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Bancorp Inc  (NASDAQ:TBBK)
Q4 2018 Earnings Conference Call
Jan. 25, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

See all our earnings call transcripts.

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to The Bancorp's Fourth Quarter and Full Year 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instruction). As a reminder, today's conference is being recorded.

I would now like to turn the call over to Mr. Andres Viroslav. Sir, you may begin.

Andres Viroslav -- Director of IR

Thank you. Chelsea. Good morning, and thank you for joining us today for The Bancorp's fourth quarter and full year 2018 financial results conference call.

On the call with me today are Damian Kozlowski, Chief Executive Officer; and Paul Frenkiel, our Chief Financial Officer. This morning's call is being webcast on our website at www.thebancorp.com. There will be a replay of the call beginning at approximately 12:00 p.m. Eastern Time today. The dial-in for the replay is 855-859-2056 with a confirmation code of 1896377.

Before I turn the call over to Damian, I would like to remind everyone that when used in this conference call, the words believes, anticipates, expects and similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties which could cause actual results to differ materially from those anticipated or suggested by such statements. For further discussion of these risks and uncertainties, please see The Bancorp's filings with the SEC.

Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Bancorp undertakes no obligation to publicly release the results of any revisions to forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Now, I'd like to turn the call over to The Bancorp's Chief Executive Officer, Damian Kozlowski. Damian?

Damian Kozlowski -- Chief Executive Officer & Director

Thank you, Andres. Good morning and thank you for joining us today. This quarter capped a very important year for The Bancorp. We moved the institution ahead on many fronts and created a credit environment to innovate and create expanded client opportunities through new and enhanced products and services. In the fourth quarter, Bancorp earned $0.13 a share on net revenue of $47 million, while total non-interest expense for the quarter was $38 million. For the year, Bancorp reported GAAP earnings per share of $1.55. Our CFO, Paul Frenkiel, will go into detail concerning our quarterly and yearly financials in a moment.

In 2018, we substantially completed the process started in 2016, to transform our run rate operating performance, derisk our institution, and exit non-core activities. I would like to highlight five of the major accomplishments and events for 2018, that will propel our organization forward in 2019. Number one, our capital base is strong and supports our planned growth. The company has grown the leverage ratio to over 10% from less than 8% at the end of 2017. Our book value per share now stands at $7.22, compared to $5.81 at the end of 2017. Two, asset quality has continued to improve with the reduction of non-core assets and discontinued Walnut Street. That exposure has been reduced from $379 million to $257 million this year, a 32% reduction. We will continue to pursue an aggressive strategy to retain and recover value in those portfolios.

Number three, earnings continue to build with core revenue growth and the control of expenses, even as we invest in new initiatives and platform reengineering. For 2018, core revenue, which excludes gains and losses on securities, Walnut Street and one-time sales, increased 8% while expenses decreased 2%.

Four, the creation of new capabilities in 2018 will lead to an increased potential for revenue growth and we believe higher productivity in 2019 and beyond. Our Rapid Funds payment capability utilizes the credit card network rails of Visa and Mastercard to facilitate disbursements, and a proprietary Talea automated lending platform are just two examples. Both of these platforms will be significantly expanded and enhanced in 2019.

Number five, we completed the creation of our financial crimes center of excellence. This provides the bank with an integrated and robust capability to meet BSA, AML requirements, but equally important, a scalable platform to support the growth of volumes and new products and services.

In 2019, our strategic agenda is squarely focused on enhancing our ability to rapidly innovate in a safe and sound manner by building and strengthening our core capabilities. Our team is very excited about the future potential of our organization with the common objective to innovate for our clients and create value for our shareholders and everyone in The Bancorp community.

I now turn the call over to Paul Frenkiel, our CFO, who will detail more about the first quarter.

Paul Frenkiel -- Chief Financial Officer

Thank you, Damian. Net interest income for the fourth quarter increased $3.9 million compared to Q4 2017. However, the quarter was impacted by several items which decreased pre-tax and after-tax income. The largest item was $1.3 million in legal and document production expenses related to the company's continued cooperation with an SEC investigation into the 2014 financial statement restatement.

