Q4 2022 NewtekOne Inc Earnings Call

Speaker 2: The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 11.

Speaker 1: We.

Speaker 2: To ask a question during this session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question. Please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Barry from president and chief executive officer. Please go ahead. Mr.

Speaker 3: Thank you operator and appreciate everyone joining today. Good morning. My name is Barry Sloan, president, CEO and founder of New Tech One. I'll be doing the call today from Las Vegas, Nevada, where I'm at a structured financial association conference for asset backed securities.

Speaker 3: And I certainly appreciate attending the call with me today is Nick Young, our EBP and Chief Accounting Officer. Also Nicholas Young, our President and Chief Operating Officer of New Tech Bank National Association. And John McCaffrey, our Chief Financial Officer of New Tech Bank National Association. We're excited today to close our chapter out.

Speaker 3: a business development corporation. This will be the last time that we're reporting financial results as a BDC. We withdrew our BDC application with the SEC on January 6 when we acquired New Tech Bank National Association and on a going-forward basis will be reporting as a financial holding company, which we've been for

Speaker 3: little less than approximately 60 days for now. Most of today's call will focus on our final financial results as a BDC as well as our forward projections as a financial holding company, extremely important, as well as a dividend declaration that the company just made.

Speaker 3: for its first quarterly declaration, as well as a potential forecast of dividends going forward. So I think today is a watershed mark. The transformation that many of you have been waiting for is finally complete. We've had a lot of things that have been transforming. Shareholders have been transforming, operations have been transforming, capital has been transforming.

Speaker 3: I think it's important to note that the company had no earnings forecasts in 2022. We had dividend forecasts, but no earnings forecasts because we didn't know actually when the bank transaction was going to be completed. So with that said, we want to try to move forward through the presentation, give people clarity on how we sit.

Speaker 3: call that obviously are interested in investing in a financial holding company, owning a very unique technology oriented bank. And we clearly have a lot of things that are transforming. I would like to call everyone's attention to the forward-looking statement slide on one on the deck.

Speaker 3: For those people who want to follow along, the deck is hung on newtech1.com, at www.ene.com in the Investor Relations section, and the presentation will also be archived there.

Speaker 3: On slide number two, we could talk about recent events. We acquired National Bank of New York City on January 6th. That acquisition was completed. We withdrew our application with the SEC to be regulated and report as a 40-sec company using a different kind of...

Speaker 3: County, Fortexect County, which is now will be doing to consolidate the three active county, which we welcome. And we acquired the 59-year-old nationally chartered bank.

Speaker 3: known as National Bank of New York City and renamed it Newtip bank. We also at the same time Renamed the holding company new tech one. I will continue to trade under the existing stock tiffers symbol and EWT and important to note that we are a financial holding company that is positioned itself as a leading business and financial solutions company

Speaker 3: to a very important economic demographic in the United States that we refer to as independent business owners.

Speaker 3: using an SBA definition of SMBs. It represents about 50% of non-form GDP. It represents 9 out of 10 businesses in the United States. And most of the net new job growth in the United States comes from these enterprises. So we've been serving this community for a long period of time. We have been building our platform of business and financial solutions for clients.

Speaker 3: And by owning a bank and being able to put this all together in the new tech and damage, our plan is really very well positioned for the future. We're excited about it. We really look forward to reporting and developing our business model and serving our client based. I think it's also important to note that as we go forward as a financial holding company and we transition.

Speaker 3: Certain assets like New Tech Merchant Solutions, New Tech Technology Solutions, the valuation of the payroll company, the insurance company, which were part of NAV from a fair value basis will not be counted in tangible book value from an accounting perspective going forward. As a matter of fact, the insurance company will not be counted in tangible book value from an accounting perspective.

Speaker 3: We believe that they'll be going into and we'll report on this the end of the first quarter into the financial holding company at approximately, you know, plus or minus zero basis.

Speaker 3: So that's approximately about $17 million that I would refer to as fair value, which if you look at a share can of 24 million, it's almost $5.6 a share. So for those of you that are trying to look at the company based upon a multiple of tangible book on a gap basis, pretty hard to do. We're definitely a different unique company requires a bit of evaluation, but we think we're unique in terms of we are positioned to be able to.

Speaker 3: We're all earnings over time, raise capital over time, which is what we're able to do as a BDC, but we all have to be dependent upon constantly selling equity and deluding shareholders. We're very excited about our future and look forward to reporting on our results and telling everyone about our unique technology enabled bank.

Speaker 3: as well as differentiated financial holding companies. So let's move to slide number three. We rename the company to Tech One, which I think is appropriate, because we believe we're the one company that partners with clients.

Speaker 3: to help improve their business. We also believe we're the one company that will make our business owners more successful. So rather than do what most other financial organizations do today, maybe take the positive thing, make them alone, we actually give our clients an asset. And that's in the new tech advantage, just to talk extensively about on our January 18th presentation.

Speaker 3: The new Tech Advantage is a great solution for our business owners. We have 1.0 on our screen. We'll be developing it further and we'll talk about the new Tech Advantage in future presentations. So we're very excited about the advantage we realize that our clients typically go to their, the pository institution three to five times a week, maybe 12 to 20 times in a given month, and that we're going to be able to.

Speaker 3: position ourselves with our clients that they'll be able to see. Number one that we offer all these great solutions for them without necessarily having to bring it up. They'll be able to store their organizational documents there. They'll be able to pay a roll. They'll be able to see the merchant processing data and statistics. They'll be able to look at the web traffic statistics. They're actually going to get an asset from the organization rather than just quote unquote, kick the depository money. So once again, very excited about the opportunity. The new tech advantage is.

Speaker 3: the real secret sauce and the value going forward to our clients. The low hanging fruit obviously is the fact that we're no longer be constrained by two to one leverage ratio as a BDC. And the ability to raise less expensive liabilities in the full of core retail deposits, which

Speaker 3: Today, and it's a differential of, you know, eight and a quarter approximately to say 4% depository money plus borrowing commercially at a 55% of the dollar haircut versus 100% in the bank. So you could see that the NAF really works in our favor, when you'll be able to see that, particularly on a going forward basis as you analyze our earnings dreams.

Speaker 3: Slide number four. So in the fourth quarter, final period and 2022, I think the most important lending highlights clearly one of the key features of our business historically has been the ability to execute on our SB7A loan business, which in 2022 we funded a record 775 million of loans. So in the fourth quarter, I think the most important lending highlights clearly one of the key features of our business

Speaker 3: that was up from 362 million and when you look at our growth forecast going forward, we wanted to tone that down a little bit, not to say that we can't produce those numbers, but we forecasted $885 million for 2023 and a little bit of an increase. So there's clearly some upside in those particular numbers, but we wanted to be comfortable in forecasting going forward. But the 7A business has clearly been a flagship.

Speaker 3: One of the benefits of our new structures and financial holding company is greater diversification of revenue streams. Unless of a dependency, gain on sale income, which has been, I would refer to it as not reoccurring income, but a reoccurring event. We've had gain on sale for 20 years. It's pretty predictable. And make a loan. We sell 75% of it in the form of government guaranteeing to the street. And it's a pretty good gain.

Speaker 3: This was what enables us to get returns and equity net of charge to us of 30% of our business. It's been a very good business for us and it's why we generate return average assets or return on tangible common equity that clearly exceeds other financial institutions.

Speaker 3: So in the fourth quarter, we did $188 million worth of loans. We frank with you in the fourth quarter. We slowed some of our activity down to save our capital to be able to put cash resources into the bank because you really can't move things back and forth. You know, from a bank holding company into a bank. Thank you.

Speaker 3: We actually didn't fund any 7A loans in the last two calendar. 7A loans in the last two weeks of December , but we technically are busiest months.

