NewtekOne, Inc. (NEWT) Earnings Call Transcript & Summary

Good day, and welcome to the update on NewtekOne Inc.'s financial and operational performance as a financial holding company. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to Barry Sloane, CEO and President of NewtekOne. You may begin.

Thank you, operator, and good morning, everyone. I'm Barry Sloane, President and CEO of NewtekOne, a NASDAQ company, stock symbol NEWT. I wanted to welcome everybody to an important update on our position in the market, both from an asset and liability, and financial perspective. Also on today's call is Nick Leger, Chief Accounting Officer of NewtekOne, Nick Young, President and COO of Newtek Bank and National Association; and John McCaffrey, Chief Financial Officer of Newtek Bank National Association as well. For those of you that would like to follow along to the PowerPoint presentation, it is on our website. We'll be there with an audio portion for the course of the week. But please go to our website, newtekone.com, investor relations section and the PowerPoint is there. Today's presentation is meant to give investors and analyst an insight into NewtekOne as a financial holding company owning a bank. Obviously, with some of the recent conditions in the marketplace with respect to financial institutions, we felt it was important to give everybody an update and kind of give everybody a little bit more of an in-depth analysis as to who are, why we're different, and also very importantly, it is very clear that organizations similar to us are going to be looked at with different metrics going forward. It is very clear that the old metrics really have not held up in current market conditions, particularly with the rapid rise of interest over the course of the last year. But more importantly, the change in ease in which liabilities or deposits can move in and out of a financial institution. We feel very good about where we are. Our business model for those you that are not familiar with NewtekOne, we were a nonbank organization for 22 years of our public company, 24 years since inception. We acquired the bank on January 6. And clearly, today's presentation is to give everybody an update on how we're doing with respect to deposits, assets, give people comfort that we are good risk managers and stewards, which we have been over the course of our historic 24-year history. Also important to note, NewtekOne, we look at ourselves as a financial and business solutions company. As a matter of fact, in a given year between 40% to 60% of our revenue would come from nonbanking activities. So we're extremely diverse, not dependent upon pure banking. We're excited about the opportunity to enter into the banking community. Some people might say, is this kind of nutty. So I'm trying to figure out whether this is the best of times today or the worst of times. Obviously, on this stage, it doesn't really look very good. But as people in the market that know things. This is where money is made and this is where the opportunity lies. And we feel very good about how we're positioned and hopefully, we'll be able to depict that story to the investment and analyst community today. So I'd like to go to Slide #1 and make sure everyone's familiar with the note regarding forward-looking statements on Slide 1 of the PowerPoint. And after reviewing that, we can then go to Slide #2. And I will say this, we've had a lot of attention drawn to us lately. And I think it's been positive attention that people are looking at our organization with the recent movement and saying, hey, this is an interesting opportunity that it doesn't look like any of the other financial or bank holding companies that I'm looking at. So Newtek was clearly a differentiated financial holding company and today's focus is really to talk about how we're different and why the industry's problems might indirectly, which are clearly indirectly affecting us, but not directly affect us, directly with respect to how our assets are situated with a really great asset liability matching and how our ability to have diversified ability to attract liabilities to fund their business is a tremendous strength. The acquisition of National Bank of New York City was done not just for upside, but to actually further diversify our ability to finance ourselves and reduce our risk, and we think increased our opportunity to make money for our shareholders on a long-term basis. So as we look at our organization, clearly, we're swept up in the discussion as a financial holding company. But we've always looked at it's important to regularly discuss with investors and analysts in the turbulent times full transparency. And this has been our north star over 22 years, and we'll on to do so. Once again, we believe our business model is dramatically different, and today's discussion is designed to emphasize that on how well positioned we are to operate both from an asset and liability perspective, from a credit risk perspective and the fact that very importantly, we're very well diversified and liquid as of this point. Also important to note, the metrics that people have used to analyze banks, bank holding companies and Newtek, I have to question. I mean I can't tell you how many times over the last year, people would say, what's your deposit strategy, what your -- and people would say to me, jeez, where you going to get these cheap deposits and the noninterest-bearing deposits and the core deposits. Well, it looks like in these deposits that can actually move in 3 to 5 minutes really aren't that sticky. And that's what we're seeing. I think it's important to note that people have relationships with institutions, but sometimes the movement of several percent in interest rate, which is built into our model or for that matter of concern over the security of a bank could change things over time. We've seen this occur over the course of 12 to 18 months. So this is not a surprise to us, surprised of what happened in the last week or two, but the movement of money in the way it's occurring, not a surprise. By the way, the 1 discipline in life is be a nonbank lender for 22 years. It really enables you to be a good risk manager, not to count on, rely on 1 particular source for anything, and most