Nov 15, 2021
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Operator
00:05 Good day and thank you for standing by. Welcome to the BMTX 3Q twenty twenty one Earnings Conference Call.
At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to hand the conference over to your speaker today, Bob Ramsey, CFO.
Thank you. Please go ahead.
Bob Ramsey
00:33 Thank you, and good morning, everyone. And thank you for joining us on BM Technologies third quarter twenty twenty one earnings webcast.
Our earnings release, merger announcement, and investor presentation were issued earlier this morning and all are posted on the Investor Relations page of the company's website at ir.bmtxinc.com. 00:56 Our investor presentation includes important details that we will be walking through on this morning's webcast, and I encourage everyone to pull up a copy.
Before we begin, I would like to remind you that some of the statements we make today may be considered forward looking. 01:11 These forward looking statements are subject to a number of risks and uncertainties that may cause actual performance results to differ materially from what is currently in anticipated.
Please note that these forward looking statements speak only as of the date of this presentation and we undertake no obligation to update these forward looking statements in light of new information, our future events except to the extent required by applicable securities laws. 01:37 Please refer to our SEC filings, including our Form ten K and ten Q for a more detailed description of the risk factors that may affect our results.
Copies may be obtained from the SEC or by visiting the Investor Relations section of our website. This morning, I'm joined by BM Technologies, CEO, Luvleen Sidhu; Chief Operating Officer, Bob Diegel; and CTO, Jamie Donahue.
02:02 At this time, it's my pleasure to turn the call over to Luvleen.
Luvleen Sidhu
02:06 Thank you, Bob. Good morning, everyone, and thank you for joining BM Technologies third quarter earnings call.
As Bob said, joining us today is also our COO, Bob Diegel; and our CTO, Jamie Donahue, who are on the line and available during the Q and A section. We are thrilled to be sharing with you two great accomplishments this morning.
The first being our record Q3 results and the second our exciting strategic merger with First Sound Bank. 02:37 Before we get started, diving into both of these significant update.
For those joining us for the first time, I wanted to provide a brief overview of who we are. BMTX is one of the largest digital banking platforms in the country today with over two million accounts.
We are on a mission to make banking better for millions of Americans by providing a more affordable, transparent, and consumer friendly banking experience. 03:05 We were one of the first neo banking fintechs to go public earlier this year, are one of the first to have a profitable business model, and are now among the first fintechs embracing a bank charter to create an innovative fintech bank with a sustainable, profitable business model into the future.
03:24 We pursue a B2B2C and a banking as a service strategy, which allows us to acquire bank customers at low cost and at high volume. Today, we are acquiring customers at less than ten dollars.
This provides a tremendous competitive edge for us relative to not only traditional banks, but also to most challenger banks, which are having to spend an exorbitant amount to acquire a bank customer. 03:53 Today, we are leveraging our B2B2C and banking as a service strategy in three main verticals.
The first being higher education vertical, where we have relationships with approximately seven hundred and forty five campuses across the country, which allows us to touch one in every three college bound students and introduce them to be BM Technologies an offer to them a choice to open a BankMobile Vibe Checking account through our Partner Bank. 04:22 It is through this vertical that we disperse eleven dollars to twelve billion dollars a year, of which approximately two billion flow into BankMobile Vibe Checking accounts.
And we are opening several hundred thousand new accounts a year through this channel. 04:38 The second vertical is our banking as a service business.
Through our proprietary API driven banking as a service platform and our white label interface we are able to help fintechs and brands launch fully branded financial services products to their customers and to their employees at a fraction of the cost and at a fraction of the time it would take them to roll this out on their own. 05:04 Our offering provides them with a strong point of differentiation that leads to attracting new customers, building greater customer loyalty, adding new revenue streams and accessing data to provide an even more personalized experience to their customers.
