Q4 2023 NewtekOne Inc Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the NewTekOne, Inc. Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Good day and thank you for standing by welcome to the New check One Inc. First quarter 2023 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your tell us.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you that your hand is raised.

You will then hear an automated message advising you that your hand, just raised to withdraw your question. Please press star. One again. Please be advised today's conference is being recorded I would now like to hand, the conference over to your speaker today, Barry Sloane, Chairman, President and CEO of New Tech one. Please go ahead.

Operator: 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 Sloane, Chairman, President, and CEO of NewTekOne. Please go ahead.

Barry Scott Sloane: Good morning, everyone, and welcome to our fourth quarter and full year 2023 Financial Results Conference call. We're pleased to report our results to you this morning. My name is Barry Sloane, CEO and President and Founder of NewTekOne, Inc. Joining me today on the call for presentation purposes is Scott Price, our Chief Financial Officer of NewTek Bank, National Association and NewTek, Inc. In addition, we also have Nick Young.

Good morning, everyone and welcome to our fourth quarter and full year 2023 financial results Conference call. We're pleased to report our results to you. This morning. My name is Barry Sloane, CEO, and President and founder of New Tech One Inc. Joining me today on the call for presentation purposes is Scott price.

<unk> financial Officer of New Tech Bank National Association of New Tech.

In addition, we also have young.

Barry Scott Sloane: President and CEO of Newtek Bank, N.A., and Nick Leger, EVP and Chief Accounting Officer for Newtek 1A. I'd like to draw your attention to slide number one, which is our fourth quarter reporting as a financial only company. Excuse me, slide number one is the forward-looking statement. Chance to absorb that, and I'll go to slide number two. Slide number two, this is our fourth quarter and third full quarter reporting as a financial holding company. We acquired National Bank of New York City on January 6, so it took a while for us to get a lot of the assets and employees into Newtek Bank National Association. So I think it's important when you look at year over year comparisons. Q1 2024 comparison might be a little bit choppy versus Q1 2023, and therefore, when we also look at our 2023 performance, it's very difficult to do the comparisons as a prior BDC.

President and CEO of New Tech Bank N, a and Nick Ledger, EVP and Chief Accounting officer for new check one.

Let me draw your attention.

[laughter].

Slide number one.

Here's our fourth quarter reporting as a financial holding company.

Excuse me up slide number one as the forward looking statements.

Get a chance to absorb that and I'll go to slide number two.

Slide number two this is our fourth quarter and third full quarter reporting as a financial holding company.

We acquired National Bank of New York City on January six so it took a while to us to get a lot of the.

Assets employees into new take Bank National Association. So I think it's important when you look at year over year comparisons to Q1 2020 for comparison it might be a little bit choppy versus the Q1 2023 and therefore when we also look at our 2023 performance, it's very difficult to do that.

Comparisons caused as a prior BDC. However, I think it's important to focus on a quarter over quarter sequential comparisons and we had a really good year and quarter over quarter comparison, when you take a look at things like.

Barry Scott Sloane: However, I think it's important to focus on the quarter-over-quarter sequential comparisons, and we had a really good year and quarter-over-quarter comparison when you take a look at things like the portfolio of loans growing, net interest margins expanding, and deposit growth. We also now have six analysts that are covering Newtek One as a financial holding company. We've been able to demonstrate an ability to raise insured deposits quickly with a high growth rate through digital account opening. Also important to note, and we'll go into this a little further, we don't have the interest rate risk issues that are currently present in the industry. As you can see, our assets and liabilities are very well matched. We also believe that a return on average assets or a return on tangible common equity, and Capital Issues, when you compare them to the banking sector, are well-capitalized, very high, and also well-reserved. I'd like to now draw everyone's attention to slide number three.

Portfolio of loans growing net interest margins expanding and deposit growth. We also now have six analysts that are covering new tech one as a financial holding company been able to demonstrate an ability to raise insured deposits quickly with high growth rate through digital account opening.

Important to note will go into this a little further we don't know if the interest rate risk issues that are currently president and the industry. As you can take a look at our assets liabilities are very well matched we all.

I believe better return on average assets return on tangible common equity and capital ratios when you compare them to the banking industry.

Well capitalized very high and also well reserved against.

I can now draw everyone's attention to slide number three.

Barry Scott Sloane: So Newtek Bank National Association summary financial highlights focusing on Q3 to Q4 growth and the fiscal year 2023. If you look at return on average assets for the year, 5.76% at the bank. Obviously, very, very high for a bank.

So new Tech Bank National Association summary, financial highlights focusing on Q.

Q3 to Q4 growth in fiscal year 2023.

If you look at return on average assets for the year, 576% at the bank, obviously very very high for our bank as well as we get through the presentation explained why we are able to generate such high returns return on tangible common equity, 35% efficiency ratio approximately 50%.

Barry Scott Sloane: And we'll, as we get through the presentation, explain why we're able to generate such high returns. Return on Change in Common Equity, 35%. Efficiency Ratio, approximately 50%. These are really ratios you do not see in the banking industry, and a lot of it is based upon a very unique business model that focuses on returns on shareholder equity.

These are really ratios you do not see in the banking industry and a lot of it is based upon a very unique business model that focuses on returns our shareholder equity.

Return on assets and not necessarily growing a book of business, which is very typical and traditional in the banking sector also be able to being able to do it at a very efficient basis.

Barry Scott Sloane: Looking at, on slide number three, the margins, important to note, we obviously had increasing yield on loans as we began to add more of our Newtek-type traditional loans to the bank's portfolio that we acquired. Average rates on deposits were fairly stable from Q3 2023 to Q4 2023. We might have a little bit of an uptick next year as some polls, below interest-bearing CDs roll off, but we feel pretty good about the future for that. And Scott Price will talk about that going forward. And importantly, our net interest margin at the bank went from 3.49% to 4.43%. That's a pretty significant increase.

Looking at.

Slide number three the margins.

To note.

We obviously had increasing yield loans as we begin to add more of our new tech type traditional allowance to the bank's portfolio that we acquired <unk>.

Average rates on deposits were fairly stable from Q3 2023 to Q4 2023 might have a little bit of an uptick next year as some old.

Low interest bearing Cds roll off, but we feel pretty good about the future for that and Scott price, we'll talk about that going forward.

And importantly, our net interest margin at the bank, 349% to four 3% that's a pretty high increase in most banks right now if they are lucky they are stable with a growing marginally. So we're very proud of this particular accomplishment with respect to margin.