importantly, diversification, diversification, diversification. Slide #3. Important balance sheet variables. Newtek Bank as of Jan 31, approximately $250 million of total assets, $78 million of capital, 30% capital base, very strong. The banks that -- our question today, we're at 6%, 8%, 10% and then you got a mark-to-market, which they don't have to mark-to-market. They're at book value accounting. I always love that term, tangible common equity, that's based upon book value accounting, not mark-to-market. So you can see the bank itself very strong. Those are unaudited. We look forward to our report and to be able to deliver the audited numbers to the market place. NewtekOne Financial Holding company, on a pro forma unaudited consolidated basis, $1 billion to $1.1 billion in assets, $200 million in equity, back of the envelope, is close to 20%, also a well-capitalized, well-positioned financial holding company. We want to reconfirm our guidance and up $1.70 to $2 for the calendar year, $2.80 to $3.20 going out. I want to make 1 comment on this. I feel good about these numbers, and we typically give these numbers with cushion. I'd say that in the backdrop that if you look at the 2-year note, I think somewhere in the middle of last week, it was at $5, then it was shot down to $4, then it was up to $4.30 or $4.35 yesterday and this morning, last time I looked, it was like $4.45. So a lot of things are moving, a lot of volatility, but I'll explain to you what's going on, particularly with one of our core drivers, which is the government guaranteed SBA market, which unintended consequences, but that's a favorable outcome for Newtek based upon what's happened in the market, and we'll talk about that. But I want to be clear, these are numbers that we're comfortable with. We did put them out again. If things change, we'll be transparent and report it to the market. I will point out that one of the important aspects is PLP status and moving the originations from Newtek Small Business Finance, which will set up at the bank holding company and have the SBA originations done in the bank. I think at this point, it is important to let participants know that NSBF is doing, there's no interruption. There's no changes, and that is up at the holding company. We have recently accomplished the feat of approving and dispersing enough loans in the bank, Newtek Bank, N.A., so that is eligible for PLP status. We're trying to get that moved over. I will point out, and I won't get into the weeds too much on this call, we'll save it for the future, that doing loans up at NSBF versus in the bank, in the bank, we wind up using CECL. It actually generates less upfront profit, more profit in the future. But these are numbers we're very, very comfortable with. So I think there's no interruption. There's no problems that we couldn't move the PLP in time. We do anticipate getting them moved over. We've got to work that through the SBA. And you can imagine that government agency is fairly busy right now. Once again, important to note, unlike these other organizations that are kind of capitalized 8%, 10%, we've got much more robust numbers, both at the holding company from a cushion standpoint. And I also think it's important to note that when we just released our final result as a BDC to finish that chapter in our life, we marked those assets to market. We are comfortable with mark-to-market, okay? So when you look at our organization, you're getting -- first of all, there are all generally -- I'm not saying the banks [indiscernible] accepted accounting principles. I'm just questioning it's not mark to the market. So we did the right thing, we marked our assets appropriately as a BDC at the end of the year. We took write-downs that we thought were appropriate and why were those write-downs appropriate? How do interest rates go up 4% to 4.5% in a given year cost of capital wise and you don't change the valuations. So we're current, we're transparent and very well positioned for the future. When we look at the bank, the investment portfolio is tiny. I'm going to lean towards the $7 million, maybe $7-plus million of securities. These things have approximately a 1 year duration, I think, a 4% yield. The rest of the investment portfolio was $40 million of cash. How is that for good duration? Now where does that cash going to go? It's going to wind up going into the SBA business, which is floating rate 10.75% coupon, 3/4 of it are available for a gain on sale. That seems like it's a pretty good business to me without a lot of risk. It's one we've done for 20 years. And it clearly -- it's not like -- you're not going to -- you're going to have greater charge-offs, then you have in a AAA-rated car loan portfolio, or residential mortgage loan portfolio, but that's based in direct calculations. And on a risk-adjusted basis, we make money. So I think it's important to note, and I keep pounding into the investment community, we're going to get there. When they see the numbers, and we were able to hit our projections, which we believe and anticipate, we can do that our model is different. Where banks historically and most of them have predicated their business model on low-cost deposits and assets that are very, very tight at the margin, and they're all kind of in the same transaction. We pay a market rate for our deposits, so that should keep us in the game and invest in assets typically that are floating rate on the 504 portfolio, it is typically hedged. I say typically, we've been hedging since 2019, where it wasn't very sexy to hedge. Now you have people talking about hedges on securities portfolios, I'm kind of like how do you hedge a AAA-rated agency bond. How do you hedge a mortgage-backed securities and turn it into a floater, you could barely make money on it, which was the whole problem. You know what I'm saying? So we are good risk managers in the company. We've managed risk for 22 years of public company, 24 years since our inception. Regarding once again, liquidity, we raised $50 million of debt in January. People say, why are you raising debt? It's really I'm glad I got that cash right now and $20 million of preferred stock. We have investment-grade BBB+ rating. And we also have a line of credit with the Federal Home Loan Bank of Atlanta that is underutilized. Important