05:21 Additionally, our technology can also be used by community banks and credit unions to accelerate their digital strategies with state of the art mobile and web based banking apps and we can also provide back office banking operations, compliance, fraud, and risk management and customer service support if needed. 05:40 Our banking as a service vertical is best exemplified today by our partnership with T-Mobile and with the launch of our checking account product T-Mobile MONEY.
We continue to expand and significantly grow this relationship. 05:54 Lastly, our workplace banking vertical where we distribute the bank mobile suite of banking products to employees across the country as a financial wellness offering.
We continue to make solid progress in all three of these verticals. 06:10 As mentioned, we are mission driven company's first and foremost and are dedicated to our vision of making financial services more accessible and affordable and to financially empower millions of Americans.
06:25 From a financial standpoint, our vision continues to be to create a company with a market cap of five hundred million to one billion over the next three to five years by executing on the strategy that we've laid out and building upon the strong foundation we already have. 06:42 So, let's get started, flipping to slide four.
I am delighted to report to you record results for the third quarter and first nine months of twenty twenty one. We are pleased to report Q3 twenty twenty one EBITDA of seven million, up ninety one percent year over year and Q3 year to date EBITDA of twenty point nine million.
07:07 Additionally, given our performance to date, we are excited to raise our twenty twenty one EBITDA guidance to twenty six million from twenty four million. Q1 revenues improved twenty percent year over year with Q3 revenues of twenty two million.
Additionally, we continue to add new accounts to our portfolio and added approximately one hundred and fifty seven thousand new accounts in Q3 and approximately three hundred and fifty thousand new accounts year to date. 07:40 Moving on to slide five.
Here we graphically show our strong year over year growth in revenue and EBITDA. Revenue for the first nine months of twenty twenty one totaled sixty nine point three million, a forty percent increase from the first nine months of twenty twenty.
Core EBITDA for the first nine months of twenty twenty one totaled twenty point nine million, an eight sixty seven percent increase from the first nine months of twenty twenty. 08:12 On Slide six, you can see that our average service deposits totaled one point seven billion in Q3 twenty twenty one, one hundred and twenty eight percent increase compared to Q3 twenty twenty.
08:27 I would like to point out that at the end of the quarter, service deposits surpassed two billion dollars for the first time. Specifically, average new business service deposits increased four thirty three percent compared to Q3 twenty twenty, which is a nine forty million dollars increase.
08:48 As a reminder, our new business segment includes our banking as a service and workplace banking verticals. In our students business, organic deposits, also as a reminder, these are deposits that are above and beyond any school disbursement increased seventeen percent year over year to one point seven billion for nine months ending September thirty twenty twenty one indicating strong primary banking behavior.
09:17 Additionally, debit card spend was seven seventy three million in Q3 twenty twenty one, a four percent increase compared to Q3 twenty twenty and new business debit spend increased forty four percent compared to Q3 twenty twenty. 09:35 Lastly, in the higher education vertical, we dispersed ten point six billion dollars to students year to date, of which one point four billion has been deposited into BankMobile Vibe accounts held at our Partner Bank.
09:50 Moving to Slide seven. We continue to see a strong performance in the overall business.
Our revenues per active account increased thirty one percent year over year to forty seven dollars. Again, this is an annualized third quarter revenue number.
The strong revenue per account metric is driven by healthy average balances and spend across the portfolio. 10:16 Again, we couldn't be more excited about our record financial results, and now I will pass it on to our CFO, Bob Ramsey for some additional financial details.
Bob Ramsey
10:27 Thank you, Luvleen. I'm going to continue on slide seven and everyone can see that the average deposit balances per active count in our new business segment increased an impressive two ninety five percent year over the year to approximately ten thousand dollars today.
10:44 Average balances in the student business increased twenty three percent year over year and today are over eighteen hundred dollars. Similarly on the spend side, our new business, active accounts, quarterly spend increased by seven percent year over year to approximately thirteen hundred and fifty dollars and its student quarterly spend is even higher at over eighteen hundred dollars a thirteen percent year over year increase.
