Joe Yanchunas

Joe Yanchunis followed up on the credit sponsorship lending portfolio, asking for a year-end exit rate target and which portfolios would be rationalized to accommodate growth. He also sought clarification on the impact of doubling credit sponsorship loans and winding down lower-yielding portfolios on the Net Interest Margin (NIM).

Answer

CEO Damian Kozlowski and Andres Viroslav targeted at least two new credit sponsorship partners, projecting a year-end portfolio of $2 billion to $3 billion (potentially double current levels). They noted that the company has already begun restructuring by reducing participation in institutional businesses like non-purpose securities loans and RIA acquisition financing, and has mechanisms like SBA-guaranteed paper and securitization to manage liquidity. CFO Dominic Canuso and CEO Damian Kozlowski explained that NIM will continue to show variability and is expected to compress towards 4% as the business shifts more towards fintech, generating more fee revenue and lower-cost deposits, which will be offset by a larger mix of fee revenue as a portion of total revenue. They also suggested adding back interest-like fees from credit enhancement for a better understanding of total NIM.

Joe Yanchunis inquired about the steep EPS ramp outlook for 2026, seeking more building blocks to bridge the EPS gap, particularly concerning underlying revenue drivers like embedded finance and the new Cash App card. He then asked for further details on the specific drivers that negatively impacted the fourth-quarter results. Additionally, he questioned the economics of the $400 million off-balance sheet deposits and whether all future deposit flows would be swept off-balance sheet. Later, he followed up on the credit sponsorship lending portfolio, asking about the year-end exit rate with the addition of two new partners and which other portfolios might be rationalized to accommodate this growth. Finally, he asked for insights into the Net Interest Margin (NIM) outlook, considering the anticipated growth in credit sponsorship loans and the winding down of lower-yielding portfolios.

Answer

CEO Damian Kozlowski highlighted increased clarity on large revenue opportunities, progress on initiatives, anticipated credit sponsorship announcements, and the upcoming launch of the embedded finance platform, expressing confidence in achieving the Q4 2026 EPS target of $1.75 and significant impact in 2027. CFO Dominic Canuso identified legal settlement fees, the unexpected duration of the government shutdown, and late-quarter credit sponsorship balances as Q4 headwinds, noting the quarter's end sets them up for 2026 expectations. CEO Damian Kozlowski added that early indications for Q1 2026 show substantial tax remittances. Regarding off-balance sheet deposits, CFO Dominic Canuso explained their use for optimizing earnings and generating revenue, with CEO Damian Kozlowski clarifying that historically it reduced funding costs, but future excesses will generate direct income. For credit sponsorship, CEO Damian Kozlowski projected the portfolio to reach at least $2 billion, potentially $3 billion, by year-end 2026, driven by the Chime program and new partners, and detailed portfolio rationalization efforts including ceasing new originations in IBLOC and RIA acquisition businesses. CFO Dominic Canuso indicated continued quarter-to-quarter NIM variability, expecting compression towards 4% as the shift to fintech increases fee revenue (projected to reach 35% of total revenue excluding credit enhancement), with CEO Damian Kozlowski suggesting considering the 'interest in fees' (non-GAAP) for a holistic view of total NIM.

Joe Yanchunis asked about the increase in period-end non-interest-bearing deposits, the rationale behind the 2026 origination guidance (annualized $1.4 billion with 5% growth), the recontracting process with existing partners, the company's view on fintechs obtaining bank charters, and initiatives to cross-sell products with existing partners, including MoneyRails volume.

Answer

CFO Bob Wahlman clarified that the deposit surge was due to strategic partners anticipating increased student loan volumes and collateral requirements. Bank CEO Jim Noone confirmed the $1.4 billion baseline for originations normalizes for student lending seasonality, which is expected to return. Jim Noone also stated that recontracting has historically gone well, with only a few partners matriculating out over time, and no current concerns. CEO Kent Landvatter discussed the trend of fintechs seeking bank charters, noting it's not ideal for all and FinWise's scalable platform plans for partner churn. Kent Landvatter also mentioned that MoneyRails volume is not disclosed but is becoming more meaningful, with cross-selling to existing partners being a key focus for incremental income.

Joe Yanchunis inquired about the surge in period-end non-interest-bearing deposits, the rationale behind the 2026 origination guidance, the expected seasonality of student lending, the recontracting process with existing partners, the impact of fintechs obtaining bank charters, and the success of cross-selling products and MoneyRails volume.

Answer

Bob Wahlman, CFO, clarified that the deposit surge was due to strategic partners anticipating increased student loan volumes. Jim Noone, Bank CEO, explained the $1.4 billion baseline for 2026 originations accounts for student lending seasonality, which is expected to continue. Jim Noone also detailed the successful history of partner recontracting, with contracts generally having 3-4 year initial terms. Kent Landvatter, Chairman and CEO, discussed the company's view on fintech charters, emphasizing that a charter isn't suitable for all fintechs and FinWise's scalable platform. Kent Landvatter and Bob Wahlman noted that MoneyRails volume is growing, and cross-selling capabilities are attracting new partners.

