is hurting us is the provision for loan loss. From a p and l perspective driven in large part by the charge offs in the traditional loan portfolio. So kind of summing all that up and what I think about it, you know, I am looking at the second half of 2020-- 2020, and I think this is 1 way that you can look at it. Thinking about it is that to view-- 1 way you can look at it is to view the first quarter of 2020 as a proxy for Q3 and Q4. it is been a very stable environment. And the charge-offs are-- and the provision is probably going to be about there. But then to make any adjustments you think appropriate for what happening on the other portfolios. Originations are growing a little bit and so forth. The credit enhanced portfolio growing a little bit. Expense is flat. But whatever you think are appropriate there. But that is-- that is my crystal ball. Look at this. Thank you.

And we do have a follow-up question. We will hear from Manuel Navas with Piper Sandler.

I appreciate the commentary. I just want to jump on to kind of make sure I understand the progression well. The core portfolio provisioning rose this quarter on some heightened losses. But the expectation is that those while the heightened losses might be a little might be higher in the second half than previously expected. They should be lower than the second quarter. Is that the right projection on my part?

From a provisioning from a provisioning perspective, the answer to that question is yes. Provisioning in the second quarter was $6 million compared to I think roughly-- and this is excluding the credit enhanced, roughly, you know, in that 4 to $5 range that we said. So, yeah, we expect the second quarter to be a bit of an outlier.

Got it. Okay. that is helpful and then Okay. And the shifting of the credit enhanced portfolio, you are taking on the Tallied portfolio. Is the Tallied portfolio going to have less growth than what you could have had with it if it had continued independently. Because it seems like you could think of these 2 portfolios, your Credit Enhanced portfolio and the Tallied portfolio, and say that they are gonna have the same growth that you had previously in your guidance, are you slowing the Tallied growth?

No, there is no change to what the expected growth rate is with Tallied, Manuel, Just because it is become a direct portfolio versus a credit enhanced portfolio. it is just that when that changed, you know, in conjunction with the fact that we had another partner whose growth had slowed and certainly had not met expectations earlier in the year. It just kinda made sense to pull the guidance.

Got it. Okay. This is helpful to clarify. Thank you. Thank you for the time and the commentary.

You are welcome.

And that will conclude today's conference call. We thank you for your participation. You may disconnect your lines at this time.