Newtek Bank, National Association (NEWT) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Thank you for standing by, and welcome to Newtek Investor Conference Call. [Operator Instructions] Please be advised that today's conference may be recorded. I'd now like to hand the conference over to your speaker host, Mr. Barry Sloane, President, CEO and Founder of Newtek Business. Please go ahead, sir.

Thank you, operator, and I certainly appreciate everyone attending today's investor and analyst call. As we near the end of the third quarter, it's somewhat of an understatement to take a look at all the markets, look at the amount of volatility out there and make a comment. There are a lot of questions that people have, a, relative to the overall macro conditions in the market and also potentially questions about Newtek Business Service Corp as it's in a transitory position where it's announced a change potentially from a business development corp to owning a bank and owning a bank holding company. So the purpose of today's call was to get together with shareholders and investors and analysts with a brief update on where-we-are things, open it up to Q&A and then let everybody get back to make their investment decisions. Clearly, I think it's important from our perspective, and we've been a public company since September of 2000. So we're probably looking at 80-plus quarters of quarterly earnings calls and transparency with the investment community in a public setting to make sure that people have as much information as they possibly can. So with that said, we put out a release this morning, which we should take a look at when out, I think, about 8:15 where Newtek Business Service Corp has elected Apiture Digital Banking Platform to power Newtek Bank. Obviously, that is still -- the acquisition of the bank is still subject to OCC and Fed approval. We'll talk about that a little bit. And we put out a press release yesterday forecasting a fourth quarter 2022 distribution of $0.70 per share, and we'll chat about that a little bit as well. Clearly, the one primary topic of our investor base is the announced acquisition of National Bank of New York City, which we announced a little over a year ago. We're working through the regulatory process to get approved by the OCC to acquire National Bank of New York City and then for the Federal Reserve to approve the publicly traded Newtek Business Service Corp to be repositioned as a bank holding company and electing financial holding company status going forward. So we've been through that process. It has been a very thorough process. We complement both regulators, were working through this process with us. We've been extremely transparent giving them a ton of information. And obviously, because this is not a bank-to-bank deal, which typically gets done rather quickly, although in today's environment, everything is being done a little bit more slowly than usual based upon the backlog of activity, we feel pretty good that we're pretty close to being at the end of the road, and we've recently indicated that we thought a decision on the applications both to own the bank and be a bank holding company would be forthcoming in the third quarter or in the fourth. Well, we're running out of days in the third quarter. So now the decisioning for approval looks obviously more likely in the fourth and we'll keep you all posted on that. Yesterday's press release that we put out regarding a $0.70 of distribution was important to put out there. Number one, $0.70, it's a forecast. It hasn't been declared yet by the Board. We'll do that a little bit down the road. We get a little bit closer and get a little bit more information to firm that up. That's with the understanding that we believe the conversion and the approvals will take place. We're optimistic about that, although it's never done until it's complete and that's a guess on our part based upon conversations that we've had. However, the reality of it is this isn't horseshoes and anything can happen. And we are clearly humble irrespective of the authorities final decision-making in both cases at the OCC and the Fed level. With that said, the $0.70 is based upon the earnings expectation for Q4, it's based upon spillover income. That is income that's been retained historically as a BDC, which would need to be distributed and the potential to, at the end of the calendar year, [ derisk ] and convert from a '40 Act company and to a '33 Act company. We feel pretty good about the returning of cash of $0.70 that would be a cash distribution dividend in the calendar year of approximately $2.75. Taking a look at just $0.70 for a 3-month hold in period at the current stock price, it's a pretty attractive yield. I also want to point out that if you take a look at where we are as a BDC versus other BDCs, I only mention that because the investment community today is looking at us in the middle of a transition. And that's actually caused some consternation and I would say, prospectively that uncertainty might, I use the word might, be creating a discount to where things should be. We're trading at around NAV. Most internally managed BDCs are trading at around NAV. The universe of BDCs are trading at about 70% of NAV. So typically, Newtek has always been an outperformer. We feel pretty good about where we are relative to other BDCs. And also