Barry Scott Sloane: And most banks right now, if they're lucky, they're stable, or they're growing marginally. So we're very proud of this particular accomplishment with respect to margin, all the while our capital ratios are strong CET1 at the end of the year, 20.94%. Total capital 22%, leverage 16.4%. So we look at, you know, why and how we're being able to do this.

All the while our capital ratios.

Our strong CET one at the end of the year $12, 94%.

Total capital of 42% leveraged 64% so we look at.

Why and how we're being able to do this obviously we have alliance upon.

Barry Scott Sloane: Obviously, we have a reliance upon the digital deposit channel for funding that works well. In 2023, we're excited about the opportunity to add the transactional lower cost deposit channel throughout 2024. We've also maintained a very strong capital position and a prudent risk-based tolerance. And when we talk about our reserves, our reserves grew to 310 basis points at the end of the year. We hope we'll gravitate up to 350 basis points

Deposit channel for funding it worked well.

In 2023, we're excited about the opportunity to add the transaction at a lower cost deposits throughout 2024.

Also maintains a very strong capital position and a prudent.

Risk based tolerance, and we talk about our reserves.

Our reserves grew to 310 basis points at the end of the year, We hope will gravitate up to 350 basis points in 2024.

Six or seven times normal reserve.

Barry Scott Sloane: That's like six or seven times the normal reserve of a bank in our particular space. Now, when you look at our loan portfolio, particularly in the 7A category where we're adding assets, we're a prime plus three lender, and we're able to sell three quarters of the loan at a 10 to 11 percent gain on sale. Now, important to note as we go forward, we'll explain why we feel that the risk reward on those loans is well calculated, it's well documented, and that we believe these types of returns we will be able to preserve them and also be able to withhold any increases in delinquencies or charge-offs as time goes forward. Slide number four, please.

Of a bank in our in our particular space now when you look at our loan portfolio, particularly in the seven eight category, where we're adding assets, where prime plus three lender and we were able to sell three quarters in a while at a 10% 11% gain on sale now important to note.

As we go forward, we will explain why we feel that the risk reward on those loans is well calculated it's well documented and that we believe these types of returns we will be able to preserve them and also be able just withhold any increases in delinquencies or charge offs as time goes by.

Slide number four please.

Barry Scott Sloane: Newtek One summary financial highlights. This is obviously the publicly traded holding company. Now we're transitioning more and more of the operating opportunities down to the bank, where we have a lower cost of funds and the ability to lever more. So we're working off of it. The holding company is the higher cost of funds that we've traditionally dealt with to run the business. You can still see a return on average assets for the year, 3.2 percent, and return on tangible common equity, 22.7 percent. These are all very, very attractive numbers for a bank holding. Average yield on loans is nine and a quarter. And our net interest margin expanded from Q3 2023 to Q4 2023, 2.62% versus 2.78%. We're proud of all these numbers.

You take one summary financial highlights. This is obviously the publicly traded holding company now we're transitioning more and more of that.

The operating opportunities down to the bank, where we have lower cost of funds and the ability to lever more so working off of at the holding company is the higher cost of funds that we've traditionally dealt with to run the business, but you could still see a return on average assets for the year three 2% return on tangible common equity.

22, 7%. These are all very very attractive numbers for a bank holding company average yield on loans in the quarter.

Net interest margin expanded from Q3 2023 to Q4 2023 to six 2% versus $2 seven 8%. We're proud of all these numbers take a look at our capital ratios also well capitalized financial holding company.

Barry Scott Sloane: Take a look at our capital ratios. Also, a well-capitalized financial holding company, GET1, 16.49. Total capital, 19.6. Leverage, 15.6.

$116 four nine total capital and $19 six leverage 15 six.

Barry Scott Sloane: Also important to note, we were able to deliver $1.70 in diluted earnings per share and $1.71 in basic earnings per share for the calendar year. This is the midpoint of our guidance. We continue to encourage the market and analysts to follow our quarterly guidance and our annual. Obviously, 2023 was a challenging year, about midway through the year, based upon issues that were related to the banking industry. Silicon Valley Bank, Signature Bank issues, and British Republic issues. It made it for a more difficult year.

So important to note we were able to deliver.

70, our diluted earnings per share of $1 71 on basic earnings per share for the calendar year that was the midpoint of our guidance. We continue to encourage the market and analyst to follow our quarterly guidance and our annual guidance.

Obviously 2023 was a challenging year about mid point through the year based upon issues that were relating to.

The banking industry sales.

Silicon Valley Bank signature bank issues first Republic issues. It made for a more difficult year, and we slowed down our alternative loan program that program, which you'll see in our pipeline reports coming up is back into full gear and that should.

Barry Scott Sloane: We slowed down our alternative loan program. That program, which you'll see in our pipeline reports coming up, is back into full gear, and that should... We restore some of the growth. Needless to say, you can see these numbers. We're growing very well. But with that particular program in place that is very much capital-driven, we believe that we'll be able to get back to higher growth rates in the future. Slide number five.

Restore some of the growth Needless to say you can see these numbers, we are growing very well.

With that particular program in place that is very much capital driven.

We believe that we'll be able to get back to higher growth rates in the future.

Barry Scott Sloane: These are common questions about Newtek One that I've had with investors almost everywhere. Why is your stock trading at the current market multiple? You know, why don't people understand?

Number five these are common questions about new tech one that I've had with investors just about.

Why is your stock trading at the current market multiple.

Why don't people understand somebody go through some of these I think will be helpful. First of all we don't have a desire to operate like a traditional bank. We have a lot more to offer to our clients and just taking your deposits and hoping they get along and we really look nothing like a small community bank first of all we're an OCC charter Nash.

Barry Scott Sloane: So I'm going to go through some of them. I think it'll be helpful. First of all, we don't have a desire to operate like a traditional bank. We have a lot more to offer to our clients than just taking their deposits and hoping they get along. And we really don't look anything like a small community bank.

Barry Scott Sloane: First of all, we're an OCC charted national bank. We take deposits using digital account opening and remote deposits and are able to do so in a compliant, rapid manner with much lower costs than the traditional way of hiring bankers, brokers, and PDOs. Important to note, we're focused on return on tangible common equity and RLAA, not what I refer to as the assets under management traditional bank model, where you make loans, get deposits, typically not interest-bearing deposits, which we think going forward, there'll be less and less of that in this particular industry. Basically, making loans, selling them, and getting various streams of income, which we'll talk about. Clearly, we have an over weighting of non-interest income versus traditional bank interest income.

Bank, we take positive.