to note, no exposure. We don't have any deposits at any of the 3 Ss. I'm glad Newtek's name does not begin with an S. No Signature Bank, no Silicon Valley, no Silvergate, no deposits, no loan opportunities with them, so there's just to our knowledge, no exposure there whatsoever. Let's go to Slide #4. Differentiated business model, again, the business model does not rely upon non-interest-bearing deposits at a lower cost. I'm not saying we don't want them and we will be able to get it them. Well, how are we going to get them? Well, by putting same-day funding and for payment processing accounts. On the payroll business by moving money more quickly into employees' accounts. This is a big advantage that we have. Once again, I'm not going to spend too much time on this today. Go to the Newtek Advantage. We've gotten great receptivity from our clients. We have clients that, frankly, in the merchant space that accounts with some of these other entities, they've asked us to switch that over. This is a great to us and from a banking standpoint. And I'll discuss the timing of that. Sometimes financial people snap your fingers thinking it can happen. We've got to teach, train, mentor and educate our staff to be able to work with clients and with the process of doing it. So it's going to be a little slow, but we have a very good receptivity in bundling these opportunities together. Once again, it's important that we believe those lower-cost deposits are valuable. But trust me, we're never going to count on them sitting there if we just leave them, then the rate environment goes up. I mean, that doesn't make much sense to me. But the bottom line is the world has changed. And if those deposits were sticky, I'm just making up a number. For 180 years, they haven't been that sticky in the last 18 months, and they're going to be less sticky going forward. Banks like [ Marcus, Bask ] and Newtek Bank in 3 to 5 minutes, you can move your money from one account to the next, from one bank to the next. You can go treasury direct, purchase securities directly from the U.S. government. You can do this from your home, you don't have to go into a bank branch. So this is -- this trend is going to continue to happen. Now, if other banks start getting on online deposits, that's great for them. Where is their asset machine? What assets are they generating? That they're going to be able to get a return. If their cost of money is 3%, 4% or 5%, it works for us, they're going to have to change their model. Okay, let's talk about the SBA 7(a) loan market. And once again, you got a lot of volatility. So I don't know what's going to happen today, but as of late last week, this market on a gross basis was up 4 to 5 points since we split with the SBA, say 2 points to us. So although this market was not attractive into Q4, where our gain on sale was about 108.75, it typically averages 110, 110.5, 111 over the last 5, 6, 7 years because these are floating rate instruments. But look we had nothing to do with the market being under the median in Q4, now we move back up toward what I consider the median. Why is this happening? Guess what? Banks and insurance companies are all suffering from the same, what's the market value issue. So guess what they want to buy, floating rate government-guaranteed bonds, and this started popping like crazy in the middle of January. So hopefully, this will continue, and that will be beneficial, an unintended consequence. Sometimes they have -- I know the expression, would you rather be lucky or good, than rather be lucky and good. And in this case, this is moving in our favor. Just like in Q4, we were unlucky based upon changes in the market. Now we're getting a benefit from it. But when you look at the historic median for this business on gain on sale, it's like 110 to 111 based upon where we do our loans at, which is prime plus 3. Also important to note the 504 loans, which will be held for sale, we've been hedging for 18 months. And we really talked about hedging when the 10-year treasury was 65 basis points. As a matter of fact, people are talking about rates going negative, but as the company looked at risk management, we were more concerned about the 10-year going to 4 than negative 4. So that made sense for us to do that. And we did when the position got to be material, and this is the benefit that you get with Newtek management. I will tell you, I started in the bond business in 1982. GNMA 15s, that funds were double digit and I've seen all kinds of markets. And this company as a culture to be risk averse and really to pay very much attention to all aspects of risk, interest rate risk, asset liability risk, managing duration and obviously, we never believe that deposits could move, particularly with the pace of technology where that's sticky. And if we start to grow that side of the base, we'll make sure that we have access to capital. Important to note, in the event that there are issues, we can always do securitizations out of the banks, which we have done 11 to 12 times, not quite as cost effective, but it's a tool. And frankly, we plan on doing that in the future because there is a benefit to that. They are duration-based and they're match funded. So when I say duration based, match funded, the loans that go into a securitization, those are self-liquidating against the bonds that are sold. So you don't have to worry about losing the money because they're already funded for the term. Slide #5. We filed a shelf. So the first question I get. You're raising equity? Okay, everybody relax. We were a BDC up until January 6. Well, the registration statement that we had a public registration statement, every public company should have a public shelf, was under the N series as a 1940s Act company. Well, not a 40s Act company. So we then filed the S-3 Shelf registration, which allows us to do debt, preferred stock and equity. As a matter of fact, if the shelf was effective, instead of doing the private deal for both the preferred and bonds that we did in January, we probably would have accessed the public markets and maybe gotten a better price. So I mean this is a shelf that is for years for us. That means this is put up to give us the ability to be nimble to access the market, take advantage of opportunities. And most