relative to the concept of a bank investor making an investment in it. Most of the bank investors, a, can't or won't buy BDCs. Many of them are institutionally oriented, and therefore, they can't buy another mutual fund. They have the AFFE issue. So we're kind of in a unique position where we've given a regional-wide information for people that have loved the historic dividend and the fact that we didn't have to pay any tax, a reason to sell, but haven't really been able to open up the gates to those that want to buy bank stocks. Number one, we're not yet approved. And number two, many of the people that buy bank stocks can't buy BDCs, won't buy BDCs and are waiting for these approvals and the closures. So I mean, that's kind of one explanation as to why things are where they are. And I take a lot of calls and questions both from Street analysts as well as investors. I will point out that our current analysts are basically all BDC analysts. We don't have a bank analyst. And the projections in the market are based upon the BDC and not based upon a bank. This obviously makes things a little bit more difficult for us. We do appreciate the uncertainty, but I also think it's important to explain to the investment community why things are where they are, what we can answer or what we cannot answer. And we put things out in the market that are really well thought out, have good backing within the context of what we think good and appropriate disclosure. One of the questions I've been asked recently, obviously, rate increases and inflation are on the minds of many investors. Important to note that a major portion of our balance sheet is SBA 7(a) loans. For those of you that aren't really familiar with SBA 7(a) loans, our portfolio, our floating rate loans, they float over prime, they do not have a cap. Prime today is 6.25%, that's not assuming that the Fed will do additional rate hikes. The current margin on our loans that we're taking loans in is Prime plus 300. That's 9.25%. That's a very healthy rate, particularly for a bank. I've asked many of you to take a look at banks or for that matter, even BDCs. That's a good portfolio for -- that does not include the 70% portion of the loan that we create and typically sell for approximately plus or minus a 10% gain on sale. We've also indicated that because the Fed has been slow and behind the curve to raise rates. The gain on sale margins have been under pressure in Q2. They'll continue to be under somewhat pressure in Q3, although we've indicated we think they'll be a little bit better than they were in the prior quarter. That still remains to be seen as we have a couple of days left of selling in the market but we'll stick to that current statement that we've made previously. We think will be a little bit better. Our portfolio performance at the end of Q2 was good. Our currency rate was very high. We're pleased with that. We don't see major changes of that between Q2 and Q3. We're very pleased so far that people's concerns about a recession and consumer spending slowdown have not yet hit the portfolio, although you can rest assured that the company and the management team that has been in the business for over 2 decades, is cognizant of the fact that the economy will most likely slow from where it's been and we have our portfolios marked at appropriate levels. I believe that we have a good handle on reserves. Mind you, being in business since 2000, we've seen up cycles, down cycles, up credit, down credit, survived the [ '08-'09 ], survived the pandemic. This is a company that is extremely nimble, entrepreneurial, can adjust on the fly and to be able to have good forward thought into what we need to do going forward. And this company has always been run for the long-term and that's in the shareholders' best interest. We don't run it for the next day, for the next month or the next quarter. It's really to preserve long-term shareholder value. I think it's important to point out, I've been asked this quite frequently, are you disappointed in your decision to potentially become a bank holding company owning a bank? I think if you go back and you look at what's transpired over the last year, BDCs are currently financing their debt with a 7 handle. I point out a recent deal that Owl Rock did, a significantly larger BDC and a very big brand in asset management, I believe the coupon was around 7.75%. In addition to that, to grow, and we're a growth BDC, we have to be continuing to sell shares of stock. This is not a time where you prefer to sell less equity than more equity. And the conversion into owning a bank and being a bank holding company is the ability to use the core deposits to be able to finance the 7(a) business and the 504 business without having to sell a dollar worth of stock and $1.30 worth of BDC debt. So the only thing I could say is we've evaluated that 89% of our shareholders recently in the proxy vote to give us the approval to it through our election, also believe that. So we do believe that despite the fact that our stock has come under some pressure recently and when it was a material overperformer on the upside, as we all know, sometimes that reverts back and you become an underperformer on the downside when things come back. I think that the one thing I wanted to do today, and I'll try to keep this short and get everybody back to the markets