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

Thank you for standing by. Welcome to today's program entitled NewtekOne 2026 Investor Day. I'd now like to introduce your host for today's program, Bryce Rowe, Vice President, Investor Relations. Please go ahead, sir.

Excellent. Thank you, Jonathan. I wanted to welcome all of you here in Boca and then those that have joined via the webcast. My name is Bryce Rowe, if you haven't met me, Investor Relations here for NewtekOne. We're very excited to be here today for the Investor Day. I wanted to make a few introductory remarks and then turn it over to Barry. So today's presenters here for NewtekOne we've got Barry Sloane, Chairman, CEO and President; Frank DeMaria, EVP and Chief Financial Officer. We have Peter Downs, who is President of Newtek Bank, N.A.; and then Andrew Kaplan, Chief Strategy Officer. Definitely don't want to steal their thunder, but we'll run quickly through some of the logistics for the event. Barry and Frank are going to start with a financial presentation, including a discussion of the '26 forecast. Andrew will then cover the Newtek Advantage. Peter will then talk about Newtek's technological advantage and how we're using AI, and then we'll go back to Frank and Barry to dive into the ALP securitizations before Barry makes some concluding remarks and we move to Q&A. As far as Q&A, for those of you here in the room, you're going to have the ability to ask questions. I just ask that you raise your hand. I've got another microphone over there, and that will give those on the webcast the benefit of hearing the question as well. Those of you on the webcast, there's a chat box at the top right corner of that website. You can input questions there, and I'll be monitoring that and can answer -- can ask those questions for you. That should really cover the logistics. Before I turn it over to Barry, I do want to note Slide 2 in the presentation that covers some forward-looking statements, and those forward-looking statements could be made during the presentation. So just be aware of those. With that, I will turn it over to Barry.

Thank you, everyone. I appreciate you all attending our Investor Day presentation and conference. And obviously, the purpose of doing this today is to really give a better explanation of our organization, what we're about, what the company stands for and also to give greater exposure to a great management team that I have here between Frank, Peter and Andrew. For those of you that aren't familiar, the company was founded in 1998 out of a spare bedroom in a New York City apartment, 120 West 18th Street, Apartment 4B. And when you go forward to Slide #4, Frank, if you could help me with that. Newtek's mission hasn't changed since the company was formed in 1998. I think what's important, particularly as you understand the culture and the DNA of the organization, is the goal of our organization is to build a company that provides business and financial solutions to independent business owners. So we're all about building a company and a business first. For those of you who have followed the long and winding road over 27 years, 25 as a public company, we have taken different forms. We started off as a '33 Act company. We switched to a BDC when it became relevant to do so to grow the business. And then recently, and we are celebrating our 3-year anniversary of owning and operating an OCC chartered bank. But all in all, the important aspect of it is our goal to make our clients more successful has been the primary driver to what really runs this company each and every day. I think it's also important that we've developed a brand. And when I say that, when customers do business with Newtek and they get a 10- to 25-year amortizing loan, they go, you know what, that's a real good loan. It sounds like they borrowed $100,000, paid $140,000 back at the end of the year and said, now what did I do? And who did I do that with? And is their value. We're creating a real brand. And when people ask me many times, why did you buy a bank, the simple answer, and I keep repeating myself and maybe more and more people over time will pay attention. I do believe after today, after Peter speaks, Andrew speak and Frank speak, you'll have a better understanding of why we exist, how we help our customers and why there's really a brand to be built here that is currently built and that this is a very scalable operation using the technology of which many of you are not familiar with, including artificial intelligence, we have used across the different areas of gathering deposits and making loans. Let's go to Slide 5. So from a technical standpoint, we're a technology-enabled financial holding company regulated by the Fed. In January of 2023, obviously, I mentioned we're celebrating our 3-year anniversary of acquiring Newtek Bank and OCC chartered bank. And within its 5 core verticals, we're able to offer to customers depository solutions through banking, making really attractive business loans that are extremely useful to their business growth, payment processing solutions, payroll and insurance agency. Most importantly, we support independent business owners approximately 80,000 across the United States with one or more of our services. Also important to note, we'll spend a lot of time on this today, we use proprietary and patented advanced technological solutions to acquire customers cost effectively. It's extremely important. And importantly, to offer treasury management services through the Newtek Advantage. One of the things that I think is totally misunderstood, I say this sort of tongue in cheek if you want insult me, say we're an SBA lender. Oh, yes, Newtek, I know they're an SBA lender. We are so much more than an SBA lender, it's not funny. Once again, one of the purposes of having this discussion today is to demonstrate all the things that we do for businesses. What I can tell you is the customer base moves money every single day. And we talk about the customer base. We're not talking about consumers. We're not talking about Fortune 1000. We're talking about independent business owners that are identified as approximately 36 million businesses in the United States that have 2 employees to 2,000 and about $50 million to -- a couple of hundred thousand a month to $50 million of annualized sales or annualized revenues. I think it's important that when you look at our organization, we have patents on our technology, particularly NewTracker. We have a patent pending on the Newtek Advantage. We offer a full menu best-in-class on-demand solution to a business. Our business clientele doesn't necessarily want to be bothered between 9:00 in the morning and 5, Monday to Friday. They want to be talked to in the evening, maybe on Saturday or Sunday, and they want to be able to not have to leave the comfort of their business or their home. Therefore, our customer-facing staff is on camera and is available in addition to having great technology to be able to exchange data effortlessly and frictionlessly, we also give the customer a human being to deal with, particularly when they become a customer, every customer has a customer service rep whether it's in payroll, whether it's in payment processing, whether it's in servicing a loan, whatever it might be, we service our customers. It's very important to note. When you look at our business model, it's cost efficient. There's a better client experience. There's less friction to becoming a client. And we believe that our solutions, whether it's a loan, whether it's payroll, whether it's processing payments, whatever it might be, is best-in-class for the customer. Let's go to Slide #6. This kind of an important slide. Many of you, obviously, are capital markets participant. I say this with great pain. The most frequently asked question I get is what is wrong with your stock price, okay? I say that with transparency. I say that with candor. My answer really is nothing. It is what it is. I've had the stock price at $0.50 for periods of time, and we've almost been delisted. I've had at $0.39. I wasn't euphoric at $0.39. I wasn't despondent when it was at $0.50. We just go out every day and perform great solutions to business clients. And most importantly, we manage risk. That's extremely important in every aspect of these businesses. You can't be in business today without managing risk, whether you're taking in customer data, whether you're helping clients, whether you're giving a lending solution, taking deposits, you are managing risk. So when we talk about what's misunderstood or I'll use the word underappreciated, #1, I'll say credit, I'll talk about credit. There's a tremendous misunderstanding of what I'll call SME, SMB or small and medium-sized business credit. It is fully misunderstood. And I think that when you look at our organization, we have wider lending margins. And for those that are businesspeople, people or businesses that have great margins have the ability to absorb mistakes. Now thank God, in our period of time, we've made a few, but they've been small, and they haven't been great. So the fact that we have wider lending margins allows us to have larger provisions for credit losses, higher allowance for credit losses. And in our 20 years of this business model, we do a really good job of managing risk. We believe this industry is in a risk avoidance spectrum. In other words, the typical loans that they make have very low margins and they're typically avoiding risk. They want to have no charge-offs, minimal amounts of allowance for credit losses. But when you look at our returns, which Frank will talk about today, they're extraordinary net of the write-offs, the write-downs, the large allowance for credit losses. Importantly, the assets are mark-to-market on a regular basis. We have RSM, top 5 accounting firm in the United States evaluating what we're doing. We've had 3 years of audits from both the OCC and the Fed, and we've been doing this for over 2 decades. We know how to manage risk on a 10- to 25-year amortizing portfolio. We have proven that as an SBA lender, and we'll spend a lot of time talking about the AOP business, which is not an SBA credit. The credit is extremely stronger, and we have data to back that up and data to show you. The acquisition of National Bank of New York City rounded out our offering of business solutions because now we're able to push everything into the Newtek Advantage. Andrew will talk about that today and the real benefit of offering a solution and an asset to a customer that basically gives you the ability to take their depository money below the risk-free rate. Why should a customer give a bank money at a noninterest-bearing account or low interest rate if they're not getting anything. An FDIC insured depository account, it's a commodity. There're probably 4,000 places in the banking industry to get it, and then you go to credit unions, other forms of government insurance. So if this industry does not prepare to offer a value to the customer for the movement of money, for the holding of money, that money will move. So we are very well positioned for the trend going forward in the business. I also want to talk about an important trend, fair value. I'm very thrilled. Lending Club has announced they use fair value. SoFi uses fair value. My good friends at Grasshopper just merged with Enova, they use fair value. I think we need to start to get used to this. It's not rocket scientry. It's not that complicated. I realize it doesn't necessarily fit the models out there, and some of you are getting it and we're appreciative of that. But when you look at the math and you look at the numbers, and I think we'll be able to hear some of that today, it's very, very beneficial and valuable. Most importantly, we believe we've solved the 3 problems that exist in the industry. #1, cost effectiveness. Without branches or traditional bankers, we're able to operate the business at a 46% to 47% operating ratio -- efficiency ratio. That's only going to get better. And you need to use technology, you need to have a human interface preferably in the United States for a business customer, you need to be available on demand when the customer wants you. Secondly, being able to put assets on the books that have value. I could argue that a bank standard 65% to 70% CRE loan or C&I loan or a car loan, the margins are razor thin. It's a crowded market, and there really is not a big margin forever. God forbid, if the cost of funding for banks ever creeps up to where the customer because they can move money on a phone very easily, starts to creep up, it's going to be a problem for the industry. It will not be a problem for Newtek. And lastly, Andrew will talk a lot about the Newtek Advantage. We will earn the faith and trust of our customers through the Newtek Advantage to actually give them a business portal that makes them better, makes them more successful. We're constantly polishing it, scrubbing it. important. We acquired the bank 3 years ago. This was a single branch bank in Flushing, Queens with no technology. So we've had to put this in. So we don't get any credit for running this business, making money, putting on 30,000 business accounts digitally, doing $1.5 billion of loans a year using a great lending operating system that Peter Downs will talk about. So many of you will be uphold at the fact that I'm going to shut my mouth for a while and pass the baton. Frank?