Speaker 3: We kept the pipeline going and we're rolling that forward. But I think it's important to note that a lot of what we did in the fourth quarter of 2022 was positioning ourselves from a capital perspective and a financial perspective to become a financial holding company is reanticipated closing the bank deal on January 6th.

Speaker 3: On slide four, when you look at our forecast, we're forecasting $170,5 million of fuel for loans for the 2023 guidance. We think that's fairly, fairly, you know, not very aggressive. And obviously, we always look to clearly meet or exceed our targets.

Speaker 3: And the big growth area obviously is a nonconforming CNI loan business of which we did a securization in January of 2022. Important to note all loans that have been done in that business originates in 2019 are performing. There's never been a default and there's never been a charge of in that particular portfolio. And I can point this, we'll be financed at the financial holding company with more expensive securization.

Speaker 3: and joint venture financing, but still generating high returns on capital which we'll talk about. The 7A and the 5.04 business will be financed in the bank once we get the PLP status moved into the bank. I also note that we will diversify our loan portfolio.

Speaker 3: I refer to it as conforming CNI and conforming investors to the reloans. These are the types of loans that are pretty typical at all banks, meaning bank standards, bank guidelines, greater equity contributions, shorter, free-pay schedules of loans that are doing three years, doing five years with the loans, with all packed with loan components, and typically are done at Pytomarge and this will.

Speaker 3: diversify our portfolio, which we think is a good thing having a barbell pool of credits. Slide number five, our history as a BDC was we paid out a lot of dividends. Our life as a BDC, 330 million dollars in dividends and distributions. And we're proud of the fact that we were able to return that cash back to shareholders. And on the going forward, we'll continue to maintain.

Speaker 3: A dividend policy for as far as my I can see, but obviously share appreciation is important. We could talk about the structural differences between a BDC and a financial holding company. We pay $275,000 and 75 cents in dividends and distributions in 2022. And once again, I want to...

Speaker 3: You'll put a five point on this to transition and transformation is over We're now a financial holding company and we've been acting that way for approximately a little under 60 days And I you know do want to repeat we gave no earnings guidance in 2022 And we didn't give any clearly for 2023 as a BD so you're 2024. So I have no idea

Speaker 3: where some of these bullets or concepts or projections are coming from. But I will also point out that

Speaker 3: people have been waiting for a dividend announcement as a financial holding company, so we'll talk about that declaration. And we also have, I guess, developed a 2.4 million shares short, according to NASDAQ, get our outstanding shares, which is about 10 percent. And that's a fairly interesting fund. I'm going to do that, I guess, the markets will deal with on a going forward basis.

Speaker 3: Slide number six.

Speaker 3: So on slide number six and slide number seven, we are doing our final report as a BDC. I must say these are not particularly impressive numbers. However, I think it is important to note.

Speaker 3: For people that are tuning into this quote for the first time and trying to follow us in a bank the adjusted investment income for the calendar full year was obviously a profit We say it's adjusted because a non-gap number and the important aspect of you know that adjusted NII of 51.9 million is that includes gain on sale which gain on sale

Speaker 3: from a BDC perspective is not yet. So historically, our NII, with the exception of the PPP business that we did in 2020-2021, we've always been at an NII loss. So, going forward, NII will have a totally different meaning as a financial holding company, net interest income. Instead of investment income, I look forward to the transition, I look forward to consolidated.

Speaker 3: financials and to be able to be fully transparent and all different verticals with all the analysts, we put a ton of data out there so analysts can begin to build their own models and develop a following that we really haven't had for the last 12 months. We've kind of been floating in isolation and frankly we have lost quite a few shareholders that love that flow through structure and the full dividend which wasn't taxed, it got taxed on the individual basis instead of us paying tax.

Speaker 3: But the results for the financial holding company are readily apparent on 6 and 7. I think the way we look at things on a going forward basis, we're pleased to say as we sit here today, we have put out an estimate of where we stand with a very well capitalized tank which will go through that.

Speaker 3: We have a very well-positioned financial holding company. We have great earnings projections and a great future going forward. And we think we conservatively marked up portfolio in the fourth quarter to reflect the reality that a market market basis, which you have to do as a BDC, is reflect the facts.

Speaker 3: did interest rates went up 4 to 4.5%, they closed the capital end up. So it made sense, I will say this, we've seen, despite the fact February hasn't been particularly pretty, but January really recouped quite a bit of value from a fair value perspective. As a matter of fact,

Speaker 3: If you look at the government guarantee market, the SBA lending, it's actually on a gross basis of four to five points. We think the uninsured market will somewhat follow in that footsteps. We didn't see any major credit deterioration in that period of time. So when you look at the rationale for gain on sale from the government, he's going down, the lagging amount of rates.

Speaker 3: high volatility and velocity and rate hikes, the lagging effect of the SBA business only changing in a rears on a quarterly basis really affected the prices which we'll talk about. So we think there's a lot of good things going forward with respect to Q1, our futures and financial holding company, and we look forward to continuing to report.

Speaker 3: On slide number eight, we could take a look at our loan closings and pipeline. So if you look at the top portion of it, it's not particularly impressive, it's flat. I think of what's important to note is that we looked at $2.1 billion, which was loaned so far in 2023. So obviously we're very selective up from $1.7 billion in 2022. In units, 3597 individual businesses came to us looking for financing. Now the approval rate...

Speaker 3: I can explain. That's a approval, I believe, from underwriting. It's important to know it's hard to get loans through pre-quality into underwriting, but we've really cut down loans that actually put a full credit memo together and got turned down in credit. A lot more selective in picking through things. I should note that we are typically rejecting 99 and change percent of the loans that come through that process function at the top part of the page.

Speaker 3: We're still getting a lot of demand. We're being a lot more selective. A lot of people are qualifying, but we believe we're very confident that we'll be able to hit the projection numbers out that we have in the market as we've also tightened up on underwriting criteria. We should talk about. On slide number nine, our first quarterly dividend declaration is a financial holy company, important to note on January 17th in our forecast to investors and analysts that call as archive. We had a 16 cent projected.

Speaker 3: a forecast to dividend for our first quarterly dividend. So the board declared an 18 cent dividend for the first quarter. It did that in anticipation of hopefully being able to keep that dividend constant and least for the calendar years. So it did that with the concept that it believes in its forecast, it believes in its ability, it's a percentage of total earnings. I think that's important to note.

Speaker 3: So, you know, the headline risk goes, oh, they cut the dividend. Well, it's not like we cut the dividend and our earnings are, you know, falling about the part here. As a matter of fact, we're paying taxes and we'll talk about how earnings flow through in the different accounting, particularly with the effects of seasonal and earnings per share. These things are fairly complex, but when we pick up the analyst's coverage, people start to understand what we're doing.

Speaker 3: I feel fairly confident that the historic track look and the company has been around for 24 years, 22 years of public company really has developed some great process and solutions in the market. We just got the right financial structure for the current economic environment which you'll be able to demonstrate for the course of this presentation.

Speaker 3: So, dividend that was declared is payable on April 14th. Shadows of record on April 4th. That's our first quarterly dividend as it's an it's a holding company and we're hopeful and believe that that dividend will be maintained quarterly for about a year. Then we'll revisit obviously if all of a sudden the earnings go from 185 in the midpoint to three of ours at the midpoint.

Speaker 3: On slide number 10, as of February 17th, that was a track record version of the S&P in the Russell, I guess the market, is enjoying the fact that we're being able to execute on our plan, be recognized by the Federal Reserve.

Speaker 3: and accept their application and allow us to be a bank holy company with financial holy company designation and the option of the controller of currency looking at our business model and feeling comfortable that we can capitalize the bank which we've been able to do and want it successfully. So the market is anticipating good things going forward and hopefully that will continue.