and open it up for Q&A, was to give investors an understanding as to, a, why they may want to look at the company going forward, if they're not in it; and b, for those that are in it, why continue to stay in it. Well, we continue to perform, in my view, as a BDC. Obviously, we didn't have $50 million of PPP income that we had in 2021, which created $50 million of revenue. So you take $3.47 of adjusted NII, and you take $50 million out of that, then it'll almost notch you down $2 to $1.47. But we're clearly well beyond that. As a matter of fact, adjusted NII, I think for the first 6 months of this year was about above [ $1.46 ]. I think we also paid out $1.40 in dividends for the first 6 months of the year. I've had a couple of investors questioned me recently about our payout ratio. I really don't know why people are thinking that we paid out more in cash than our earnings. Historically, that has not been the case. Now we've indicated in the recent press release for Q4 as we wrap things up. We hope -- anticipate and if we get the approval that we will wrap things up as a BDC. The goal is to pay out the retained earnings and all the earnings. As a matter of fact, if you've got an error, you want to err on the side of maybe returning a little bit of capital. So I mean that is a possibility going into the fourth quarter relative to the $0.70. But then on a going-forward basis, prospectively looking at us as a bank, we do not have a forecast for 2023 and 2024, either as a BDC or a bank, although we have put out an illustration, which you can find on our website, which is sort of indicative which will need to be revised once we and hopefully get regulatory approval. But that illustration indicates that on an after-tax earnings per share, we have pretty reasonable earnings per share, pretty reasonable growth and apply any kind of a reasonable market multiple to that and you kind of get a different stock price than you get today. I ask the investment community to go take a look at what's out there, draw your own conclusions, do your own research. But one entity that's not an exact comparable but a reasonable comparable, Live Oak Bank, which is the largest SBA lender in the United States, trades at about 14x earnings per share. So I think when you take a look at our organization versus others, there's clearly a reason to take a look at it. Obviously, we don't talk about the stock being rich, cheap. We leave that up to the investment community. We try to provide the information in a transparent and as pure manner as we possibly can. We say when things are forecasted and estimated, and that's up to you to determine on our track record of being able to forecast and estimate. But one also thing I'd like to say before I turn this over to Q&A is the concept of realignment of interest. I still represent the single largest shareholder of Newtek Business Service Corp and there is no real economic benefit to myself individually and more importantly, representing all the shareholders than the alignment of interest between all the existing shareholders or myself. National Bank of New York is currently a $200 million asset bank. So I don't think anybody can expect me to get a Jamie Dimon type benefits package at National Bank of New York City or that might compensation is going to increase wildly for owning a $200 million bank. This transaction was done because we were concerned about rates rising, were turned about quality spreads growing. If you read the Apiture release, Newtek Bank, subject to approval, is positioned to be the bank of the future. We think that has a lot of value. We think the technology that we built over 20 years will add a lot of value. I just got to be frank with the group. I feel very, very good about where we are. We're hitting on all cylinders, everything we need to get done from a financing perspective, we believe it sits in a good spot, and we're very, very optimistic about the future despite the fact that the markets are extremely turbulent and kind of crazy. But I can only reflect back into March -- April of 2020 during the pandemic, when the stock was trading down precipitously and even trading in the $7, $8, $9 type range, and the company took a look at the landscape, it repositioned itself, it shifted itself and boom. We had a great year in 2021. And for those of you that point out that there may be a dividend cut in the future. Typically, for a dividend-paying stock, it pays out a material portion of its earnings in the form of dividend, but you got to understand that we'll be retaining the remainder of those earnings. And we do believe that over the course of time, this structure will give us the ability to grow earnings precipitously and really create greater shareholder value. For those of you that have received dividends, question is, did you put it back in the stock market that's now down 20% or 25%? Did you leave it in cash that lost money versus inflation? What did you do with it? We typically get a return on equity that's in the double digits. That's a good investment. That's why this transaction potentially makes a lot of sense for us in so many different ways. So with that said, I hope this has been helpful to the shareholder base. I'd like to open it up to questions -- any questions at the group may have. So operator, if you could open up to questions, that would be great.

