Live Oak Bancshares (LOB) Q3 2026 earnings call transcript

Thank you. Good morning, everyone. Welcome to Live Oak's third-quarter 2026 earnings conference call. We are webcasting live over the internet, and this call is being recorded. To access the call over the internet and review the presentation material that we will reference on the call, please visit our website at investors. live. bank and go to the Events and Presentations tab for supporting materials. Our earnings release is also available on our website. Before we get started, I would like to call on you that we may make four-looking statements during today's call that are subject to risks and uncertainties. Factors that may call as actual results to differ materially from our expectations are detailed in the materials accompanying this call and in our SSC findings.

We do not undertake to update the four-looking statements to reflect the impact on certain stances or events that may arise after the date of today's call.

Information about any non-gap financial measures referenced, including reconciliation of those measures the gap measures, can also be found in our SSC findings and in the presentation materials. Here in the room we have Chip Behan, our chairman and CEO, and Michael Carnes, our chief credit officer, who will be available for a few day after our president, BJ Los, and CFO will fight for a finished or prepared remarks. I'll now turn it over to Paul to BJ.

Great. Thanks, Greg. Good morning, everybody. Let me start where you'd expect me to start. We reported EPS of 52 cents as obviously not the number we wanted to print and not the number you expected from us. The driver was 17 million of additional provision on our Exited Distillery portfolio, about 27 cents of EPS. Excluding that action, adjusted EPS was 76 cents. Later on all, we'll walk you through that bridge on slide 15. So I'll spend time right up front on that this morning, but then I'm going to spend quality time on what is at risk of getting lost this quarter, which is our operating performance and momentum underneath these results, which is simply outstanding, one of the strongest operating quarters in our company history.

Let's get started on slide four. Five themes in the quarter. One, the decisive action on the distillery portfolio. Two, outstanding operating leverage momentum, with record adjusted PP and R of 88 million dollars of 33% year over year. Three, the main live oak engine, our small business banking model, is humming. Four, live oak express and business checking are now generating meaningful profit and have a long runway ahead. And five, deploying AI is front and center for us. And our adoption continues to accelerate. We've only scratched the surface of what's possible.

First of those five is about actively dealing with a challenge head-on, which is who we are. And the others are about continuing to build a company with strong, sustainable operating earnings and growth. Overall provision, this quarter was 55 million, four pieces, and they shouldn't be 100% on the exited distillery portfolio. More on that in a moment.

Second, 16 million or 30% of the total from low growth. We added more than 700 million of low and balanced growth this quarter, a record. As I've said before, Cecil is not kind to growing companies like ours. That 16 million is a reserve against loans. We haven't had a chance to earn a penny on yet. I'll take that trade over low growth and lower provision all day every day. The third 13 million or 24% of the provisioning was in commercial banking. From six relationships across three verticals, not concentrated. Since these are larger loans, we will see more of a mix of impairments, charge offs and recoveries in any given quarter, making results more lumpy.

Fourth, nine million or 16% of provisioning was in small business where it was diversified with no single industry driving it and consistent with the history of our book. Turning to slide six on distillery, as we talked about last quarter, we exited this vertical in 2024 over two years ago and were at workout only. And while eight of the 13 loans are still accruing, we have 98% of the portfolio classified and have dedicated workout resources for all of that, with every remaining loan under enhanced monitoring.

What happened industry-wide is pretty straightforward if you read the news. Second straight year of declining U. S. spirits demand resulting in further excess barrel inventory across the industry, which is driving a sharp decline in collateral values. We've now recognized 29 million of provision here to date on this portfolio through specific reserves and net charge offs. That portfolio is about one half of one percent of our total loan book. So, of course, this hurts, but it's manageable given our PP and R strength. We have a saying at Live Oak that when you have to eat something unpleasant, you don't take small bites. And that's exactly what we've done here.

Every quarter, we've taken every charge and every impairment we could reasonably support as soon as we could support it. We have not spread this out to smooth a quarter and we're not going to with this or any challenge we have. From here, what we watch is collateral realization versus our current estimates, ongoing performance of those businesses, and active cooperation from our borrowers. We've been proactive with each relationship and exposure and will continue to be. And we've made significant progress working the book in the last six months.