likely, going forward, this would be tapped for debt and preferred. And what I learned to do in this business and in my life is never say never, but I'm just telling you what our general thoughts are. And sometimes I get asked the question, what are you going to do next? And I tell my investment bankers, it's -- I'll let you know when I'm ready. We saw that when that gets done inappropriately, what can happen to a financial institution like Silicon Valley Bank. National Bank of New York City #6, the call report on 12/31. This is an interesting section of the call report. Not only is the type of deposit you have, but the size of the deposit. So these are the savings deposits. You can see a little above $3 million of deposits over $250,000. I'm sorry $250,000 right. So most of our deposits are small. This is the time deposit group. I believe we've got an additional $20 million of demand deposits. Most of that has been raised recently. And obviously, as I mentioned before, we're very liquid. We've this week raised about $35 million in term CDs in addition to what I talked about earlier. So we're -- [ thank god ] very liquid in a good position and raised that as far as the price that will enable us to make money in the marketplace because we have assets to deploy the money that generate very high returns, which we talked about on other conference calls. We acquired National Bank of New York City as a very small clean bank. These are clean liabilities. The assets were clean. The assets were matched against term CDs at very, very frankly tight spreads, but that's the nature of the market. If you do a CRE loan, it's got kind of a 50% or 60% LTV, you're not getting more than 1.78 to 2.8 of the curve as liability match in stock. And we are to make money on that unless you got very low cost structure, which most institutions don't and that's going to be an issue going forward for most financial institutions. But if you look at once again our model, it's very different, it's unique, and we're proud of it. And we believe this will turn out to be an opportunity for all NewtekOne stakeholders going forward. Let's go to Slide #7. Why're we different? Why are we innovative and well positioned as a technology-oriented solutions provider? And it's important, yes, we are technically a financial holding company and designated as such. But we are a financial solutions provider. It's important to focus on that. So when we work with clients, we had a client this week and they're moving their merchant business to us. They're currently looking at us for the Newtek Advantage, moving their deposits over and the payroll, because they can go to the Advantage and do everything in 1 spot, very, very, very attractive. Also, we're getting up our loan operations to begin to taking deposits where we're not conflicted with our financial institutions, referral partners because we're not going to take their deposits, but we have plenty of real partners that are nondepositories. And once again, we're very, very excited. We look at the market, we look at the history, I'm in the wealth management business, and I'm going to get these core deposits to add to my bank. It's not going to be as easy in the future. You move money very easily over. You went to a treasury build, you do want to diversify and you're concerned about totally covering up those deposits. Venture lending frankly never made a lot of sense to us. We actually looked at a venture bank. That is not how we -- where we're getting our deposits. We're getting a deposit in a market rate of interest for a service. And you think if you do that, that's a long-term strategy that works and we're deploying money in areas that we've developed, we think, a fenced off area in SBA lending, 504 lending and non-conforming lending based upon how our business model is built. Let's say other people are going to try to get into it. I welcome that, but we've got a 20-year head start on them. And software and staffing really has got us very well positioned. I believe we have built a very valuable franchise, particularly as we started pulling deposits from SMBs. So as people are looking at deposit gathering machines, the ability to pull in deposits under $250,000 in smaller pieces with many participants is valuable. The problems of the other banks encountered were primarily not small individuals wind up outside of the bank looking to pull their money out. I hate to say it, it was the fancy people that had $5 million, $10 million, $15 million, $20 million that just yanked their money out in a second. And these are the people that were wined and dined, that were taken out for golf. That had the relationships with the bankers. Well, those relationships, when push came to shove, didn't really create a level of stickiness. They might have for the last 180 years, but not today. And in a 0 rate environment, I'm just going leave my money, doesn't make a difference. When you can get 4% or 5% on your money, it makes a difference. So look, I think as we go to the last Slide #8. When you look at our organization, we're building a business for the present and the future. It's a tremendous franchise here. There will be client loyalty because we're going to give our clients an asset, the Newtek Advantage. And we've consistently maintained this position in the market for over 24 years for really focusing on independent business owners. Our management team has steered the company through the '08/'09 crisis, the pandemic and the current market condition that the traditional banking, depending upon low-cost deposits, must change and correct itself. You're going to have to have a model that pays the market rate of interest. And we believe that we've been more than an adequate risk manager over our history and the important acquisition of the 59-year-old National Bank of New York City will be a risk reducer and in a perverse way, ultimately expand margins and business over time and the asset base, because we will be able to invest in more higher grade assets, probably a wider spreads in the future. We greatly look forward to reporting our first quarter financial 2023 results. And I'd now like to open up the call to Q&A. I realize it's a tough day. People might want to run, but we're here to answer any questions if people have them.