Using digital account opening and remote deposits that are able to do so in a compliant rapid manner with much lower cost than the traditional way of hiring bankers brokers and <unk>.

To note we are focused on return on tangible common equity in a row.

Now what we refer to as the assets under management traditional bank model, where you make loans get deposits typically not.

Non interest bearing deposits, which we think going forward there'll be less and less of that in this particular industry and.

Basically making loans selling them and getting various streams of income in which we'll talk about clearly we have an over waiting of non interest income versus traditional bank interest income gain on sale.

Barry Scott Sloane: Gain on sale, payment processing income, servicing income, income from the insurance agency growing, payroll growing, and Newtek Technology Solutions, which will be divested between now and January of 2024. Our margins and returns are much higher than those of a traditional bank because of the way we lend on a risk-adjusted basis with more than adequate reserves and floating rate assets that work really well, A, for our customers, and B, for our shareholders. Many times I've been suggested, gee, you went to the small business market.

Payment processing income servicing income income from the insurance agency growing payroll growing and new Tech technology solutions, which will be divested up.

Between now and January of 2024.

Our margins our returns are much higher than that of a traditional bank because of the way we lend on a risk adjusted basis with more than adequate reserves and floating rate assets.

Well for our customers and be for our shareholders.

<unk>.

Many times I would suggest GE led to the small business market.

Barry Scott Sloane: And we think small business credit is going to get weak. We've been lending for over 20 years in this space. We've been through 2008, 2009. We've been through the flu pandemic.

And we think small business credit is going to get weaker.

We've been lending for over 20 years to this space, we've been through OE Onofre, we've been through the pandemic.

Barry Scott Sloane: We understand this market. We have static pool analysis going back over this period of time. We have 12 securitizations in the market. We have a very good handle on what our losses are, delinquencies should be, and we are very confident that our reserves are more than adequate. This is not a new situation.

We understand this market, we have static pool analysis going back over this period of time, we have 12 securitizations in the market.

Very good handle on what our losses delinquencies should be and we are very confident that our reserves are more than adequate.

Barry Scott Sloane: We know and understand small business credit. However, we were questioned whether we were able to raise deposits. Well, we did for $340 million last year, up from, I think, $140 million when we took over the bank. The ability to raise lower-cost transactional-based deposits, we'll be able to demonstrate that, and Scott may talk a little bit about that in his presentation. But that will definitely be a Q2, Q3, and Q4 event where we start to really grow that side of the business. We've had to put people, process, technology, and compliance in place. We hired Jennifer Merritt as COO of a digital bank, and she's brought in a great team of people.

This is not.

New situation, we know and understand small business credits.

We have a question whether we are able to raise deposits. While we did that for $340 million last year up from I think $140 million when we took over the bank.

The ability to raise lower cost transactional based deposits will be able to demonstrate that and Scott may talk a little bit about that in his presentation, but that will definitely be a Q2 Q3, and Q4 event, where we start to really grow that side of the business in fact to put people process technology and compliance in place.

We hired Jennifer Merit, a CEO of a digital bank.

She has brought to the great team of people and we've got the compliance dipped.

Barry Scott Sloane: And we've got the compliance department in there with Sarah Limones from the BSA officer. And we recently brought in our compliance manager, Julio Hernandez. So we're excited about our ability to grow that side of the business. We can't make an error in this space, so we've done it prudently, and that should improve accuracy.

Department in there with Sarah <unk> from the BSA Officer recently brought in their compliance manager.

Julio Hernandez, we're excited about our ability to grow that side of the business, but we can't make an error in this space. So we've done it prudently and that should drop the act.

Barry Scott Sloane: The cost of funds over time and improve our margins. Gain on sale. People say, oh, gain on sale. Nobody likes gain on sale.

Cost of funds over time and improve our margins.

Gain on sale of People's sale gain on sale and they'll be like gain on sale gain.

Barry Scott Sloane: Gain on sale for Newtek has been going on for 20 years. Quarter by quarter, go look at the K's and Q's. We originate loans; we sell them in the market. So our gain on sale isn't like a portfolio of securities in a bank or insurance company. Rates go down, bond prices go up, and you sell them for a gain. This is clearly a reoccurring event. However, it's not a traditional stream of income, and we do believe it's valuable and gives us a diversified stream of income. Yes, a bank or financial holding company can be a growth vehicle, which is sort of unheard of in the market and kind of unheard of from a banking perspective without just doing the traditional bank trade of acquiring another bank, getting bigger, and squeezing out the expenses.

Gain on sale for new Tech has been going on for 20 years.

Quarter by quarter, when you look at the Ks and Qs, we originate loans, we sell them into the market. So our gain on sale is it like a portfolio of securities and a bank or insurance company rates go down.

Bond prices go up and you sell them for again. This is clearly a reoccurring event. However, it's not spread income that traditional and we do believe it's valuable and gives us a diversified stream of income.

Yes, a bank or a financial holding company can be a growth vehicle, which you sort of unheard of in the market and kind of unheard of.

From a banking perspective.

Just doing the traditional bank trade of acquiring another bank getting bigger squeezing out the expenses that did that might not be an opportunity for us in the future, but it's not a core reason for existing today also important to note. We really strongly suggests that investors get to know what we do with payment processing solutions Tech solutions.

Barry Scott Sloane: Not that that might not be an opportunity for us in the future, but it's not our core reason for existing today. Also important to note, we really strongly suggest that investors get to know what we do in payment processing solutions, tax solutions, insurance, and payroll. Please visit our website. Slide number six talks about the different earnings engines for Newtek across different areas. So we have a very attractive, diversified stream of income flowing into the whole economy. Newtek Bank divvying up small business finance is the legacy portfolio in runoff, with very few operating expenses again. The other businesses are fairly well self-described in our case and on our website. I'd now like to turn slide numbers seven and eight over to Scott Price, who will talk about the data on these two slides. Scott?

<unk> solutions and payroll solutions. Please visit our website slide.

Slide number six talks about the different earnings engine for new tech across the different areas.

Very attractive.

Attractive diversified stream of income flowing up to the holding company.

You take bank, depending up small business finance as the legacy portfolio in run off with.

With <unk>.

Very few operating expenses against it.

The other businesses are fairly well self described in our case it on our website I'd now like to turn to slide number seven and eight two Scott price will talk about.

Scott Price: Thanks, Barry, and good morning, everyone. I want to focus most of my comments this morning on slide eight, given the time constraints that we have, but we saw a nice expansion in our net interest margin during the quarter. That's going to be driven by mostly lower funding costs, on a net basis relative to the balances. We clearly issued debt in the third quarter. We used those proceeds to pay down higher-cost debt.