We'll continue to be transparent as we work through the rest of the exposures. Now, turning to slide seven, let's move beyond the distillery noise and look at the fantastic year to 172 million, while adjusted expenses grew only 1%. 15 and 1, 15x operating leverage. That produced record adjusted PP and R 88 million up 33% from a year ago and 16% from just last quarter with our adjusted efficiency ratio improving seven points year per year from 56% to 49%.

We've built an operating model that produces 88 million of pre-provision earnings a quarter and grown. That's the number that matters most to me because it is the number that allows us to absorb actions like we did this quarter. And on that last point, slide eight demonstrates just how much we have improved the business over the last two years. So go back two years to the third today is 88 million up 64%. Adjusted revenue is up 31% over that stretch while expenses are up nine over 3x operating leverage and total assets are up 35%. Now look at the provision. Q3 2024 we took 35 million in provision and delivered 19 million of adjusted pre-tax income. This quarter we took 55 million, 20 million dollars more and still delivered 33 million of pre-tax income.

That is 74% more pre-tax income in just two years while absorbing substantially more provision and excluding distillery was 50 million, 163% above where we were just two years ago. That's excellent operating leverage and it earns us the flexibility to deal with the problem and keep momentum moving forward. Flexibility we did not have two years ago. It is the reason we can take the big bite and still earn money, still grow 16% and still find every initiative that matters to us.

Turning to slide nine, the biggest driver of that performance continues to be our small business franchise, the engine of this company. We are the number one SBA lender in the country by dollar amount again and it's not even close. Our deep expertise across 30 verticals along with an unmatched speed and quality of execution is why the business is clearly demonstrating soundness and profitability along with that growth and our default performance continues to significantly outperform the broader SBA industry. This is a portfolio we have underwritten through multiple cycles and is doing exactly what we expected to do. A key initiative to extend our SBA scope is on slide 10. Live Oak Express, our small dollar S 7A business, posted another record with 107 million of originations, up 173% from a year ago and up from 82 million last quarter.

This is a fee-generating capital efficient engine for us. We sell more than 75% of the guaranteed portion at strong gain on sale premiums which recycles liquidity. We earn servicing fees and we retain the roughly 25% unguaranteed portion on the balance sheet which earns recurring net interest income. Gain on sale from Express with 7 million this quarter of 250% year over year and we've now generated 18 million over the last five quarters about 30 cents of earnings accretion and growing. This is just fantastic work by our Live Oak Express team and everyone involved.

Our target at cruise altitude remains over 750 million dollars annually in this business and again do the math on that kind of volume at those premiums. The earnings impact still in front of us is substantial.

Turning to slide 11, our second key initiative growing checking to deepen relationships and lower our funding costs. Checking balances across to half a billion dollars this quarter of 39% year over year with total relationship deposits at now 1.3 billion. Why it matters is cost and stickiness, our relationship deposit base only costs us 184 basis points compared with our overall deposit costs of 347 and the relationship depth keeps building. 25% of our customers now have both a loan and deposit account up from 20% a year ago and four years ago that number was only 3%. We're at roughly 5% of checking and DBA to total deposits with our target at 10% and above on a deposit base of about 15.5 billion growing 16% a year.

That is an enormous amount of funding improvement still ahead of us. Phenomenal work by our lenders and our treasury management teams and there's a lot more to come. Moving to slide 12, our AI efforts continue to accelerate. 100% of our employees have access to AI native tools and we now have 200 cloud super users across the company with a bank wide rollout of cloud for enterprise kicking off this fall which will unlock even more capabilities. Our people are building real things as you can see on the bottom left but we have been smart about it building common skills and prompts and requiring training while also encouraging innovation and I point you to the credit side of that list on purpose.

Better portfolio management, better aggregated credit data and faster credit worker exactly would help us see things earlier. What I like to say about AI is today is not tomorrow. The technology is advancing rapidly so we're dreaming big about how to use it to accelerate our strategy. Thank you to all live ogres. I could not be more proud of how our people are taking care of customers, making our operations better and profitably growing this company.

With that wall why don't you take us through a few more financial details.

Thanks BJ. Good morning everyone. BJ hit the highlights so I'll go straight to the numbers behind them. The EPS bridge, growth and funding, our margin performance, credit trends across our two lending business units and capital. During the slide 15 as BJ knows and reporting figures are on the left with reported EPS to 52 cents. It's ruined by reported PP&R of $90 million of 26 percent late quarter and 53 percent year-over-year and offset by an elevated provision that supported record loan growth, distillery actions and the portfolio changes across the two lending business units. The right hand side of the page walks you from the reported to adjusted EPS. Adjusted EPS was 49 cents in the quarter and the bottom right shows that excluding the 27 cent drag from the distillery action adjusted EPS would have been the 76 cent BJ referred to.