11:10 I want to also highlight that on the new business side of our operations in addition to the strong overall metrics that I just shared, in the third quarter, highly active users or those defined is having both direct deposit and a minimum of five customer driven transactions per month have annualized spend of nearly sixteen hundred dollars on their debit cards and average deposit balances of over four thousand three hundred. This very attractive cohort makes up approximately seventeen percent on active accounts compared to twelve percent in the year ago period.
11:47 Moving to slide eight. Slide eight illustrates several of our KPIs.
You can see here that average service deposits increased one hundred and twenty eight percent year over year to one point seven billion dollars and I'll remind everyone that on an ending balance basis, we surpassed two billion dollars in deposits for the first time. 12:09 Debit card spend increased four percent year over year, our year to date financially refund disbursements increased seventeen percent to four point one billion and retention of college and universities remains near one hundred percent.
12:24 Turning to slide nine. Slide nine includes our income statement.
Compared to the year ago period, our revenues increased twenty percent to twenty two million with the strongest growth in our deposit servicing fees fueled by strong growth in service deposits. 12:41 Our core operating expenses excluding depreciation amortization increased just two percent to fifteen million dollars.
This quarter, we recognized a benefit from virtual active pricing on a vendor whose contract we renegotiated, which did benefit expenses. And looking into next quarter, we expect our core OpEx to be somewhere between the second and third quarter amounts.
13:05 So attracting our core expenses, excluding depreciation and amortization from revenues, and we earned seven million dollars in core EBITDA this quarter, which is a ninety one percent increase from three point seven million in the year ago period. We also updated our full year EBITDA guidance to twenty six million dollars, which implies approximately five million in the fourth quarter.
13:28 With that, I'll turn it back over to Luvleen to walk you through the slide ten.
Luvleen Sidhu
13:33 Thanks, Bob. So, on slide ten.
I would now like to provide you with a few key business updates. In the Higher Education vertical, in addition to the positive trend in account level deposits and spend, which I have already covered, we continue to see additional positive trends.
13:53 For example, we added twelve new partnerships with colleges and universities across the U.S. year to date.
Over seventy one thousand additional students now have access to BankMobile Disbursements and the BankMobile Vibe checking account. Additionally, we retained almost a one hundred percent of our higher education institutions this year and disbursed ten point six billion dollars to students year to date of which one point four billion has been deposited into BankMobile Vibe checking accounts.
14:24 We also continue to expand our product offering and have signed three new colleges and universities up for our new vendor pay offering, which creates more stickiness with the schools we do business with today. We also announced in August, our plans to serve banks and credit unions looking to expand new digital presence through our proprietary banking as a service technology [stack] [ph].
14:49 We also continue to build out an ecosystem of value added its services for our higher education account holders to build greater stickiness and engagement. Most recently, we entered into a partnership with TutorGigs, which employees college, students as tutors, providing students additional sources of income and driving customer engagement.
15:12 Lastly, I am proud to share that BMTX and T-Mobile were selected as the best fintech partnerships at Finovate twenty twenty one. One of the leading fintech organizations for the innovation we together have demonstrated through the launching of the T-Mobile MONEY checking account.
15:31 Next on slide eleven. Now, to talk about the most exciting and impactful update of the quarter.
This morning, we announced the signing of a definitive agreement to merge with First Sound Bank, a Seattle, Washington-based community bank. This is a thrilling milestone for BM Technologies and is a major step forward in executing our vision to create a disruptive fintech bank.
16:02 We are joining the likes of a few other innovative fintechs in the marketplace that have taken a similar step of combining a fintech with a charter such as Square, LendingClub, Varo, and SoFi. Similar to these other fintechs, we believe this is a critical step in order to create a sustainable profitable company with numerous growth opportunities in the future.
We believe there are several strategic and financial benefits to this merger. 16:34 First, we create a fintech bank that combines the best of financial technology, including our proprietary banking as a service offering with all that a bank charter has to offer.
Thus combining both the deposit and asset size of the balance sheet. 16:52 Second, we accelerate our earning power by supplementing fee-based income with net interest income.