Speaker 3: On slide number 11, one of the reasons why we switched over, you could clearly see that over the course of 10 years, lots of 2000 stocks outperform BDCs. So this is another reason why we think this is very beneficial to shareholders, because from a category standpoint, we're excited about potentially the added to the Russell. There are some firms on the street that have indicated that we could pick up as much as 2.1 to 2.7 million.

Speaker 3: share purchases by just being added to the Russell. I'm sure some of that activity has already occurred as people do jump it, but we haven't been named to it at this point in time, but given the market cap and the code of the Russell, it looks like that has a good possibility of occurring.

Speaker 3: Slide number 12, valuation going forward. Obviously we talked about financial holding company being regulated by the Federal Reserve Bank of Atlanta, up at the FHC area. That would be the Tech One. And we clearly talked about no longer reporting.

Speaker 3: as a BDC and using 40s active counting, we'll be using 33s active counting. And we're all excited about that. And we're reiterating our EPS projections of 17 to two bucks, 28 to 320. There's some geographic changes in there. If you take a look closely, I'll see some things to move around a little bit. Obviously you could see it from the volatility in the market. And from a timing perspective, also things.

Speaker 3: things are changing dynamically as we move forward. On slide number 13, things to focus on, capital ratios, you'll see that the banks of city are very well, very well capitalized. We'll talk about that. The joint venture that we've created, which will enable us to do, we believe, 600 million of not-conforming loans in 2023 and a billion in 2024 and appointing category generating.

Speaker 3: high returns and equity of between 20 to 30% risk adjusted. And our joint venture partner has committed up to $100 million in equity for us to work together. The ability to lever more, we'll talk about the value of that. You'll see that our return and the assets between three to four percent return and tangible common equity, 20 to 30%. And we could do this because we're not doing home loans, car loans, owners.

Speaker 3: All consumer products, which frankly, you know, the Bank of America as well as far goes with scale and tight margins are able to do that business that's not too last well. Stick to the things we do really well that we've developed particularly on the lending side over the course of 20 years. And obviously our non banking activities, we think will really further develop payment processing, tech solutions, payroll insurance, all featured in the new tech advantage. And these areas of non banking revenue.

Speaker 3: you can see when you show your projections going forward, are very valuable and they actually have different multiples and banks aspire to get that type of activity. And you can see that our financial holding company is different and unique. Most financial holding companies, your bank holding companies, they don't have much up at that area. And most of your needs are generally solely from the bank.

Speaker 3: You can see that we had a pretty good mix between the two and we'll demonstrate that in the future slide. On slide number 14, key financial metrics. Once again, we talked about 7A. We think there's potential upside to those forecasts, but we're comfortable with those numbers today. Both on the 7A and the 504.

Speaker 3: the conforming, C&I and CRE loans about 140 million in 2023, not a big number, but we'll start to blend those basic vanilla, you know, multi-family industrial type loan.

Speaker 3: ABL loans, which are lower margin, but cannot be funded with core deposits, which really couldn't be done in the non-backing environment. And also the non-conforming CNI business that we've done. You know, we had to break that a little bit through COVID, but we turned the program back on. We have a nice pipeline. You can see on the cash premium for 7A, we've got a model of 10. The market is...

Speaker 3: almost the point north of that at this point in time so those numbers are somewhat muted and only 10.5% for 2024. New financial holding company debt raise, that'll be the recent answer of the existing baby bond debt. We have an S3 that's been put in with the SEC. Hopefully that will get cleared in the near future that will enable us to do

Speaker 3: publicly traded debt as a financial holding company Egan Jones recently rated that debt triple V plus So are very pleased with that rating by Egan Jones We'll also be able to do preferred stock and also common equity which Obviously if you look at our projections, we don't have a plant currently raise it that

Speaker 3: always based upon market conditions, but the benefit of being a financial holding company is you could use the retained earnings. You're not constantly raising shares that we had to do as a BDC. As a matter of fact, my recollection is we started off as a BDC with about 15 million shares plus or minus and that grew to 24 million shares today.

Speaker 3: That's quite a bit of share issuance. And we are still able to grow our earnings and our dividend will now. We could use leverage with lower cost of funds for core deposits versus the commercial financing. This plan where confident will work out very nicely. Let's go forward to slide number 15.

Speaker 3: There, wouldn't be for a second. Okay. So, thinking into the new tech one, that's the financial holding company, you know, financial summary and perform a couple of things, want to point out, once again, you know, the earnings per share projections, those are mid points. We range 170 to two bucks, 2023 after tax.

Speaker 3: and 280 of 320 in 2024, share count flat, give it in for share. I mean, that's, you know, if we continue on the track and hit our forecast, that's most likely the dividend that we'll pay, that should be a qualified dividend because we're taxed already.

Speaker 3: And as our earnings grow, we'll either, you know, we'll obviously do things to benefit our shareholders through share by share by back to dividends. You can see we're able to grow our earnings substantially at the, you know, at the close of the year, from about a billion oh sixty two. We believe at the end of 2023 a billion seven the end of 2024 to point one billion. We believe that we'll be able to.

Speaker 3: grow our total assets in a balance sheet and and still stay within our plan and financial results for the regulators You could see their return average assets and this is a beholding company that returns an average assets or returns an average changeable Common equity are greater at the bank, but at the holding company we have that expensive debts everything's consolidating up It includes the bank data, but obviously things we do with the banker Typically more profitable with it the holding company

Speaker 3: Still fairly robust numbers for a financial holding company. Then interest margin kind of skinny because of things we do up at the holding company. What's again, a funded with that expensive debt. You can see the cost of funds also very high. You'll see the difference between the cost of funds on a consolidated basis versus what we can do at the bank. You can see the efficiency ratio from 2023 to 2024 starts to decline. And we're hopeful that we can get to better efficiency ratio numbers going out in the future as we start to take advantage of the operational leverage to be the bank's prosperous, pro vocalist, branchless, BDO nurse.

Speaker 3: institution providing business and financial solutions to business owners. And literally just around things, I once again, we emphasize the EPS projections for the next two years. Moving to slide number 16. The important items on this particular slide, this is Newtech Bank National Association. You're looking at around 260 million of capital, $77 million ofervation for significant economic issues and projects in climate and political cooperation. The Web shadow computer and city drawing building leadership and by expressing trust inukan. The Web shadow computer and city drawing building leadership and by expressing trust inukan.

Speaker 3: Common equity. You know, that's, that was their aspiration to get the bank. Holy funded, that slowed some of that activity down in the fourth quarter to be able to move the money around that we needed to do. And you could see that our capital ratios, this is very well capitalized bank, approximately 30% on PC versus total assets.

Speaker 3: and then you get to C-T-1 ratio closer than 40%. So we feel pretty good about these numbers and we're excited about that. We'll obviously use that capital over the course of time. Slide number 17, I think the important aspect of this slide is to see the breakdown of income coming from the bank versus non-bank entities up at the holding company. Everything will consolidate up, but you could see that it's reasonably well balanced. And we get a lot of income.

Speaker 3: coming from non-banking activities. That's important. Obviously the bank's got the 7A business, the 504 business, the conforming business, but you could see that the other business lines up with the holding company will be important to us and substantial as well as the things that we could do from that activity for our clients. On slide number 18, I think the important aspect here obviously is the earnings per share number.

Speaker 3: On slide number 18 and dividend per share we kept it flat that's just modeling purposes, but if we're you know generating three bucks, you know we'll look to do things for our shareholders relative to buybacks or dividends that always keep in mind. The importance of what I'll quote shareholder value. Go on forward to slide number 19. I think the important aspect of this slide would be once again looking at the growth of.

Speaker 3: Total assets of new tech one that's the financial holding company You know 1.06 billion 1.7 billion 2.2 billion

Speaker 3: And very nice growth, look at the growth in total equity. 189 million, we raised $20 million of preferred stock. That is not calculated in 189 million. It is reflected in the 231 million for total equity. And then going to 26 million in 2024.