In the quarter, the prepaid division incurred $672,000 of expenses related to the exit of one relationship and atypically wrote off $739,000 of its receivables. Additionally, a valuation charge of $708,000 resulted from a single loan in Walnut Street, which represents the company's investment in the a securitization of loans from its discontinued operations. At December 31, 2018, the balance of the company's investment in that securitization, which we refer to as Walnut Street, amounted to $59.3 million compared to $74.5 million at the prior year end.

Service charges on deposit accounts were down from Q4 2017, by approximately $1.9 million, primarily as a result of the sale of the IRA portfolio in the third quarter.

Salary expense was $2.7 million higher during the quarter and reflected higher BSA, temporary employment and incentive compensation expense compared to Q4 2017. Our goal for 2019 is to keep non-interest expense relatively flat from current levels, and below $40 million per quarter. Quarterly results reflected continuing revenue growth in Bancorp's major lending lines, with that growth led by respective 17% and 8% year-over-year increases in SBA and SBLOC loans. The $3.9 million or 15% increase in net interest income reflected an increase in interest income on SBLOC of $2.4 million or 40% to $8.3 million. Including loans held for sale, interest on SBA loans increased $1.8 million or 38% to $6.5 million. Interest on loans held for sale into securitizations increased $300,000 to $3.6 million, compared to Q4 2017 and was down from $4.7 million from third quarter '18, as a result of the most recent securitization. We anticipate that first quarter 2019, will show an increase as loans continue to be originated for the next securitization, planned for March 2019. In addition to loan growth, the increase in net interest income reflected the impact of the Federal Reserve increases in 2018.

The positive impact of the most recent December increase should be realized in future quarters. Approximate yields on the loan portfolio are 4.2% for SBLOC, 5.7% for SBA and 6% for leasing. These lines of business have historically had low charge-offs. Overall cost of funds grew 42 basis points to 87 basis points (ph) in fourth quarter 2018, compared to 45 basis points in fourth quarter 2017, and 83 basis points in Q3 2018.

Prepaid card deposits are our largest funding source, and should continue to adjust only a portion of future increases in market rates. The net interest margin was 3.32% for the quarter compared to 3.11% in fourth quarter 2017 and 3.22% for third quarter 2018. Compared to fourth quarter 2017, the yield on interest earning assets in continuing operations increased 66 basis points, while as noted, the cost of funds increased 42 basis points. Non-interest income on all payments related fees, which consist of prepaid fees and ACH card, and other payment fees increased 2% over Q4 2017, after considering the impact of $739,000 write-off in Q4 2018. For full year 2018 total payment fees increased 6%. Prepaid card accounts, our largest funding source, are also the primary driver of non-interest income. Fee income on prepaid cards was $13.1 million in fourth quarter 2018, and after consideration of the aforementioned write off, was slightly below Q4 2017, reflecting timing differences in fees assessed and earned and changes in programs. Card payment and ACH processing fees include the Rapid Funds revenue, which Damian discussed earlier and increased 38% to $2.4 million. Gross dollar volume, which is the total amount spent on cards, increased 23% over fourth quarter 2017.

After adjustment for a $672,000 prepaid exit expense, non-interest expense for fourth quarter 2018 was $36.9 million or 2% higher than fourth quarter 2017. Additional expense reduction opportunities, in various categories, continue to be pursued. As a result of our 2018 earnings, including the gain on the IRA sale, the consolidated leverage ratio increased over 10% and book value per share increased to $7.22. Our increased capital provides a solid base from which to conduct our operations, and take advantage of opportunities in our lending and payment space.

Our goal for 2019 is a significantly increased loan growth over 2018 levels, through initiatives which are specific to each lending line. Net interest income will also benefit by the most recent December rate hike. Our goal for payments revenue is to achieve at least mid-single-digit growth. We anticipate that in 2019, FDIC insurance rates will be lower, as a result of the impact of higher capital levels on those rates.

The overall goal for 2019, non-interest expense is to keep those expenses in total relatively flat. The combination of flat non-interest expense against higher loan interest from lending lines, which have historically low losses, and growing payments revenue, will be key in achieving our return on asset goals. Our short-term return asset goal is 1.2% with a multi-year objective of 1.75% as presented on Bancorp's website. Excluding the $48 million tax effected gain on IRA sale, ROA was 0.95% and ROE was 11.1% in 2018.

That concludes my comments and I will turn the call back to Damian for questions.