Thank you, Barry, and good afternoon, everybody. Thanks again for joining us today. A brief background on myself, prior to joining Newtek in May of '23, I spent about 9 years at KPMG auditing banks of various sizes before transitioning into the industry, where I held various roles, including Chief Accounting Officer at a publicly traded financial holding company. That, along with the almost 2 years that I spent at Newtek prior to my appointment as CFO, has given me, I'd say, quite a unique perspective into our mission as the preeminent small business financial institution. I've titled my portion of the Investor Day presentation. The model is working, which feels like an appropriate title to describe Newtek since transitioning to a technology-enabled financial holding company. I don't think it's a stretch for me to say that many CFOs in the industry would love to put up the graphs on the following 5 slides to display the constantly or consistently improving fundamental financial trends, consistent growth in revenue and assets, and the stable to increasing capital levels that are comfortably above regulatory thresholds. These include tangible book value per common share growth alongside a hefty dividend, revenue growth, industry-leading returns, as Barry mentioned, on assets and tangible common equity. And again, those regulatory capital ratios that have only increased since the transition to the financial holding company. So the model is absolutely working, and we'll dive into Slide 8 here. Again, book value per common share has grown. It's up 45%. Tangible book value per common share is up 62% in less than 3 years, respectively. In absolute dollars, that's about $4.30 per share. And we paid a $2.05 per common dividend, which does not include the $0.19 that we paid last week. Bank stock investors and analysts are often screening for tangible book value growth over time because we only have that 3-year history as a financial holding company, we're not hitting the radar of the longer-term screens, those 5-year-plus screens for tangible book growth. But we feel if this trend continues, and we believe it will, we're going to start showing up on those screens likely near or at the top. Go to Slide 9. Again, revenue growing nicely. Note 25 is an annualized figure for the first 9 months of 2025. And as you'll see in the next 2 slides when we get there, our fourth quarter is typically the strongest quarter of the calendar year. The primary takeaway from this revenue slide is the mix of revenue. Noninterest income comprises roughly 80% of revenue, which is contrary to your typical bank, which is usually seeing 80% of that revenue in net interest income. We do acknowledge, and as Barry mentioned, fair value trends, we do acknowledge that a portion of the noninterest income consists of those fair value marks on loans that are originated to be sold, and we've dedicated a portion of today's presentation to help investors gain a better appreciation for that revenue. Slide 10. This slide, we believe, is the very definition of operating leverage. Our franchise is built to scale. Our efficiency ratio has improved from north of 80% immediately subsequent to the bank acquisition and now sits below 60%, and there's no reason to think that this won't continue, and we won't continue to capture that operating leverage as the model continues to work. Our operating infrastructure can support a much larger organization. And not only is that downward trend or improving trend important, but more so is the consistency of it. Slide 11. All the measures of profitability that you see here are, as Barry mentioned, exceptionally strong, so strong that it may give some pause. But if we continue to operate this model as we have and as we plan to do, we believe that this profitability will continue. And that's going to be difficult to ignore. Annual ROAs consistently with 2 or 3 handles is uncommon in the industry. And as good as these are, there is potential for even further improvement as we continue to capture incremental operating leverage as provisioning for credit losses stabilize and we move away from some of the tougher vintages of '23 and '24 and continue to diversify our loan portfolio. And in addition, as our legacy nonbank lender, NSBF continues to wind down and becomes an increasingly smaller part of our balance sheet. Slide 12. I also don't believe we get enough credit for how we've managed capital given the asset growth, most operators in the industry, the concept of managing capital is a combination of determining how much stock can be bought back and how big of a dividend to pay because there is very little aggregate asset growth in the industry. Our asset base is growing because we've developed that expertise in certain pockets of small business lending over the 20 years that are hard to replicate, especially at scale. We have more than doubled our asset base in less than 3 years while also strengthening that capital position. So again, I'll say it again, the model is working. Slide 13. We'll shift to the forecast for '26. We're showing a range of EPS of $2.15 to $2.55, 7(a) originations of $1 billion, ALP or C&I loans that we ultimately plan to hold for sale and sell at $500 million, SBA 504 originations of $175 million and net growth in the more traditional C&I and CRE held-for-investment portfolio of $150 million. We've tried to layer in a degree of conservatism to these estimates and believe if we continue to execute with growth in EPS and tangible book, we should start to see an expansion in our PE and price to tangible book multiples. And with that, I'll turn it back to Barry.

Thank you, Frank. Before I pass the baton to Andrew, I want to give an honorable mention to Nick Young. Nick, thank you for joining us here today. The father of Newtek Bank, National Association. Nick has left us for greener pastures, but we appreciate you being here for, I think it was 4.5 years and really set us up in a good spot to pass the baton to Pete. So thank you very much for coming today. And with that, I wanted to introduce Andrew Kaplan. Andrew is somebody, I believe I've known for about 15 years. Andrew was an alliance partner. I'll let Andrew go over his background, but he is eminently qualified and a big disciple of our strategy. Once again, that strategy is to basically be the organization that makes our clients more successful, delivers state-of-the-art technology in a frictionless manner, understands the client experience and delivers a best-in-class solution to help customers grow their revenue, reduce their expense and reduce their risk. Andrew?

Thank you, Barry, and thank you, everybody. I am Andrew Kaplan, Chief Strategy Officer for NewtekOne, and I have the privilege to present the Newtek Advantage to everyone here today. A little bit about me, 30 years plus in the banking space. Prior to joining Newtek, I was with a growing banking organization, was part of a deal team that finished 14 successful banking transactions. And if anybody has been part of a banking transaction, to get to 14 transactions, we probably did due diligence on a couple of hundred different transactions. So familiar with what the space looks like and what is out there. And what delights me the most about sharing the Newtek Advantage is this is a game changer. My opinion, nobody else out there has this. This is a best-in-class client experience, which is critically important as we deliver on meeting that mission of growing revenue for our customers, reducing expense and reducing risk. The Newtek Advantage has been built for business. It is a client-first, client-centric solution, and let me share a little bit more with you. Next slide, please. The financial -- the financial services space is built in a very siloed structure, payments, banking, lending, payroll, all different verticals, different silos. And if you obtain these products from an organization, from that same organization, we ask clients to go through, they ask clients to go through a whole new application process, a whole new structure and then clients interact with these solutions through very fractured solutions. So different log-ons, different systems. The financial services industry is very, very vertical. But independent business owners manage their financial business in a very horizontal way. It's all interconnected. It's capital, its payments, it's the movement of money. And what we've done with the Newtek Advantage is we've brought that into a single friendly user experience. Next slide, please. The Newtek Advantage as a concept was announced by Newtek in 2012, cloud-based, web-based solution for independent business owners. Since then, it has been built and layered with additional solutions, practicing the art of what I would like to refer to as the Japanese art of Kaizen. It's a system of continuous improvement. How is the world changing? How are our clients changing and how can we make this experience better. This top-of-the-line technology and because of the way that this has been thoughtfully constructed for client experience over time, not easily replicated by anybody. We don't mind sharing what our 7 secret spices are to our crispy chicken because nobody can recreate what has been built here over many, many years with absolute service to client. And we'll share that on the next slide. But before we go there, let's talk about what this has delivered for Newtek now with the addition of the banking services to the platform. Since the acquisition of the bank, the bank has grown 7x in the past 3 years, 7x, $1.5 billion in assets. We have opened digitally 30,000 bank accounts. We will originate over $1.4 billion, $1.5 billion in loans in 2025. Our client acquisition tools generate 600 unique opportunities for us to have discussion about financial solutions a day, 600 unique opportunities a day. Over time, we've assembled a marketing database that we communicate with often and we solicit often, 2.5 million names. And using this brilliant technology, efficiency ratio in the mid-50s, and industry ending. Next slide, please. So let me show you the Newtek Advantage. Within the Newtek Advantage, we have a frictionless environment in which our customers can add payroll services, payment services, their banking, their lending, all with a single stream frictionless wiring of their information. Our customers can then interact with that on a day-to-day basis. As Barry highlighted before, why did we buy a bank? Most people buy banks as they want to drive more cash to the company. But no, this was the missing piece to a financial ecosystem and the most critical piece. As Barry highlights, people visit their bank account, check on their balances, check on their transactions 1 time, 2 times, 3 times a day. You put this as the cornerstone and then combine this with payments, payroll, insurance, all real time, all frictionless, marry that to the bank, you get your payments quicker, you could originate your payments same day. And the entire experience in a single pane of glass, one screen. By the way, we didn't stop there. We also provide free and unlimited document storage. We provide free website analytics. And while most banks will talk about how they integrate their information into a QuickBooks solution, which is the most common accounting solution used by independent business owners, we reverse the flow. You connect your QuickBooks accounts to the Advantage, and we can display for you real time, your balance sheet, your income statement, your revenue, your invoices, your money due and your balances across whatever other institutions you may choose to do your financial services with, all in the single pane of glass. In the meantime, we don't forget the human part of what is really driving behind all this. As Barry highlighted before, at any time, you can speak to your Newtek representative or a Newtek representative if you're interested in a new solution on camera 24/7, 365 days a year. Picture above me happens to be Aniseko. Aniseko is in our offices today, on camera, sharing screens, helping customers all day long. This is not only the Newtek Advantage, this is the Newtek Advantage. I can just add one note. As we look at a system of continuous improvement coming soon, you probably heard a lot about stablecoin and people looking at things truly quickly as that tool really moves money at real time, stay tuned. Our solution not only enables what we do at Newtek and what we do for Newtek clients, but it also helps enable partners. So today, for banks and credit unions, either some or all of our services can be provided to those institutions effectively and efficiently because we are scalable. And later on, our President of the bank, Peter Downs, will talk about the technology that we use and how this technology has been developed under the hood of this and highly scalable, highly efficient so that we can drive more business part of that 600 opportunities a day that we drive to the organization through partnership mechanism. And what does that do? And why do people come to us? What problems are bankers trying to solve for every day, grow deposits, grow revenue, retain customers. And we have a model where we can originate loans, and we can do it for their balance sheet and service those loans for their benefit. So we solve not only for ourselves, but for others, which complements our business and creates even more opportunities. That's the Newtek Advantage advantage. The bank piece and the bank acquisition were a critical complementary element to the entire structure. It was an anchoring solution that we look towards. What we do is embedded. It's financial technology. It's financial technology at the finest, balanced with personal and available solutions, domestic and all Newtek employees. We help our customers consistently grow revenue, cut costs and reduce risk. And this is a best-in-class solution that cannot be replicated by our competitors. Thank you.