[Operator Instructions] And our first question comes from Paul Johnson with KBW.

Just have a few. I just want to make sure I'm correct looking at this. So it seems approximately 98% or so or most of your deposits are under the insured level. I just want to make sure I'm correct there. And then also, can you just kind of talk about the current liquidity of the bank, maybe sum up what sources of capital are available to you. I realized you've raised a little capital in the financial holding company, but anything like bank lines that are available to you, possible credit facilities, you may be looking to line up that sort of thing? Any update on liquidity available would be helpful.

Sure. So first of all, let me focus on the bank. The bank has got 30% capital. I mean we got a lot of capital. In addition to that, we indicated that there's $40 million of cash in the bank now. We currently are in the market and anticipate raising another $50 million this week in term CDs. So we have plenty of cash. We also have a Federal Home Loan Bank line that is underutilized. So that's additional cash. We also, although we don't have the SP portfolio in the bank, but we can also tap securitization if we need it. So in addition, as I mentioned, the holding company, a BBB+ rating, we just raised money in January. So the bank, frankly, is the least -- is very liquid, very liquid. Now on the deposit side, those numbers would be accurate if you're just looking at the time deposits. If you add it in the demand deposits, we're like approximate -- and it's obviously a fluid number, 10% to 11% would be uninsured. But most of those, I would say, are family and friends. On the other hand, if you got a problem up, you have no family and you have no friends today. And once again, that's how I run the business. But the reality of it is that -- obviously, we're small, but those are the envious numbers for most institutions today.

Got it. And I would now assuming the 10% to 11% sort of family relationship, it's obviously with the legacy bank owners, is that correct? And just 1 more on top of that. I guess, do you have any sense in terms of how much of those -- that your deposit base is sort of operational, sort of commercial demand deposit accounts versus consumer?

I don't have that breakdown. I would -- don't want to guess. I would say, it's primerically, I would say, consumer oriented. But I don't have the breakdown.

That's okay. Just 1 more for me. Possible to hear, but understanding, obviously, liquidity is not the issue right now for you guys. And it sounds like deposit growth story is still very much intact, which is positive for you guys. But I'm just sort of curious, in future quarters or I guess, by the end of '23 and maybe next year, what type of loan to deposit ratio are you really looking for in the bank? Just asking because obviously, as it stands today, your ratio, loan to deposits, obviously well north of 100, but you're going to be positively growing deposits quite a bit. So do you have any sort of rough target there that you guys sort of looking for by perhaps the end of this year or next year?