Damian Kozlowski -- Chief Executive Officer & Director

Okay. Operator, would you please open the line for questions.

Questions and Answers:

Operator

Certainly. (Operator Instructions).

Thank you. And our first question comes from the line of William Wallace with Raymond James. Your line is open.

William Wallace -- Raymond James -- Analyst

Thanks. Good morning guys.

Damian Kozlowski -- Chief Executive Officer & Director

Hey, how are you?

William Wallace -- Raymond James -- Analyst

Good. Thank you. Maybe, let's start with the prepaid relationship that you exited that resulted in some excess expense and some writedowns of receivables. Can you talk a little bit about the nature of this exit? Why there was a expense associated, and why there was a writedowns or receivables?

Damian Kozlowski -- Chief Executive Officer & Director

Yeah. The program wasn't successful. So it was a program that -- we have over 100 programs, and depending on their own business proposition in the FinTech space especially, some will be successful and some won't. And so, we do try to work with them, because they do have clients of the Bank on it over long periods of time, but at the end of the day, this program was not successful in getting the client -- profitable clients that they needed. Therefore, we concluded the relationship and shut down the program. When you do that, and it has happened very seldom over the last five years for this company, when you do that, sometimes you have to incur expenses in order to close it down in an orderly way, and that's exactly what happened. We also had to take -- work out a accrual of revenue that was due us in order to close down in orderly fashion. This was not a big client to us, but you have to take the steps necessary in order to make sure everything is done properly.

William Wallace -- Raymond James -- Analyst

So just to make sure I understand, so the write-off of receivables, that was revenue that had been booked in prior periods?

Paul Frenkiel -- Chief Financial Officer

Yeah. So it's actually -- yes, in fairly recent periods.

William Wallace -- Raymond James -- Analyst

Okay. And then what is the nature of the expense that's associated with closing a program?

Paul Frenkiel -- Chief Financial Officer

Well there are shutdown expenses in terms of indirect and direct expenses.

Damian Kozlowski -- Chief Executive Officer & Director

Those were expenses that they pay us through our provider. So, we have other providers. And so, that expenses things that they hadn't paid us. That what -- that's what triggered a review of this over the last six months where it was clear. We look at each of our programs to see their financial stability, but in this space too, you've got a lot of money raising going on across all these programs. Some of these are start-ups. So you have got to work with them in order to make sure your client is protected, the people who are depositors on our bank, and if you -- this is seldom happens to us. This hasn't happened since I've been here, but sometimes when you think that the best thing is to incur the expense, and not go into litigation or something, just shut the program down. That's what we did in this case.

William Wallace -- Raymond James -- Analyst

Okay. Okay, so your mid-single digit target for growth in the prepaid revenue line, what kind of GDV growth, does that assume?

Damian Kozlowski -- Chief Executive Officer & Director

Yeah. So we're -- we want the -- see, this is very hard to predict. So last year, if you looked at the fourth quarter, we had an incredibly good fourth quarter on fee income. However, the GDV growth did not grow as much. This quarter, we had tremendous growth in GDV, that's usually a good sign for fees. We have so many different programs. We want to at least have 5% growth from the prepaid side. So, when you look at the prepaid and all the payment activities, we still want high-single-digit growth from the whole envelope of activities of payments, which we think we will get from both the ACH side, the solution side, and the prepaid side. So, I think we're still targeting that GDV growth over 10%, and the fee growth just below 10% for 2019.

William Wallace -- Raymond James -- Analyst

Okay, great. And then, on the ACH side, I did notice that the growth in that line, it slowed a little bit in the quarter. Is there seasonality in that business or how should we think about that because that's been a pretty good grower of the shares?

Damian Kozlowski -- Chief Executive Officer & Director

Yeah, there is two -- yeah, well, it's over a much bigger base, of course, and it's primarily through one program, through that the Venmo program. So, there is two, when I talk about enhancing that platform, today, we do it only indirect, which means our partner, a big company like a PayPal needs to integrate the platform, OK? With the Visa rails or the Mastercard rails.