Third, we are now able to offer new products and services over time through the addition of new banking products, which will also help us better attract, engage, and retain customers and help us fulfill our customer for life strategy. 17:18 Fourth, this move enables us to become a fintech bank that can support other fintechs to come to market similar to a Cross River, WebBank, MetaBank and a few other players are doing today.
Fifth, this helps us enhance our customer lifetime value by providing access to lending and other banking products, which we can cross sell to our customers. 17:42 Overall, our vision over time is to create a fintech bank that combines the best of banking as a service, plus a marketplace lender, plus, personal investing and global advisory services, plus blockchain based payment system to create an unparalleled customer experience.
18:03 Flipping to slide twelve, I wanted to highlight a few transaction details. BMTX will pay up to seven point two two dollars in cash for each share of FSB or First Sound Bank common stock or approximately twenty three million in aggregate consideration.
The combined company to be named BMTX Bank, will be led by me, as Chair and CEO. I will also be directly responsible for our digital banking initiatives.
18:35 Marty Steele, the current CEO of First Sound Bank and a Veteran Banker, will serve as COO of BMTX Bank and will lead the combined company's community banking division. The transaction is subject to regulatory approval and other customary closing conditions and is expected to close in the second half of twenty twenty two.
18:58 I am sure you will have some questions for us about this merger over the coming months, but in closing, thankfully for us, we have a competitive edge as we were born within a bank and operated as a bank for six years prior to divesting as an independent fintech company earlier this year, which provides us with a huge competitive advantage relative to other fintechs hoping to become banks. 19:23 Additionally, we strongly believe a bank is the most profitable way for us to operate our model versus a bank partner model where we need to share in revenues and have less control over our financial future.
19:38 Lastly, we will be a tech driven fee-based fintech bank, which we believe will also drive strong valuations based on EBITDA and earning, which should provide compelling returns for our shareholders. 19:53 I am thrilled to share with you this huge step forward in the evolution of our company and believe it will be a trend setting strategic merger that other fintechs may follow.
On slide thirteen, I want to quickly highlight some of the tremendous growth opportunities in front of us. 20:12 In our student business, we continue to work on expanding the number of college relationships that we have, which gives us access to more students who can potentially convert to bank account customers.
We are also investing in marketing to drive more bank account adoption and retention. 20:31 With regards to existing banking as service partnerships, we continue to enhance our product offering for T-Mobile MONEY and further expand it to new channels.
We also continue to work on our pipeline for new partners. Lastly, we are also open to exploring possible strategic M and A opportunities like the one I shared with you today where one plus one can equals three or more.
20:58 On slide fourteen, we reiterate that we want to continue you expanding our product offering, so we can have the best in class digital banking platforms that includes banking, lending, advice, Crypto, investing and insurance. We will keep you posted as we continue to add new products and services over the next six to eighteen months.
21:23 On slide fifteen, I would like to end by summarizing our key investment highlights. We continue to share record results with core EBITDA, up ninety one percent year over year and revenue up twenty percent year over year.
We have an established customer base with over two million accounts. 21:44 We have solid growth and opened one hundred and fifty seven thousand new accounts in Q3 and three hundred and fifty thousand accounts year to date.
We demonstrate deep customer engagement with an annualized revenue per active account, up thirty one percent year over year driven by higher average balances and spend. 22:06 We have strong existing partnerships with approximately seven hundred and forty five university partners and T-Mobile.
We have developed a proprietary banking as a service platform, which is API driven and ready to roll out quickly and integrate with partners easily. 22:25 We have a very attractive valuation, which today is at a deep discount relative to both private and public periods.
And lastly, we couldn't be more thrilled and excited about our growth prospects once our merger is complete, and we become a true fintech bank. Once again, I want to thank our investors and shareholders for their continued support and also to all the BMTX team members whose passion and dedication makes all of this possible.
22:59 Operator, we would now like to open the line for questions.