Thanks, Andrew. And what Andrew says it can't be replicated. This has been obviously approved in our business plan by the OCC, by the Fed with Reg W and understanding. And a competitor would have to buy a payroll company, buy a merchant processor, buy an insurance agency, buy a bank, be a long-term amortizing small business lender. I'm telling you they really don't exist. Put this all in and get the staff to do it at the same time and weave the technology in place. So Pete is going to spend a lot of time talking about the technology. He's done a fabulous job historically with Dan Hendel, our Chief Information Officer. But we say this, it can't be replicated easily, but it's immeasurably scalable. I think that's important as well. Our ability to scale this, both from deposits, lending, payment processing, payroll, margin pool, it's all there. Unfortunately, most of the market doesn't really understand this and don't value it. And I wouldn't say it's a 0. It's probably a negative, like what is that crazy company doing? But hopefully, with what Andrew has talked about today with respect to the Newtek Advantage, which is constantly being polished, honed and advanced. And when Pete talks about what we've done technologically, hopefully, you'll come away with a different viewpoint. In addition to comfort on credit, which we're going to give you today, we believe our credits have stabilized to improve. We'll be reporting in a month. We'll be able to demonstrate that. But this technological aspect of it is no one asked about it. It's totally misunderstood. I mean I would like to know how you raised -- how you got opened up 30,000 bank accounts fairly quickly from a single branch bank in Flushing, Queens that their backup disaster recovery plan was driving a truck up if the power went down with a generator attached to it. And all of this is connected obviously, to the Fiserv core to NewTracker to the Advantage. Pete, take it away.

Thank you, Barry, and thank you all for attending today. It's 75 and sunny here in Boca. You all had a choice to do something else, but you chose to come inside and listen to us today. So I do appreciate that. Peter Downs, President of Newtek Bank. I think outside of Barry and maybe Jon Schmidt, who's here today, I might be the longest tenured employee at Newtek. Started here in July of 2003. I did start when I was 12. So it's helpful. And Barry is fond of saying I was 6-foot 4 actually when I started. So a little shorter than that now. But it's been a great 22 going on 23 years at Newtek. I was asked to talk a little bit about our technology, our use of AI, kind of the future and what we're doing and how we do things. But I thought it was important to talk a little bit about history before we talk about the future and what we're doing here today. So July 1, 2003, I started at Newtek. I asked Barry, what he'd like me to do first. He said, get your hands around the pipeline of loans that we just started to develop. I said, sure, I went out to the one and only underwriter we had, and I asked him to show me the pipeline. He took me into an office, and that office was a whiteboard sitting on a chair couldn't even afford to bolt it to the wall yet. We just had a whiteboard on a chair. It had 3 loans in marker, 3 loans. This is a true story, by the way. I'm not making this one up. It had 3 loans in marker. I came back about 15 minutes later to Barry, and I said, what do you want to know? And he said, oh, you've only been gone 15 minutes. What do you know? You have a pipeline of 3 and they're tracked on a whiteboard with marker. And he's like, well, we got to do something about that. Let's go build a pipeline. So I went out and I said, let's see how we get referrals in. We had 2 referral partners. Each of those referral partners had a fax number to fax things to fax machine. One had green paper; one had yellow paper. When the fax would ring, it would have information about the borrower, how to contact them, what they were looking for. We would take the paper off the fax machine, poke 3 holes in it, put it in a binder. That was the beginning of NewTracker. When we started to add on more referral partners, we were running out of color for paper. So we had to do something else other than fax machines and taking them in that way. So we developed NewTracker as it exists today. So you've heard Barry talk about NewTracker having a patent on it. You talk about the Newtek Advantage inside of NewTracker. NewTracker started as our ability to communicate with referral partners to accept referrals for the products we offered at that time was merchant solutions and lending. They would come to us with that information through a username and password protected login. They'd be able to see that referral and track it through its life. We gave them a window into our back office, which was unique back in 2003 and 2004. We put a barcode on that referral. We call it a referral ID, a RID for short, and they were able to track those referrals throughout the process from beginning to end. They could see the comments we made, how many times we reach out to their clients and what the process was going to be from there going forward. We matured that platform and grew some more referral partners and figured that we would start to focus in on the customer side of the transaction. At that point, we were sending needs list out, and I'll talk about lending for a moment, needs list out to clients via an e-mail, and they were sending us back a FedEx package with their documents in the paper. And we would push paper around. And as we grew and grew in referrals, we realized paper wasn't going to be the long road for us. So we built on top of NewTracker, a portal, a customer portal and interface to be able to grab documentation from those potential business owners, those independent business owners, and we had to make it easy so that we could track the information coming in as easy as attaching a document would be to an e-mail. And we were able to track throughout that process, all the information that came in. And we developed that and matured that, so we went paperless at that point in time. And we started to be frictionless to particular business owners in helping smooth out the process. As we grew from there, we started to develop that further for our internal needs. So think about NewTracker now going from referral to document gathering and now to our internal processes. How do we complete a credit template? How do we gather information to document your loan and fund it? How do we provide funding documents to you? And then ultimately, when the loan is on the books, how do we service you as a client of ours over the next 5, 10, 15, 20 and 25 years. And so we built a repository for those business owners to be able to transact with us their business, yes, initially and then ongoing as they became a client of Newtek. So that -- and I don't know if you can visualize what NewTracker is, but that is the core of what NewTracker is and we built this. We own this code. This is a CRM. This is a loan operating system. This is a loan servicing system. It is a doc prep system, fully compliant with regulatory needs, audit needs. We'll go into some of that in these slides. But it's our system. We built it. We didn't buy it from someone and adapt our process to how they produce a piece of software. We bought it. We built it. We developed it over years. We own the code. It's ours, and we continue to use it. We have a saying at Newtek. If it's not a NewTracker, it didn't happen. So it's the core of everything we do, how our business operates, how our employees' function, and how we interact with our referral partners, and we take every referral very seriously. They're like gold. We don't expect we're going to get another one tomorrow. Come in every day thinking that today is the day we're going to get a referral, tomorrow we're not. So we have to do it well. And that's how NewTracker was built. That's how we developed it over the years and how we integrate it into our company. So I just wanted to give a little background in history. It really was -- I do -- if anybody would like to see someday, I could show you, we really do have yellow fax paper and green fax paper, and I do have them in a 3-ring binder. So we can go to Slide 21, talking into today. And today, we'll talk about -- we'll look at this from a lending kind of viewpoint. But keep in mind that what I'm talking about here today works equally well in our payments processing business, in our payroll business, in our insurance business and our banking and deposit gathering business. So -- but I'm talking about this in the lending operating system side of the equation. So we're driving scale and efficiency. How are we doing that? Well, scale without hiring, automating workflows to handle growth without increasing headcount, sounds pretty interesting. Just to give you real numbers in 2022, we had 31 folks in the closing side of our equation. Those are closes, paralegals and attorneys. Today, we still have 31 people in that group. We are closing this year 3x the number of units we closed in 2022. So no additional headcount since 2022, 3x the number of units. That is the development of the technology that we just talked about today. Digital customer access, as we just talked about, customers and referral partners can give us referrals, but customers apply track and manage their loans online through the phone, through their laptop. They all have access to see exactly where they are in the process. And then once they're a customer of ours to be able to manage their loan and their relationship with us online using tools like Newtek Advantage. Faster decision-making AI, big ticket today. We're using AI to help streamline the process for quicker approvals. We are not using AI to make decisions. We still make decisions, but the AI is helping us do analytics and streamline processes. I'll give you an example. We have prequalification calls. Those are recorded calls between a business owner and a business service specialist. That recorded call is listened to and transcribed by AI, put in a format that starts our credit template to the transaction summary without anybody having to put fingers on a keyboard. Have a conversation on the screen, as Barry was talking about, as we do all our interactions with borrowers. And from that conversation comes the beginning stages of our credit template transaction summary and all the foundation without putting figures on the keyboard. Think about having a conversation with a business owner, not having to take notes, not having to remember what they said, how many employees did they say they had, what was their competitive advantage? What was the use of proceeds? Don't need to do that. Have the conversation, ask the questions, listen as a business service specialist. And then we're going to let AI do the enabling analytics and processing for us, drives growth, shorter turn times, best-in-class customer experience. Andrew taught me best-in-class. So he uses that a lot. So figure that's rolling in. Seamless integrations. We're connecting with core banking systems. All of our NewTracker systems are connected to the cores. So when a customer is boarded, we're not putting fingers on a keyboard. It's going directly from NewTracker into the core. It's taking much of the heartache of boarding clients out of the way. Risk management, integrated tools we use to monitor credit risk, transparency, clear audit trails, internal regulatory, Nick Young didn't explain to me that this was a regulated entity and what that meant. Thank you, Nick. So there's a lot of scrutiny at the bank, as you can imagine, in how we do what we do. NewTracker allows us to be able to do that in a very organized and electronic fashion without having to throw a lot of bodies at it. Clear audit trails, who touched the document, when they touched it, what they did with it, all recorded inside of the system. So very audit friendly, which is a big deal in a regulated bank environment. Track the application on smartphones and tablets and reducing operating costs.

Let me jump in for just a quick second. A couple of things to talk about. One, appointment setting. I think it's important. Pete and the team have built a funnel where we get 600 referrals a day, and you basically want to get back to the best ones first. So we quickly get out of fact finder, it gets answered. Someone from the comfort of their home or in a business gets a very fast answer. If they've been in the business x amount of years, if they have a high credit score, if their revenues are x, they get a secure file vault opportunity, which connects them and they get an appointment center, a calendar to speak to a human being, very different. I think another important part is the funnel. We have one big funnel. Businesses come in for money. They don't know whether it's a line of credit, which we now do or connected to the core. They don't know if they need a term loan. They don't know if they need an ALP loan a 504 loan or 7(a) loan, but we guide them through that process. And the one reason that you all know this is true is because people take merchant cash advance and daily debit like that at 30% to 80% rates just because the money is there. The customer experience, I would argue might be good for the moment. But at the end of paying that loan off after a year, what do they have? They may need to reborrow again at 40% rate. It's not a lot of branding. We have a totally different approach to making loans to this customer base, long AMs, no balloons, maximum flexibility and covenants. I want to bring one other point before I hand the phone back to -- the microphone back to Pete. Obviously, we recently heard about fraud. Fraud is a big thing, particularly fraud in Minnesota and moving money. The reality of it is, if you give a customer funding, and I'm not saying it's here today, whatever, the government wants to know, is it any money laundering? Is it BSA? Is it AML? So the reality of this is we are a financially regulated institution that's got fintech inside of it. It's extremely valuable. So we all know that there are issues with Banking as a Service, Lending as a Service, in dealing with that organization, you get the best of both worlds. And we've been regulated and examined over 3 years. It's fully compliant. So for organizations and customers that are looking for a model that's technologically capable, that's scalable and that's compliant, Pete, Dan Hendel and many others in the organization have built an incredible way to do business. And I will tell you, we have fairly large core operating platform providers that are interested in our lending operating system and working with us. And that is something that is testament to what Pete has built.