Now, what's happening for 2019 is that we're doing the direct model. So, we haven't even rolled that out. That will be rolled out over the next year, and we're going to do it in five different industries. Let me -- there is a big difference between the two. When we do it in the direct way, we are actually the integrating force with a processing company, so that we can go direct to companies, and they don't have to integrate themselves into the Visa rails. It's a big deal. So there's a -- while there's only a few Venmos in the world that could actually do the integration on the indirect through, on the direct through, we literally open up that product to everybody who wants to issue payments, any company in the world because we are doing the integration into the rails with the -- with a partner. So that's the -- when I say we're going to greatly expand that, that's what we mean by that for that product, that Rapid Funds product, payment product.

William Wallace -- Raymond James -- Analyst

And so, I mean, do you think that -- that can continue to drive growth in '19 and '20, and maybe even in the '21 at levels...

Damian Kozlowski -- Chief Executive Officer & Director

Yes, we can't give you guidance because the pricing is -- there is -- the market is so much larger and the pricing is very different. The pricing is quite -- when we're not the integrator, the pricing is really up to the big person with all the pricing power. When we're the integrator, that totally changes because payment companies that are issuing large payments have a different price sensitivity, so it all depends on what the use case is. Each use case is different in each industry. So that's what we're doing in 2019. We'll see it if it -- I can't give guidance because we are not even sure what the potential is. Of course, we have our idea of what it is, but that should continue to drive that side of the business quite substantially for the next few years. So...

William Wallace -- Raymond James -- Analyst

Okay. Okay, good. Shifting gears a little bit to the expense line, you called out $1.3 million in legal related to the SEC investigation. Is that $1.3 million -- how does that compare to the last quarter, and maybe the first half of the year?

Damian Kozlowski -- Chief Executive Officer & Director

Yeah, unfortunately.

William Wallace -- Raymond James -- Analyst

(inaudible) until this quarter.

Paul Frenkiel -- Chief Financial Officer

Yeah, it's not a consistent number it can vary. So I don't know...

William Wallace -- Raymond James -- Analyst

The last quarter it was nothing?

Paul Frenkiel -- Chief Financial Officer

No, we -- it's been relatively significant in each quarter. I'm going to -- if you look at our Qs and our Ks, we talk about that in the legal expense, but we actually have some of the expense in other -- in another category. So I'm going to put that in the 10-K. I'm going to break that out and give more detail.

Damian Kozlowski -- Chief Executive Officer & Director

Yeah, that's one of the areas. We have a bunch of areas where we think we can maintain flat expenses. From FDIC insurances is another area. We don't -- we believe we're at the end of many of these processes. So, we don't think the expense will be -- this is, of course, up to the investigators, but we believe that expense will be trailing off in 2019. So, that will be one of the sources of our ability to invest in the business and control expenses. That's why we think we can keep -- depending on revenue growth, I want to have a 10% spread between revenue and expense growth. So we're able to do that this year, which was a big deal. We had 8% continuing revenue growth and then we had 2% lower on expenses. We'd love to be able to continue to do that. If I did that next year, I'd rather have 8%, negative 2% than 10% and 5%. I just -- I mean that should -- and I think we're going to do -- I think we're going to have more like a -- I think we will be over 10% revenue growth, and I think we will be a few percentage and expense growth or flat, if we get less than that for 2019.

William Wallace -- Raymond James -- Analyst

Okay. Yeah because Paul said in the prepared remarks, I believe, averaging less than $40 million a quarter is your target?

Damian Kozlowski -- Chief Executive Officer & Director

Yeah, relatively flat. When we say relatively flat, we mean as a proportion of revenue. So we're very cognizant. We do have ability to -- we do have a lot of investments going into the business in 2019, and still we think we'll be -- we can keep it to 0% if we need to, by pulling some of those back depending on the rev -- we see the revenue...

William Wallace -- Raymond James -- Analyst

So, if we don't get the revenue growth, it could be $150 million. If you get the revenue growth, you'd hope to end up around $160 million. Is that a fair way of categorizing what you're saying?

Damian Kozlowski -- Chief Executive Officer & Director

We want the spread to be 10%. So we were able to get to 10% this year, with all the -- with all the one-timers, the revaluation of certain Walnut Street, we were able to keep ourselves to a good spread. We want to continue -- as those things fall away, that's the last non-core thing we do are the discontinuing of Walnut Street. We want to maintain the discipline. We think we can do it for the next three years of this -- what is an unlikely spread in the banking industry of this 10%, and we still believe we have the room to do that at least for the next couple of years. Depending on the revenue growth, if we get too much revenue growth, of course you have to -- it will -- it could lead to an expansion of expenses if there is significant amount of revenue potential. But the last thing we want is 20% revenue growth one year, and 15% expense growth because you're probably not going to get 20% revenue growth the next year, but you're going to have the 15% expenses.