[Operator Instructions] Our first question is coming from Paul Johnson from KBW.

Just real quick on the announcement with Apiture [ this morning ]. How does that affect, I guess, the Newtek dashboard app and the development for that? Does that accelerated? Does that replace essentially what you had been working on? Just curious how that affects, I guess, the ecosystem of your dashboard.

Sure. So thank you, Paul. The announcement with Apiture as we've put into the release. It's a delayed announcement based upon, obviously, what we've been working on with Apiture over many, many months. Apiture is an organization that we believe has done online banking, mobile deposit, account opening for hundreds of institutions. They're really a high-quality organization. And their technology in conjunction with our tools will be integrated together into the current existing National Bank of New York City's core so that there will be no core conversion or transformation of customers from that particular core. So this announcement is totally consistent with our desire to deliver the Newtek Advantage, which when we deliver that to our clients will be the one company for all your business needs, the one dashboard for businesses to acquire 6 relationships, analytics -- 6 executive relationships with Newtek, analytics, transactional capability that do not exist in banks. So when you look at the Newtek Advantage, which would be the tool that we're going to be giving to all customers eventually, initially just depositors. You'll be able to do payroll from the dashboard. You'll be able to see your Google analytics from the dashboard. You'll be able to see your merchant processing data from the dashboard. You'll be able to store all your organizational documents on the dashboard. So these are the things that we're taking the Apiture technology, which they've done a fabulous job in providing online banking capability as well as mobile deposit opening and merging that into the existing Newtek technological tools that have been developed over the course of 20 years. This is what I refer to as the unlocking of value in what we've built over 20 years, which you really can't see. So when businesses go to their dashboard, they're never going to have to say, well, gee, I didn't know you did insurance. I didn't know you did payroll. I didn't know you can do a virtual desktop or give me a 24/7 help desk or gee, I didn't know you designed websites or I didn't know you can do Workman's comp or health insurance or for that matter, they go to their banking portal a couple of times a week, 10x a month. They go to us for webinars, seminars, product information. It will be the central place that business owners can really map themselves to manage their business. So these are the intrinsic intangible things that will enable Newtek to really position itself as the bank of the future and achieve higher levels of greatness going forward.

Thanks, Barry. I appreciate that. A lot of color on that recent announcement. I guess just maybe for investors in the market, I was wondering if you guys had any update on what pro forma book value would be for closing the bank transaction. I think the last -- the most recent presentation that and may be off here, I have a 0.74%-or-so in front of me or somewhere in the 10% range. Do you guys have any update on that?

Yes. It's a good question, Paul, because for investors that are obviously familiar with us at NAV, okay? This is once again, really important to note. We have a valuation. I believe it's around $115 million for Newtek Merchant Solutions and $30 million to $40 million for Tech Solutions. So there's like $150 million of value that rolls into NAV. That will not be part of tangible book. So in a bank environment, once again, we're not sure -- mom and dads or grandpa and grandma's bank. We're going to look differently. It's just like we're a different BDC. We're going to be a different bank holding companies. So that will actually come out of what traditionally has looked at as tangible book. We may wind up creating a valuation to adjust that to add this back in because there's clearly value in those businesses, but they're not part of book. So you could probably play around with those numbers and come up with your own definition of what that might look like. There's no question we're going to be trading at a multiple of tangible book. However, from our perspective, as long as we grow earnings, and I would strongly suggest for those that haven't done it, go take a look at our website, the August 2, 3 illustration with the banking b, we think that we can achieve ROAs north of 3%, returns on tangible common equity in the double digits, high double digits, unlike most banks if they get 10% or 11%, given what they do, they're lucky to do it. We're just -- all the things that we do, once again, we've got to get approval to be able to get these things done, which is one of the reasons why it's taking it so long because the regulators are looking at all these different things as they should, but we're confident they do fit the regulatory environment. Most importantly, they're great for our clients. These are different businesses that generate great cash flow, don't require capital like the merchant business or minimal amounts of capital in tech solutions, but generate that nonbanking recurring income with growth. So we're very excited about the model. But I will give you a hint. My guess is from an accounting perspective, those valuations, which are part of NAV will have to come out of NAV.

