FinWise Bancorp - Earnings Call - Q1 2025
April 30, 2025
Executive Summary
- Q1 2025 delivered steady originations ($1.26B) and sequential improvement in credit metrics (NPLs down to $29.9M; NCOs down to $2.2M), but net interest margin compressed to 8.27% reflecting mix shift to lower-risk, lower-yielding assets and seasonal softness in high-yield HFS programs.
- EPS was $0.23 on net income of $3.2M, down year over year, with fee income strengthening to $7.8M on higher Strategic Program fees, BFG fair value improvement, and lease portfolio growth.
- Against S&P Global consensus, FINW missed Q1 2025 EPS (actual $0.23 vs $0.255*) and revenue (actual $18.8M vs $22.6M*), largely due to NIM compression and mix shift; management reiterated that NIM will decline as the balance sheet derisks while NII should grow with asset growth.
- Execution catalysts for 2025: ramp of the Credit Enhanced Balance Sheet program to $50–$100M by YE, extended HFS product contribution, and expected deposit inflows from BIN sponsorship, payments, and online account opening—supporting funding and operating leverage in H2 2025.
What Went Well and What Went Wrong
What Went Well
- Sequential asset quality improvement: NPLs fell to $29.9M (6.1% of HFI) from $36.5M (7.8%), aided by repayments/payoffs; NCOs declined to $2.2M (1.9% annualized) from $3.2M (2.8%).
- Fee income strengthened to $7.8M (vs $5.6M in Q4) on higher Strategic Program fees, favorable BFG fair value change, and lease portfolio growth, with reversal of a Q4 callable CD premium charge.
- Strategic program momentum: new Backd partnership to deliver SMB installment loans and utilize the Credit Enhanced Balance Sheet, broadening low-risk revenue avenues and capital-efficient balance sheet usage.
Management quotes:
- “We posted solid loan originations and encouraging credit quality metrics, as both non-performing loan balances and net charge-offs declined sequentially… we continued to migrate our loan portfolio to a lower risk profile” — CEO Kent Landvatter.
- “We continue to expect our credit enhanced balance sheet program… to be a meaningful contributor to our earnings in 2025, with most of the growth coming in the second half” — CEO Kent Landvatter.
What Went Wrong
- NIM compression to 8.27% (from 10.00% in Q4; 10.12% in Q1’24) driven by seasonal decline in high-yield HFS originations, repricing of variable-rate SBA loans after Q4 rate cuts, and deliberate mix shift to lower-yielding, lower-risk loans.
- Net interest income fell to $14.3M (vs $15.5M in Q4), pressured by yields and HFI mix; management expects NIM to continue trending down as risk is reduced, even as NII grows with volume.
- Operating expenses rose to $14.3M (vs $13.6M in Q4), mainly due to FICA payroll taxes and higher professional services following Q4 accrual adjustments; efficiency ratio ticked up to 64.8%.
Transcript
Operator (participant)
Greetings. Welcome to FinWise Bancorp's First Quarter 2025 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 star zero on your telephone keypad. As a reminder, this conference is being recorded. Thank you. You may begin the presentation.
Juan Arias (Head of Investor Relations, CorpDev and Marketing)
Good afternoon, and thank you for joining us today for FinWise Bancorp's First Quarter 2025 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 website, investors.finwisebancorp.com. 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 contained in the company's earnings press release and filings with the Securities and Exchange Commission.
Hosting the call today are Kent Landvatter, Chairman and CEO, Jim Noone, Bank CEO, and Bob Wahlman, CFO. Kent, please go ahead.
Kent Landvatter (Chairman and CEO)
Good afternoon, everyone. The FinWise business model remained resilient in its first quarter, even amidst a more uncertain macro environment. Loans originated totaled approximately $1.3 billion, and we also posted solid asset growth and encouraging credit quality performance as both NPL balances and net charge-offs declined versus the prior quarter. Furthermore, we continue to migrate our loan portfolio to a lower-risk profile while still growing profitably and increasing tangible book value. Specifically, our tangible book value per common share ended the quarter at $13.42 versus $13.15 in the prior quarter. We also remain well-capitalized, significantly above regulatory guidelines, with a tangible shareholders' equity-to-assets ratio of 22%, down from 23.3% at year-end 2024. As we have discussed in the past, we expect our capital ratios to decline due to the planned growth in assets.