So, that's what a lot of companies do. We don't want to do that. We're in a process of reengineering almost every part of our company. We really want to set this up to be of much higher value in two to three years rather than worrying about quarter-over-quarter. We're just maintaining expense discipline depending on the revenue growth.

William Wallace -- Raymond James -- Analyst

Okay. My last question and I'll hop. I let somebody else ask. As far as the, your SBA businesses, with the SBA not processing applications, can you talk a little bit about the impact to you guys, and how we should think about the mechanics of that? I assume you continue to take that -- take applications and process them, but you just have to wait until they open back up to submit them into the (multiple speakers) so the balance sheet can...

Damian Kozlowski -- Chief Executive Officer & Director

Yes, exactly right. And we have deals that can be funded. So we're waiting for the door to open again. We've had no lessening of the pipeline, and so we have deals stacking up ready to approve. We have about four deals that we could execute on, we believe if we have to, if this turned into a multi-month. But otherwise, it will impact the business, if this continued six months, of course, it would impact the business. Luckily it's, as you know, a small percentage of our sources of revenue. So it won't have a devastating impact on the whole company, but we want to keep them. We've had very good momentum in 2018 building out parts of that business. The last thing we want is that to be lessen, but it's -- if it's 30 more days, it should be fine. If it's 60 more days, maybe it's going to start impacting the growth of the portfolio a little bit, but as of yet, it has not impacted the business. So, as you know, premiums on the SBA market, all those things if we hadn't -- we keep those things on our balance sheet and it has impacted large and small players, and the SBA market for various reasons.

William Wallace -- Raymond James -- Analyst

Right, but you guys balance sheet everything. So the premiums don't impact you at all, right? I mean, you don't care about the premium.

Damian Kozlowski -- Chief Executive Officer & Director

That's correct.

William Wallace -- Raymond James -- Analyst

Okay.

Damian Kozlowski -- Chief Executive Officer & Director

(inaudible) we would, but we don't.

William Wallace -- Raymond James -- Analyst

Yeah, OK. Okay, I've taken a lot of time. I'll let somebody else ask a question. Thanks guys.

Damian Kozlowski -- Chief Executive Officer & Director

Okay thank you, Wallace.

Operator

Thank you and our next question comes from the line of Frank Schiraldi with Sandler O'Neill. Your line is open.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Good morning.

Damian Kozlowski -- Chief Executive Officer & Director

Good morning Frank.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Just, first Damian, on the Rapid Funds business. Sounds like, I mean, is it fair to say that the direct business that you're building out is more of a 2020 revenue event or is it going to start picking up you think in -- are you're going to see -- could you see meaningful revenues in 2019 from that?

Damian Kozlowski -- Chief Executive Officer & Director

Yes. We can see meaningful -- we're ready to go to market and what we want to do is set the platform up. So we're trying to get five use cases in different industries for 2019 throughout the year, and that could result in significant revenue. We just don't have any guidance on it because when you go to market with something like this, the adaption of it, we think there is real benefits of it, and the pricing hasn't all been worked out. But it could be meaningful contributor to the company over a very short period of time. But 2020, it should be -- it would be -- it will be totally setup and should be -- we should be having multiple partners and be able to expand at a greater rate.

Frank Schiraldi -- Sandler O'Neill -- Analyst

I mean, it just seems like the addressable market, right, that you point to is just so much larger. You don't have to rely on -- I mean, Venmo is a big player, but you don't have to rely on one player, and there's a lot of different uses. So, I mean, would you hazard the guess that this would be a bigger overall revenue generator than the Rapid Funds, the indirect business? Does that make sense?