Speaker 3: Look at the growth in total equity. 189 million, we raised $20 million of preferred stock. That is not calculated in 189 million. It is reflected in the 231 million for total equity. And then going to $26 million in 2024.

Speaker 3: Next slide, number 20. I think important to note, some hold co financial metrics, return on income and equity close to 23% in 2024, 30% in 2020, excuse me, 2023, in 2024, 30.6% return on tangible common equity, 26.5, 34. You don't see these in banks. You just don't because banks don't specialize in the areas that we do, which is to focus on that independent business or small-time business or with all these different great assets for them.

Speaker 3: to take advantage of through the new tech advantage, the full suite of services. We'll feel very good after developing this business model. Over the course of 20 years, these are businesses that we've owned and 100% of an operated, some cases 10 years, some cases 15, some cases close to 20. You can see the return on average assets can solidate 3.28 to 3.75, 2023, 2024. Also important to know, look at the cost of funds, fairly high. That's going to start to decline.

Speaker 3: because the deposit story is really out in the future. You know, we start to really work on getting deposits through our payments division, our payroll division, and really coupling deposits from a lending perspective. So we hope to beat that. We hope to get metrics. Nick Yan will be reporting on deposit growth on a going forward basis quarterly. He showed you how many accounts you open, how many dollars, cost of funds, et cetera. So we're excited to be able to report that. But, you know, we're going to get this.

Speaker 3: business up and running and we will clearly try to beat these expectations and early conversations with clients who have tremendous receptivity about offering same day funding on payments, ability to pay people through payroll faster to move the depository accounts to us. I'm excited about our future in these particular areas and the ability to ultimately get better economy is relative to a pretty important category for banks to be respected in a deposit funding.

Speaker 3: So, on slide number 21, I think the most important thing we talk about here really relates to equity at the bank. You see the growth in the equity, there really is no need for equity contributions at the bank.

Speaker 3: fairly self-sustaining with our ability to retain earnings both at the bank and obviously that the venture holding company which is clearly different from a BDC that's got to pay up between 90 and 100 percent in earnings. Moving forward to slide number 22.

Speaker 3: You know, some general metrics for the holding company, assets, PC ratios, at the bank, you could see more robust capital ratios will be utilizing that as we grow the balance sheet in the book of businesses in the bank. Slide number 23, some earnings forecasts for the holding company. We're trying to average assets, we're trying to change the common equity, fairly robust numbers. Slide number 23, some earnings forecasts for the holding company.

Speaker 3: The banks cost the deposits, but you see you're low because we've got lower costs of deposits from the legacy national bank in New York City, but they're also match-funded against lower costs of assets that were commercial real estate loans or fixed. That's kind of a match book. But we clearly do want to grow that deposit business. Once again, I do believe that is a more of a 2025-2026 story. We hope to be able to.

Speaker 3: beat that particular guidance that we're getting here today. Slide number 24. Those of you that are not that familiar with us as an SBA lender, we want to include this. You can see that we've been in this space for close to 20 years from...

Speaker 3: 2023, that's our history. We've Curitized historically, which is the only way to fund our business, long-term, match funded with 12 S&P rated transactions beginning in 2010. Everything's been held there rating have been upgraded. The garbage is low in size, it's not an insurance piece, 151,000 so we get tremendous diversification.

Speaker 3: Our loans are now being done at prime plus 300. That prime plus 275, the SP has changed those rules and that's how we can our gain on sale numbers, particularly because it's calendar year. And once again, I do want to repeat that we've got more, we have better pricing right now than we put into our guides. With pricing can be pre-volatile, we want it to be conservative. I always want to be able to over, over, deliver and under promise.

Speaker 3: So net premium trends on slide number 25, important. We've used 10% or 10% a par. As I've said, we believe that numbers probably a point higher. But look at the Ford quarter, 8.72. So clearly that was low. We believe that's based upon the fact that banks, plus the funds were rising dramatically. And these loans are just going forward. So that negative drag carry, we really do believe, really diminish this. The other thing that we're being told is.

Speaker 3: The bid for these S&P government guarantees floaters picked up in Q1. A lot of competitors in the banking space had difficulty in their portfolio. They had to mark down assets and the floaters tend to gravitate more towards a part evaluation. So we do think that we've got a bounce back to equilibrium in pricing, which we would look forward to and we'd show up in our earnings per share numbers. Slide number 26 shows the benefits of increasing a portfolio and as we get that nice spread income, which we plan on benefiting from at the bank level.

Speaker 3: You could see that our interest income grew significantly in Q4 2022. And frankly, as the coupons start to adjust, particularly in the first quarter, that spread income will grow because we actually had monthly change over on our cost of deposits commercially, but the loans adjusted quarterly going forward. So this will pick up, and we should see a nice number.

Speaker 3: Although, once again, the point is out. This is NSBF. This is a non-bank lender. It'll be held at the holding company, in the runoff mode. And once we get the PLP status transferred over, all the originations will be done at the bank using Cecil accounting, which we'll talk about a little bit as well.

Speaker 3: Slide number 27 talks about a non-cooled trends. So you can see that we've had a favorable trend there. These are done at fail value. I think it's also important to note that historically we really haven't reported the rest of the loans that we originate, which you could see on the next slide, slide number 28. So on slide number 28, we've originated 401.504 loans, have not experienced.

Speaker 3: a single default or a charge-up to date. And the company has also originated 132 million of the non-conformative invention allowance. Also, no defaults are charged with. So, next is a $500 million allowance with a big zero. The cruel is a big zero in charge-offs. So, we'll, going forward, be reporting our loan business on the spaces, which I think will be in the market a better depiction of the fact that, you know, SBA loans are written to a different standard, with a different charge-off rate. However, you also get the benefit of a fairly high coupon. Today at PrimePlace 300.

Speaker 3: with where prime is versus a potential future for rate adjustment, you're at a 10-3 quarter coupon. You look at the funds for or for a quarter, it's a very healthy net interest margin on a floating rate asset, not including the fact that you get a gain on sale on 70% of the government guarantee fee sales. To business, we've done over 20 years of work for us and we're dedicated to it and we will continue to grow that business very nicely.

Speaker 3: On slide number 29, we have tightened the running writing criteria in 2022 to do the changing market conditions, clearly bringing in the higher FICO and SPSS scores. The total portfolio has increased by about 10, but understand that, you know, that's just 2022 originations going on to the existing book of business. So without actually calculating what that number is, I would guess could be 20 to 25 basis points higher in SPS scores in 2022 versus...

Speaker 3: historical reginations, but the total portfolio is about 10 higher. We're stressing the portfolios at current levels of rates, so we're actually turning down quite a few more loans as a percentage. And it's important that one of the things we experience through in COVID is making sure the businesses can basically withstand four to eight quarters of a difficult time versus their expectations and projections going forward. Also letting the business of the ability to liquidate collateral or unencumbered borrowing power, a supply, higher expense increases or revenue increases. We've been in this business for 20 years. We survived the late 2009.

Speaker 3: and survive the pandemic. And as an on bank lender, I think that's quite a vegavana. We now look forward to being able to participate in the banking environment and diversify our funding sources. Moving forward to slide number 30. You can see that our currency ratio has held up very nicely. Slide number 31 is our class example of SBA 7a.

Those people are familiar. This is how we create cash when we do a seven-day loan. And 32 is the income slide generates that risk-adjusted profit recognized. I think it's important to point out for the analysts that are looking to model our business going forward. The primary earnings engines for New Tech 1, New Tech Merchant Solutions held up at the holding company, $6 million of EBITAs, approximately in 2022.