Thanks, Barry. Appreciate that. Yes. I appreciate the very complicated matter. And obviously, there's a lot of moving parts to this. And as we said, the transaction still hasn't closed. So there's a little bit of forecast built around this but I appreciate all that. But just to be clear, I want to make sure. So the $10 to $11 range, $10.74, is that sound reasonable to you in terms of where you stood at the last presentation?

I'm sorry, could you repeat that, Paul?

Just the pro forma tangible book value that sort of just, I guess, calculated from some of your recent presentations. I think I came to a number around $10.74, I mean, thereabouts, I guess, sound accurate to you? I just want to be clear on that.

I think the information that you're taking from an illustration that we put out, it's reasonable if you were to assume that the valuations that I mentioned would come out of NAV. You could come up with a number that is somewhere around that number, plus or minus.

Got it. Appreciate that. My last question, I did ask you on the last earnings call, but just kind of refreshing my memory around this. I'm just curious what happens to prepay rates in your sort of typical SBA 7(a) portfolio you guys have operated with, I guess, maybe just for instance, like back in 2017, '18 as rates were going higher back then and the prime rate was moving up. What sort of -- I guess what did you observe from the peak prepay rates within your portfolio?

Yes. I think that what you see in an SBA portfolio when rates rise is borrowers that have real estate collateral that have improving cash flows that have demonstrated good pay histories for 2, 3, 4 years, will up to potentially get a lower rate cash out on the valuation of the -- maybe the increase in the real estate and refi. So speeds do pick up. Do they pick up precipitously, did it go from like 16% to 22% or a bigger number? Yes, but it's not like they go to 50%. I mean it's not as sensitive as getting a refinance in a residential mortgage loan, if that's helpful.

And our next question coming from the line of Scott Sullivan from Raymond James.

A quick question on the return of capital. My assumption would be that if there was any return of capital in the next dividend, that would be based on you guys trying to avoid really onerous tax situation. Is that correct?

100%. I mean you don't want to be 98% or 99% when you do the final and when you do the final, it's based upon where you think the tax return is coming out. So we have a lot of work to do. We're doing it. We're in the midst of it. We're paying attention. But to try to be as transparent as we possibly can to the investment community that for those people that have a position in the stock and they want to keep on understanding that they're going to get cash, we thought that this was a good way to number one; forecast. And then we obviously anticipate delivering that otherwise we wouldn't have forecasted it. But that -- if you're going to derisk, you can't be at 90%. Does that -- do you get that?

Absolutely. Makes perfect sense.

You need to be at 100% or 101% or 102%. You don't want to be at 90%.

Right. Probably I just wanted to clear up that confusion.

That's a really -- this is why we do this call. That's a really good question for people to understand. I mean, the other thing is people are like trying to figure out, geez, they're right up into the number of 100%. Well, most BDC analysts will say, well, gee, that's not very good. But we're transitioning out of being a BDC. So therefore, you should start to see leverage go up, you should start to see the payout ratios be close to 100%. That's what we're supposed to be doing. That's called preparation, and that's a great question. Thank you for bringing that to surface.

No worries. Next question I have is sort of based on the overall pro forma topics or actuals, I guess. So you're kind of creating a new bank category, in my mind's eye, and I know you may not want a fintech type of label because you're really not. But I see it as a branchless model, which is always interesting. Obviously, SBA and nonconforming focus in terms of lending with small business offerings. How would you look at your pro forma in terms of offerings compared to a Live Oak? And further, what pushes your positive opportunities versus them, the advantages, et cetera?