The data on these two slides Scott.

Thanks, Barry and good morning, everyone.

I wanted to focus most of my comments. This morning on slide eight given the time constraints that we have but we.

We saw a nice expansion in our net interest margin during the quarter.

That's going to be driven by mostly lower funding costs.

On a net basis.

Relative to the balances.

We clearly.

Issued debt in the third quarter, we used those proceeds to pay down higher cost debt. We also saw our.

Scott Price: We also saw our borrowing costs, or excuse me, deposit costs increase 40 basis points. That was largely driven by the $92 million of CDs that repriced in the fourth quarter. We experienced good retention on our retail CDs that repriced and expect loans to reprice in the first and second quarters as we move through and try to eliminate the lumpiness in our CD portfolio. I'd point out that our loan portfolio's yield on that portfolio in the third quarter included a prepayment penalty. So that's why you see a little bit of lumpiness between the third and fourth quarters.

Borrowing costs or excuse me deposit cost increase.

40 basis points, and that's largely driven by the $92 million of Cds that repriced in the fourth quarter, we experienced good retention on our retail Cds that repriced.

And expect launched.

Loans to reprice in the first and second quarters.

As we move through and try to eliminate the lumpiness in our in our CD portfolio.

I would point out that our loan portfolio the yield on that portfolio in the third quarter included a prepayment penalty.

So that's why you see a little bit of Lumpiness in between the third and fourth quarters.

Barry Scott Sloane: We do rely on, as you can see in our deposit mix, we do rely on our high-yield savings product. We've seen nice retention in that product going forward. And, or excuse me, so far, we've seen minimal closures, and the seasonal slowness in deposit gathering is fairly muted for us, with deposit levels relatively stable through today. I'd point out the comment that Barry made earlier about business checking and business accounts. We do expect to roll that out in 23, excuse me, 24, and that will provide really optimal pricing, optimal funding costs on our deposit portfolio, and we expect an expansion as we go through the year into 24. So Barry, I'll turn it over to you.

We do rely on as you can see in our deposit mix, we do rely on our high yield savings product, we've seen nice retention in that product going forward.

Or excuse me, so far we've seen minimal closures and the seasonal slowness in deposit gathering.

Is.

Is fairly muted for us.

With deposit levels relatively stable through today.

I'd point out the comment that Barry made earlier about business checking and business accounts, we do expect to roll that out in 'twenty three excuse me 24 and that will provide.

Really optimal pricing.

Optimal funding costs on our on our deposit portfolio and we expect NIM expansion as we as we go through the year and to 'twenty four.

So Barry I'll turn it over to you.

Barry Scott Sloane: Thank you, Scott. I appreciate it. Slide number nine, the Newtek Advantage. And I will tell you, we are doing our best to condense this presentation. I've had people say, "This is amazing."

Thank you Scott appreciate it slightly.

On slide number nine the new take advantage.

And I will tell you we are doing.

We're doing our best to condense this presentation.

That said people say this amazingly level all the data we give you have other people say, we complete shorten it.

Barry Scott Sloane: We love all the data we give you, and other people say, would you please shorten it? I've had people say, comb your hair in the middle on the left.

Say call me or here in the middle.

Barry Scott Sloane: So we're trying to get through this as much as possible. But I think it was important in our first year to give as much data as we could to the analysts to give everybody a really good chance of understanding a business model that is totally different and differentiated. But we will look to condense this going forward. I appreciate Scott bringing that up.

We're trying to get through this as.

As much as possible, but I think it was important in our first year.

Give as much data as we can to the analysts to give everybody a real good chance of understanding our business model. It is totally different and differentiated but we will look to condense. This going forward and I appreciate Scott, bringing that up could.

Barry Scott Sloane: Newtek advantage is an extremely important aspect of why we exist. It's probably the number one reason why we elected to own a bank. And it has to do with what I'll call impression.

Could you take advantage of an extremely important aspect to why we exist is probably the number one reason why we elected to own a bank.

And it has to do with what I'll call impression most people on this call and most consumers and businesses will go to their depository.

Barry Scott Sloane: Most people on this call and most consumers and businesses will go to their depository many times in a given month. They'll do it for transactional reasons, and in today's environment, they do it just to make sure, hey, my money's still there, my assets are there, my account is still there. Important to note, impression.

Many times in a given month.

They'll do it for transactional reasons and in today's environment. They do it just to make sure. My money is still there my assets are there. My account is still there important to note impressions, we get lots and lots of impressions from our business clients.

Barry Scott Sloane: We get lots and lots of impressions from our business clients by going to the Newtek Advantage Business Portal, which is an entry level into the bank, as well as other solutions that are held up at home. What a client receives when they open up a Newtek Advantage account. Free unlimited documents, free real-time updated web traffic, and if a merchant client signs up with us, in addition to having that client connected to a bank account where we can deposit the money same day, they'll receive real-time charge back, and all debit versus credit, visa versus master, all that information right in the business. If they're a payroll client, they can make payroll directly from the business, an important Relationships still matter, so although we are a technology-enabled bank, you can get our staff on camera, 24-7, 365, in all these different verticals. Extremely important. There is a real advantage to doing business with Newtek. That's the Newtek advantage.

To the new Tech advantage business portal, which was an entry level into the bank as well as other solutions that are held up at the at the holding company.

<unk> received when they open up a new take advantage account free unlimited documents storage free real time updated web traffic analytics, and if a merchant client signs up with us.

They should have that quite connected to a bank account, where you deposit money same day.

We received real free time chargeback batch.

All debit versus credit visa versus master all of that information right in the business portal. If they are a payroll client they can make payroll directly from the business portal and important relationships relationships still matter. So although we are a technology enabled bank you can get our staff on camera 24, 7%.

365 in all these different verticals extremely important there is a real advantage to doing business with new Tech. That's the new Tech advantage on slide number 10, we talk about this 340000 users that have the ability to see the new tech advantage those of the current users that have a user name.

Barry Scott Sloane: On slide number 10, we talk about 340,000 users that have the ability to see the Newtek advantage. Those are the current users that have a username and password to our new tracker system, which now displays the advantage. So, we have approximately 5,000 monthly active users that are going in and logging in at least once a month, so we're getting these impressions month after month, time after time. It gives us the ability to communicate with webinars, podcasts, and really make Newtek the destination point. An authority for all of their business activities to learn about things like tax or payroll initiatives or whatever might be an important topical business.