We have three-point-three-point-three million of EBITDA, new tech insurance agency, payroll solutions, also be consolidating up as an engine. The new tech small business finance, the SPLC, will be up at the holding company and run off mode. We are still originating 7A loans out of new tech small business finance in January and February . That will be reflected in our Q1 earnings. We look to move that into the bank and move the PLP status over. We've actually gotten 10 loans approved at the bank using GP and NPLP.

during the process of being funded after that, we should be eligible to move that POP status over. And then obviously, New Tech Bank, originating profits and then distributing and divinating cash up through earnings. Slide number 34 talks about how we do 504 loans. 35 talks about the types of returns that can be gathered.

in SB 504 loan origination. So you can see from 504 loan, seven a loan, so you can generate high returns on equity. Slide number 36, I non-conforming conventional loan business, which we're really proud of. This is a business that's performed very, very well. We did a colonization. I believe it's NCUL 2022. It's modeled on Intex. You can look it up. We have a single default in that portfolio.

And we're looking to expand that business. You could see that on slide number 37. We have a joint venture partner that's indicated they'll put up to 100 million of equity, the fund business out of a JV. We'll fund the equity, they'll fund the equity. We have leverage lines in place. We put out a press release. We raised $300 million in Q4 to be able to leverage our business over and do these types of loans. And we're pretty excited and we've cranked the model up and we started.

the JV started client loans in the fourth quarter of 2022, and we feel that we'll have a very robust pipeline in business. The advantage of the nonconforming loan portfolio, which we see on slide 38, is we typically originate these loans at 3.5 origination points, 100 basis points of servicing income, that'll go into the bank, the origination fees are going to the bank, and the loans will be funded up at the bank holding company through the JV, or the holding company's balance sheet.

We do hedge these loans that typically fix for five years and they adjust over the five year treasury with a floor at the origination rate. We believe that it's four to five year duration. And once again, we anticipate really good volumes in these. It's a good investor demand, even at fairly high rates. Today we're on the street at 10 1 1 2 11 gross for the 8 credit 11 to 11 1 1 1 1 1 1 2 12 1 1 2 13 for the sheet type credit.

Those are the gross rates we service for 100 base points and then they go into the joint factory. We believe that we generate approximately 20 to 30 percent returns an equity net up anticipated loss of their main frequency and so for the poor folios performed very well, primarily based by the fact that we'll loans at personal guarantees similar to the SBA program and very, we typically lean towards loans that have strong guarantors. So we talked a little bit more about the program on.

Slide number 39 talking about discretization that we did, which will model our future exits over. Slide number 40, as we wind up our discussion before we go into the financial criteria that Nick Ledger will report on. You know what a different 60 days. We say 60 days through under 60 days, but we're clearly operating as a BDC. So we're looking forward to reporting for the first quarter of 2023. Can you book versus NAV?

The major difference I talked to you about before is about $170 million of value between the market value of the payments business, tech solutions business, payroll and insurance that are winded up going into the financial holding company that will go into the basis of plus or minus zero versus the fair market value on NAV. So obviously most banks and bank holding companies don't own a lot of these assets. They're basically filled with home mortgages and home equity lines and car loans things that all accountants can't even book. Now, I won't accountants can't even book these assets.

that throw of reoccurring income very valuable, have actually greater market multiples and typical bank, they're going in and not adding to tangible books. That's something that we'll have to address and maybe create a non-cap statistic with adjusted book value. Then you look at after tax net income or EPS versus net investment income and adjusted net investment. Well, we definitely enjoyed our days of BDC. We paid a lot of dividends, but we're happy to get rid of all those metrics and criteria that may be difficult to evaluate who you are, who you're paid.

a healthy dividend distribution over our life, and we'll continue to pay what we think is a top quartile type dividend of 4%. That's not a secret. We've been talking 4% for 12 months. So for people to be surprised that this is dividend at the current stock price. But anyway, people are gonna have their own takes on things, but...

We just laid the information out and give a lot of information on these particular calls and hope people pay attention and listen, but these are things that we've been talking about for 12 months. When you look at the positive versus commercial bank line, as I said, let's say I use a round number, the positive 4% versus right now, if I draw on like commercial bank lines 8 in a quarter, I only get $55 cents on the dollar, which means I got to use 45 cents of equity and order to grow up to keep raising equity and keep the looting shareholders. Totally different story. So between the lower cost of funds, the ability to lever up to 10 to 1 over the course of time, very, very beneficial structure going forward.

And obviously, the fourth quarter, 22 gains on sale premiums versus the current expected prices, more quickly different. I think we pretty much saw decade lows in Q4. That's on everything. For those people who tried to do anything in the capital markets in the month of December , or we had to do our market. That was clearly a low point. And the market seems to bounce back nicely in the month of January . So we look forward to bounce back in gain on sale prices as well as.

the value of loans of which NSBF will be valued on a fair value basis. So we should get some recoupment of value there as well. On slide number 41, from an investment summary perspective, we would love the market to focus on us, the financial holding company, that we've operated a little under 60 days, oil capitalized entity, that our first rodeo would be in a public company for 22 years. We've been able to manage all different and trade environments, credit environments.

These projections are based upon what we've been able to do in the market with assets that are really generating higher returns risk adjusted than what a normal bank does. And we've worked hard at developing these businesses. It's been a 20 year history in 7A business and the 504 business. But then the payments business for 20 years. So when you take a look at the new tech advantage and see the cost towards you're going to be able to pick and choose and get a real asset eventually bringing it deposits over. We're fairly comfortable with these projections and we hope to be able to deliver them and actually hopefully be able to beat them.

We are very comfortable declaring a Q, our first quarterly dividend as a financial holding company at $0.18 that's based upon the fact that we're confident that we can produce these numbers and this is a nice payout ratio versus earnings. And important to note that we're a growth oriented differentiated technology enabled financial holding company. We look forward to continuing delivering the types of results that we've done. Most importantly, we appreciate the opportunity for you to listen in today so we can disseminate information that people can make investment decisions on which frankly have been, you know,

We were going to go in this direction. And we couldn't do it because we didn't know when we would get approved. We didn't know what would be approved. Well, now we know it has been approved. We know we are approved. We own the bank. It's just a different story. And this is the beginning of a new period. And quite transformational. We look forward. And figured by to. For exactly counting the BDC. And a lot of investors that want to buy in.

a technology enabled by and we think a well-positioned to really succeed in this particular structure. Now I'd like to pass the baton to Nick Ledger, actually the counting officer to do a good answer with you. Thank you Barry, good morning everyone. You can find a summary of our fourth quarter 2022 results on slide number 43, as well as a reconciliation of our adjusted net investment income or adjusted NII on slide number 45 46. For the fourth quarter 2022 we had a net investment loss of $5.4 million dollars or

provides 23.1 million of total investment income, a 6.9% decrease over the fourth quarter of 2021's total investment income of 24.8 million. The primary driver of the $1.7 million decrease in total investment income was primarily due to the 4.6 million of dividends from the portfolio companies in the fourth quarter of 2022.

as compared to the 9.8 million in the fourth quarter of 2021. In addition, interest income increased by 5.2 million, resulting from a year-over-year increase in the accrual loan portfolio, combined with the primary increases in the calendar year of 2022, which increase 425 basis points year-over-year. Everything income increased by 27% to $3.8 million in the fourth quarter of 2020.

and $125,000 from mobile money. Focusing on total expenses for the fourth quarter of 2022, which increased by 5.1 million compared to Q4 of 2021, that is mainly driven by higher interest-related costs due to the 425 basis point increase in the prime rate, which was 3.25% at 1231-2021.

and increased to 7.5% at 12.31, 2022. Realized gains recognized from the sale of the guaranteed portions of the SBA loans sold during the fourth quarter, total $15.4 million, as compared to $18.1 million during the same quarter in 2021. In the fourth quarter of 2022, NSBF sold 252 loans.

for $144.8 million at an average premium of 8.72 percent as compared to 223 loans sold during the fourth quarter of 2021 for $126.6 million at an average premium of 12.28. The decrease in realized gains attributed to lower average premium prices in the secondary market when comparing to the fourth quarter of 2021. NSBF sold 13% more units in the fourth quarter of 2022

as compared to the fourth quarter of 2021. Realized losses on SBA non-affiliate investments for the fourth quarter of 2022 was $8.5 million as compared to $3.1 million in the fourth quarter of 2021. Overall our operating results for the fourth quarter of 2022 resulted in a net decrease in that assets of $2.2 million or $0.9 per share and we ended the quarter with nabs per share of $15.25.