Joe Yanchunis asked about the outlook for Home Bancorp's SBA business in 2026, specifically whether it would be a growth driver or require further investment. He also inquired about capital deployment priorities, particularly M&A, given building capital levels and throttled-down buybacks, and the pace of M&A conversations. Finally, he asked about the expected size of the bond portfolio in 2026.

Answer

John Bordelon, Chairman, President, and CEO, stated that the SBA business has been slow to develop but anticipates a pickup with lower interest rates, though not yet tremendous. On capital deployment, Mr. Bordelon indicated that M&A is now a top priority, as the company's stock price (closer to 1.40x tangible book value) provides the power to pursue larger deals. He expressed optimism for 2026 M&A, targeting deals not exceeding $1.5 billion, or half Home Bancorp's size or less, potentially within their existing geography. David Kirkley, Senior VP and CFO, expects the bond portfolio to remain 11%-12% of assets, increasing by $15 million-$20 million on a par basis as the balance sheet grows.

Joe Yanchunis inquired about the potential for the SBA business to drive growth in 2026, the prioritization of M&A as a capital deployment strategy given current capital levels and stock price, the preferred size and geography for potential M&A deals, and the expected size of the bond portfolio throughout 2026.

Answer

John Bordelon, Chairman, President, and CEO, Home Bancorp, anticipates the SBA business will improve with lower interest rates, though not tremendously yet. He confirmed M&A is a top capital deployment priority, with the improved stock price making larger deals more attractive than in the past three years. He indicated a preference for deals no larger than $1.5 billion, or half their size. David Kirkley, Senior VP and CFO, Home Bancorp, expects the investment portfolio to maintain 11%-12% of assets, increasing by $15 million-$20 million on a par basis, plus any changes in AOCI.

Joe Yanchunis inquired about Triumph's 4Q26 expense outlook, specifically whether the $6 million savings from the building and airplane sale were pre-baked into the initial guide or if those funds would be redeployed. He also asked about LoadPay's projected tripling of annualized revenue in 2026, seeking clarification on the underlying assumptions for account growth versus increasing revenue per account.

Answer

Aaron Graft, Founder, Vice Chairman, and CEO, confirmed that the $6 million savings are baked into the Q1 estimate and will be part of the run rate, noting that Q1 expenses typically see a natural jump. David Vielehr, President of LoadPay, explained that LoadPay's revenue growth will be a combination of opening 7,000 to 12,000 new accounts and increasing utilization, targeting $750 per account, with top 10 accounts already tracking over $5,000 annually. The goal is to drive a higher linked and funded percentage.

Joe Yanchunis asked about potential revenue upside from the Bank of Houston acquisition beyond announced cost savings, specifically from cross-selling or balance sheet optimization. He also inquired about other technology investment priorities for 2026, aside from the BOH integration. Yanchunis sought to understand the new loan yields in the fourth quarter of 2025 and requested a disaggregation of the $500,000 in acquisition-related expenses and consulting costs to identify a core expense number.

Answer

Brent Bates, Chief Credit Officer, noted that while additional products like wealth management and trust services could be offered to Bank of Houston customers, these revenue synergies are not yet quantified in their modeling. Cory Newsom, President, highlighted opportunities to leverage South Plains Financial's scale, particularly in Treasury services, to assist BOH. Newsom also mentioned ongoing technology investments, including an Abrigo conversion for improved workflows and credit operations, and a focus on enhancing the credit side of the bank to accommodate BOH's smaller average loan size. Steve Crockett, CFO and Treasurer, stated that new loan yields in Q4 2025 were generally in the mid-sixes (6.5-6.75%). Bates clarified that the $500,000 in acquisition expenses are part of legal and professional services, with the remaining bulk of professional services attributed to consultants on technology projects, which are expected to cease once projects are complete.

Joe Yanchunas asked about potential revenue upside from the Bank of Houston acquisition beyond announced cost savings, specifically from cross-selling or balance sheet optimization. He also inquired about other technology investment priorities for 2026, aside from the BOH integration. Additionally, he asked for a sense of new loan yields in the fourth quarter and to disaggregate acquisition-related and consulting expenses.

Answer

Brent Bates (Chief Credit Officer) mentioned additional products like wealth management and trust services for BOH, though not built into current modeling. Steve Crockett (CFO and Treasurer) highlighted Treasury services as a significant area for leveraging scale with BOH. Steve Crockett (CFO and Treasurer) mentioned an Abrigo conversion for better workflows and credit-side loan operations, and enhancing the credit side of the bank for BOH integration. Cory Newsom (President) estimated new loan yields in Q4 were generally in the mid-sixes, with Brent Bates (Chief Credit Officer) specifying 6.5% to 6.75%. Steve Crockett (CFO and Treasurer) clarified that $500,000 for acquisition expenses is within legal and professional services, with other consulting expenses for technology projects.