Password.

Our new tracker system that now displays the advantage. So we have approximately 5000 monthly active users that are going in and logging in at least once a month. So we're getting these impressions month. After month time after time it gives us the ability to communicate with.

Webinars podcasts and really make new tech the destination point, an authority for all of their business activities to learn about things like tax or payroll initiatives or whatever it might be an important tactical business. This is not your local community bank or <unk>.

Barry Scott Sloane: This is not your local community bank or even a major money center bank. We offer things to independent business owners that they've been starving for for most of their active lives. Slide number 11, fourth quarter and full year 2023 highlights. Look, I think it's important to note, we've sort of laid a lot of this out in the data in the early slides. For the full year 2023, we came in at a buck 71 basic common, a buck 70 diluted. We're proud of the fact that we were able to hit a midpoint.

Major money Center Bank, we offer things to independent business owners that they have been starving for for most of their most of their active lives slide number 11.

Fourth quarter and full year 2023 highlights.

Look I think it's important to note.

Sort of laid a lot of this out in the data and the early slides. The full year 2023, we came in above 71 basic comment above 70 diluted.

We're proud of the fact that we're able to hit the midpoint.

Barry Scott Sloane: It's pretty hard to forecast when you're first getting into the business. We had a lot of changes, a lot of changes. Going from a BDC with 1940s accounting into banking accounting caused a lot of issues for us to be able to track, follow, and make those updates. I'm proud of what we've been able to accomplish in all aspects this calendar year. On slide number 12, we talk about the enhancements that we've made. I say the team enhancements.

Pretty hard to forecast when you first getting in the business. We had a lot of changes a lot of changes going through our BDC with 19 Forties Act accounting into banking accounting.

Caused a lot of.

Issues for us to be able to track follow make those updates.

Proud of what we've been able to accomplish.

In all aspects of this calendar year on slide number 12, we talk about the enhancements that we've made I would say the team enhancements.

Barry Scott Sloane: Obviously, we welcome Scott Price joining us as chief financial officer, principal financial officer, joined us approximately mid-year May 2023. Nick Leger, our EBP chief accounting officer, he's been with us a while, a 2015 veteran. Frank DiMaria joining us.

Lee we welcome Scott price, joining us as Chief Financial Officer Principal Financial Officer joined US approximately mid year May 2023, Nic Ledger, our EVP Chief accounting officer, he's been with us.

While 2015 veteran.

Thank you Maria joining us extremely.

Barry Scott Sloane: Extremely helpful, beneficial stalwart in that group, SVP Accounting and Finance, John Shanfield joining us to help us with our reporting, performance management, both from a financial metrics perspective as well as an operational metrics perspective, Julio Hernandez joining us as SVP Compliance Officer, Matthew Solley, another key hire, January of 2024, we're migrating to NetSuite, and we have a lot of efficiency so we can be able to This is a management team that isn't a management team for a $700 million bank or $1.4 billion bank holding. This is a management team for a much, much, much larger institution with much greater foresight and direction, and that's where we're going.

Helpful beneficial a stalwart in that group SVP accounting and finance, John Stanfill, joining us help us with our reporting performance management, both from a financial metrics perspective, as well as an operational metrics perspective.

Julio Hernandez, joining us as SVP compliance officer, Matthew solely another key hire January of 2024, we're migrating to next week and we.

We have a lot of efficiencies so we could be able to report.

With.

Less spreadsheet transitional risk.

Doing onto more done on a more automated basis.

Really just be a better institution. This is a management team that isn't a management team for a $700 million bank for $1 $4 billion Bank holding company. This is a management team for a much much much larger institutions with much greater <unk>.

Syed and direction and Thats, where were going I will say unfortunately, or Fortunately these are not inexpensive hires not an expensive talent. This is all frontloaded and these are the types of things that affect our returns early on despite the fact that I would argue.

Barry Scott Sloane: I will say, unfortunately or fortunately, these are not inexpensive hires, not inexpensive talent, this is all front-loaded, and these are the types of things that affect our returns early on, despite the fact that I would argue our ROAAs, ROTCs, and efficiency ratios are built to last, and as we grow, I do think we have a good chance of these things expanding in the future. Scott, if you can handle 13, I would appreciate that.

ROA as our OTC ease and efficiency ratios are built built to last and as we grow I do think we have a good chance of these things expanding in the future.

Scott you can handle <unk> I would appreciate that sure Barry. Thank you I wanted to give a picture of how our deposit mix changed quarter over quarter. I also want to point out that we brought in.

Scott Price: Sure, Barry, thank you. I wanted to give you an example of how our deposit mix changed quarter over quarter. I also want to point out that we brought in about $40 million plus of deposits that we had at other banks from our affiliates, earning less than fed funds on those deposits. And we brought them in and were able to earn fed funds and deploy them in higher cost and, excuse me, higher yielding assets, as well as avoid raising outside deposits. We did reopen in August our high-yield savings product, so you'll see a full quarter's impact on the net interest margin and deposit costs from those increases. We also increased the rate on those deposits during the third quarter, so you will see a full quarter's impact in the fourth quarter. And then finally, at the bank, we saw a weighted average cost of deposits of 4.4%, which is slightly down from 4.44%.

$40 million plus.

So we had other banks.

From our affiliates.

Ben.

Earning less than fed funds on those deposits and we brought them in and we're able to.

Earn fed funds and deploy them in.

And higher costs.

Excuse me higher yielding assets as well as avoid.

Racing outside deposits.

We did reopen in August our high yield savings product.

Youll see a full quarter's impact and the net interest margin and deposit costs from from those increases. We also increased the rate on those deposits during the third quarter. So you see a full quarter impact.

In the fourth quarter.

And then finally at the bank, we saw weighted average cost of deposits of four 4%, which is slightly down from.

444%.

Scott Price: We will continue to optimize our funding base. We're going to prudently manage that through a combination of retail deposits, wholesale deposits, whether those be traded or a listing service, and we'll also tap the FHLB if we need short-term liquidity. But we are a deposit growing franchise. We want relationships, and as Barry mentioned, and I mentioned earlier, business checking is where we want to be. The deposits are sticky, the relationships are sticky, and that's where we feel like we can offer the most to our clients. Barry, I'll turn it over to you.

We will continue to optimize our funding base.

Prudently manage that through a combination of retail deposits.

Wholesale deposits, whether those be brokerage or listing service.

We will also tap the FHA Obi.