Oh, now I'd like to turn the call back to Barry. Thank you. Operator, we'd like to open this up to Q&A. Thank you. As a reminder, to ask a question, you'll need to press star 11 on your telephone.

to withdraw your question, please press star one one again. Please wait for your name to be announced. Please stand by. We'll recompile the Q&A roster. Our first question comes from the line of Kristen Love with Piper Sandler. Your line is now open. Thanks, and good morning, Barry and Nicholas.

First off, just looking at your targets and origination volume targets, we're expecting significant balance sheet growth with growth in non-conforming CNI from 600 million in 2023 to about a billion in 2024. I'm just curious how comfortable you are with those targets specifically, the non-conforming CNI does as it implies. And if you turn your objective

A lot of borrowers that would normally go to a bank and they're pitched-growing borrowers, they can't make the debt service coverage ratio based upon the three or five year repayment terms or bullet. So we're really getting better quality borrowers to go into this side of it.

go to a bank and they're good strong borrowers, they can't make the debt service coverage ratio based upon the three or five year repayment terms or bullet. So we're really getting better quality borrowers to go into this side of it. So...

One could look at this, and go, gee, you've never done it before. Well, we're okay with that. We're very comfortable with what our pipeline looks like in our ability to get it. We think a majority of this is gonna start flowing through in the third and fourth quarter as our pipeline builds. On the flip side of it, we've probably been more conservative on the seven A side. I think that we certainly could make things up on the seven A side, but typically, the non-conforming book does tend to be better credits. So we're more comfortable and would prefer to hit these numbers and targets and put this on our books.

and reduced and be a little bit more picky on the seven-night segment. But we do have the flexibility to go in either direction. So we're not totally uncomfortable with the admin numbers. Mind you, we're projecting out two years in a market where the five-year treasury moves by 50 basis points in two days. So not an easy thing to project, but we do it. We've done it for, you know.

23 years of public company and we're comfortable with it, but I would comment that if there is something that is Less proven it would be those volumes, but on the other hand the ability to

to use 7A numbers and the 504 numbers is fairly muted as well. Great, thanks very much. That's helpful. And then I guess just drilling a little bit deeper into the credit quality. I know you said that you might be a little bit conservative on the 7A volume side, but say if the exam growth is not conforming as much as you'd like and have to grow or grow or got to know that you had a better tempered setting than that you've given up on logaudio paraphrasing you

grow the 70 side a little bit. Curious what your kind of big picture views aren't are on credit quality over the near to intermediate term. And then just related to credit quality as well. I saw on slide 27, you give the non-acquools as a percent of loans at care value. I'm just curious if you have that number on a cost basis as well. Giulia

Well, I think, Chris has a B.C. Let's go back and look at the history. We've always had fairly healthy in this space, not a cool number because it's just a function of these types of credits. On the other hand, you do get paid for making these types of loans with respect to the coupons and the government guarantee and again on sale. I think we look at the current environment. It's amazing.

the three and change weeks ago, people were thinking of rate cuts. Well, all of a sudden, three weeks later, they're going from a rate cuts to rate hikes. And it's like they went right through, isn't there a middle ground? They raise rates a little bit more, they stop and hold it three or two, which is probably the likely scenario. We do not see like a breaking economy. We see...

a slowing economy, we see certain sectors performing better than others. But no, we're not looking for, you know, this is not 08.09. There's a lot of liquidity in the system. And our customer base has gotten a lot of support from EIDL loans, from PPP loans, and ERC tax credits. And many of the individuals got government support as well. So we think our customer base is pre-liquid. And obviously we are forecasting.

You know, hired defaults and we've had historically, but we think we're fairly well-reserved. And when you take a look at our numbers going forward from a Cecil perspective, we'll have some pretty hefty reserves in that particular calculation when the loans are done as a bank using Cecil as a matter of fact.

When you do do Cecil, which is one of the reasons why the numbers ramp, you get fairly heavily when you make the loan because then you have the lifetime of cool and you're not putting the loans on the books in a premium anymore. You're putting it on a par, which is different than fair value that we experience historically. Hopefully that gives you some background that answers your question. Yeah, thanks very much. I'm not going to be careful, but just one on the non-a-cool as a person alone to add cost.

I don't, I have to pull that out of the queue. It might be a percent or two higher than that number. We've written these down from a book perspective. That's important to note and from a taxable income perspective on the ISBDC. Great. Thank you, Barry. And I appreciate you taking my questions.

Thank you. Thank you. One moment for our next question, please. And our next question comes from the line of Paul Johnson with KVW. Your line is now open. Yeah, good morning, Barry. Morning, everyone. Thanks for taking my question. So I just wanted to clarify.

on your respective equity investments in the JVs. Or how should we be thinking about the return of those as you guys ramp that going forward?

The way to think about that at this point is those returns are based upon income that's generated at the bank.

and servicing income going forward as well as the equity in the JV. So the equity in the JV would be a subset of the total amount of income that's generated from the activity. Important to note that we really get a lot of leverage out of our intakes that we take all those referrals and some of those referrals now go into non-conforming. I'm going to file a-

So as you and others probably appreciate you, writing on us as a bank, obviously you are a BEC coverage, so we appreciate that. But you'll start to see the stuff starts to ramp going forward, particularly when you look at, for example, the Cecil.

You do a loan in Q3, Q4, you've got a huge loan loss reserve and you haven't got the coupon for a couple of months, right? So because you're not valuing and fair value, you're taking the hit. Now that starts to flow through in the following year when you've got a really nice high coupon versus your cost of funds and your margins starts to pick up. So

This is a new accounting. It's new modeling. And we look forward to questions like you've asked today because it really will shine a light on what we're trying to be going forward and how this business model is going to be very advantageous to our shareholders.

Got it. Okay. So I understand it's obviously your, your, we're talking about 20, 30 percent. We're looking at the bigger picture of what you're generating off of those portfolios for the business. Well, thank God today everything consolidates. So we don't have to deal with portfolio companies. I am.

Everyone's going to be able to look and have full transparency into how all these businesses are doing and they're going to be segmented in the case and the cues. And you guys are going to be able to model the business.

and have a better understanding of the full value creation far more easily using conflatedated accounting and the right segment reporting than you historically have been able to do, you know, as a BDC, that BDC is bad, but only businesses will.

based upon their value and we reported that way and it worked well. But now we could take advantage of lower cost of funding, diversified liabilities. We can diversify the loans that we make, as now we can also add higher quality loans, which to the book will minimize.

you know, on a total basis in types of loan losses, but at the end of the day, we make money on both. You know, we'll make money on a tight margin that has, you know, 15 basis points of charge off the year, which is what most banks do, but most banks can't grow their business because that's their whole portfolio.

and types of loan losses, but at the end of the day, we make money on both. We'll make money on a tight margin that has 15 basis points of charge off a year, which is what most banks do, but most banks can't grow their business, because that's their whole portfolio. They're locked.

They're all making residential loans, car loans. They really haven't developed the expertise that we have in these greater risk-bawared type opportunities. So that's kind of where we look to hang our hat, make our mark, and then down the road, we're more effective in a deposit category, which we hope to outperform. You know, what we've stated that we're gonna do there. That'll also pick up. So we have...