Operator
23:03 [Operator Instructions] Your first question comes from the line of Mike Grondhahl with Northland Securities.
Luvleen Sidhu
23:39 Hi, Mike, how are you?
Mike Grondhahl
23:41 I'm well. I'm well.
And congrats on a nice quarter Luvleen and Bob. Hey, my first question, just looking at the trends in new business, maybe especially deposits and into a lesser extent spend, can you just help us understand what's driving that specifically in new business and kind of how you're thinking about it in terms of, kind of an outlook and what kind of growth you think you could generate going forward?
Bob Ramsey
24:15 Yes. So, I'll take that one first, Mike.
So, yes, we have seen really nice growth in the new business, particularly on the deposit side of things. I think that the industry has got excess liquidity and there are excess deposits out there.
I think that we did implement in partnership with our partner earlier this year some changes in the way that accounts qualify for interest as we're trying to really incentivize growth in usage of use accounts. And I think that what we see is metrics overall, we're really happy with the traction.
Luvleen Sidhu
24:50 And to show that that is a combination of strong balances and spend, we did talk about how about seventeen percent of the portfolio is what we call active transactors. They are both direct depositors and doing at least five transactions per month, and their annualized spend is at about sixteen thousand dollars.
So again, our goal is to have nice strong balances and spend and we are demonstrating both.
Mike Grondhahl
25:23 Got it. And is there, do you feel good about projecting similar growth or how do you just think about that over the next six months to twelve months?
Bob Ramsey
25:36 So, I think the balances for account can't grow to the moon, but I think that what's going to really be the will driver of growth in new business is account growth. And so, I think we will continue to see good growth in deposits and spend and we'll continue to see good growth and spend per account and maybe a little bit more modest and balances per account, but we do expect to see continued growth overall.
Mike Grondhahl
26:00 Got it. Got it.
And then flipping to the merger, which gives you a lot of capabilities, it sounds like it's nicely accretive. Luvleen, if you had to pick two things that merger acquisition will help you, what are the two things that stick out the most for you?
Luvleen Sidhu
26:27 Sure. So, I think what is very important to acknowledge is that it will accelerate our earnings power.
I think everyone sort of understands that our model in banking as a service, we were able to create a very low cost high volume acquisition model, but what we essentially provide today are banking products and services, checking, savings, loans products, etcetera, and that today requires us to work with a partner bank. 26:54 And obviously when you work with a partner, there is sharing in revenues, but when you have your own charter, you are able to create more control over your financials into the future and create more sustainable profitable growth by owning that entire revenue.
And so, that is what number one, we are able to accomplish by creating this merger with First Sound Bank. 27:22 Secondly, we are really excited because it is very obvious as we're seeing Square LendingClub, SoFi and other very innovative fintech players in the marketplace engrave the charter that once you have a fintech that also has a charter with it, you're able to add new products, new services, that you are able to attract new customers and engage with them better cross-sell to them and retain them as well that enhances customer lifetime value over time.
27:57 So, those are two very exciting things that this one hundred percent helps us to accelerate and create into the future through this really trendsetting what we believe strategic merger.
Mike Grondhahl
28:12 Great. Thank you guys.
Luvleen Sidhu
28:15 Thanks, Mike.
Bob Ramsey
28:16 Thanks Mike.
Operator
28:18 Your next question comes from Michael Diana with Maxim Group.
Luvleen Sidhu
28:24 Hey, Michael.
Michael Diana
28:25 Good morning. Hi.
Congratulations on the bank acquisition. I follow LendingClub for example, I think it's a hugely positive thing for you as so you can, as you said, capture all the economics, could you talk for a second about, you mentioned the closing is probably in the second half of twenty twenty two.
I'm sure you're probably building in some conservatism there, but are there any issues you see in getting approved?
Luvleen Sidhu
29:04 Sorry, I’ll the LendingClub and you can follow-up. So, yes, we've had preliminary conversations with the regulators.