Thank you. Page 22. We are branchless. We're a unique bank. We had to open up digital deposit accounts for business customers, not consumers, but business customers had a lot of work to be done to be able to do that digitally inside of the platform that we've built and that we just described today. So we simplified small business banking to be able to open deposit accounts for business customers very easily and quickly using the tools that we just talked about today. So ease of application, it's a simple intuitive process for the small business to open up deposit accounts online. We couldn't make it difficult to do. We would lose interest from people, integrated with our loan operating system. So all of what we just talked about in gathering data to get a loan in, we had much of the data we needed to also offer a deposit account for you. So rather than ask you to put the information again to apply for a deposit account, we're able to integrate our loan operating system and our digital account opening process for deposit accounts so that there's no redundant data entry. It sounds easy. It's not. It's difficult. If it was easy, everybody to be doing it right now, they're not. So we worked hard to make it so that it's a single application for a business owner. These are independent business owners running their businesses. As Barry said, want to communicate at night, weekends. They don't have time to be filling out multiple applications or coming into a branch and want to be able to do this on their own time in their own place of business. A single knows your customer process, KYC. Barry just talked about that, with fraud, money movement and all sorts of heightened awareness of issues that are out there today, having that process in place easily through our digital account opening process is key. Instant offering with the loan approval. So when we have the loan approved, we instantly offer because we gathered the information, we needed to approve you for a deposit account at the same time you apply for the loan, and we did that single integrated KYC. We're able to instantly offer you a deposit account automatically upon your loan approval. You didn't ask, my mom always said, try to do something for somebody when they don't ask you do it. That's polite. Well, we're trying to be polite. You didn't ask, we're going to offer it anyway. Direct boarding to the core as we do on the loan side of the equation, regulatory compliance built in. And as Barry said, we've been fully tested with banking regulations and audit requirements. And then the enhanced customer experience with faster boarding. It's one application. It's a better experience for the client. They don't have to do things multiple times. Page 23, I'll talk a little bit about AI and lending today and what we're going to do in the future. We talked a little bit about the call recording and translation. We do automated review of financial data. So we're reading tax transcripts, bank statements, credit bureau information as they come in and placing that information integrated into our credit templates. We're not sitting here and typing in spreads for tax returns or your average bank balances or what your FICO score was. They're coming in and they're coming in directly into our template. Speed, spreading the tax returns, spreading of the bank statements. It's not only speed and ease for our underwriting side, but it also makes it a more consistent cash flow analysis as it gets pulled in from the tax returns and tax returns lend themselves very well to this type of analysis. Line 23 is Line 23 on everybody's tax return. So makes it easy to do and gives us a more consistency of cash flow. We look at -- we use AI to do some summation of documents. Think about leases, think about operating agreements or business corporate docs, think about franchise agreements. Somebody has to read those and pull key terms out of those agreements to see if they match what we're looking for in our credit approval. I'm making you a 10-year loan, I'd to know you have a lease in your building for the next 10 years. Somebody's got to read a lease and look to see if it's a 10-year lease and if it's coterminous with the maturity of your loan. AI is reading those, summarizing those instantly as the client is uploading those documents to their portal and giving us back that information so we don't have somebody doing the mundane task of reading and picking out documents. They can actually do what they're paid for, which is make sure it actually fits what we're looking for. So we're taking more mundane tasks and turning them into better and faster processes. Instant access to insurance needed to close loans. We started -- many of our loans would require keyman life insurance as an instance of this bullet point. Inside of our NewTracker portal is a connection to life insurance option. If you'd like to take life insurance out through Newtek insurance agency, it's a click of a button. It's about 3 minutes' worth of additional questions. Again, we're porting over as much information as we have on the individuals already to the life insurance application, you're filling in a few additional questions. With those questions comes an instant quote bindable quote, bindable quote, not an offer, not come and talk to us if you're interested, but a bindable quote. Okay. There you go. Thank you. I appreciate that. I'm sorry, so you said it wasn't 3 minutes. It was only 1.5 minutes, so we had a client in here that held me accountable. Thank you very much for that. They can choose who the beneficiary is, but it's assigned to Newtek. So if there ever were an issue and you needed the insurance to pay off the remaining balance of the loan, you could use that insurance payoff remaining balance of the loan. And that's the key that was what I was getting to on the next part of the insurance. It's not only a bindable quote that's instant, but you're delivering the policy with the assignment language back to us as a lender. So that used to take days, if not weeks, to go to carriers to get the actual policy and then the assignment back to us before we can close. This is now instant. So thank you within 1.5 minutes, we delivered an instant bindable quote with an assignment back.

[indiscernible] never delivered.

So we had to purchase the second insurance, spending $1.5 million again and eventually, that was a very successful experience, the client experience.

Thank you. And we're not related in any way. So that's...

No.

This is what is emphasizing the position that we have in the market of embedding solutions into a single application. So if you come in for a loan, the solutions are embedded. We're about to roll out the P&C policy for the loan, the life is there for the loan. The flood insurance is there for the loan. So it makes the lending process much better. The bank account is there for the loan. So it's one application and you get multiple solutions all at the same time. That's the benefit. So crossing back to what Andrew was talking about in the Newtek Advantage. Do you think business owners want to go to ADP, want to go to the bank, want to go to their daily debit provider and their -- I mean, this is all in one place. Now we don't force it. We don't require it, but it's there. It's convenient. It's at the right price, people take it. And that's what we built. And that's what, frankly, very few people know and understand. I will tell you that the internal teaching, training and mentoring of our staff to be able to roll these things out is at a very low level, but it's still working, and it's going to grow from here. Pete?

Thank you. I want to go to Page 24. What's all this going to do for us, right? It's nice to say that we do all these things, and we have all these things integrated, how do they become tangible offerings. So because of the loan operating system we have, the digital account opening process we just talked about for business deposits and the AI that we're using today, we're able to look at 2 offerings that we're focused on and very excited to roll out. Small business term loan launch. That will be apply and prequalify in 7 minutes, close and fund in 7 days with a real term loan, long-term 10-year amortization, which is going to give you much lower payments, secured by business and personal assets, not just the daily deposit loan and hope the money is there to when you want to debit the account to take the money out. These are secured loans. They'll meet SBA eligibility criteria. competitive interest rates, talking prime plus 3. We're not talking about 40% on the daily deposit merchant cash. underwritten, not score-based. So we keep to our 5 Cs of credit and loan size is up to $350,000. This is achievable because of the things that we've built inside of that loan operating system, that digital account opening process and utilizing AI. In addition...

Let me pause here. This is the one area of a hole in our offering just because we're competing against the TV ads that says, come to me, I'll make a loan in 5 minutes. I'll get you the money in 5 days or whatever the heck it is. We can basically be able to go out on a secured basis, extremely important. It's not daily debit, it's not MCA. And through our technology, I'm not saying it's going to fit everybody, but make a secured offering with liens that will help us on the credit side where we could do well at prime plus 3 and the customer walks away and goes, I'm not paying a 40% or 50% vig for money. So this will be added to it.

What are the terms of these companies that hit you up and are proactive and...

Well, typically, social media. You could -- I don't want to mention names on the call, but the MCA players, and there was a big play in the market with one player that's kind of merging into a private company, they're public, but it's able to deliver the money quickly. I mean the business owner today, if they want the cash, they want it quick and they want certainty of funding. They're not discriminating. It's not to say they're happy after they realize that after a year, they paid all the principal back and they paid a 40% to 50% rate on it. They can't be happy. and they might be okay, but they're not thrilled. We offer what we refer to as an adult loan. And now we can give them an adult loan. It's not going to fit everybody; we want to basically -- we're not in the business of funding businesses leading to the cemetery. We're in the business of funding businesses that should be underwritable. They've been in business a long time. They have a legitimate business. They have good balances in the bank. If they need quick funding, we can do it and we can get security on the loan. So we will have this particular program, Pete?

So you're talking about when you get these things to your text, and you see these on a daily basis. We've talked a lot to business owners because we talk to them on a daily basis, hundreds. And it is ease and speed as well as the terms that we offer. So using the tools that we've built to be able to offer something that's easy and quick to be able to be funded and keep us into the types of loans that we make today is really what we're trying to take advantage of. So we had this in place, and we've worked hard to put this all together so that we can offer these things on a quick basis. Offering #2 is what we call the triple play offering. We talked earlier about having one application to be able to do multiple things. And this is the culmination of that work. One application, I'm going to get you 3 instant offers. The business bank account that we talked about today and our business bank accounts have no fees, no fees, and pay you interest on your balances. I give you earnings credits towards -- and offset the fees that we charge you, so effectively, you have no fees. We don't charge you fees. And we pay you interest on your balances. That is actually cash that we put into your account on a monthly basis in interest that you can go and spend and go and do things with it. So this is not earnings credit offsetting your fees that we're charging you so that you think you've got no fee banking. No, this is true, no fee banking, not charging you and paying you interest.

We're able to do that because we don't have a back book of fee interest. And when you look at our net interest margin at the bank, what's it Frank, it's about 5.5%, give or take.

Give or take.

About 5.5% at the bank, give or take. So these are risk-adjusted returns, which is what I talked about previously. So if you're making low margin, no-risk loans, you can't do this. As a matter of fact, most of the bank's entire business model is predicated upon interest way below the discount rate and the fees from the back book. We don't have the back book. So we're able to actually give our customers a really good deal. It's true 100%, no fee banking, no asterisk, no BS. Even if you bounce a check, we don't charge a fee. Won't let you bounce checks for too long. But even if you bounce a check, there is absolutely no fee, no minimum, no asterisk. So -- and the triple play that Pete is talking about probably start up with a minimum of around $10,000 to get you that instant decisioning. It's connected to the bank account. You put that and you attach it to the debit card that's on the business that has a cash back capability. It's a pretty powerful offering to a small business. There will be no fee for the line of credit. There'll be no non-usage fee. So if I want to grow my payroll book or I want to grow my merchant book at the same time, you could pick up a $10,000 line of credit doesn't cost you anything, extremely attractive.