We'd need short term liquidity, but we are a deposit growing franchise, we want relationships and as Barry mentioned and I mentioned earlier business checking is is where we want to be the deposits are sticky.

The relationships are sticky and that's where we feel like we can offer the most to our clients very I'll turn it over to you.

Barry Scott Sloane: Thanks, Scott. Slide 14 is important from a lending activity perspective, and we have been reporting that our pipeline continues to grow based upon our unique business model of acquiring referrals from partners, as well as our efficiencies in making loans using technology, but not cutting corners on a FinTech-type basis, but doing full underwritings. Total SBA loans funded $260 million, a 24.2% increase over the prior quarter.

Thanks, Scott Slide number 14 important from a lending activity perspective, and we have been reporting that our pipeline continues to grow based upon our unique business model of acquiring referrals from partners as well as our efficiencies in making loans using technology, but not cutting corners on a fintech.

Type basis, but doing so underwritings total SBA loans funded $260 million or 24, 2% increase over.

Barry Scott Sloane: I think that's, A, we do have some seasonality, they're the four quarters typically our strongest, but the industry for SBU lending was flat. We were the number one originator in Q4 calendar 2023 by loan volume for SBA 7A, and we're very proud of that fact. In addition, Hmm.

The prior quarter I think thats, a we do have some.

Seasonality there in the fourth quarter is typically our strongest but the industry for SBA lending was flat.

We were the number one.

Originator in Q4 calendar year 2023 by loan volume for SBA Seven day work, we're very proud of that fact.

In addition.

Barry Scott Sloane: DSB's Loan Portfolio at Newtek Bank reached 169.6 million. Those uninsured loan participations, and there's probably some government guaranteed in there, are typically prime plus three loans. You can see 11.5% floating rate, quarterly adjust, no cap, real attractive, sell the government guaranteed piece at a 10 to 11 point gain, gets a really nice return. Even posting, you know, a high seasonal reserve of six and three quarters percent up front, which obviously was far more, I'll use the word punitive, than what we used to do as a non-bank lender where we didn't have that seasonal reserve. Important to note, we're forecasting 925 million in 7A loan fundings, a 13.5% increase in calendar year 2024. We also had a good year in 504 loans, 16.5 million of 504 loans for the three months, a big increase over the prior quarter, and total loan closings of 142 million ending December 31, 2023. We closed a record 1.1 billion loans across all products, and we hope to do about $1.4 billion in this coming calendar year 2024. 15 is our pipeline.

Okay.

The SBA loan portfolio at New Tech Bank reached 169 6 million.

Uninsured loan participations.

Some government guaranteed in there.

Typically prime plus three loans, you can see 11, 5% floating rate quarterly adjust no cap real attractive sell the government guaranteed piece at 10 to 11 gain gets you a really nice return even posting.

Our Ics or reserve of six and three quarters percent upfront, which obviously was far more.

I'll use the word punitive than what we used to do as a non bank lender. What we didn't have that C stores are important to note. We are forecasting $925 million and 70 loan fundings 13, 8% increase in calendar year 2024, We also had a good year in Taiwan for loans.

$60 5 million.

Three months, a big increase over the prior quarter total loan closings of $142 million.

Ending December 31 2023.

Close to record $1 1 billion of loans across all products and we hope to do about $1 4 billion in this coming calendar year 2024.

<unk> is our pipeline.

Barry Scott Sloane: You can see we're in good shape across the board, particularly with the Alternative Loan Program, which I'd say is a differentiator for extended growth. The SBA business, we have that down pretty pat. We've been involved in that for 20 years.

You can see we're in good shape across the board, particularly with the alternative of loan program, which I'd say is a differentiator for extended growth.

The SBA business, we have that down pretty Pat we've been involved in that for 20 years the alternative loan program.

Barry Scott Sloane: The Alternative Loan Program has been growing through difficult times, that being a pandemic and a banking crisis since 2017. We also need to note in the bank conforming investor CRE loans and conforming business loans, non-government programs, all that in the bank. Slide number 16, this is important because people want to know about the credit. That's one of the things I keep getting asked about.

Has been growing through difficult times that being a pandemic pandemic banking crisis since 2017.

We are also important to note in the bank.

You.

Conforming investor CRE loans, and conforming business loans nongovernment programs all of that in the bank.

Slide number 16. This is important because people want to know about the credit Thats one of the things I keep getting asked about so.

Barry Scott Sloane: When you look at the total loan portfolio at NewTek Bank as of 12-31-2023, outstanding balances of $401 million, and unfunded commitments of $46 million, those are primarily 504 loans. I want to quickly just talk about 504 loans from a risk standpoint. It's important to note that the 504 business for us is originate and sell. The second lien is taken out by the CDC and funded by the government to bed.

When you look at the total loan portfolio at New Tech Bank and a 12 31 2023.

Outstanding balances of $401 million.

I'd funded commitments of $46 million, primarily 504 loans I wanted to quickly just talk about 504 loans from a risk standpoint, it's important to note that five or more business for us is originate and sell.

The second lien.

It out by the CDC and funded by government debentures. So we're getting very high returns on the coupon gain on sale and even in the construction process, where prime plus two a prime plus three floating rate plus fees for short term loan and we don't look at these as being extraordinarily risky.

Barry Scott Sloane: So we're getting very high returns on the coupon, gain on sale, and even in the construction process for prime plus two or Prime plus three, floating rate plus fees for a short-term loan. And we don't look at these as being extraordinarily risky relative to lease up risk because these are owner-occupied. And I want to point out that owner-occupied CRE is entirely different from investor CRE, and it needs to be looked at that way. First of all, our experience in small business lending for 20 years is that, first of all, the loan must... meet repayment terms by the business. That's Backstop number one, the business is repaying the loan. It must meet it based upon historical projections.

Relative to lease up risk because these are owner occupied.

I want to point out owner occupied CRE is entirely different than investors CRA and it needs to be looked at that way first of all our experience in.

Small business lending over 20 years is first of all the loan must meet.

Repayment terms by the business.

Backstop number what the business is repaying the loan it must meet it based upon historical projections number two.

Barry Scott Sloane: Number two, personal guarantees. So the owners of these are personally guaranteeing the loans. Then you've got the real estate really for recovery. Unlike office buildings, he's multifamily, so everyone is exaggerating.

Personal guarantees so the owners of these businesses.

Personally guarantee the loan.

Then you've got the real estate really recovery unlike.

These office buildings multifamily so everyone is exaggerating the CRE problem and by the way the proud in and of itself is not an exaggeration really exist just really doesn't we believe pertain to our particular portfolio. So when you look at our portfolio on slide number 16, you got a real good currency rate.