I think, Paul, we will probably have those targets at the upcoming earnings call, but I think it's important to note that we're big on making loans with really good margins on it. We are asset-generating machine, okay? And the liquidity portion of the portfolio to make sure we have it, will be real liquid stuff, real close to the mass, not taking any risk. And I think that one of the benefits of investing with NewtekOne's risk management team, and I'm talking about my Director of Capital Markets, my Chief Lending Officer, we've got vast 12 years' worth of experience in doing securitizations to be able to take the loans we originate them and package them into bonds and sell them. So the funny thing is a lot of times historically as a nonbank, we get the question, well, what do you do if the asset-backed market shuts down? Well, Paul, we have everything covered right now. I've got the Federal Home Loan Bank. We've got the Fed window, which we don't need. We've got deposits, we've got securitization. We have an investment-grade rating. We are so diverse. No one has this diversity. So I'm pleased with that. I don't say nobody, a bit of exaggeration, JPMorgan does, but for a small institution, nobody's got this diversity and we have it. We've got the ability to really cover all the gamuts. And in this market, that's ebbing and flowing and things are changing, you really you need that capability. And I will be prepared with those ratios going forward. It will be fairly high, though. Our loan-to-deposit numbers will be high, but once again, important to note, our loans can be put in the bonds and sold if we have a depository problem. I mean, particularly when you look at 504 loans at a 50% LTV, commercial real estate loans or for that matter, our 7(a) loans that we've securitized 11 times in our history, and that will be 12. I'm excited about that deal. It's a floating rate deal. There should be an insatiable appetite for floating rate bonds in this market. It's beautiful.

Our next question comes from Christopher Nolan with Ladenburg Thalmann.

Barry and team, kudos to you guys for being upfront and addressing lot of issues. So I want to say thank you for the call. Barry, 2 questions. First of all, in your earlier comments, I thought I heard you say that it's difficult to hedge mortgage-backed securities. Did I hear you correctly or not?

You did. As a former mortgage-backed securities trader, I'm not saying you can't do it. You could turn them back into floating, but figuring out the prepayment risk, the volatility and the yield for these banks, it's pretty hard to get a margin on it, to be honest with you. But yes, I would say it's hard for a bank to own mortgage-backed security to act as a hedge from the prospect of actually providing liquidity and providing enough margin to be able to deal with the current cost of funds that's going to take to run a bank today. So I have to give you a full description of addition opinion that's not -- doesn't mean it's right, but that's my opinion.

Great. As a follow-up question. There are several articles in The Wall Street Journal, questioning what the regulators were doing before SVB was ceased? And given that SVB is a different business model, given that Signature Bank has somewhat of a different business model, given that you guys are really a different business model, do you find that it's a challenge to bring the regulators up to speed in terms of adequately profiling the risk for Newtek Bank?

Chris, that's an awesome question. And I'm going to say, no, and I'll tell you why. We went through 12, some people might say 14, 15-month process with them and very important to note. The regulators for Newtek Bank and NewtekOne is a Federal Reserve and the OCC. The regulators for the S banks were primarily state regulators in the FDIC. So it's a different group of regulators. Our regulators were extremely thorough. They asked exactly the right questions. And we gave them the business model that showed whatever historic charge-offs are on these types of loans over the course of time, the asset liability match. Listen, there aren't too many people that start up banks with 30% capital, okay? We did that for a reason. We wanted everybody to be comfortable. Watch us to do what we do over time. So I think that they have a very good understanding of us and I will comment to be transparent, yes, there's a risk that the world might change here. But in the event that it does, we'll be very well positioned for it, but they do understand every aspect of our business and we have concentration limits, capital ratios that we've got to hit. And all of these are inherent in our projections. So we didn't project things without having the regulatory construct in our mind. So we don't think -- you never know that there should be a change because our bank has got a 30% capital in it. And the holding company has got a lot of capital in it and we're liquid. We're in a good spot. I don't mean to -- as my mom used to say, cross my fingers. Throw salt over my shoulder. I don't want to jinx us, but I think we're okay. But I have the same -- and that's why when I said direct and indirect, Indirectly, we're sort of washed up in this whole banking thing, okay, which is true. However, directly, the business model can do well in this environment.