Thank you, Scott. First of all, the question definitely molds into our recent press release we put out where we talked about the prospective branding of the company to be called, number one, NewtekOne. And NewtekOne, one company for all your business needs has a vertical of banking, also has a vertical of lending, but has a vertical of banking. So it's important to note that although NewtekOne will be a financial holding company owning a bank, we don't want to be -- first of all, we are not going to look like any other bank. I'd say that from the prospect that first of all, we're going to give customers 6 executives to have relationships with. A licensed insurance executive, a payroll health and benefits person, a payments executive, a loan executive, a deposit executive, a relationship manager. Most businesses, if they're lucky, they may know their banker, most of them do not. So that's a huge differentiator. Businesses will actually have relationships with people. Now we say we're branchless. They're going to be able to go to the advantage and pull up people on a camera and be able to have. That's the bank of the future. That's the technology of the future. That's where we're going. In addition to that, they're going to be able to get multiple solutions that's going to make their business more successful. It's going to make their business better. We're going to give them value. Instead of just taking their deposits and the customer hoping they get a loan. We're going to give them analytics transactional capability so that we don't want to be a bank or thought of it and the other -- we don't want to be called as a bank. It's always where the new bank, the Newtek bank -- the new bank or fintechs are typically software. They're not people in process. So they provide software and they give it to the bank, and then the bank has issues in looking at it. Relative to the comparison with Live Oak Bank, who I have tremendous respect for. They're a great institution. They've done exceptionally well in the market. But they recently announced that they hired 13 bankers and they're about to look to hire a lot of other bankers. That's not what we're doing. We've got tremendous capability to leverage the infrastructure and put on sizable amounts of business with the current staff that we have without bankers, brokers, BDOs or the physical location of branches. So we look forward to ultimately being able to brag about our efficiency ratios, the ability to leverage to put more business on without killing the expense line. That's a major difference between Live Oak and ourselves. Live Oak has done a very nice job of creating technology, which is software and spinning it out like nCino. Kudos to them. They did that with -- Finxact recently as well. But they're still using a lot of humans and manual labor. And they also -- they don't own and operate the businesses that we've owned and operated for 10 years. They could buy them, and they could start to integrate them. I wish them luck. I've got 20 years of scars on my back from this. But we're here, we're positioned. We're just waiting for approval, and hopefully, we'll get it soon.

Fantastic. I really appreciate that color. Lastly, can you give any kind of guidance for '23, '24 or goals, if not permissible?

Yes. Well, I think -- so look, I think what we should look at, number one, for investors currently in the stock, I think we have performed in earnings and dividends for this year, particularly assuming that we're recovering from COVID, you pulled out PPP, we had to ship back to our normal business. We had a record financings in Q2. We have a couple of days left. I wouldn't be shocked if you see record loan closings for the third quarter as well. That's something to look at. It's not a forecast. It's not a prediction. I'd just say stay tuned for that. Relative to 2023, 2024, providing that we get approval. I think the illustrations that exist in the August 2, August 3 deck, and they are just illustrations are the closest thing that one could come to being able to think about what we could be to envision what we could be. So when you look at those illustrations, you're looking at ROAs that are 3% plus, well north of where banks are you're looking at illustrations of $2.10 after tax in the first year, $3.10, you split that in the middle, you put a reasonable multiple on it. I mean -- I can't tell you that those are forecasts or predictions, but those are potential illustrations. And without the deal closing, I really -- I should say, being approved, I can't with real certainty tell you what goes where at this point. But I think that's -- those are good guesses for you to take a look at and maybe base some decisions off of. Right now, unfortunately, because we don't have bank analysts looking at us, we don't have forecast in the market. The stock is trading where it trades. And it is what it is.

That's very cool. I definitely appreciate that and obviously respect your patience and perseverance in the whole transition. So thanks a lot.

Thank you. Appreciate it, Scott.

And our next question coming from the line of Robert Dodd from Raymond James.

Just 2 questions. One to follow up on the book value question. The bank tangible book, obviously, yes, it's different item. So it does include asset values from the BDC. But does that, call it, mid-10s -- 10 to 11, does that include an expected loan loss reserve? Or is that before the assessment of that because I presume that's part of the conversation with regulators on what the appropriate scale for a reserve, if any, is?