Barry Scott Sloane: And by the way, the problem in and of itself is not an exaggeration; it really exists. It just really doesn't, we believe, pertain to our particular portfolio. So when you look at our portfolio on slide number 16, it's got a real good currency rate, a percentage of CRE compensation on the old legacy National Bank of New York City portfolio, which was very well underwritten, also went through purchase accounting adjustments on January 6th of last year. So you're not looking at valuations based on that. 2020, 2019, 2018, these are recent valuations. I just think that...

Percentage of CRE compensation on the old legacy National Bank of New York City portfolio, which was very well underwritten also went through purchase accounting adjustments on January 6th of last year. So youre not looking at valuations based upon.

<unk>.

<unk> 2019 2018. These are recent valuations so.

Barry Scott Sloane: When you look at the portfolio... The National Bank of New York City portfolio, which we'll talk about in the next slide, is doing very well. The CRE loans that we have in our SBA lending business basically provide recovery if the business can't pay the loan off. It's not the real estate that's repaying the loan.

I think that.

When you look at the portfolio.

The National Bank of New York City portfolio, which we'll talk about in the next slide doing very well.

CRE loans that we have in our SBA lending business basically provide recovery if the business can't pay the loan off it's not the real estate Thats repaying the loan and you got PGS.

Barry Scott Sloane: And you have PG&E. On slide number 17, this will give you a pretty good exposure, a picture of what the portfolio looks like. So we have $193 million of total CRE. $56 million are construction loans made under the 504 program.

Slide number 17, this will give you a pretty good exposure.

Sure of what the portfolio looks like so we have $183 million of total CRE.

$56 million.

<unk> construction loans made under the pilot program.

Barry Scott Sloane: We don't fund these loans until we have a takeout from the CDC on the second lien. So yes, we have construction risk. These deals are typically bonded. We've done this for five or six years.

We don't fund these loans until we have a take out from the CDC on the second lien. So yes. We have construction risks. These deals are typically bonded we've done this for five or six years, we've done very well in the final four loan portfolio, which I'll talk about and you have a debenture taken out by the CDC, which can take it out by government.

Barry Scott Sloane: We've done very well in the 504 loan portfolio, which I'll talk about. And you have the debenture taken out by the CDC, which can take it out by government funding, very important to know, serial loans not made under the 504 program, 132 million. Then look at the portfolio, very diverse across industry types, but look at the LTV. 5151.33 on mobile, and office.

Clearly very important to note.

<unk> not made under the 504 program $132 million, then look at the portfolio.

Diverse across industry types, but look at the Ltvs.

51 point, 50, 133 and multi.

Barry Scott Sloane: These are tiny offices. I mean, the average phone size in the National Bank of New York City portfolio is a million and a half, two million. These are not skyscrapers, and these are basically local New York City-based real estate loans. Slide number 18, it rehashes the quality of what we've been able to do in 504. We've originated 555,000,000 SBA 504 loans since 2017, with no charge-offs to date. And in the Alternative Loan Program, which used to be known as the Nonconforming Loan Program; we changed it to ALP, we haven't experienced any charge-offs to date for originating loans since 2019. Slide number 19 talks about gain on sale of the SBA 7As. We finished up the year at 110.2. Um, the first quarter looks pretty good.

Office. These are tiny offices I mean, these are average loan size on the National Bank of New York City portfolio was $1 million and $2 million. These are not skyscrapers and these are basically local New York City based real estate loans slide number 18 at rehab.

<unk> is the quality of what we've been able to do in firewall for we've originated $555 million 7 million.

Since 2017, no charge offs to date.

The alternative loan program, which used to be known as a nonconforming loan program, we changed it to ARLP, we haven't experienced any charge offs to date originating loans since 2019.

I'd never 19 talks about gain on sale of the SBA seven days.

Finished up the year at 110 decimal too.

First quarter looks pretty good it's up markedly so we've had an increase in prices.

Barry Scott Sloane: It's up markedly. So we've had an increase in price, and that's just based upon investors wanting to own assets at the short end of the yield curve floating rate. Slide number 20.

Thats just based upon investors wanting to own assets at the short end of the yield curve floating rate.

Barry Scott Sloane: Important to note, this is our payments business. We're excited about our 2024 forecast. We're losing some amortization and depreciation, but hopefully, a pre-tax income jump of hopefully $16 million for the calendar year, up from $12.9 million in the year prior. The insurance agency, a nice increase.

Slide number 20 important to note. This is our payments business. We're excited about our 2024 forecast, we're losing some amortization and depreciation pre tax income jump of hopefully 16 million for the calendar year.

From $12 9 million in the year.

The insurance agency, a nice increase now the insurance agency in the payroll business are going to be benefiting from the bank relationship. So we hope to a open up a ton of accounts, where people looking to insure themselves. They see it it's there.

Barry Scott Sloane: Now, the insurance agency and the payroll business are going to be benefiting from the bank relationship. So we hope to A, open up a ton of accounts where people looking to insure themselves see it; it's there. We'll talk in future calls about the connectivity between the agency and the lender, the connectivity between the payroll company and the lender, and both these entities in connection to the bank. Both of these entities are held up at Newtek One in the hotel.

We'll talk in future calls about the connectivity between the agency and the lender and connectivity between a payroll company and the lender and both these entities in connection to the bank. Both of these entities are held up at new Tech won at the Holdco.

Barry Scott Sloane: Slide number 23, basically the key financial metrics projections for 2023 in the model, what we had for 2024 projection and forecast, and what we did for 2023 for the quarter and the fourth and for the full year in 2023. You can get a good feel for where we're going. We're forecasting $1.80 to $2 in basic and diluted common shares for the calendar year, and we've got them spread out quarter by quarter. There is seasonality here,

Slide number 23 basically.

The key financial metrics projections for 2023 in the model.

What we have for 20, sorry 2024.

Rejection and forecast than what we did.

For 2023 for the quarter and the fourth and for the full year in 2023.

You can get a good feel for where we're going we're forecasting for 2024.

80 to $2 and basic and diluted common shares for the calendar year, we've got them spread out quarter by quarter.

Barry Scott Sloane: There is a ramp-up here. We really asked the analyst community to pay attention to what we believe are the seasonal, Slide number 24, companies investing in 2023 and 2024 for growth. Look, I talked a lot about the dollars that we put into building Newtek Advantage, operating in a compliant manner, software, hardware, consultants, advisors, a lot of money spent up front. And those investment initiatives are going to continue. So these are all built into our model. They're all built into our forecast. We feel very comfortable with these numbers.