We also remain focused on executing our business strategy, including announcing a new strategic program agreement with FinTech, Backd, subsequent to the end of Q1. As part of our relationship with Backd, FinWise will provide business installment loans to small and medium-sized businesses, and we will also provide access to our lower-risk credit-enhanced balance sheet program. While we will continue to closely monitor the economic environment, we remain very excited about the long-term outlook for our business, particularly as our existing and potential strategic partners are enthusiastic about the benefits that our broader banking and payments platform provides them. For 2025, we continue to look for gradual progression and growth as we move through the year, driven by originations from existing programs as well as incremental growth from programs that were signed late last year and more recently.
We also continue to expect our credit-enhanced balance sheet program, including a similar extended held-for-sale product, to be a meaningful contributor to our earnings in 2025, with most of the growth coming in the second half of the year, as we had discussed on our prior earnings call. With that, let me turn the call over to Jim Noone, our Bank CEO.
James Noone (President and CEO)
Thank you, Kent. As mentioned, our businesses are healthy. We originated approximately $1.3 billion in loans during the first quarter, and we were pleased that several of the strategic programs we announced in 2024 began to contribute. That said, in the second half of the quarter, we saw some seasonal softening in demand from our higher-yielding partners, and this seasonality is in line with our expectations from prior years. Our largest student lending program had a strong seasonal quarter on originations, but we expect this contribution to decelerate in line with school calendars during the second quarter. Although the lending market could change through the first four weeks of April 2025, loan originations are tracking at a quarterly rate of $1.2 billion. We remain comfortable in the outlook for originations for the year, particularly as the four new programs from 2024 begin to mature more meaningfully with us.
Our SBA 7(a) loan originations ticked down a little quarter-over-quarter. This was driven primarily by average loan size coming in slightly lower in the quarter, as we have continued to see stable demand with our SBA lending. We also had solid growth in our equipment leasing and owner-occupied commercial real estate lines, both of which have been meaningful contributors to portfolio growth. During the quarter, we continued to sell some of the guaranteed portions of our SBA loans, as we have previously discussed. We plan to continue to sell SBA loans as long as market conditions remain favorable. Our SBA guaranteed balances and our strategic program loans held for sale, both of which carry lower credit risk, in aggregate made up 44% of our total portfolio at the end of Q1.
Moving to credit quality, the provision for credit losses was $3.3 million in Q1, compared to $3.9 million in the prior quarter. The decrease was driven by lower charge-offs. Quarterly NCOs were $2.2 million this quarter versus $3.2 million in the prior quarter. Regarding NPAs, while we continue to expect roughly $12 million in potential NPA migration during Q2 as a result of higher rates, during Q1, we were successful in reducing our NPA balances to $29.9 million versus a $36.5 million balance in the prior quarter. The decline in NPAs was driven by consistent collection efforts by our portfolio team. Of the $29.9 million in total NPAs, $15.1 million is guaranteed by the federal government, and $14.7 million is unguaranteed. I will now turn the call over to our CFO, Bob Wahlman, to provide more detail on our financial results.
Robert Wahlman (CFO)
Thanks, Jim. Good afternoon, everyone. For the first quarter, we generated net income of $3.2 million, or $0.23 per diluted common share. Key items that drove our results were softer net interest income, including a sequential NIM decline driven mainly by a change in the mix of originations during the quarter and adjustment of our variable-rate SBA 7(a) loans for the two Q4 rate reductions, partly offset by solid fee income. Average loan balances, including both held-for-sale and held-for-investment loans, totaled $565 million for the quarter, compared to $522 million in the prior quarter. This increase included growth from our SBA 7(a), commercial leases, and consumer programs. Average interest-bearing deposits were $430 million, compared to $355 million in the prior quarter. The sequential quarter increase was driven primarily by an increase in interest-bearing demand deposits and brokered time certificates of deposits to meet our funding needs.