Damian Kozlowski -- Chief Executive Officer & Director

Well , yes -- the indirect, there's only a few players that you got to remember, they -- you have to be a big sophisticated players to do the integration. So, if we're doing that with a partner ourselves, that's a huge difference, right, because many people wouldn't be able to get access to those -- to that process, unless they're somebody like us. So, the potential's enormous. Whether we are able to execute on the potential, we'll find out during 2019. We just don't have any guidance as to -- and if we don't think that that potential will play out, we'll report it back to you, and let you know, but we think this is -- the market is -- I don't know, it's enormously larger and it's -- the pricing could be very different, but that has to be proved out. That concept has to be proved out as we go to market with -- we already have beta type of things set up for testing this. So we're far down the lane, the road.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Okay, and then just in the business, the indirect business, I guess Venmo seems like the primary partner there for you. Is that -- do you have visibility now into that partnership where you can say that you think the growth rate in that line item is a reasonable expectation of what we'll see with the indirect business in the near term here or is that still ramping up significantly do you think?

Damian Kozlowski -- Chief Executive Officer & Director

Yeah , I don't have visibility and it totally depends on what their strategy is for that product and everything. I think, you can look at the fees over the last couple of years and it's off a much bigger base. It started with practically no fees a year and a half ago. So, I don't have visibility on that. I think we'll continue to support that product, but changes in programs happen. It could happen, but we're not waiting around, and we are not waiting for another big partner. So, we think the direct is by and far the much larger opportunity. So, I think the future growth of that product would be dwarfed by that opportunity, but we don't know. Totally honestly, we don't know yet as to what will come of that. We don't have -- it's not like a lending portfolio. We have to really get into the market and prove out the concept. We think it will -- everything we know about the payments industry, it should be substantial, but we don't have guidance on that as of yet.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Okay. And then, just on -- just on deposit costs, if you know, if you look at the demand interest checking line, deposit costs were up 11 basis points linked quarter, which makes perfect sense from what you guys, I think, have talked about 40% to 50% betas around there. I just want to confirm with you now if through, obviously, we got the one in December, but through the rest of 2019, if we don't see the Fed -- if we don't see any additional Fed hikes, is it reasonable to think that those betas are basically have all gone through at this point, and are going to be essentially zero, in light of no rate hikes?

Paul Frenkiel -- Chief Financial Officer

Yeah. So, we'll have a slight uptick, but it will be to our net benefit and net interest margin, but we'll have -- we will have a slight uptick from the last one in December, but yeah, generally I would characteristic that -- I would characterize that conclusion is accurate. There are mixes in deposits. There are changes in the balance -- balances of individual programs, and remember, we have a large number of programs that are key to different rates. So you could see some changes, but as of right now, we're not really expecting big changes.

Damian Kozlowski -- Chief Executive Officer & Director

You'll get the CD repricing happening with pretty much every other bank our size over the next year, and that will change obviously their funding cost. That's just not going to happen with us, since we have no CDs. But, you are going to get that -- you definitely will have a lag in banking on funding costs over the next year, we just not going to have that.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Right, I mean your partners -- I mean it's contractual. So you don't have people coming to you and say, well...

Damian Kozlowski -- Chief Executive Officer & Director

There will be a little bit more -- yeah, there will be a little bit more from the lag from when the last increase was, but with the current market conditions and stuff, maybe the Fed -- there is a great disparity of opinion as to what the Fed will do this year. There's a lot of ambiguity, whether they will raise a couple times or they won't. So, even some people are predicting lowering the rate. I don't think that'll happen, but you just don't know.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Right. Okay, and then just finally, just on the, just for modeling purposes, just on the comp line, Paul, you mentioned some of the reasons for comp being up year-over-year. What was the greatest driver of comp linked quarter? If I pull out the variable costs or variable comp, I should say, related to the gain on the securitization. It seems to me that comp was still up linked quarter, and just wondering what was sort of the biggest driver there, if you can give that?

Paul Frenkiel -- Chief Financial Officer

We do give some detail in the 10-K. I don't really -- I did review the changes and so forth. They're in a number of categories, but I'd rather wait till the 10-K. So, I'm going to put you off on that one.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Okay, but is that a fair -- is it fair to say that, ex that variable rate comp, that comp was up significantly linked quarter or am I wrong?

Paul Frenkiel -- Chief Financial Officer

Comp has -- yeah, comp has increased...

Damian Kozlowski -- Chief Executive Officer & Director

Not that dramatic right now.