Slide 16 and 17 highlight our consistent outstanding growth trends. Q3 originations were well diverse five across 34 different industries in total $2.1 billion, up 38 percent late quarter in 29 percent year-over-year and a record quarter of production for the bank. That production drove period end loans to $13.9 billion, up 6 percent late quarter and 16 percent year-over-year. While we funded that growth with approximately $920 million from due deposits with our customer deposit channels contributing about 75 percent of that growth in a highly competitive market.

Moving to slide 18, net interest income grew to $133 million, up 6 percent late quarter remained in line with the last five quarters. Loan volume and mix added about 14 basis points offset by higher funding costs reflecting both our need to fund our strong loan growth as well as that very competitive deposit market. We will take that trade every day, a relatively stable margin and substantially more net interest income balance.

Looking ahead, we still view a flat to rising rate environment as a favorable backdrop for our balance sheet with volume growth remaining the primary driver of net interest income and funding competition and growth needs the key variables for the margin performance.

Highlighted on slide 19, gain on sale of guaranteed loans was $19 million for the quarter, up 12 percent both link quarter and year-over-year while premiums held city overall. Live Oak Express contributed a record $7 million, nearly 40 percent of Q3's total gain on sale. The success of Live Oak Express in the third quarter also provided us with the opportunity to sell more season larger SBA loans while still growing the gain on sale line and maintaining an average premium of 7 percent on total sales for the quarter. Earlier, BJ gave you the adjusted view of operating leverage. While slide 20 shows our operating leverage on a reported basis, reported revenue grew 23 percent year-over-year while expenses grew 3 percent and the reported efficiency ratio improved to 49 percent.

Approximately 1,000 basis points better than a year ago and 500 basis points better than just late fourth. Credit trends are detailed on slide 21 with further granularity provided this quarter by splitting out trends across the two lending business units. Small business banking credit performance remains stable, past dues remain low at nine basis points, and non-approvals of 1.10 percent and net charge also of 1.07 percent were consistent with recent courts. In commercial banking, past dues are essentially zero, non-approvals of 1.17 percent and net charge also of 86 basis points reflect the stiller reactions, which the majority of this portfolio sits within this business unit, as well as the six credit speed year reference. The commercial banking ratios have been and will continue to be lumpy given the size of these loans and the timing of a pair of December and the third quarter reflecting growth, portfolio changes, and a more uncertain macroeconomic backdrop.

Latently, capital levels are detailed on slide 22. Roughly 37 percent of our assets are cash or government guaranteed with a guaranteed loan mix about nine times the industry. Given our uniquely large guaranteed loan portfolio, we focus on two measures that measure capital against our true credit risk, the young guaranteed loan books.

First, our making ratio, tier one capital plus reserves and fair value markets, a percent of unguarded guaranteed loans, was a strong 15.4 percent. And second, the tangible common equity version of that ratio, shown on the bottom right of the page, was 14 percent. We believe that our capital position relative to the true risk when our balance sheet remains healthy. And with that, thank you for your time. I'll turn it back over to DJ for his bottom remarks for both of you, man.

Great. Thanks, Walt. Just quickly, let me close where I started. This quarter had, you know, we realized something unfortunate, 17 million on distillery. We took it head on, and that's how we'll always operate on any challenge you can count on us for that. And at the same time, record originations of 2.1 billion across 34 industries, record adjusted PP&R loans and deposits each up 16 percent, a sub-efficient 50 percent efficiency ratio and improving and record quarters in both of our key initiatives. So the franchise we have and are building is stronger than the quarter we just reported. And the quarter we just reported is the proof because it took a 17 million dollar hit and kept moving.

We understand that the best way out is through on things like this, and we'll continue to build our momentum while we do it. So again, with a big thank you to all live oakers and our customers, let's take some questions.

Hey, David, good morning. Um, let's let's maybe just dig in a little bit more on the, uh, the credit for an obviously some pretty aggressive actions here. I was hoping you could touch on. We talked about the facility book for a while, I guess. Could you maybe just elaborate on what led to the changes you saw this quarter and what lessons you've learned as you've gone through this process since you, you know, we exited the book. We've had some lagging credit issues and then so touch on that a bit. And then the other migration that you saw, um, any color on those loans and just how you think about credit here is rates arising and what you see on the horizon as you stress the book from high rates.