Net interest income was $14.3 million versus the prior quarter's $15.5 million, primarily due to the previously referenced change in the mix of loan originations, repricing the prime-based variable-rate loans, and lower rates on additions to the held-for-investment loan portfolio, partially offset by an increase in interest-earning assets. Our net interest margin declined to 8.27% from 10% in the prior quarter, driven primarily by a seasonal decline in origination volume from our three highest-yielding held-for-sale programs, the addition of $40 million of lower-risk and lower-yielding loans to our held-for-investment portfolio, and a decrease in yield in our SBA and other variable-rate loans as the 50-basis-point Q4 market interest rate reductions took effect.
This overall decline in our net interest margin, while significant, is directionally consistent with our expectations and commentary on prior earnings calls that we would see the NIM decline as we continue to migrate our loan portfolio to a lower-risk profile. We continue to expect the net interest margin to decline over time due to our risk-reduction strategy, though the downward progression could be slower in future periods if we have stronger origination from higher-yielding held-for-sale loans or quicker if we fund large amounts of lower-risk but lower-yielding assets, such as the credit-enhanced loan portfolio. Fee income was $7.8 million in the quarter, compared to $5.6 million in the prior quarter. The sequential quarter increase was primarily driven by a modest pickup in strategic program fees, a favorable change in the fair value of our investment in BFG, and an increase in miscellaneous income.
The increase in other miscellaneous income was due to increased revenue growth from our operating lease portfolio, increased distributions received from BFG, and the $900,000 reduction of prior quarter miscellaneous income due to the write-off of the called CDs unamortized premiums that we described in January. Non-interest expense in the first quarter was $14.3 million, compared to $13.6 million in the prior quarter. The increase was primarily due to an increase in salaries and employee benefits and an increase in professional services expense resulting from reduction in accruals for legal services during the three months ending December 31st, 2024. Our efficiency ratio was relatively flat quarter-over-quarter at 64.8% versus 64.2% in the prior quarter. We remain committed to generating positive operating leverage as we move through 2025 and begin to realize revenue associated with the new programs that have been developed.
Future increases in incremental headcount will primarily be related to increased production, and we do expect to see future decreases in the efficiency ratio. Our effective tax rate was 28.1% for the first quarter, compared to 24.3% in the prior quarter. The change from the prior quarter was due primarily to permanent differences related to executive compensation. We expect an effective tax rate of roughly 27.5% for 2025. Lastly, we remain comfortable with the outlook provided on last quarter's conference call for the credit-enhanced balances to increase by $50-$100 million by year-end 2025. Positively, we have been working proactively with many of our programs over the last six months, and conversations continue to go well. We went live with two credit enhancement balance sheet programs by the end of 2024, and additional discussions continue.
During the first quarter, we were also pleased to see material growth in an extended held-for-sale program. In this case, our strategic partner needed balance sheet access, but for a period of less than the full term of the underlying loans, which varies from our credit enhancement program, where FinWise typically holds the loans to maturity or payoff. That said, this enhanced held-for-sale structure also generates incremental bank earnings for FinWise through a yield split model with low credit risk, and the bank is happy to initiate the program. This is another example of how FinWise delivers innovative lending products that support our strategic partner's growth and further enhances our revenue opportunities. With that, we would like to open the call for Q&A. For your information, Kent had to step away as he has a travel conflict, but Jim and I are here to answer your questions. Operator?
Operator (participant)
Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pull for questions. Our first question is from Brett Rabatin with Hovde Group. Please proceed.
Brett Rabatin (Director of Research)
Hey, good afternoon, everyone. I wanted to start on the expense run rate. You know, it seems like, despite a possible easing of regulatory levels, that the fintech space, people continue to spend money. And just wanted to get a sense of if the build rate may have changed at all in terms of thinking about what you have to do with expense levels for either technology or people or back office from here?