Paul Frenkiel -- Chief Financial Officer

But, not that dramatically and the way we look at it is that, in terms of your model, you're probably better off looking at it the way we do, which is total non-interest expense. So, there is some interplay between the salary expense and other expense categories. So, and -- then our management has -- the way we manage expenses , can have an impact on salary. So, salaries might go down, but other expenses go up. So we look at it as total non-interest expense. That's what I would focus on.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Right.

Damian Kozlowski -- Chief Executive Officer & Director

Yeah. So we, as you can see like, things like our processes, but there's been some dramatic decreases in several of those categories and part of that is to really make sure that we're managing the total pie.

Frank Schiraldi -- Sandler O'Neill -- Analyst

Right. Okay, all right. Fair enough. Thank you.

Operator

Thank you. And our next question comes from the line of Matthew Breese with Piper Jaffray. Your line is open.

Matthew Breese -- Piper Jaffray -- Analyst

Good morning, everybody. I wanted to focus on the ACH line item, not to beat a dead horse here, and just to understand the components behind it. So the $2.4 million of revenues this quarter, I'm assuming that it was based on gross dollar volume and some margin behind that. Is that correct?

Paul Frenkiel -- Chief Financial Officer

The $2.4 million is a function of the Rapid Funds -- the Rapid Funds transfer income and that's been the main driver of the increase. It also includes our other ACH, the second biggest driver is our ACH income, where we process large volumes of ACHs for companies, for instance, payroll companies is the largest and bill payment companies.

So, it's really a function, contractually set with various and each contract is different. So, you can't really -- and because of the rapidly changing character of the Rapid Funds income, you can't -- it's very similar to the prepaid when you try to establish a relationship between gross dollar volume and apply a percentage against that and relate that to income. It really depends on the individual contracts. I think as Damian said, you really have to look at that income, really, year-over-year gives you the best idea of how you should treat that in your model.

Matthew Breese -- Piper Jaffray -- Analyst

Okay. And then, maybe just turning to the loans held for sale. It was a pretty sizable increase this quarter. And I think you said that there is going to be some growth there (inaudible) before the next securitization. So, just from a dollars perspective, it looks bigger than usual. And with that, should we expect a larger than usual securitization gain?

Damian Kozlowski -- Chief Executive Officer & Director

Well, the securitization will be larger. We've been running 3%, 3.25% on these securitizations. These are small -- they're actually of a small size. It's kind of a starter size for these type of securitizations for institutional investors. It's going to be larger. We don't know how much larger. It doesn't necessarily mean the gain will be larger though.

So, we really have to see how that plays out in the first quarter. It's -- we probably will have a larger securitization, but we just don't know yet. And that will happen at the end of March. And we can't give you guidance on the gain because once again, the gain is really the result of spreads in the marketplace levels that are set by rating agencies, the expenses of each securitization. So, it will be driven by the size and where the market is at the point where these -- where this is issued from the securitization trust, so.

Matthew Breese -- Piper Jaffray -- Analyst

Okay. Now, you said it would be at the end of March. So, is that to say that the gain will be in the first quarter or will it bleed into the second?

Damian Kozlowski -- Chief Executive Officer & Director

That'll be first quarter. We're planning to have end of -- so, you'll get the full interest. So, we're at a high level now. So you'll get that full interest income for the first quarter. I think, after the first quarter, it will set the model for you, for the rest of the year. So, you'll have another securitization probably at the end of September, like we've done last year.

We tend, because of the way the market is set, we'll go for -- instead of having three securitizations and have to incur the expense three times of actually doing the securitization, we'll have two larger, which are more compatible with how the market wanted to be with more diversity of individual loans, and then larger dollar amounts for institutional investors and our other partners.

So, I think we'll -- I think the first quarter will set where we're targeting for the second securitization too, and that will give you a very good idea as to -- the spread revenue to that will be generated from the building of that loan book to the end of the third quarter.

Matthew Breese -- Piper Jaffray -- Analyst

Okay. Last one is just on the -- the savings in money market line item, it was down quite a bit this quarter. What happened there? Was it tied to the exit of the prepaid relationship?

Paul Frenkiel -- Chief Financial Officer

No, it was actually the sale of the Safe Harbor in the third quarter.