So Robert, thank you for joining. I appreciate it. The number that you reiterated based upon that illustration, that would be -- I don't how to answer the question because that I think what you're asking me is if you have to make a guess on what the tangible book would be, is that tangible book net of everything? The answer is yes. So -- now to point out the concept of multiples to tangible book in a banking environment or for that matter, multiples of NAV in a BDC environment. And we've had these questions numerous amounts of times. When we were in the middle of PPP, and we were breaking records for earnings and paying dividends, I think we got as high as to 2.5% to 2.6% to net? Now how did it get there? Very simple. You earned it. So as long as you could earn and generate the cash flow, the stock price is going to go. Banks trade at these multiples and BDCs trade at these multiples because they're not growth vehicles. We broke that mold in BDCs. We believe we will break that mold in banks because we're unique and different, which is why it takes us, frankly, longer to be understood, there's more explanation, that's the value prop. So I do realize that we will be, and I'll use this word, hazed by analysts and investors what's your multiple tangible book. It shouldn't trade at a big multiple to book. It's not like other banks. I mean that's fine. We'll just earn our way through it. But to answer your question, if you were to -- if we were to put out a pro forma and historically, we've only pulled out an illustration, which we think is different, it would include all charge-offs and expenses, yes.

I appreciate that clarification. I mean, the multiple a bank and BDC get tends to be driven by its ROE as well as growth. And your ROE has been higher than average. Part of that is the success obviously in the growth of the 7(a) business. Can you give us any color on the licensing situation? Because obviously, you have a preferred lender license within Newtek as it stands today, but you're going to drop the people into the bank, right? So is the license going to transfer as is as a preferred lender license from Newtek as it is today to the bank on a go-forward basis?

So the plan is that National Bank of New York City, which currently has a lending license but obviously, it doesn't have our infrastructure or our capability, we're going to wind up putting probably in excess of 200 employees in the bank, we'll be able to obtain that preferred lending status in the bank. But that is one of the things that we will be executing on. I mean, I think, there's a list, Robert, of about 70 things we got to execute on. That's one of the items. But yes, that's put that on the list in that. So we envision that the bank will be a PLP lender. We've had conversations with the rating -- with the regulatory bodies about this. So yes, that's an important part of our ability to affect this transaction and be successful at it.

Got it. I appreciate it, and thanks for the update, and good luck on getting the final approval and getting this thing wrapped up.

And Robert, thank you for working with us all these years. And I appreciate all of your thoughtful questions and effort. Thank you.

[Operator Instructions] Our next question is coming from the line of [indiscernible].

My question has to do with the bank purchase agreements or the bank purchase. Once you get approval for the bank purchase, can you go over what your -- how you're going to address the precondition regarding the notes, about refinancing the notes?

The answer is I can't address that. I can't address that at this point in time because it depends upon the timing of the approval and the circumstances.

Well, re-asking the question, the notes cannot -- I mean the notes couldn't have language that requires the BDC or has the BDC language in it, which needs to be eliminated? I mean, there has to be some approach to getting rid of that, right?

[ Don ], I didn't understand that question.

Yes. I mean, the purpose of the reasons for the notes to be refinanced, apparently, it has to do with the fact that the language in the documents that have to do with the business development company that need to -- that language needs to be eliminated. That's the reason for the refinancing, I suppose. How is that going to be addressed? All right. I guess you just said you couldn't see an answer to that.

That's correct. Although I will tell you that it will be addressed. And we've had private conversations about the stock, and I appreciate you coming on today, and we wanted to take your question. And the answer that I give to you, and I've given to other investors that have contacted us in transparency is we will be in complete compliance with all of our covenants. We're aware of it. We've got great counsel representing us and investors will be protected.

I am showing no further questions at this time. I will now turn the call back over to Mr. Sloane for any closing remarks.

Great. I want to thank everybody for attending this morning. Given the nature of the questions, it was really good that we had this brief call. Hopefully, just clarify things. obviously, for anybody with other -- further questions, please send us an e-mail, call Jayne Cavuoto, Investor Relations. We're more than happy to answer any and all questions. We realize there's a fairly big transition going on that's left a bit of a vacuum on a variety of items, but we're trying to be as transparent as we possibly can when we can answer questions. We try to be as forthright as possible. That's been the company's 20-year tradition. We feel really good about where we are, and we'll hope to continue to deliver good news and good reporting. So thank you once again. I appreciate your time, everyone. Have a great day.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.