They are aware of our objectives and what we are trying to create. And so, we really enjoyed this conversations prior to announcement today, which really puts us in a good path going forward to be in a really great position as we submit our application and go through this process over the coming months.
But we are really excited to be in conversations with the FDIC who is the current primary regulator for First Sound Bank. And as you probably read as well, they in my opinion very innovative in their mindset as they think strategically about how banks and fintechs can work together.
29:53 And so, we feel privileged to be working with them and conservatively would like to estimate that at closing in the second half of twenty twenty two, but given that we've already started the process with them, have had conversations, it could potentially be earlier, but we want to be conservative in our estimates.
Michael Diana
30:19 Okay, great. Thank you very much.
Luvleen Sidhu
30:24 Thanks Mike.
Bob Ramsey
30:25 Thank you, Mike.
Operator
30:27 Your next question is from Chris Sakai with Singular Research.
Luvleen Sidhu
30:34 Good morning, Chris.
Chris Sakai
30:36 Hi, good morning. I guess to start, could you talk a little bit about interchange revenue, and seems like it's been in the down trend?
Wanted to get your take on why that is and where you guys see it in the future?
Bob Ramsey
30:57 Yes. So, I'll take that one Chris.
So, no, I would not describe interchange revenue as being in a down trend. There was a bit of a true up that did impact this quarter where we had been a little bit over accrued in recent quarters when we corrected that this quarter, but if you normalize that out, you really would see the interchange income track with debit card spend.
We provide those measures debit card spend is up year over year. 31:23 There is seasonality, particularly on the student side of the business, but we would expect the card interchange income to grow on a year over year basis again to normalize out the seasonality.
Chris Sakai
31:36 Okay. And then to go to your guidance, you know revenues, what's been flat, but EBITDA is growing.
So, what's going on there?
Bob Ramsey
31:51 So, I'm not sure what you mean by revenue is flat and EBITDA is growing. I mean as we look at the full year, I think we see very good growth in revenues and that's driving the growth in EBITDA.
Expenses have been reasonably flat and the revenue growth has been what's really been driving the EBITDA growth. 32:14 Maybe do you want to ask it in a different way, maybe I'm not understanding your question.
Chris Sakai
32:19 Okay. Yes, I was just wondering what was driving the EBITDA growth there?
Bob Ramsey
32:28 Yes. No, our EBITDA growth has come from the top line, as you say in the third quarter and you would see similar trends for the year, we've had, third quarter, we had twenty percent growth in top line revenues and our expenses were roughly flat.
And if you look at full year, we will have a little bit of expense growth, but it's the growth in revenues that’s driving EBITDA.
Chris Sakai
32:50 Okay. Great.
And then any sort color on your new agreement with TutorGigs? How is that going to add to the top line?
Bob Ramsey
33:07 Yes. So, I think this is a really exciting partnership, because it's aligned with what we do in that core student business.
We're offering our customers the opportunity to a partnership part to be tutors and have additional sources of income. So, we think this is going to benefit our top line, primarily by driving greater engagement with those students of those accounts are going to see more value in the accounts.
33:31 Additionally, as they have more income, we expect that that income will be deposited into a BankMobile Vibe account, so it should benefit our deposit balances and then spend as they spend that money out and then there also is a small referral fee. So, several ways that we see this benefiting us financially, but even more importantly, I think this is a great strategic alignment for us and our customers.
Chris Sakai
33:59 Okay, All right, great. Well, thanks.
Bob Ramsey
34:02 Thank you.
Operator
34:05 Your next question is a follow-up from Mike Grondhahl with Northland Securities.
Mike Grondhahl
34:12 A couple more questions. As you own the bank yourselves, are you able to provide a range of what the savings will be?
If you don't have to like rent those services or profit share those services with your current partner?
Bob Ramsey
34:37 Yes. I don't think we're going to provide specific earnings guidance, but I think the real benefit here is the ability to earn greater revenues by deploying those deposits into assets where we earned a net interest margin that exceeds the deposit servicing fee.