We have good aspirations with respect to really benefiting from low cost deposits with all the bundled solutions that we have coming out of the advantage diversifying our lending book to have a credits as well as less than a credits in the SBA business. So I think we're well set up for the future. Thanks for that Barry. Just a few more questions.

working around that. Yeah, it's in motion and you know the employees are now in the bank. The loan just still being made generally out of NSPF but we put gun to get approvals in the bank. We have funded 7A loans in the bank but they're done GP versus PLP. We anticipate that transition over in the very near future.

Okay, thanks Matt. And then I'm just sort of wondering, you know, if you know, it might be nice to know, and if you don't have it, or you can't share it at times, that's okay. But I'll ask, you know, do you guys have any sort of stats? You could share it as far as, you know, service utilization of, you know.

clients, you know, customers that you guys have, you know, what are the, I guess, sort of some of the comments, sort of crossovers, opportunity of services you might have to offer, you know, between your borrowers and you know, clients for two other parts of your company.

Not at this time, it's something that we will look to report in the DexMal 40 pages plus. And I will say that.

That has been a greater challenge historically, which is one of the reasons why acquiring the bank and rolling up the new tech advantage is going to enable us to have business owners go to their dashboard or their business portal, which being the new tech advantage. Oh gee, I didn't know I can get insurance for you. Oh, I didn't know I could store my documents for you. Oh gee, I didn't know I can get insurance for you. Oh gee, I didn't know I could store my documents for you.

to do that. So we appreciate the question. And one of the reasons for being to be the one company for a business to be able to do more things than just one thing with us. So we feel pretty good about that. Sure. Last question. I'll leave there. Just wondering maybe you get your thoughts and touch on some things, obviously, through your your devices, the production course. So this Hernandez is only a great reason. Julio.

your marks, just, you know, I guess how are, you know, things progressing now, if the merger is closed, I mean, do you feel things are on track? Deceptive to things are, you know, a schedule, you know, what are your, what I guess, your confidence in the projects you guys provided in terms of like efficiency ratios, and would you expect that I guess providing a sort of incremental update?

there as far as your projections, you know, the graphic order. Yeah, I do think things like efficiency ratio, we will be out there projecting and not projecting, but, you know, coming up with those numbers. Obviously, at the moment, you've got a lot of things moving around. You just brought up, for example, the PLP status, right? So, you know, at some income and in the first quarter that might.

go to NSPF that would normally be in the bank. So I think in the second quarter and the third quarter, you'll get a better sense of income and expense being.

put together. We obviously do have W. Policy and issues that we'll be dealing with as well, but we'll be able to report that because I think when you think about our business model, vocalist, bench, branchless, pediolis, and bankrollist, and the capital that we've got, we will be able to deliver.

really attractive efficiency ratio is going forward. We're an organization that has people available to our clients, they're on camera, they have a personal relationship with these people, it's virtual, but that's the world we're in now. The world going forward is still our customers want to have

somebody to talk to, which is just typing data into a piece of software into an endless rate. We'll be able to do that and we feel pretty good about the business model. Really giving, we give a lot of information out. We've been complimenting on that. We're going to continue to do that. I appreciate the question and that.

It's really one of the values that we believe are going to be able to derive. But I will tell you, if the heck of a lot of you see it from here, get on this call and talk about it then to actually execute on it. So we have a lot of work to do. And we'll get there. We have a history of being able to deliver those types of results and do it. It just takes time.

Thank you. One moment for our next question. And our next question comes from the line of Scott Sullivan with Raymond James. Your line is now open. Thank you.

Thank you. Hey, Barry. Congratulations to you and your team. You guys definitely had the vision on the SMB opportunities.

at the time back then and building, I think the best mouth strap at the time, using the BDC structure. Yeah, I kind of like an analogy here in this.

You're graduating now top of your class from a sort of intensive master's PhD program and again kind of skating to where the puck's going Which you know, I think might be the best structure of financial bank holding

So with that, we have a couple of questions. Really, how relevant is this key for report to the future?

Well, I think Scott, I appreciate it. I think that it's a more time and it's really the hand off into the financial holding company. So we obviously, we paid out, I think, a $17 million dividend on December 31.

We pay the owner of the bank $20 million. It puts $51 million of capital into the organization. And that, really we have to get that done. Because that's what we put in our application. That's what we have to deliver on. So I think that people looking at, first of all, I don't know how people are coming up with me. That or we've been, I don't know where that got these earnings.

company, we're now regulated by two great regulators, the Federal Reserve and the OCC. Our status is positionally at a good pipeline. We raise capital in the markets in January , a pre-tough of time the race capital both preferred from an institutional investor and bonds with our

should be plus rating. So we're in a good spot. Now we've got obviously a transition going on. We're moving people into the bank. We're changing payroll. Shareholders are transitioning. Despite the fact that we've talked for 12 to 18 months about a 4% yield without putting in given a number on it, because that would be improved. I mean, today we're able to cross over.

the concept of being improved by having the board actually declare the number and declare the number based upon the earnings because it would be improved to really talk about. I don't think, you know, impatient shareholders understand that, but for people who would like dividends, it's great, but the reality of it is...

Stocks that are able to retain earnings and generate high return on common equity, you better off. Look at what we can do with that money. It's funny, I'd say, what did you do with your dividend? Well, I held it in cash. How did that do against inflation? Or I put it in the stock market that was bound 20%. So I mean the reality of it is.

We're still going to pay a very nice dividend, which will be qualified. We're going to retain earnings, which is very beneficial to the company. So we don't have to pollute as much as we used to. And, you know, we've done the math. That's that's going to work long term. And we will hit our metrics. You know, that's where our head is at. That's where our goals are at.

And we start to hit these numbers all of a sudden, you get your following and that's where we're at. Right now we're picking up some institutions which is valuable. Hopefully we get included in the Russell which will be very valuable. Hopefully the 2.4 inch or accelerates will have realized what she now the dividend is declared. And the party is over and the seeking alpha headlines are behind us. And that's where we're at.

They'll do what they got to do with their 2.4 million share short. And could you touch on this a bit, but can you give us a more color into the state of your customers, the SMB market? Well, look, it's interesting, you know, in that our customers, they're affected. Everybody's affected. The employees are affected. Customers are affected. The state that nobody is affected by a 450 basis point interest rate height would be just ridiculous. So, you know, for people not to expect.

a reevaluation of assets is just silly. I don't know where their heads are at, but it just doesn't work that way. You went to college, you got to figure out the cost of capital is higher, you run it through the modeling assets are working. That's just what it is.

Getting down to our business customers, look, I have to say our business clients are their operators or entrepreneurs and through COVID, a lot of people changed the way they do things. They reevaluated their businesses, they got much more efficient, they got rid of things that were frankly wasteful because they were afraid they didn't know whether this is going to be their last meal or they could leave their house. So a lot of them got more efficient on the other hand. A lot of them didn't.

I say a lot of them, you know, it's a small percentage on the extreme that aren't good operators and, you know, they're going to have to deal with the fact that their interest expense is higher and they're going to have to be able to make those payments. However, a lot of them really got bailed out by the government subsidies of those three programs, so they're in pretty good shape. And that's kind of showing up in our numbers. Although we do anticipate that we'll get back to more, you know, normalized historical charge ups over time. And we think we've got the right math because we've done this for 20 years. So we've seen.

the Extreme 0809 and we've seen the pandemic numbers. So we think we've got the right numbers in our models and the right reserves and we'll be able to manage this in their customers who we speak to from a servicing perspective. I think we have 40 people in our servicing department. So we're talking to our customers unlike most banks where they make a loan, they they won't have a conversation. That's not been our school and we are very communicated with our borrowers and we're speaking to them regularly particularly when we notice that their payments are slower. You know, we're ECSU money out of the account. The money's not there on the first week. We know we need to make a phone call.