Some of us bankers would like you to charge a fee on NSFs, even if it's a small one.

I'll argue with you after, that's not my question.

Frank, 30,000 accounts opened, I think you had up on your sheet or Andrew. What's the average balance in those accounts? Where does it start? And what's it grows to when it's normal?

It's about...

Hopefully, somebody up there knows, Barry is not...

We're just putting the -- who's going to answer you. It's about $50,000 in size.

And those are -- we're not talking CDs, right? Those are...

No, it's...

Transaction accounts of some kind.

It's very -- we don't do consumer checking. It's consumer high-yield savings. Of the 30,000 accounts, those have been opened. There's probably about 27,000 that are open today. So some of those were CDs that came in and were rolled off. There are about 7,000 business accounts.

Okay. That's -- and how many business checking accounts would you open in a month?

I would say -- the utilization of business checking accounts, I would say it's probably around in a month, 300, 400.

And am I correct today that those are only offered to people that are borrowing money. You have not yet rolled out a program to offer the Advantage without the loan to small businesses.

We have not aggressively marketed the Advantage as a product to itself. You can get it from our website, but we have not gone out and aggressively marketed the Advantage. If you have a merchant account with us, you can access the Advantage. If you have a payroll account with us, you can access the Advantage. So it's not a requirement.

Right. But today, there's a huge opportunity to offer business checking accounts to the millions of businesses that don't borrow money.

Absolutely.

If it's because of the customer experience.

Yes. And I think, Birk, it's a good point. We've grown very quickly. I don't think anyone could argue that. I'm not sure I want to grow any faster than we're currently growing, but we're doing it methodically. We're doing it in a compliant manner. And I would say the biggest impediment, which we're spending a lot of time on right now is teaching, training, mentoring and educating our staff because we still do believe that outside of having really good software, customers do want to talk to somebody, particularly this particular customer base, so.

Yes. I'd be happy to have you have unlimited growth in business DDA without loans. So you can find a place to put that if you find it. Second question, you're going to do $1 billion in 7(a), I think was shown $500 million in ALP in 2026. With your customer acquisition strategy, which is very low cost, unique to the company that you've built, is that strategy sufficient today for you to double those amounts to $2 billion and $1 billion? Or do you need to do something else more of the same in customer acquisition strategy or new customer acquisition strategies?

I think that particularly in the ALP business where the average loan size is $5 million, it's easy -- it will be relatively easy to grow that business. You go from 100 units to 200 units; you're going from $500 million to $1 billion. We are in discussions with a lot of channel partners that are off the charts, monstrous and huge. So that's possible to grow the business. There's a very easily to expand the distribution strategy through channel, and we're also very interested in growing the direct business as well. So question was about ALP loans, and we're about to get into that portion of the presentation. They've proven to be well underwritten with good credit quality. The program has existed since 2019. We're currently in the market as I sit here today. So when I leave here, I'll put my bond hat back on and we'll be in the market with a $350 million collateralized transaction. The question is, could you put an ALP loan, which I've also called a C&I loan held for sale into the bank. And the answer is there's -- it's a C&I loan. It's a bank eligible loan, and that is something that could be done. Okay. Pete, are you going to finish? You all done?

No, I took enough time, so...

All right. We -- if you can hold the questions because I want to get this out of the way, and then we got a big Q&A at the end. We are ahead of schedule, which I'm very pleased.

The next part of the presentation is this underappreciated aspect of NewtekOne, underappreciated, understood, and it really relates to the alternative loan program. Let's go to Slide 26. But before I get into that, I do want to make a comment. And we talked about earlier sort of where we're underappreciated or misunderstood. We do believe that Q2 to Q3, we demonstrated stability both at the bank and at the holding company through the old NSBF portfolio, which is a legacy SBA lender that's winding down. We'll be reporting most likely at the end of January, I haven't given a date, that will probably be next week. I believe you'll see stability and improving performance in those credits. I'm not prepared to give out numbers today, but I'm confident and feel pretty good about, a, the economy and our performance in the fourth quarter. So I think that's important. That clearly has been an impediment to market participants looking at the level of nonperforming loans, the provisions and things of that nature. We're fairly adamant that the cost has been absorbed. It's been written off. There's no surprises. It's appropriate. And maybe after another year or two of operating, everyone will get to appreciate that and understand it. But even with that, those numbers, we believe, will be viewed as positively when we report. So let's go to Slide #26. The alternative loan program, which Kirk from Patriot, one of our larger institutional shareholders brought a question. We also refer to them as C&I loans held for sale. We originate them and we put them in special purpose vehicles, and we securitize them. We do that because these loans are longer amortizing loans. They have longer durations. They're meant to have longer durations because they're actually attractive capital for the business. Holding back the principal payments, which we think is overrated from a credit perspective. [indiscernible] likes to get their money back. I get it. They really need it back after a year, and we substitute that long amortization for personal guarantees, joint and several for liens on personal and business assets. And all these loans have very strong debt service coverage ratios. And we'll go into some of those metrics. But important to note, the C&I loans or the ALP loans have much stronger risk profiles than those of SBA 7(a) loans. I think I've had some people say, well, these -- are these just loans that have bigger than a $5 million balance? The answer is no. That's not the purpose of loans going into this particular bucket. The operating history is longer. As a matter of fact, look at the average operating history on the 2025-1 deal, it was 16 years. I think the current deal we have in the market is 10 years or longer. So these are seasoned businesses. We say the loan-to-value is lower. The average LTV on these loans is about 50%. You don't get that in a 7(a) loan. The guarantors have got stronger liquidity and supporting financials. I would say the average guarantors net worth is clearly seven figures and some have eight and some actually have nine. So then you would say, well, why would anybody with those strong financials take a loan that has an interest rate that's in the low double digits? Well, the reason is we give them greater flexibility. We treat them as an adult. If they're willing to guarantee their personal and their business assets, if they've been in business a long period of time, if the businesses have debt service coverage ratios of 2:1, which is typical for an ALP loan. Well, so you could pay your principal back slower. If you want to borrow money, you can do that without necessarily having to ask us. You don't necessarily need to give us monthly financials, but we have everything tied up, and we're happy about that. And this is the experience that we've learned in being in this space for over two decades. Important to note, every one of these loans has a business appraisal. So these are not little businesses that don't have significant material values. About across $850 million of originations across 180 loans since 2018, we've had $23 million of defaults. We've had $6 million of charge-offs. That's a pretty good record. We believe these loans historically in the portfolio will have a 3% cumulative charge-off over the life of the loans, and they're valued that way. Important to note, the assetability match is a 4- to 5-year duration. Why is that? Well, we get very nice margins on these loans. So because we have nice margins, we want these loans to stay on our books. So the borrowers are typically willing to accept a 5% prepaid penalty in month zero through month 36, meaning if they want to pay the loan off, you got to pay a 5% prepaid penalty. In month 36 through 48, it's a 3% prepayment penalty. So typically, these loans do stay on the books unless there's a tremendous liquidity event, somebody comes in and wants to buy the business. In that case, they'll pay the prepaid penalty. But our experience in doing this is these loans typically pay off once they get past the 48th month, and the loans have a floor at the original rate of interest and then they typically float. They're fixed for 5 and then they float at T plus 9.50. Better client experience versus our competitors offering that quick money because loan gives them a longer prepayment period, a lower monthly payment. They're not paying yields of 40% to 80% at the end of the year, they have to do it all over again. ALP securitization that we recently completed in April generated 570 basis points of spread income. We talk about spread income, that is the net coupon on the loans going into the special purpose vehicle versus the yield on the securitized bonds. If you included the 100 basis points of servicing, that would be 670 basis points. So the servicing asset is particularly valuable given the prepayments. So we have the ownership certificates marked at a 14% net yield, and that is a net yield net of a 3% charge-off. If we did it gross, it will probably be 15.5% to 16%. So these are the fair values. Our obviously, a public accounting firm analyzes these values as does Frank, our internal audit team. And we do have a third-party organization that looks at the valuations on these, and we'll be doing so at the K for this year. These assets are mark-to-market quarterly. So we're looking at them every single quarter. Fair value is not something that is foreign to us. We did it as a BDC from 2014 to current date. And it works. It makes sense. We see SoFi, the Lending Clubs who just announced they're going to go to fair value, Enova, other lenders that are in this space being comfortable utilizing this. And by the way, this is no different than CECL. It's just upside down. By the way, I've never been asked a question about CECL before. People don't ask about CECL. But oh my God, the question is on fair value, it's the upside down. CECL, you're forecasting what your loans are and you're putting a charge upfront. That's the same assumption effectively that goes into fair value, except you're theoretically present value in the income. But given that these assets are going on the books at a 14% yield, we're not taking all the juice out of these things. There's still plenty of juice. So we'll go through this a little bit deeper. You'll see the cash flows. Let's go to Slide 27. Okay. So we've been a securitizer since 2010. 13 of the 16 securitizations were backed by 7(a) loans, and these were the uninsured portions of the 7(a) loans. We've never had a credit watch of our securitizations. We've never had a downgrade. All the bonds have held up very well. We've done three securitizations backed by ALP loans, and we're currently bringing a fourth transaction that hopefully will be announced next week. So if you look at some of the numbers here, and I want to point out, the 2026 one is a hypothetical of what the pool looks like, but it should be very similar to the 2025-1. But you could see what the spread income is. And by the way, that's a spread income of 568 basis points. So if that was in a bank, and the bank said, I have 568 basis points of spread income. By the way, on a bank's liabilities for deposits, they have a tremendous amount of expense in managing that book of business going in and out. In a securitization, it's kind of set it and forget it. Yes, we have to market. The loans are in the SPV, the bonds are sold and you're just clipping the coupons, right? And we evaluate this every single quarter. So if you said to me, what's the cost of that liability? Well, it's fixed, it's fixed based upon the securitization yield on the bonds that are sold. So that's just a nice cash flow that's sitting there. It's coming in. It's held up at the holding company. We've also done this with joint venture partners. And people say, well, why do you use a joint venture partner? Why don't you use a joint venture partner? It's just another alternative form of capital. It's diversification. It also validates the fact that the prices and the yields that we're putting on the books are validated by institutional investors. '22-1 joint venture partners, [indiscernible], Tennenbaum Capital Partners. That deal has come full circle. It's unwound. The bondholders got paid. The joint venture partner got paid. They're very happy. They moved into the sunset. The 2024-1 deal TowerBrook is our joint venture partner. And obviously, they're validating these valuations. We have more validation going on than I'd care to shake a stick at. I've got ungodly amounts of validation, ungodly amounts of cost. The good news is we figured out ways to actually make loans that on a risk-adjusted basis, drive return on assets north of 3% return on tangible common equity, 25% to 30% because we do things differently. We're a disruptor. It may not necessarily neatly fit into the call report, but we're getting there. People are beginning to understand it. I also want to point out being a disruptor in an industry that typically doesn't disrupt. And maybe this is not a great example. But I recently looked up some of the entities that I mentioned, the SoFis and Lending Clubs, they flatlined for a couple of years. And then all of a sudden, people got comfortable with how they were doing things and the stock price took a different portion. And obviously, these traded at entirely different multiples than our multiples today. But I looked at a company called Carvana. Maybe it's not the best example because they clearly have got a unique background and a unique past. But what are the similarities? Carvana looked at the used car market, similar to the independent business owner market, big market, big opportunity, not a lot of people in it. So Carvana did an IPO, I think it was in 2017. And then COVID happened. I think the stock at the IPO was like $15, $16, $17. Then COVID happened, they get traded at $3. I didn't look at Carvana in the last couple of days. The last time I looked, it was over $400 a share, okay? What does Carvana do? That's simple that we do? Well, they put technology in place so that an individual from the comfort of their home can buy and sell a used car and can get the car provision. They can get all the payments done and get the insurance done. So they use technology to disintermediate an industry that wasn't used to it. But it took a while for the investment community to get comfortable that they can keep on doing what they're doing. So my suggestion to all of you is just keep watching what we're doing. We're through three years. I feel very good and confident about this particular management team. There's probably about 15 other people I'd like to put on stage today, but we'll do this in small bites because I know you're used to hearing me talk. But on Slide #27, this is a good idea of what actually is in these particular portfolios. Let's go to Slide #28. Our equity certificates in ALP securitizations, they're on our balance sheet. They're represented by the balance sheet of Holdco VI, which is a segment. It's held at fair value. It's valued quarterly. And particularly on the K, it will be evaluated by a third party with expertise in valuations. As I mentioned, the 2024 deal is held by a joint venture with an institutional investor. And we do value these things every quarter. And when we do joint ventures, the partner is approving our financials and obviously, our valuations as well. We're using discounted cash flow. It's not that complicated. We're looking at the performance of the underlying loans in the security, our internal accountants, our external accountants, they're looking at these. We're looking at change in interest rates and market clearing yields and discounted cash flows. It's something that we've been doing, obviously, since 2014. Also important to note, the cash flows of these securitizations are modeled on INTEX. So for those people that are not in the ABS securitization market, you can go on to INTEX, you could see how the bonds are performing. They're the recognized provider of cash flow models for asset-backed securities in the United States. Slide #29, we talked about what these loans look like in the securitizations, the spreads, how they're valued. I think it's important to note, and we'll go right down to the last bullet on Slide #29. The way these deals are structured, 90% of the excess spread income is used to pay off the senior bonds, okay? That's really important. And because of that, the book value, which are just the assets in the special purpose vehicle less the bonds, grows very quickly. And you can see that on Slide #30. We refer to this as overcollateralization. It could also be referred to as book value. We estimate that in a typical deal in 3 to 3.5 years, the book value because of the excess cash flow that's coming off of the deals will prepay the senior notes so that the book value will equal the fair value. So these are things that you could take a look at in the existing deals that are out there, the 2024-1, the 2025-1 deal. These might be information that we start to put into our Ks and Qs. But the reality of this is we're not making this stuff hub. This is how the market works. Slide #31 kind of gives you a hypothetical example of how profitable an ALP deal could look at. Now so -- and it's important, this is non-GAAP. I want to repeat. This is non-GAAP. I say it's non-GAAP because if you look at the cash flows of $3.325 million and $1.4 million of interest expense and you look at that January through December, boy, that's a lot of income. As a matter of fact, it's approximately $22 million of income on the current securitization. But it doesn't -- we don't treat it that way. Well, that excess cash flow is going in to pay down the senior bonds, and we're fair valuing the instrument at a 14% yield net of the 3% charge-offs. By the way, if the charge-offs are coming in at a bigger number, we're going to make the adjustment. We're going to make the adjustment on the valuation of the equity certificates, either up or down. And the third parties looking at this are going to make those comments. And our external audit firm, RSM is going to be looking at it. But you could see by these cash flows, there's tremendous value in this business opportunity. And these are not short-term loans. These loans have call protection with a nice wide spread with really strong credits. So I would say to most bankers in the room, if you had a debt service coverage ratio of greater than 2:1 and you had an LTV of 50%, and not a pretty good loan. So maybe you would allow the business. Maybe I'm creating new competitors in the market. I wish you all good luck and a lot of success doing this. It's extremely painful. But the point is long-term amortizing loans with no balloons make a lot of sense with personal guarantees and leans on personal and business assets. This is just stuff that we've learned over 20 years of doing this business. A distribution channel is set up to do this. We also have an SBA and securitization track record. So we're able to get the funding to be able to do this at the holding company level. We have investors that keep lining up to buy our bonds on a regular basis. Hopefully, I'm not changing our transaction for next week, but we're in pretty good shape. Eric, do you want to ask a question? So that's a real number that we've said on calls. And I don't know if it's actually written into the Ks and Qs, but it's a number that I've said in transcripts. It could go to 13 or 12. It could go to 16. It will change based upon the market clearing yield for cost of capital and what's going on in the markets. I mean we're -- when we go to an ABS conference, we typically have 32 meetings in two days. So these are yields that institutional investors subscribe to, whether that's in CLO equity or equity in any part of the ABS market. So we're not making it up. I'm not saying that there's a locked market at 14 or that it shouldn't be 13.75 or 14.25, but this is the number that we believe is correct. We're comfortable with it. And we actually think that there is an element of conservatism to the mark, particularly given how the cash flows will gravitate so that the book value will achieve the fair value in a reasonable period of time.