So, the first benefit is really one to revenues and it will ultimately depend on how quickly we deploy those deposits into loans, what the loan mix looks like, etcetera. 35:06 We're still finalizing as we work through the regulatory process what exactly that looks like, but I think you can look at the banking industry and make some reasonable assumptions around what that improved profitability looks like.
And then as Luvleen, I think also referred to, this does give us more options and control around additional products and services that we may be able to offer as well. So, we'll get a broader options of what we can offer and then the servicing fee, we expect that the margin will do better than what we would otherwise earn.
Luvleen Sidhu
35:38 And I would also like to clarify here that a traditional bank is net interest income driven. We are a fintech bank, and for us, we have fee based income which is a mix of interchange or banking as a service software fees, etcetera.
There are university fees, that are all fee based in nature and reflective of a check driven, banking institution and on top of that we get benefit, which is supplemented by the net interest income.
Mike Grondhahl
36:09 Got it. Got it.
Anything to call out in the workplace banking segment or other wins, if you will, I know you've been working on a few?
Luvleen Sidhu
36:25 Yes. We continue to have a strong pipeline in growth workplace banking.
We've talked a bit about what that pipeline consists of, a mix of HR Brokers and other fintechs that focus on employee based benefits, direct to employer strategy, digital benefit providers and also our white label pipeline remains strong. 36:50 As we've talked about before, these take a very long sales cycle, but we have continued to say that we are hopeful that we can be able to share with you a win here fairly soon that we will keep you posted on that.
Mike Grondhahl
37:08 Great. Thanks guys.
Luvleen Sidhu
37:11 Thanks Mike.
Bob Ramsey
37:13 Thanks Mike.
Operator
37:14 At this time, there are no additional audio questions.
Bob Ramsey
37:18 Okay. We do have some questions that have come through the webcast.
So, I will read through some of those as we have a little bit more time. The first one, and Luvleen I'll direct this to you, but feel free to bounce it back to me if you want.
The first one is, what drove the decision to purchase a bank versus partnering with another bank? Also, will you be moving your deposit to your current partner bank to the combined new company when the deal closes?
Luvleen Sidhu
37:47 Sure. I'll take that.
So the decision to partner versus go through a merger as we have done, it was very simple. So, we have a partner relationship today.
We've talked to you about having to potentially continue in a partner bank relationship into the future. And as I explained in our prepared remarks, we believe that a partner bank relationship is less accretive to us because we have to share in the revenues with a Partner bank.
38:19 Now, if you merge and you become a fintech that happens to have a charter, those economics remain with you, and you have the opportunity over time to actually expand the economics. Since you now have the deposit side of the balance sheet, as well as the asset side of the balance sheet.
So, that is to answer number one. And I believe number two is, will you be moving over the deposit?
38:44 Yes. Over time, we will thoughtfully be moving over the deposit onto the balance sheet, which we would then deploy into loans and that will we will, the timing and the size of that move is still being decided and we will keep you guys posted on that overall timing, but we do continue to believe that this will be significantly accretive on our revenues on a EBITDA, on an earning basis over the next one to three years.
And we are very excited and confident to be able to share that.
Bob Ramsey
39:27 Thanks Luvleen. I'll take another question here.
It asks if given the acquisition will BMTX continue to look for banking partners now that it's a acquiring the bank? 39:37 I'll take that one.
I think that becoming a bank ourselves negates the need for banking partners. So, the goal is, as Luvleen has said over time to bring deposits onto our balance sheet rather than work through additional partners.
39:57 Another question here asked, will the acquisition result in any changes to be terms of the existing warrants? 40:04 I'll take that one as well.
The warrant agreements as they are written does have provisions for this sort of scenario, but effectively, there are no changes in the warrants of the way that they would work. They simply would end up becoming warrants in the new security rather than in the current technology stop.