Fantastic, I appreciate that. And you might have touched on this also, but speak a little bit further on your pro forma on tangible common equity. Yeah, look, I think, you know, depending upon, you know, how you define this, you know, not including an adjustment. And if you include the preferred stock in there, you're probably looking at it. And I have another calculation, you're probably looking at, you know, eight or nine bucks. I'll show you more. Alright let's go down, Go ahead and get your price back. Now,

including the preferred stock in there. But that wouldn't be common, that's just equity. Sure. But I think that if you were to add back $170 million on $24 million shares, it's almost $6. So now you could basically say it doesn't work. But then again, if you want to buy a bank at, you know,

1.1 book or a book or a point eight. There's eight, I'd say, 8,000. It's 4,000 of you could buy. They just don't grow. So if you want to grow organization, you're gonna have to look at one like ours where we have a payments business, a tech solutions business. And only so the businesses that generate reoccurring income don't suck up capital. And therefore, worth getting there paying more money.

They should be part of the valuation, but you shouldn't in the accounting gaps is zero amount or we could put them in with good will, but that's still not going to make it, you know, when you quote get to that tangible common equity, but then again, you know, we don't have, you know, a balance sheet that well, actually, once we have balance sheet, we don't have the assets that hit the balance sheet.

And that's just the accounting treatment. So, people, someone who had understood us as a BDC, can trade it at a premium to BDC over most of our BDC life. I believe that we'll explain what we're doing, and we'll show the earnings numbers, and we'll keep quarreling those earnings. That's our desire, that's our forecast, that's our aspiration.

You know, that's capital asset pricing. You grow the earnings, you grow the dividend, people are gonna reward you with a higher stock price. If they're not, they're gonna get confident, by the way, you gotta deliver the numbers. So it's not like we're saying, don't put the price up there with that delivery numbers, but you start delivering those numbers, and you show earnings growth, which banks aren't able to show. You look at the return of average assets, or return on tangible common equity of most banks.

You're not near these numbers. That's the difference. So we hit those ROA numbers and the ROTC numbers.

The price will follow. Perfect. We'll get congratulations and best of all. Thank you very much. Thank you. One moment for our next question.

Next question comes from the line of Bryce Rowe with Be Rallyed Financial. Your line is open. Thanks, good morning, Barry. I appreciate the discussion here this morning and all the questions from the other guys. Wanted to kind of dive into your sources of fee income that you lay out, I guess on Plot Slide 17.

bank versus non-bank entities. I think you touched on this a little bit with Paul's question, but curious if you could just walk through kind of what the driver of the growth is at the bank, I would assume it's more, you know, gate on sale. And then the just the sources of non-bank themes.

on equity for the JPEs.

And, you know, we're going to put a lot of equity into that business. We don't show in the forecast.

material growth in payments, tech solutions, insurance, and pay well. Well, I think we'll get down to some more granular numbers going forward. As we report the first quarter and start to put marks out there, but I do appreciate the question.

in payments, tech solutions, insurance, and pay well. Well, I think we'll get down to some more granular numbers going forward as we report the first quarter and start to put marks out there. But I do appreciate the question. In the bank.

You're ready to get growth from the SBA business, and those frankly when you did the volumes, and we also have muted currently, being on sale numbers in the forecast version what the current market is. But you're also gonna get value from the servicing aspect of the nonconforming business and the fee income. So now, in the event that we're lower in those numbers,

We will have lower capital raising needs up at the holy company if that makes any sense. So we'll be doing less issuance You know, we'll have more capital because there is capital that goes into the non conforming business. It does eat capital Because it's more of this additional

non-bank types of financing where you got to put up equity, get a commercial bank line, you do a scuritization. It generates great returns, but the capital is expensive. I mean, down the road, it's a vote process that that business was ever able to go into the bank. And it might down the road if we can get the regulators comfortable with our projections. We didn't want to do that starting off a bank. We just wanted to keep the bank.

very simple, very vanilla, but you know, so far track record and history is pretty good. But right now using commercial financing, that's a pretty big driver of growth. In the event that that's not the case, we'd have capital will do a lot of other things.

you know, so far track record history is pretty good. But right now using commercial financing, that's a pretty big driver of growth. Any event that that's not the case, we'd have capital will do a lot of hundred things.

paid with creative dividends, buy back shares. If we felt strong about the seven-aid business, put more money into the seven-aid business, you're dealing with a fairly, you know, volatile environment. You know, what a different 60 days makes, we talk about that relative pest becoming a financial holding company for a Spina PDC, but also...

The difference between December and January was night and day in the capital of markets. February has been a little softer, but it looks like things are starting to turn around again. Because we're starting to see hints of a little bit of softness in here. So I was never a believer that it was going to be cutting rates anytime soon. And I'm not a believer that we're going to go much past 25 or 50. I think we'll go up there and sit there for probably a long period of time. And if that's going to just look at the map, but you can't raise interest rates.

by this amount of money without the economy slowing and it will. That's all I had very appreciate in time. Bryce, thanks for joining. I appreciate you participating today. Thank you. Thank you. And our last question. One moment.

Come from the line of Steve Olesio investor. Sir Yolanda is open. Okay. Thanks, Barry. I hope this isn't too low level for this discussion. But back in January for the bank, the savings account was supposed to be 4.15% then gradual increases.

year, one in two year CDE's. I'll have a 4.6% interest. And I don't know. Did it just become an accounting nightmare to have all the different interest rates? I was just kind of interested in knowing why the change. Appreciate it. And look, it's a very competitive environment right now.

And the CD rates I think you'll see are going up now on a relative basis.

It's still a heck of a lot better than the commercial finance rates that we've historically paid, which are currently in the quarter, probably no one up to eight and three quarters, but the Fed's next rain increase. So I think from our standpoint, no, it's not. Thank God we've got a great CFO and John McCaffrey in the bank and Nick Ledger.

as the president of COO keeping an eye on things with that the rates off where in place for the purchases coming on stream. So now we're able to manage this not a problem. Okay. I guess I just interest you as to why they're all the same rate though. They kind of didn't make sense to me when the...

change was the plan was for them to gradually increase with the length of the CD. Maybe I didn't pose that very well. No, no, I think it's posted well. And one might also look at the market and go, it doesn't make any sense either because the yield curve is inverted. And the overnight.

rate, you know, for banks is, you know, four to half or greater. One year treasury bills right now, I think you can get it 5% yield. So the only I could tell you is those rates are very much pegged to where the competition is in the competitive market for bank financing. Not necessarily pegged to what you think, a normalized yield curve should be. Okay. All right. Well, thank you very much. Thank you very much. Appreciate it. Thank you very much.

Thank you. At this time, I'd like to hand the conference back over to Mr. Barry Sloan for closing remarks. Well, I appreciate all the analysts we had. We are hopeful that we'll pick up coverage from, you know, maybe four to six over time with bank analysts. And I think that's going to.

really help tell a story of a bank that's different, a financial holding company that's different, and a company that's positioned to take advantage of the future, providing financial and business solutions to this particular important demographic, and I say that.

can be able to service independent business owners with feed-on-the-street sales force, with branches, with commercial bankers. Business owners today, they want their solution on demand. They wanna go online if they wake up in late in the evening or on a weekend, they wanna get somebody that could call to, wanna camera, we're positioned well for that business in the future. And the products and the solutions that we have.

a frankly better suited to that customer today. So we're clearly ahead of the curve, we're ahead of our time, and we're gonna grow into a really exciting company. We appreciate the following, the attention, and that we appreciate all the Alice and investors that joined the call today. So thank you very much.

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day. Thank you.

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