So you didn't do gain on sale or you didn't have gain on sale, but instead you just recognize the cash flow. What would be the yield based on the cost? And in other words, how much of the -- relative to the cost of creating the residual are you marking it up when it goes into -- when you do the securitization at that point?

So I think the question is -- and I get asked this occasionally, would you consider, for example, using CECL for this business? I won't consider anything. This is currently how we do it. I don't see us changing in the near term. We might. We have the ability to make that change. But we think this is clearly consistent with doing securitizations and putting the valuation on the residual. At the end of the day, Ron, at 570 basis points of spread income, net of an expected loss, it's a pretty attractive asset. And we market it as such. And every single quarter, by the way, if it was done in the converse, you'd still have the same quarterly valuation of marking it and figuring out what the loss is. It really isn't any different than the other way of doing the business. Now one might say, is it really reoccurring income? As matter of fact, I remember being at a B. Riley conference, and I had an investor say to me, Oh my God, you're going to have a huge hole in the business next quarter if you don't originate any loans. And my comment was, well, gee, if Apple doesn't sell any cell phones next quarter, they're not going to make any money either. So part of this is our business model is to make loans and sell them. We're in a return on equity and return on asset business. We'll continue to do this. By the way, the SoFis of the world and the Lending Clubs of the world that are doing this, they're trading at pretty hefty market multiples, and the market seems to be comfortable with them. So that's my answer to your question. Chris?

Chris Nolan, Ladenburg Thalmann. First of all, I want to thank you all for this great show, great presentation, all the details and appreciate hearing from the different management teams. Two-part question. One, the first part is for the securitizations, do the regulators, bank regulators require you put more capital against the loans you're going to securitize as opposed to loans that you don't securitize or is no difference?

I think that when you look at the equity certificate, there are certain capitalization levels, whether it's held at the bank holding company or we haven't done a securitization out of the bank. It is part of our original application. So it's not that we can't do it. It's totally permissible activity and provided it made sense from a match funding standpoint, we would do it. But there's capitalization requirements for ownership certificates in a securitization that we obviously would follow.

Second question, given everything you said and the attractive spreads and so forth, is a commercial bank the best vehicle for this?

The commercial bank is the best vehicle for Newtek because of the NewtekOne platform, the Newtek Advantage. And by owning a federally chartered institution, we've been able to diversify our financing in the 7(a) and 504 business, which is currently done in the bank. And we're actually able to offer the clients a platform of moving money, which they typically do 3x to 5x a week, 12x to 8x a month. So the question was a great question. And one of the things we're trying to get across today is please don't value us as a lender. That's probably a mistake. Although the money gets the honey, okay? And we get a lot of people coming to us because they're interested in using our organization for growth capital. A lot of businesses come to us to get a 10- to 25-year amortizing loan, but they don't qualify. So the best thing that they could do, open up a bank account, process payroll with us, do electronic payment processing, so we could charge for sales on a regular basis. make sure that your business is insured and you don't have cancellations on your insurance policy. So we are very happy being a bank holding company owning a bank. We just don't wish to be looked at like a community bank. We like to look at a company that provides business and financial solutions and is really able to help customers and have multiple streams of revenue and reoccurring income that are incredibly valuable. And also importantly, we are an organization that knows how to manage risk.

Barry, do you want to move into Q&A?

Yes, let's go right into Q&A. That's great. Thank you.

And for those on the webcast, remember, you can use that chat box at the top right of the website. I'll go ahead and pass the mic to Crispin here.

Crispin Love, Piper Sandler. Barry, I know you want to keep talking about the fair value, so I got one there. Can you talk a little bit...

I'm not going to talk about fair value if asked me a CECL question. I want to do the yin and yang.

Okay. I'll ask you both. So first on the fair value marks, how they're impacting the '26 guide. Can you just talk a little bit what's implied there for net gains on residuals and securitizations and then net gains under the fair value option as you look at the total noninterest income or the -- what's it the $330 million in total revenue that you're expecting?

I would say you're probably -- a lot of it depends upon whether we do the ALP business out of joint venture or whether we put it on our books. I would probably say 1/3 might be based on the alternative loan program. But that's conservative and that's subject to change.

Okay. Okay. That makes sense. And then because you asked on CECL, if you did carry the ALP loans at cost like a lot of other balance sheet lenders out there, a lot of banks and then accrued a loan loss provision consistent with CECL, how would that impact the '26 guide?