40:26 We have another question here that talks about the process for bringing the deposits over and capital levels of the bank. I think we've said a few times that deposits will migrate over time and we are working through that plan with regulators.
We do intend to support the balance sheet and those deposits with appropriate levels of capital. 40:03 We want to have strong capital ratios for an institution that is a tech driven bank that has good growth, and we will work through what those ratios look like as we finalize plans with our regulators.
41:08 Let's see. There's a question here, Luvleen, I'll let you take that talks about some of the new opportunities for new products.
It says, as we think about things like Crypto and investing as pillars of development, are these opportunities that we will explore through partnerships or develop an in-house solution?
Luvleen Sidhu
41:31 Yes. I think that we've mentioned this on previous call.
Number one is our digital banking platform and continuing to build it out with products and services that are most compelling to consumers is the highest as priority to us. We will take a build, a buy and a partner mix of strategic moves to be able to accomplish this.
41:54 And so, for example, we did talk about a partnership move to help us build out the credit monitoring and credit building through a partnership with Array that we announced in the previous quarter. So, that's an example of a partnership.
42:10 Example of a merger is what we announced today to help build out and continue to enhance our banking products in our lending products, for example. And so, it's really going to be a mix between build by partner as we continue to build out the digital banking platform, which is a strong and high priority for us.
Bob Ramsey
42:33 Great. Thank you, Luvleen.
Couple more questions here. We have a question asking how many schools have adopted the vendor pay solution?
We're happy that we signed our first three institutions this quarter, so we are sort of out of the gates, which is great. There's is a question here about the company name and can BMTX go back to the BankMobile with the deal if it chooses?
42:59 I would remind everyone that the BankMobile brand still does exist in our higher education business. We are able to use that with our current partner bank, and so, the BankMobile Vibe account does still exist.
As we look forward with the transaction, the plan right now is to name the company BMTX Bank, but that doesn't mean that we wouldn't use the BankMobile brand and the student banking.
Luvleen Sidhu
43:25 And I would just add to that. The reason, you know, BMTX Bank is reflective of really the DNA of what we are trying to create here.
And which not just that we're trying to create, but in essence what it is. It is a tech driven fintech first bank.
And so having our roots in our technology and making sure that we continue to be technology first in everything that we do is a greatest priority for us and BMTX helps us continue to reflect that in our name.
Bob Ramsey
44:02 Great. Thank you.
Luvleen Sidhu
44:05 Maybe one more Ramsey.
Bob Ramsey
44:08 Yes, one more. There's a question here around, First Sound, well two more, one asked if First Sound, does have any branches?
They do have one branch, and we will continue to maintain that one branch. 44:21 And then there's a question here about what do we plan to invest the deposits in on the asset side of the balance sheet.
And I guess to answer that, I'll take that. We are looking to have diversified balance sheet, one that we feel safe and comfortable about, we certainly will have an element of securities on the balance sheet, which would have very low credit risk and what help support liquidity.
44:45 Additionally, First Sound has got a really great community commercial lending operation. And we believe that there is opportunity to grow that business where they are as they become part of a larger institution with better capital.
And we also will be exploring the opportunity to expand our extend credit to our existing consumer customers, as we have talked about as being a part of our road map in the past, and we'll look at other ways to supplement and augment the asset strategies. So, we're still finalizing, but there are a lot of things that we're looking at and we ultimately are striving to generate a diversified asset strategy.
45:24 And you would add on that Luvleen?
Luvleen Sidhu
45:27 No, that sounds good.
Bob Ramsey
45:29 Okay. I think that's all we have time for.
Luvleen Sidhu
45:34 Great. Thank you everyone again for your continued support.
We were so thrilled to be able to share strong quarter results, as well as we are so excited to be working with Marty and the of his team at First Sound Bank to really create a fintech bank of the future. So, thank you so much and look forward to speaking to you next quarter.
Bob Ramsey
45:55 Thank you, everyone.
Operator
45:57 Thank you. This concludes today's conference call.
You may now disconnect. Speakers hold the line.