Robert Wahlman (CFO)
Good afternoon. Thanks for your question. Yeah, we saw, well, we're coming in right now at about a 65% efficiency ratio, 64.8%, which is relatively flat to what it was last period. From our perspective, the build that we had in terms of the BIN sponsorship and the payments business are substantially complete. We will continue to see some additional expenses. Our expenses in the period came from really in compensation related to FICA income taxes and the fact that we didn't have to pay FICA income tax for those people that had already compensation already exceeded $168,600. We didn't have that in the fourth quarter, yet that clock restarts this quarter. We also had just a normal fluctuation, some cleanup of accruals in Q4 that came through this year.
I think that we are, as we said in the past, we're expecting our expenses to be relatively flat and increase as we see revenues increase.
Brett Rabatin (Director of Research)
Okay. That's great color. I just wanted to get a little better sense of the path on the margin from here and maybe a different way to tackle it might just be thinking about top-line NII growth and just thinking about the margin continuing to atrophy with the risk reduction. Can you still have, or can NII growth be high single digits this year, given what's transpiring with the margin?
Robert Wahlman (CFO)
Yeah, sure, sure. Yeah, we did see a significant drop in net interest income, and that's been reflected in the NIM. To answer your question, I think directly, the expected growth that we have in NII will come from, as we move forward into the second quarter and throughout the year, comes really from two sources. First of all, there was the seasonal decline amongst the three highest-earning partners that we have in that held-for-sale portfolio. The total originations in the quarter were down approximately $47 million-$50 million for quarter one. That has an outsized effect because of the higher yields on those portfolios that traditionally have been seasonal, and we do expect that to come back. We do expect to see net interest income come up as that origination production returns to migrate towards its normal level.
The second area that we would see net interest income come up that you did not see this period will be from increase in the loan portfolio. The loan portfolio growth will come from what we call, or what I call, the traditional banking products, particularly owner-occupied commercial real estate and lease portfolio, which we saw growth in both of those books this quarter. You will also, as we move forward through the year, see the growth in the credit-enhanced portfolio. Now, all three of those products that I mentioned, their yields are below the average yield, so those will have a dilutive effect on the NIM. Your question was not specifically about the NIM, but was about NII. You will see NII grow.
We expect to see NII grow, but we will continue to see, particularly from the increase in the volume of loans, we'll see NIM come down from that offset in part, or maybe depending upon how much of those we do in the next quarter or the next few quarters, there'll be the balance between those two in terms of what actually happens to the overall NIM rate.
Brett Rabatin (Director of Research)
Okay. That's helpful. If I could sneak in one last one just around the buyback. You guys did not buy back any stock this quarter. We were closer to tangible book at certain parts of the quarter. Is there levels that you would start to think about needing the buyback more, or is this the growth that you're anticipating in the next few years just too much of an opportunity relative to maybe doing some accretive buyback?
Robert Wahlman (CFO)
Yeah, I think that's a great question. What we have tended to do in terms of our buyback is exercise that buyback option if we were to see the share price drop below what our current book value is. It hasn't done that for some time, and maybe it would even go to a discount. We haven't been active for that reason. Plus, we also try to balance it against the need to maintain liquidity in our stock and enough shares out there. We don't want to bring in too many shares and not leave enough out there for active trading.
Brett Rabatin (Director of Research)
Okay. Great. Appreciate all the color.
Operator (participant)
Our next question is from Joe Yanchunis with Raymond James. Please proceed.
Joseph Yanchunis (Senior Equity Research Associate)
Good afternoon.
Robert Wahlman (CFO)
Good afternoon.
Joseph Yanchunis (Senior Equity Research Associate)
Good afternoon. I've got to start off here. Sorry if I missed this. What were the credit-enhanced loan balances exiting the quarter? Can you reach that $50 million-$100 million year-end target with your current partners? Kind of tacking on to that, how long will it take for Backd to be able to generate or begin to generate credit-enhanced loans?