Hey, good morning. It's Michael. I'll take all of that. Um, so as BJ and Walt highlighted on the call, distilleries, obviously the biggest mover for our book during the quarter. Um, and, you know, whenever you would classify an entire loan portfolio, you're going to see that in the metric and we've done that. We've also reserved heavily in anticipation of exiting every single one of these credits. We have, uh, about $60 million in exposure remaining to work out of. And as BJ mentioned, some of these customers continue to pay us. So, um, we're working with the customers hand in hand. The 60 million is backed by conservative collateral estimates. And we're going to work towards exiting that safely and quickly.

When you look at the bigger picture, our SBA portfolio actually performed pretty well this quarter. It was a really quiet quarter from that book. We didn't see a lot of risk rate migration. Our borrowers are resilient. I think we're doing a good job on the budget. I think that's a sign of that. Where my focus is on the SBA book, particularly because of the fact that these are small businesses. And I'm thinking a lot about interest rates and where interest rates are headed at underwriting. We are being pretty conservative with our, uh, shocking of interest rates at, at origination and assuming that these borrowers are going to be operating at some point in over the life of their loan in an elevated interest rate environment.

And so we're making sure we have that cushion on the front end. And as we highlighted in the deck, our existing portfolio is, uh, well prepared for elevated, uh, as long as I see them coming in and anticipating them. So we're thinking about all of that on the commercial book. There's a handful of loans that migrated during the quarter. Again, reminder that our commercial book carries larger exposure than our SBA book. But what comes with those larger exposure is a more sophisticated borrower that has significant capital invested into these businesses. And in almost every case, those sponsors are contributing additional equity to the turnaround plan at the business level. And so there's a potential pathway for recovery, virtually all of those loans.

But when a few of them move, you're going to see them in the numbers. And as I look at everything that we've just talked about, you know, industry specific to distillery, but within our commercial and SBA book, we're not seeing broad signs of predeteriation. Just some risks playing out that we want to right to navigate through on an individual loan level. And like I said, our customer.

Yeah. Hey, David, B. J. , I'll take that one. And starting on the small business side, I really think it's two factors. Number one, I've set up a four is, you know, we are the well-known engine, particularly in SBA on the small business side. And so, you know, that halo of who we are and what our lenders do is very important. And so that engine continues to deliver excellent production. But on the other side as well is there's been a lot of change in SBA world the last couple years. SOP changes and going back to the beginning of this administration and a lot of uncertainty.

And so what you've actually seen, what we've seen, is a lot of lenders exit SBA. And so, you have to know how to do this business really well. You have to. And that's who we are. That's what we do. And so, we've seen market share come to us in addition to our lenders continuing to do what they do every day. So, that has generated further production, not to mention, like we said, introducing a relatively new small dollar loan option for our customers that is driving even more growth. And on the commercial side, we've seen different dynamics because there are different businesses, whether it's on our project finance side, like seniors housing, or solar, or on the sponsor finance side, which is more private equity based.

You know, excuse me, project finance collateral based lending has probably been a little bit stronger over the last year. And that's where we've seen growth and strength on the commercial side. But it's been pretty balanced and broad based as well. So, you know, we feel really good about the growth. And, you know, we monitor it very closely at the same time we're celebrating growth. We're also asking the question about soundness and making sure that that stays front and center. So, we think we have a pretty good balance.

Yeah, that's a great question as well. You know, I think you hit on a lot of the variables there. The 330 margin that we had here in third quarter was right in line with our expectations and what we talked about in the past couple quarters. There's really no changes to the expectations moving forward. As mentioned earlier, an interesting comes where I tend to focus a lot on the dollars that we earn is really driven by growth. The margin will be influenced by that growth as well as our deposit market competition.

You mentioned our asset sensitivity. Look, if the Fed continues to raise rates, you know, there's potential for upside to the margin, but the two things I keep focusing on are the growth, which be just what and discussed, as well as the point that you just made on, you know, the deposit market competition and what you're seeing there in stated rates, but also what you're seeing in exception-based pricing and market promotions.

And I don't think any of those things, whether growth or deposit market competition, are going to change here greatly in the near term. So where I sit in my overall assumptions that the margin remains relatively stable and are not interested in coming, will continue to grow at the same pace as our balance sheet. Perfect. That's helpful. Thank you.