We probably make you very happy because I would fit your model like that. And you'd be looking at the interest income and you'd be forecasting it and you'd see this net interest income line just doing great and my ROAA and my ROTCE would probably go down. So -- the CECL reserve probably would be consistent with what we think is a cumulative 3% historical charge-offs. So you probably put maybe 2 and change upfront or something of that nature. We get 3.5 points of origination fee. But then you'd have this huge spread income and you'd be clipping coupon and everybody that buys community banks would get all excited and who knows, maybe we get a better valuation than where we currently are. I mean the reality of this is -- and I'm just making a comment. This is not rocket scientry. This is easy for all of you to figure out. And you could take a position, you think it's aggressive or not. But we've made a lot of changes. This is not one that I particularly see us making in the near term. I think we're just going to continue to do what we're doing, make a lot of money and we keep originating these loans and doing these deals, we'll be just fine.

And could you ever put the ALP business in the bank? And if not, why not?

We certainly could because the loans are OCC eligible. They're C&I loans, and they're underwritten to federal standards based upon the OCC model for a C&I loan. I would ask the bankers in the audience a question. If you could make a C&I loan that had a 50% LTV debt over 2:1 debt service coverage ratio with a personal guarantee and you got a hard collateral against it. They'd be lined up around the block. The important part, in my view, is the asset liability management through a securitization. So I'm trying to keep this thing as simple as possible for as long as I can before I make another change. And -- but right now, we're doing just fine. It all works. It all works. I appreciate the question. And thank you for this. I was almost going to pass the baton to Frank, but I figured I can answer that one.

Steve Moss, Raymond James. A couple of questions. Maybe one, just starting with the 3-year anniversary. What changes could we see going forward here now that you've hit the 3-year anniversary with the business model, if any?

Yes. I think that from a holding company consolidated basis, I don't see any product changes. I think it's really a lot of -- which is thank God, oh my God, distress to get the policies and procedures, the software, the compliance and the rigors of running a bank in addition to turnover. We've had turnover. I've talked about this on calls. So, no, we're really excited about just coming in every day and doing the blocking and tackling. So I don't see any major changes. I will tell you, we do plan on using the bank balance sheet more, particularly diversification. I think about 46% of the bank's balance sheet is in uninsured participations in SBA loans. I think we'd like to get that number down as a percentage. And I think we have ways to do that, that are quite interesting, particularly we talk about the triple play, the lines of credit, things of that nature. So we feel pretty good about everything that we've got in place, and it's really a lot of blocking and tackling.

Okay. Appreciate that color. And then the other thing you mentioned here was with the ALP loans, they typically, I think, have -- you expect them to pay off after about 48 months, if I recall you saying that correctly. So just kind of curious, what's the catalyst that drives that typically for a customer because loans are much longer in terms of permissible life?

Yes. So it's a good question. So if you look at the 2022 deal, which was primarily created by 2018, '20, 2019 originations, then we had COVID. So the world stopped, and we put probably a couple of 2021 originations in there as well. When the loans hit what we perceived as the fourth and fifth year anniversary, most of them were gone. Now we were able to take some of them and roll them into this new deal. So that was helpful. But the driver is that they're performing if you think of the life cycle of a small- and medium-sized business owner, many of them sell their businesses, they'll sell the real estate after that period of time, too. So there is a tail, but a good chunk of them do tend to go. But the biggest advantage is the flexibility. For -- if you have a deal with a business owner complaints about a bank, these are the common complaints. Oh, I got to give them regular monthly financials. Oh, I got to give them regular quarterly financials. Oh, they're all over me because I'm tripping a covenant. I mean they just don't like the oversight due to typical and traditional bank covenants. So for entrepreneurs that are not afraid to PG, have strong guarantees, this gives them a lot of flexibility. They will pay the higher rate because on the AM schedule, because they're not repaying the principals, you're basically giving them equity as well as being able to distribute more freely, like a lot of them don't understand, well, why can't distribute my own money? No, you got to keep half of it if you get a good loan in the bank. So you give them that flexibility. We're okay because we have the collateral. So it works well from a credit standpoint. It's a different way of looking at credit.

This is Emily Lee stepping in for Tim Switzer at KBW. So for modeling purposes, what kind of assumptions should we make for the fair value mark upon origination for an ALP loan? I think at the end of Q3, the cumulative mark up on the portfolio was about 9%, and it was super helpful to see all the income statement mechanics laid out. But what would be the net impact to earnings on the day that it goes into the securitization? Is it generally neutral overall or a positive impact because you get the servicing gain?

I think what you're going to see going forward is really just the valuation on the residual. So we're going to try to eliminate some of that noise in the interim period. So it's really just are you comfortable valuing the equity certificate in the asset class.

Understood. And then kind of on the guide, what kind of deposit and loan growth assumptions are embedded within the 2026 guide?

I think they're pretty modest, to be frank with you. It's always a fun conversation. I've got the public guidance and then I've got the stretch goals that I'd like to have the management do and holding people accountable and all that other kinds of stuff. So they're pretty modest. I think particularly on the deposit side relative to cost of funds reduction, what do we have about -- we have like 50 basis points, Frank. Well, that's [indiscernible] right. So we've improved about 50 basis points this year. So we're -- it's a fair disclosure conversation, so that's okay. I don't think we're there next year. I think we're probably a quarter maybe. So we've probably dropped our cost of funds by about 1/4. I think that's conservative. But I also believe that banks are not going to be able to drop their rates as easily as they think they would. I think that's going to be fairly sticky. I think that's going to be a surprise. We are rate agnostic with the exception of the fact lower rates are better for our legacy portfolio and our borrowers from a credit standpoint. But apart from that, we are fairly well asset liability matched.

Very helpful. And then if I could do one more. Do you have any updated thoughts on capital deployment and the decision between dividends and repurchases?

No major changes. I think we're in pretty good shape with respect to our capital position, particularly with the securitization coming up, which will free up a lot of liquidity. We did obviously a lot of capital raises and substantially improved our capital base in the second half of this year. This is a tricky one. Obviously, the dividends are only approved by the Board. I don't think it's likely you'll see much of a dividend change, but that's subject to change every single quarter. I think we'll stick there. That dividend was set with the stock price significantly higher. And now it's at a level that's just like wow. And relative to repurchase, we made an announcement. We bought some stock back. I think you'll continue to see us take advantage of that opportunity. We're still trading below, I believe, what is tangible book, where we perceive tangible book going. So yes, I do think we'll continue -- we have an authorization to do that. Blackout period goes away shortly. Time flies pretty quickly. So yes, I think we'll continue to opportunistically take advantage of the authorization we have.

Andrew Scutt from ROTH. And maybe an Andrew for Andrew question. But as you kind of grow, you're looking to grow business deposits, telling clients the advantage of putting their money in Newtek through the Newtek Advantage. Kind of what has resonated with clients so far, maybe friction points that you didn't expect on client feedback? And kind of how is the account opening to deposits in the account conversion rate going, do you think, in your opinion?

So what resonates is these. The bank account essentially comes with the loan. Today, so does the merchant account. So that's there. What we are working on and improving where I think you'll see lift in the organization is improving utilization. So today, we don't necessarily say you've got to close your old account. But we need to keep tantalizing folks to bring them into the Advantage, be interested in the other solutions that we have to offer. And we don't look at this as cross-selling. In fact, we find that phrase to be repugnant. It's not cross-selling, it's not bundling. It's a financial ecosystem. And the more that we introduce customers to that convenience, the more folks become frustrated with their existing depositories and the more opportunities we have to do one more thing with folks, and that's really what we are marketing heavily at this point. We see the level of engagement picking up, which will create stickier deposits, greater deposits and greater adoption of the other solutions.

All right. I'm going to -- Barry, I'm going to ask a question from the webcast and then walk over to Hal and give them the mic. So the question here is Newtek has a compelling 7(a) business where loss rates are more than offset by very compelling loan yields. As we look forward, what do you think a good expectation for lifetime default and severity rates might be for 7(a)? Maybe that's repeat, too.

Yes. Historically, we have estimated that the cumulative lifetime charge-off rate or loss rate is about 8% over time. Now mind you, these are long-term amortizing loans, so that typically gets spread out over time, and there's loss curves on this with humps. Therefore, our CECL reserve is about -- it vacillates between 6.25% to 6.5% present value, but that will obviously be affected over time with future value. Bryce, I'm not sure I see that changing dramatically. I see that it's sticking. I don't see that -- I certainly don't see it getting worse. I don't see it getting better. I will point out that 2021, '22 and 2023 vintage years in an SBA floating rate loan program, that was the great financial crisis for small- and medium-sized business. I want to repeat that. The great financial crisis for SMBs was '21, '22, '23. Why? Well, if your rates went up by 3% to 5%, your debt payment almost doubled, put aside the fact that the cost of labor went up, the cost to insure went up, every expense went up. And really, although you could say the economy was good, it wasn't particularly robust so that the NSBF portfolio, which lost $28.5 million in 2022 is anticipated to lose materially less. I don't want to preempt their call coming up. And then even in 2020 -- I'm sorry, in 2025 is expected to lose materially less, you could figure it out for the first three quarters and will be less next year because that portfolio is burned down. It's a diminishing portfolio. It also has a capitalization of about $200 million, which we would really like to free up, okay? It's in loans, okay? But as that pays off and goes away, it turns into cash and has a tremendous amount of usefulness for a lot of lovely things. So we look forward to that portfolio continuing to pay off, returning capital back to the holding company and going from there. Hal?

My question relates to Slide 18, the Newtek Advantage is designed for deployment by banks and credit unions seeking to modernize their experiences for the clients. Is this something like a Platform as a Service that you're offering to banks? And could you expand on it a little more? Have you got some banks and credit unions in pilot or explain more on that.

Yes, this is an interesting one. So we go to banks and credit unions and make offers to them to help them raise deposits and make loans under the program. So you'd say, well, why would you do that? Well, we'll be the payroll provider, we'll be the merchant processor or in the lender service provider, -- they'll pay us a fee to maybe to service the loans or to do the kickouts. I will tell you this is not an easy sale because you've got to cut through why am I letting the fox in the henhouse. I will tell you, we've done business with partners like UBS, Morgan Stanley, Raymond James forever. And we do not take their deposits. We don't take their customers. The NewTracker system gives a great audit trail for that. So this program is a great program for depositories to partner with us. It's available, and we've had some that are taking advantage of it, but it's at very early stages.