James Noone (President and CEO)
I can take the first two, Joe. This is Jim, and I'll let Bob take the balance figure. How quickly, or I think the first question was, how quickly can we get to that guidance of $50 million-$100 million with the existing partners? Yes, we absolutely can. As far as how quickly Backd specifically scales up, I would say that with all of our programs, it typically takes one to two quarters after we've launched them and made the announcement before meaningful volumes start coming through. How Backd plays into that $50 million-$100 million guidance, I would just say that that's a back-end number. Backd is probably scaling up more in Q4 with us, but we do have other partners that we expect to contribute to that $50 million-$100 million balance by the end of the year.
Bob, I don't know if you want to touch on what the balance was.
Robert Wahlman (CFO)
At the end of the year, the balance of the credit-enhanced portfolio was slightly under $2 million as we were developing the application and making sure everything was working right. It takes a while to bring on the new partners. We are working with the older partners that were in the test mode. The balance is probably around $2 million at this point in time.
Joseph Yanchunis (Senior Equity Research Associate)
Got it. Okay. So $2 million exiting March quarter. And then kind of just for me, in your prepared remarks, you discussed the credit-enhanced kind of balance sheet held-for-sale product. Wait, I'm sorry. No, no, I'm sorry. Yeah, the held-for-sale product. Kind of given your focus to de-risk the balance sheet, why would you sell these loans? And what's that demand for that type of product?
James Noone (President and CEO)
Sorry. Say that again, Joe. As far as why do we sell the loans?
Joseph Yanchunis (Senior Equity Research Associate)
Yeah, the credit-enhanced loans. If the focus is on de-risking the balance sheet, wouldn't you want to load up on those a little bit more?
James Noone (President and CEO)
Sorry. I think you might be referring to the extended held-for-sale in the prepared remarks. The extended held-for-sale is with a partner. When we first developed the credit-enhanced balance sheet product, obviously, we're going to existing partners that have good profiles for us to offer this to, whether it's through loan performance or kind of their capital strength, etc. One of those partners was very interested in the product, but they're a regular user of the securitization markets. In that case, we tailored for them this extended held-for-sale product because it's not their intention to leave those loan accounts or those loan balances with us through payoff charge-off on the underlying loan. They did need this balance sheet capacity for a period of time. That period of time is really during a consolidation period for credit card balances and the refinancing thereof.
They needed a little bit more than what we typically do, which is a two to four day held-for-sale period. They did not need the full life of loan balance sheet capacity. This extended held-for-sale model worked for them. It worked for us with the yield split. It was a good product to roll out.
Robert Wahlman (CFO)
I would add just as a note that it still carries a very low credit risk because the purchase price is all contractual principal and interest.
Joseph Yanchunis (Senior Equity Research Associate)
Got it. Appreciate that. Just one more for me. Given the current market uncertainty, how would you characterize the healthier strategic partners at this time? Is there any concern that you have about a particular one, without naming names?
James Noone (President and CEO)
No concerns right now, Joe. I'd say origination levels continue to be healthy, and we're comfortable with the guidance, which is a gradual pickup from newer partners throughout 2025. As far as macro-related stuff, there's a fair amount of stuff going on. A lot of this we've been through at some point in the past, whether it's economic interruption with COVID, whether it's the significant and quick succession of rate increases and the effects that that has. I would say one impact that I don't think any of us have control over is just a meaningful slowdown in consumer spending and the impact that that could have kind of across the board in lending, whether it's demand within our fintech originations, whether it's delinquencies in SBA or other portfolios. I mean, we're not seeing any of that right now.
If you're talking about macro risks that are out there, that's certainly something we keep an eye on.
Joseph Yanchunis (Senior Equity Research Associate)
Perfect. I appreciate it. Thank you for taking my questions.
James Noone (President and CEO)
No problem.
Operator (participant)
Our next question is from Andrew Terrell with Stephens Inc. Please proceed.
Andrew Terrell (Managing Director)
Hey, good afternoon.