Damian Kozlowski -- Chief Executive Officer & Director

Yeah, so there are two (inaudible) loss of those deposits. We actually -- we had zero borrowings at the end of the -- we actually replaced the deposits through other means and at very high rate, which was lucky through our rest of our business. So the liquidity -- we didn't impact liquidity at all, but what it does is, we lost those deposits from Safe Harbor and we lost the fee. So if you look in our line, we lost the fees. You can see our fees down from that business year-over-year. I think we're going to have no problem replacing it, but it does have a near-term, like we said before, it would have a fourth quarter impact or a near-term impact on our financials and it did have a slight impact and the one-time items made it a little noisy too so...

Matthew Breese -- Piper Jaffray -- Analyst

Okay. Okay, I'm sorry, just one more, if you could just give us updates on where you stand on the consent orders, the SEC investigation and then on the on the mall sale as well?

Damian Kozlowski -- Chief Executive Officer & Director

Okay, the mall sale, we're working with two individuals who have plans for that property. So we're trying to -- the comps -- the complexity as I said before, there was a ground lease and there's someone who owns the ground lease and we own the mall. So we're trying to work with all the parties to get something done, really good for the Orlando community. We have our business down there. It's right adjacent to the Mall. So, we're trying to work with every -- all the constituencies to get our money back, but also to do something nice for the community. We think it's our responsibility and we said we would participate in that if we can get the right deal. I think, it would actually earn us money, but we're trying to do the right thing for the -- for Orlando, but also right thing to get our money back. But I think we'll resolve it, sooner or later. We're still income positive on the mall. So, it's no -- it's not a drag today on our income or anything. We take small gains every once in a while.

What was the second, I'm sorry?

Matthew Breese -- Piper Jaffray -- Analyst

(multiple speakers)

Damian Kozlowski -- Chief Executive Officer & Director

Oh the consent order -- OK, so we've made -- obviously, if you look at our financials, and you look at our capital levels and earnings, we've made just tremendous progress. So, usually as you -- when you have a company that was underperforming like we were with centers of risk like whether it was the ask quality questions around discontinued and everything, there's a process you go through to make yourself safe and sound. The last part of that is usually if you had an order, an informal or a formal order, a consent order, anything like that, that's usually the end of the process.

So I think, we've made tremendous progress. We set up the center of excellence here in Wilmington and that's made I think a world of difference on the way. You have to ask them, but the regulators view our ability to not only meet the guidelines, but also sustain a growing business. So I think whether they remove the consent order now or six months from now or the next time they come in to examine us, I can't speak to that. I know if not, I would like it, obviously, I don't want it there. It's not -- I don't think it's substantially impacting our business. It makes it a little clumsy to go into new product areas, but I think we're clearly in a very different place than we were last year and a dramatically different place than we were two years ago. So it's part of the process of making the bank stronger. If you look at the bank in its entirety and you think about what's happened in the marketplace, I think you go back to last year and two years ago, and you say banks are actually in a worse shape than they were. They're less stable because of interest rates, because of some of the concentrations in real estate and business finance, et cetera, et cetera. And you look at our business and you can actually say we're much stronger than we were a year ago or two years ago.

We have a long term model that we think is sustainable. We're not a one-trick pony, and one business line or one area, and we're continuing to diversify our product set. So I think we're much stronger than we were last year and I think that we have -- we're not going to be affected as much by the current market conditions, and I think we still have substantial growth opportunities that will be realized.

Matthew Breese -- Piper Jaffray -- Analyst

Got it. Okay , thank you for taking my questions.

Operator

Thank you. I'm showing no further questions at this time. I would now like to turn the call back to Mr. Damian Kozlowski for closing remarks.

Damian Kozlowski -- Chief Executive Officer & Director

I would like to thank everyone for joining us today. We're really looking forward to 2019 where we're going to be investing a lot in the business. We think we -- while doing that, we can really maintain our expense discipline, and we will adjust, if necessary, in order -- with our revenue, in order to maintain or increasing margins. So I look forward to talking to you after the end of the first quarter, and thank you for joining us today.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program . You may all disconnect . Everyone have a great day.

Duration: 44 minutes

Call participants:

Andres Viroslav -- Director of IR

Damian Kozlowski -- Chief Executive Officer & Director

Paul Frenkiel -- Chief Financial Officer

William Wallace -- Raymond James -- Analyst

Frank Schiraldi -- Sandler O'Neill -- Analyst

Matthew Breese -- Piper Jaffray -- Analyst

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