And just a follow-up, Barry. Your earlier projections indicated that the capital ratios would be going down from the current levels down to low teens or so, if memory serves. Do you anticipate that the regulators could come back to you and say, we want your capital to be above those levels, at some -- are you factoring that all here, right?

We are not factoring in at this moment, it is possible. And look, we try to put these things out with room to assume things could change against us. We certainly try not to put these things out. So expecting the unexpected is sort of what you get with, with 22 years of business management and somebody who's subscribed to Murphy's law. So I'm not going to be shocked if they bump the cap requirements up. No -- but I got to tell you, if they bump the cap requirements up with some of these other big regional banks by 1 or 2 points, that's like a big deal for them. That is not a big deal for us. And we also have various mechanisms in the business model to be able to support our business. So I feel that even if we have to change the models around, recapitalize a little bit. If on the other thing, too, is these business models, they do tend to have some room built up in them. So I think we'll be okay. But I will state that your point is very valid. It's not inconceivable that we can't have a minimum of 10, maybe the minimum 11 or 12, but I can't see them saying, you got to be at 15 and everybody else is at 9. The other thing, too, is because we have this mark-to-market discipline, when the assets are coming over at the right marks, I think we're in pretty good shape. I'm not sure they're going to be that nervous by Newtek right now. They've got a lot of other things to worry about. However, we're not cavalier about that and assume we wake up every day and assume the worst.

Our next question comes from Jim Collins with Excelsior Capital Partners.

We're both -- you and I are both alumni. We've talked about this as in DLJ. We've Credit Suisse more than 2 decades ago. So the first question, I think, this morning has to be, do you have counterparty exposure to Credit Suisse? And secondarily, as a potential holding company as opposed to BDC, what does that give you in terms of advantages and disadvantages in terms of dealing with counterparties?

Yes. Counterparties are important. And I can tell you, Jim, the number of inquiries I've gotten from some of my financial partners that are lenders to us to check that, we don't have any exposure to Credit Suisse, and are appreciative of that. And we'll continue to diversify. And we do believe this is a very difficult market, and you do need to have as much diversification as possible. So we are -- we do not have any Credit Suisse exposure.

Okay. And as a financial holding company, again, as opposed to our previous incarnation as BDC, what advantages or disadvantages does that give you in terms of choosing within your funding relationships?

Well, once again, I think the important thing that when you look at our organization, look, I got to be honest with you. And a lot of people, given the way our stock and their stocks have traded, blame this on the transformation to owning a bank and being a financial holding company. I am so comfortable with the decision at this point, although the stock price has suffered in the near term, because it diversifies our risk. I mean now, I could fund my -- 2 of my core businesses with deposits. And it doesn't have to be solely with deposit, it could be deposit securitization, lines of credit, et cetera, but I'm diverse and I've got choices. We will probably raise $35 million of deposit money this week. That's fantastic. And frankly enough without having a lot of conversations and having 15 people request 60,000 reports from me. And those deposits they are coming in from retail customers at a fair market price, and we're happy to pay them plus. Look, my line of credit for SBA business today, in the quarter, on its way to 8.5%, right? And I only get $0.55 on the dollar. So I have to sell $0.45 worth of stock to be able to fund 100% of the loan and maintain the ratio, okay? Now I can fund 100% because I got lot of capital down in the bank at 3%, 4% and 5%. To be honest, right now, most of the money is coming in more towards the 5% than the 3%. But obviously look at the market we're in. And by the way, I'm happy to have it at 5%. Because I'm putting it out at 10 and -- 10.75%, maybe soon to be 11%. So I got a really good NIM on that. So when it comes back to the conversation about having a securities portfolio for a bank, it's great, but that stuff is so tight. It's very competitive, don't make any money on it.

There are no further questions at this time. I'd like to turn the call back over to Barry Sloane for any closing remarks.

Well, for all my colleagues joining me on the call, thank you for the support and helping put the presentation together. We have a great team here. And we look forward to the challenges ahead. And once again, greatly look forward to working in this challenging market. And once again, these things do breed tremendous opportunity. And I think we're well positioned to take advantage of that. So thank you very much. Have a great day. Bye-bye.

Thank you for your participation. This does conclude the program. You may now disconnect. Everyone, have a great day.