James Noone (President and CEO)
Hey, Andrew.
Andrew Terrell (Managing Director)
Maybe just to start on margin, specifically the held-for-sale yields. Thank you for calling out the, I think it was a $500,000 impact from, it sounds like, more seasonal drop in originations from a few partners. Does that come back in the second quarter? Is there any reason it would not come back in the second quarter? I think you called out $300,000 or so outside of that. There was kind of a net yield impact from, it sounds like, lower rates somewhere, but higher volumes. Can you just explain what drove the rest of the delta there we're seeing in the drop in HFS yields?
Robert Wahlman (CFO)
Certainly. In regards to the expectations as to how the held-for-sale for those three higher-yielding partners will behave here as we move forward through the second quarter of the year, I would expect roughly two-thirds to three-quarters of that to come back during the second quarter, and then the remainder to ramp up during the third and the fourth quarter. As it relates to the other activity that moved that NIM down, there was in the held-for-investment portfolio, we have the significant part of the Federal Reserve. Significant part of the, I'm sorry, the small business lending, the SBA loans, are largely variable rate. The Federal Reserve dropped 50 basis points during the Q4, and those repriced at the beginning of each quarter. We had that flow through during the entire quarter, which accounted for a significant piece of it.
There was a reduction in yield related to our strategy to diversify our loan portfolio with the lower-risk, lower-yielding loans. You see that happen, particularly as it related to the owner-occupied commercial real estate and the lease portfolio and the held-for-investment portfolio. There was also the effect in the held-for-sale portfolio of the program that we brought on, which was the extended held-for-sale program. That also came in at a lower rate and diluted that.
Andrew Terrell (Managing Director)
Got it. Okay. But the SBA and the diversification to lower risk would all be in HFI. I guess specifically there was a note on the HFS yields in the release, $0.5 million for what sounds like the seasonal drop, and then $0.3 million from just a decrease in yield outside of that. I guess I was just trying to figure out what the $0.3 million there was referencing.
Robert Wahlman (CFO)
Actually, it comes from the $500,000. In the retained portfolio, the drop related to those three higher-yielding partners was about an additional $250,000. The residual was, as I said, the dilution.
Andrew Terrell (Managing Director)
Okay. Got it. If I could move on, just on the Commercial Real Estate portfolio, I mean, it's kind of it's a little bit interesting, the pace of the CRE growth right now, when it sounds like loan growth for the credit-enhanced piece can go from basically zero this quarter to reach that $50 billion over the next three quarters. It's obviously a pretty big pace of balance sheet growth. I'm curious, specifically, what are you growing commercial real estate-wise? We're not seeing too much commercial real estate or loan growth broadly out there right now. I'm curious what's driving the CRE growth and what specifically asset or industry-wise are you putting on?
James Noone (President and CEO)
Yeah. Hey, Andrew. This is Jim. I'd say just to be clear, this is owner-occupied commercial real estate. It is not going to be the same asset or loan product type that when banks reference commercial real estate loans. This is different. These are always going to be, at minimum, 51% owner-occupied by the small business. Generally, they are very similar profiles to what we have in SBA. In some cases, actually, originally, this was almost a defensive product, right? As we saw SBA borrowers refinancing out, we wanted to get a product out there that met their needs. It is going to be for a better LTV. They are going to get a better rate. That was the original impetus for the product.
Why we've been successful with it, I think I would point to our relationship with Business Funding Group, their ability to continue to deliver qualified applicants both in SBA and in owner-occupied commercial real estate. We did have a pretty big pickup this quarter. I would tell you that generally, will we have that type of pickup in every quarter throughout 2025? No. It'll probably be a little bit more sporadic. We feel really good about the product. It's a good quality product for us with low credit risk, good LTVs, similar business profiles to what we do in SBA, where we stay out of certain industries. We are very happy about it.
Andrew Terrell (Managing Director)
Yeah. Understood. What's the net yield you're putting that commercial owner-occupied CRE on the books at relative to, say, the net yield on credit-enhanced lending?