And if I have one follow-up on that last comment you made about maybe for SMBs from 2020 to 2023 was kind of the great financial crisis. I don't think that view is widely understood.

No...

And -- maybe that was. Yes. But that was tapered over with a lot of PPP loans that helped out quite a bit. But for 2026, 2027, based on what you're seeing now, can you give us maybe a macro outlook that you're seeing right now based on the phrase below is their cost of funds is down about 1.25% to 1.5%. That's helpful.

Inflation, although it's still positive, the rate of growth is slower. It's methodical. It's not spiking up in their face. There's a lot of slack in the business. Some of the businesses are having problem with employees and employment, particularly with losing undocumented workers. But -- I mean from Q2 to Q3, and I've indicated and we'll announce it Q3 to Q4, the portfolio has stabilized to improve in NPLs, both in percentages and in absolute dollar amount. So we are seeing less stress on that portfolio. I think that's an important announcement. I'm sure my Chief Legal Officer will be man, I had said that comment. But this is what my belief is at this point in time. And Frank sweating bullets, so is Pete. Hal, any else? Thank you very much. Ivan?

[ Ivan Jimenez, Greenholder Corporation ]. My question relates to the future as assets are held, particularly there was a cursory mention to digital assets. And I'd like to know what -- I would think the company, Newtek would be well positioned to take advantage of the Genius Act and the -- let's say, the transition towards alternative and digital assets, particularly stablecoins. So if you could -- someone can highlight, there's a cursory mentioned, but if you could highlight more as to how that could apply to the net digital platform of Newtek.

Sure. I'll try to differentiate between Bitcoin and I'll call it stablecoin. We're -- we don't have any interest in Bitcoin. We -- it's historic value, it's not transactional. It's not a currency. We have no -- we have nothing to do with Bitcoin. Stablecoin is something that has utility. And we do plan on having it on the menu. We have a partner that we'll be using. We're not going to be spending ungodly amounts of money creating our own stablecoin nor are we initially and maybe forever going to use stablecoin to gather deposits. Andrew has tremendous experience. He created a stablecoin at Flagstar Bank, New York Community Bank. Frank also very familiar with it from Signature Bank as well. So we've seen what's good about it and what can possibly be problematic. The value of stablecoin and putting it on the menu is that, first of all, for international businesses, it's great. You get rid of the currency risk and you're able to move money with some level of immediacy, so it's valuable. Two, for businesses that do business, on Saturday and Sunday and for whatever reason, they want to see the asset versus waiting for their Visa or Mastercard to batch out or in the middle of the night, we believe we have customers that would like to have it as a choice. What does it mean? It means their customers are going to have to get an app. The customers are going to have to use the app. So for B2B, it's a lot easier. In other words, if I'm a business and I'm constantly paying this party and it's international, it's not a big deal to use the app. You pay with the app, you get rid of the currency risk, it hits. And then the business easily has the ability to turn that into cash at a finger snap and they're not waiting and they're not transferring and they're getting paid a rate on their money. So there is application there. Our goal as a provider of the best solutions in the Newtek Advantage, you can move money through credit card, debit card, by the way, we have our own debit card with big interchange because we're not a $10 billion bank. So the utilization of that debit card, which should be a line item and should be something we really push to get utilization should be valuable to us. ACH and wire, invaluable. So if you're a business, don't you want to go to one place and see every place where you're sending money and receiving money and then get analytics for that as well? The answer is yes. You don't really want to go to three or four places. You don't want to go to Fiserv or your merchant processor, go to your bank and then you want to go to one place and see it all. Therein lies the Newtek Advantage. And also in terms of sending and moving money, it's payroll. It's payroll. You want to be able to have payroll, you want to see your merchant batches in the Advantage. You want to be able to see your ACHs, your wires all in one place and be able to get analytics and have it integrate today only QuickBooks, but down the road, it will be other accounting packages as well.

Guys, I just want to thank you guys for doing this. I think it's extremely helpful. Chris Lahiji, LD Micro. Two questions. First, has -- can you, Barry, give us kind of a little bit of color on how the appetite for M&A has changed for Newtek year-over-year? And then my second question is, do we really have a publicly traded comp that you guys kind of use as a North Star or a guiding light?

Thank you, Chris. So first question, relative to the M&A market, it's off the charts. I mean the bankers that we work closely with that specialize in M&A for banks, they haven't been calling me lately because their phone is ringing off the hook, okay? So I mean, there's -- they're all lined up to do deals. Everyone is buying and a lot of people are selling. So the -- and by the way, parties that weren't interested in owning a bank for the obvious reasons are now interested in owning a bank. So the value of an OCC chartered franchise has just gone up through the roof. So that's a good thing for us. Secondly, comps. There isn't one. The best comps, I believe, are some of the ones I mentioned, the Lending Clubs, the SoFi, Enova/Grasshopper, technology-enabled banks. Some people compare us to Live Oak. The only thing that's consistent between us and Live Oak is we both have a government-guaranteed loan program that we're good at. But apart from that, they're not -- they don't acquire customers the way we do. By the way, they do an amazing job in creating technology and spinning it off for huge sales and gain on sale. Everyone is happy about that. But God forbid, you put a fair value on ownership interest and like, oh, what is this? But if you sell a business, and I don't blame, it's a cash sale. I get it. But I think the point is Live Oak is probably not a great comparison of ours. But if you look at their ROAAs, ROTCEs, they're just different. By the way, I wish I had the market multiple. So I appreciate the question. But we're going to get there.

Steve, another one for you.

Thanks, Bryce. So, Barry, just maybe following up on SBA originations. Your guidance is essentially flat year-over-year for originations. I noticed you made the comment about shrinking as a percentage of your balance sheet in future periods. Just kind of curious here, rates have come down, as you mentioned, better economic setup for borrowers. Kind of normally I would think of you maybe originating more in 2026. But maybe is it a change in some of the SBA rules or maybe a change in some of your underwriting just to tighten the box? I noticed like the number of originations or daily referrals is at 600, I think it was 800 before. Like is there a little bit of change maybe underneath that we should be thinking about with regard to USB originations?

Yes. And Steve, I appreciate the question. I think what you will see at the end of January is clearly diminished volume in 7(a). Now we've confirmed our guidance. We're going to deliver the earnings numbers. Part of that is the government shutdown. This was the longest government shutdown in history. Part of it is the SBA regs changed, and they changed in a bigger way than I thought they would have when I got asked this question in July or August. Some of the issues are how the SBA actually does their business. They're now doing their own OFAC and CBR checks, which might be different than how we do them. And then you got discrepancies and you can't make them go away even though they may or may not be wrong. In addition to the issue of making sure that every owner, even a 1% owner has to be a U.S. citizen. That showed up in a more prevalent manner than we would have thought or anticipated. In addition to not being able to utilize an SBA loan to refinance a merchant cash advance. So these things have been problematic. We also have tightened up our credit score guidelines somewhat. And from my perspective, as long as we could satisfy the customer. And the one thing I working with Pete for 22 or 23 years. I've never had to worry about him pushing loans out to make numbers. It's not a good thing. It's not what we want to do. It's why we've been around for 22 or 23 years. So you will see diminished 7(a) loan closures for this year. The projection for next year, we've made a few changes that I think due to the technology, due to new alliance partners coming on because that stuff is constantly coming going. So, Steve, for example, if you previously had an alliance partner that was doing business in the categories that you can't do it anymore, all of a sudden, those referrals come down. So it's always coming and going. We're always shifting and making changes in the business. We have a couple of monsters that we're talking to that could be a game changer for all aspects of our business. And we think we feel pretty good about where we are. I mean the one thing I'm not overly concerned about at the current market multiple, anything with a 2 handle is a pretty good EPS. So the key here, keep the car going, keep it on the tracks, don't make bad loans. That's what we've been -- that's what we've been doing over 25 years. So -- but I do think that the dominance of the 7(a) business, it's less and less important to us. It's still important. I'm not throwing the baby out the bathwater. We're really good in the business, and we're going to continue to be good. We just want to continue to do it at the high level that we've done it over two decades.

Barry, there's one more here from the webcast we're at. About 3:10. I don't know if you want to.

Yes, let's take one more and then we'll call it a day.

It's similar to Emily's question, but it's around capital allocation and how the Board thinks about retaining capital internally, buybacks, dividends? How do you all think about that at the Board level?

I think the Board, obviously, and we meet frequently, I would -- my directors earn their fee. They'll probably now be asking me for an increase. But it's pretty hard. I mean, in the past, I would basically say, I'm paying people for this, but no, no, they earn it. So -- and I speak to them very frequently pretty much every weekend on an off basis, not all of them, but a good chunk of them. And I think that they're cognizant of all the stakeholders, the creditors, the employees and the shareholders, and they're constantly paying attention to that. Obviously, from a stock price, this has been somewhat painful. We're not necessarily the most popular people at a cocktail party when your stock is down. But on the other hand, they've looked at the business performance and opening up depository accounts, making loans. not having any surprises with our regulators from the standpoint of what our expected provisions and charge-offs. So they're extraordinarily pleased. Relative to the concept of -- I'm just going to make this -- whether you're paying a dividend or buying shares back, that's financial engineering. I mean, if you can buy stock back below your tangible book, it clearly always makes sense. If you could pay a nice dividend, that's really important because if the stock price goes down, people are being rewarded for waiting. So we don't see those things dramatically changing. I think that the most important thing that shareholders can focus on, is this a business that I now understand it's got tremendous technological advantages. over its competitors in the space. I have a greater appreciation for what they're doing and the accounting and the cash flows. It's a company that's been around for 25, 26 years. There's tremendous insider participation and ownership. That's not changing. It's never changed. And they're good risk managers. So not to say that it could never happen, the likelihood of us blowing up after doing this for such a period of time and being very clearly invested in the business ourself is less likely than a management team that's typical at our competitors that doesn't have the ownership mentality. So we're very appreciative of everyone attending. We had great attendance here today, people tuning in and really listening. We're not going to hide from the fact that we are not simple. We don't fit the mode, and we are more complicated. On the other hand, all this stuff makes a lot of sense. We're all invested in this. I could tell you, there's nobody on this front for here that doesn't work 70-plus hours a week that gets e-mails in the middle of the night from some strange person and works very hard for the purpose of creating a successful business. If you create a successful business and you do right things for the customer, everything follows through. So I can't thank everybody enough for traveling and attending today and also being very appreciative of the patience as well. Thank you.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.