Yeah, Ben. It's me getting, you know, again, I'll use the word resiliency. You know, when we see problems with customers, it's not always but the majority of the time, it's some kind of life event or business event that causes deterioration in the business as opposed to, you know, a small business owner, you know, not being able to manage their business through higher, you know, gas prices or higher energy prices. Small business owners, that is who they are. That's their livelihood. And so we tend to see that, you know, they will do everything in their power to make sure that they can keep their businesses active and healthy. So, you know, we're not really seeing a ton of change like Michael talked about in the portfolio itself or in the financials that we're seeing right now.

Obviously, we were constantly monitoring that and requesting financials every 90 days for all those small business customers. So we're on top of that. So we feel good right now. But to Michael's point, moving forward, we are underwriting new production at higher rates than where we are today anticipating, you know, potential stress and debt service coverage going forward. And we want to make sure that we and customers are prepared for that. We never want to put a customer in a position to not be able to have a prosperous business or pay us back. So that's what that's what we'll continue to do.

Hey, Dave. I know you've done a lot of work on the distillery book. This hasn't been the only quarter you've taken out the reserves. I was just wondering what the total market is now that you have on that 60 million that you've kept at this point. And then, you know, given your outlook on small business credit, which sounds positive in the larger commercial credit overall, how are you thinking about the provision, you know, trend in for you and next year and the likelihood that you can return to that 20 to 25 million normal provision range? Thanks.

Yeah, this is Michael. I'll start on the distillery question. So to answer your question, 60 million dollars is our outstanding, unreserved balance against that portfolio. What we do is we charge off the access of what we don't think will be collectable. And so what we're talking about there is 60 million that is secured with collateral. And we take, in my view, a very conservative estimate of what that collateral value is.

And then, Dave, this wall will jump in on the provision expense. Yeah, so, you know, really, to take that 55 million dollars that we have, we'll break it down to kind of two halves, right? We had the distillery of the 17 million dollars. And then that leaves essentially 38 million dollars across three different pieces. You know, BJ kind of walked through, 16 million of that, 38 million is growth related, right? It sees soul and record production. We reserved the data loan, goes on the books, before we even earn a penny. That piece is always going to move with our volume. And, you know, we have no intention to stop growing. You'll see some variability there.

9 million or so on small business, that's normal portfolio changes diversified. And that book's really performing in line with, you know, it's history kind of our expectations. And then commercial is the other piece. So that's 13 million dollars. And that's really where a lot of our variability lives. So for perspective, let's just talk about the last three quarters. You know, the first quarter, we had three new impairments, across two verticals, otherwise pretty stable migration. Second quarter, we had zero new impairments, positive migration across the rest of the portfolio. And in this quarter, we had six impairments with positive migration elsewhere. So, same book, really three different outcomes across three different quarters. And then it kind of runs both directions as well.

So if you think about, you know, that was the focus on impairments, then you also have recoveries. And they can be very wealthy as well. So then, charge-offs and commercial were actually negative in the first quarter, because recovery's ran ahead of our charge-offs. We had net recovery in Q2 as well, but then we had zero in Q3. So really the point here is that resolutions can swing a quarter just as much as an individual impairment. So that brings back to the run rate, you know, if we've talked about past, you know, I'm not going to replace that range that we've discussed with a new one. And I'm not going to tell you that this step down next quarter either.

You know, what I think is, you know, looking forward, the commercial book is really going to be lumpy in both directions. And that's, for a lot of reasons, we've talked about loans or larger such nature of that book. What's not going to change is how we handle all that, right? So, every one of these credits is analyzed, preserved on its own facts. And as soon as we get to the point where we can, you know, reasonably support in pairing it, we impair it. And that's what we did this quarter is what we'll do next quarter and so on. So, you know, really our focus, and BJ hit on this earlier in terms of PP&R, you know, our earnings power is going to allow us to continue to move up and to the right.

It's just not always going to be a linear line. And, you know, I think that's, you know, that without a way to focus for us this year will be focused for us next year and so on. You know, I think we've done a pretty good job at it.

Yeah, we have charged off of everything that we can. There is a small amount of reserve there, but the unreserved component of of those loans is about 60 million.