James Noone (President and CEO)
I guess on gross yield, the credit-enhanced let me think about the difference here. The owner-occupied commercial real estate is likely going to be 300-350 basis points below credit-enhanced. Again, both of those products are newer. It's hard for me to go, it's hard for me to say what the stabilized difference there will be. With the credit-enhanced product, that's something that we're still rolling out. We feel good about the numbers we put out there for 2025. As far as what that yield looks like, it's a little bit still TBD. It would certainly be higher than the owner-occupied commercial real estate.
Andrew Terrell (Managing Director)
Yeah. Okay. Understood. Yeah. I'm sure it even differs partner to partner. If I could also just sneak another one in around just I heard Kent's not here anymore, but he mentioned in the prepared remarks comments about leveraging capital further. You guys have obviously brought TCE down a bit. Your leverage ratios come in a bit. Remind us capital goalposts. Then specifically whether you're comfortable if a majority of the growth later this year is coming from credit-enhanced where you're not taking risk, if you're willing to leverage capital further given the risk-free nature of that growth.
Robert Wahlman (CFO)
What we've consistently talked about over the last three or four quarters, and we're still staying with, is that we have a floor that we think we're comfortable with, which would be around 14%. We would like to maintain our capital with some cushion in excess of the 14%. That gives us on our balance sheet, with our existing capital, the balance sheet to grow our portfolio and maintain that leverage ratio at that level in excess of $1 billion. Still a lot of room to grow yet.
Andrew Terrell (Managing Director)
Okay. Thanks for taking my questions.
Operator (participant)
Our next question is from Andrew Liesch with Piper Sandler. Please proceed.
Andrew Liesch (Senior Equity Research Analyst)
Hey, everyone. Thanks for taking the questions. Just sticking with the commercial real estate there, do you have the yield on what those loans were added at, the owner-occupied CRE?
James Noone (President and CEO)
Sorry, Andrew. You're saying what's the gross yield on the owner-occupied commercial real estate portfolio?
Andrew Liesch (Senior Equity Research Analyst)
Yeah. Just curious what that came on at.
James Noone (President and CEO)
Yeah. I would tell you, in general, it's going to be a prime minus product. So it's probably prime minus 100.
Andrew Liesch (Senior Equity Research Analyst)
Got it. These were sourced from BFG. Is that what I heard?
James Noone (President and CEO)
Correct.
Andrew Liesch (Senior Equity Research Analyst)
Okay. Got it. It also looks like these were funded with brokered CDs. I mean, the spread on that, am I looking at the balance sheet wrong? It just looks like the spread on that's pretty narrow. Is it worth it to grow this owner-occupied CRE?
James Noone (President and CEO)
Yeah. I agree that the margins there are tighter than most of our other products. I think we'd point to the credit risk there also being meaningfully different. Yes, we hear you on the margin being tighter than the other products. It is certainly something that we keep an eye on and make sure that we're booking good loans. That is going to be a growth trajectory that is, I would say, meaningful, but it is not going to be the entire, it is not going to be where the primary asset growth of the bank is. It is a good way to capture good customers that might be refinancing out or good referrals that are coming in to BFG and to our existing borrowers. We can make good margins, but those certainly are not the highest margins at the bank.
Andrew Liesch (Senior Equity Research Analyst)
Got it. Okay. Just thinking about the funding side then, not only for this product, but for other products going forward, when the BIN sponsorship really gets going, are there opportunities there to bring on deposits? I guess how do you look at funding over the course of maybe the next year rather than looking at the brokered funds, brokered sources?
Robert Wahlman (CFO)
That is the plan. We expect to see significant deposit growth as it relates to both BIN sponsorship, and we also look for deposit growth from the payments business. In addition to that, we are close to launching our online account opening, which will also give us another source of non-brokered funding, more core funding.
Andrew Liesch (Senior Equity Research Analyst)
Great. That's good to hear. Looking forward to seeing that product. I will step back. Thanks for taking the questions.
Operator (participant)
There are no further questions at this time. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.