Yeah, this wall again. Thanks for the question. Look, I think our team said a really great job for past years at calling in efficiencies, implementing automation and, you know, we're now starting to leverage AI. You know, at the same time, we're coming to work with organizations and we still want to invest heavily into, especially the strategic initiatives that BJ mentioned about live up express and tracking as well as new products. So it's about, you know, we work with this, you know, pretty hard each, each and every day. Look from an expense to outlook standpoint, look, I'd expect modest expense growth, right? It's a very continued find ways to really look at, you know, supporting those initiatives with continued improvement in our efficiency ratio, because we're attacking both sides of that ratio, right?

The expenses, you know, through finding efficiencies and opportunities, like you mentioned, leveraging AI and things of the like. And then the more fun side of that is really attacking the revenue side. And that's what we're doing really well right now between kind of our main engine, as well as live up express. So, you know, models growth and expenses with continued improvement and efficiency ratio over time.

Morning. Emily. Yeah. So just to touch on Live Oaks business checking initiative, can you just expand a bit more on the progress made? You've been really successful in deepening the relationships with the percentage of customers with both a load into blogs account, continuing to move up. So are there any incremental product capabilities or investments needed to kind of deepen those relationships and just any update there?

Sure, Emily. This is, this is BJ. So we're incredibly pleased with the progress that we've seen in checking for a lending organization for most of our life to in two years go from virtually no checking relationships to 5% of our deposit base. To me is incredible work by our team. And we have a lot more to go. I think the first couple of years, it's been more driven by commercial customers, which are used to when they they are accessing new credit. They know that a lot of times they're going to have to move their operating accounts. And so about 60% of that 500 million or so has come from commercial the first couple of years.

40% from small business, which as you might imagine are much smaller balances, but there's more customers there. And so one of the key priorities we have this year certainly going into next year is the introduction of merchant services, which we think will really be compelling for our small business customers to move over. And then obviously if they are running their merchant services transactions through our operating account, that's incredibly sticky. That's incredibly active. We are giving them more income the way that we are working with them on merchant services. And we're getting more higher sticky balances over time. So I expect over time that 4060 split to actually move more towards small business over time. And that will continue to accelerate our checking account growth.

So very pleased with that. The other side of it that maybe we don't talk about as much, but that's really important is other GBA. It's things like control accounts or cash collateral accounts on some of our commercial oriented or project finance businesses that are very low cost as well and very sticky through the life of the relationship that we have on those side. And so we're actively pursuing those as well, which obviously is a creative to our cost of funds in addition to checking.

Hey, Emily. Well, that really depends. We're all in some of the variables we talked about growth and deposit competition. But look, I think our team has done a really good job pricing on the asset side. I think we're doing a good job finding the right positioning on the funding side. I'll speak more to that interest income. Typically, 25 basis points can really kind of equate anywhere from $5 to $10 million on an annual basis of accretion. So I think I'll stop there. I think that's probably the key point for me. I think margin will kind of move up and down really depending on the growth and the loss of cost.

Hey Noah, this wall I'll start there. Sorry I get to the overall deposit market. I think you probably heard BJ and I say the word competitive quite a bit here on the call and I think that's probably the best word to describe it. And it's not just like I mentioned, it's not just competitive raise funding. You also got to have a state of rate that's competitive with the market, but you're also trying to combat on cash based promotions or exception based pricing or relationship based pricing and marketing campaigns. So there's, I guess the best way to describe there's a variety of channels that we continue to work and compete on. I think our team does a really good job at leveraging and really monitoring where the growth's coming from.

So we'll switch between consumer and business savings or retail CDs using Broker to help fund on a short-term basis some of the gaps that we need to support the strong loan growth. State of rate. So right now or we average for the quarter was 347.

State of rate is trending a little bit higher than that as you would expect given the September FedHike. And that's typically what happens right? A FedHike at the end of the quarter or deposit pricing really reacts pretty quickly. And that's what we assume in our modeling. It's typically elevated betas and whatnot. And like I said, a lot of that's really exciting.

This is Michael. Yeah. So we identified this vertical as Habit Head went back in 2024. And at that time we stopped actively lending and we have since that time of working through this book, our goal is to exit as quickly as possible on every one of these credits. However, as I mentioned earlier, some of our borrowers continue to pay. So I'm not going to walk someone out of the bank if they're paying on their loan. And so the timeline there depends it depends significantly on a lot of different variables. But we're taking active measures to to exit as quickly as we can. Great. Thank you.

Yeah, now again today and we'll see you in 90 days.