Seasonality here there is a ramp up here, we really ask the analyst community to pay attention to what we believe are these seasonal reasons.

Slide number 24 companies invested in 2023 and 2024 for growth look I talked a lot about the dollars that we put into building the new take advantage.

Operating in a compliant manner.

Software hardware consultants.

Advisors.

A lot of money spent upfront and those investment initiatives are going to continue.

These are all built into our model, they're all built into our forecast, we feel very comfortable with these numbers and but.

Barry Scott Sloane: And, but we do want you to understand that as we grow. We believe we're going to be able to take advantage of the scale. This is a management team, not for a $700 billion bank and $1.4 billion holding company. We believe the team can grow to $5 or $10 billion inside. Slide number 25, many investors are interested in how we're going to begin to get investor interest. I'm going to give you the one biggest... is blocking and tackling and putting up these types of numbers every quarter. I could part my hair on the side, I could part my hair in the middle, or I could shave my head, okay?

But we do want you to understand as we grow.

We believe we're going to be able to take advantage of the scale.

As a management team not for $700 million bank and $1 $4 billion holding company.

We believe the team can grow to five or $10 billion in size.

Slide number 25, many investors are interested in how we're going to begin to get investor interest I didn't give you. The one biggest thing, it's blocking and tackling and putting up these types of numbers every quarter.

I can part by air on the side I get partner here in the Middle I could shave my head if we keep putting up numbers like this I think the market will react differently to us and it takes time for analysts to get comfortable with the model for investors to believe these are the numbers that we can deliver they've never seen a bank or a bank holding company.

Barry Scott Sloane: If we keep putting up numbers like this, I think the market will react differently to us. It takes time for analysts to get comfortable with the model, for investors to believe these are the numbers that we can deliver. They've never seen a bank or a bank holding company operate in this manner. We had a really terrific year from my perspective.

Upgrade in this manner, we had a really terrific year from my perspective, we got through our fed.

Barry Scott Sloane: We got through our, you know, Fed. Our compliance reporting and our OCC compliance reporting is well, our business modeling plan is intact, we plan on attending investor conferences, we plan on hosting an analyst day in the second quarter, we're going to continue to show that year-over-year growth comparisons, once again I'll point out Q1 can be a little choppy with the NOL and is also not really having feasible calculations, but we do anticipate a decent number, I think it's We're excited about our business going forward. Slide number 26, when you look at market multiples, Triumph is sort of a bit of an anomaly, although I would like to think that We have Triumph-type growth aspirations and expectations when you look at our ROAAs and our ROTCEs and our efficiency ratios, but even throwing that out, you're looking at around a 9.2% median-type earnings multiple, which is not what we're currently dealing with as we currently look at the market. Slide numbers 27 and 28.

While compliance.

Reporting at our OCC compliance reporting well our business model and plan is intact.

Plan on attending Investor conferences, we plan on hosting an analyst day in the second quarter.

We're going to continue to show that year over year growth comparisons once again I'll point out Q1 could be a little choppy with the NOL and is also not really having seasonal calculations, but we do anticipate.

Number.

22% to 23 cents for Q1 <unk>.

Diluted and basic EPS for the first quarter.

We're excited about our business going forward slide number 26, when you look at market multiples.

Triumph is sort of a bit of anomaly, although I would like to think that we have but try on pipe growth.

Aspirations and expectations when you look at our ROIC as an rotc's that our efficiency ratios, but even throwing that out you are looking at around.

Nine 2% median type.

Earnings multiple which is not what were currently dealing with.

As we currently look at the marketplace.

Slide number 27 28 look.

Barry Scott Sloane: Look, we feel really good about where we are in the marketplace. We are excited about the opportunity. I think I've expressed most of these items in the summary that I discussed throughout the presentation today. On slide number 28, I want to highlight and point out that for fiscal year 2023, the bank into which more and more activity is flowing, ROAA 5.76, ROTC 35 percent, and efficiency ratio 50 percent. You just don't get these kind of numbers in a community bank. Holdcode, three and a quarter for ROAA, ROTC, 22.7, efficiency ratio, 74.

We feel really good about where we are in the marketplace. We are excited about the opportunity.

I've expressed most of these items in the summer and the summary that I discussed throughout the presentation today on slide number 28, I want to enhance and point out that.

Fiscal year 2023, the bank, which more and more activity is flowing into.

ROE a 576, our OTC, 35% efficiency ratio of 50% and you just don't get these kind of numbers.

Have you had any bank.

Holdco three in a quarter for.

Our OTC $22 seven efficiency ratio 74.

Barry Scott Sloane: These will get better as we begin to leverage and more opportunities go down into the bank. Also important to note, obviously, we're a dividend-paying company, and Census Share. I wish the dividend yield was lower because that would mean we'd have a higher stock price, but even with that, you got 6.4%. The current yield is March 1, and it's probably not far from that today. An investment in Newtek One is a growth-oriented, differentiated, technology-enabled business solutions company that is also a deposit.

It will get better as we begin to leverage and more opportunities go down into the bank also important to note obviously, we're a dividend paying company.

18 cents a share.

I wish the dividend yield was lower because that would mean, we'd have a higher stock price, but even with that you've got a six 4%.

Current yield as of March one, but its probably not far from that today.

And investment in New Tech one is a growth oriented differentiated technology enabled business solutions company.

That is also a depository.

To note we are also with depository.

We're not like 95%, 98% of the other banks that are out there with that I'd like to turn the remaining portion of the appreciate the presentation over to Scott priced through the MD&A.

Scott Price: It's important to note that we are also positive. We are not like 95 to 98% of the other banks that are out there. With that, I'd like to turn the remaining portion of the presentation over to Scott Price for the MD&A. Thanks Barry.

Thanks, Barry I'm going to keep my comments brief I will point out that the comparisons year over year virtually difficult given the change in accounting model.

And the fact that we're consolidating our previously unconsolidated investments.

Scott Price: I'm going to keep my comments brief. I will point out that the comparisons year over year are virtually difficult given the change in accounting model and the fact that we're consolidating our previously unconsolidated investments. I do want to focus my comments on the non-interest components of our P&L quarter over quarter since I feel like I've at least tried to cover the net interest margin sufficiently. We did see increases quarter over quarter in non-interest revenue, mostly from higher loan volumes, which include origination fees on loans that we've elected the fair value option on. We also saw increased gains and valuations on the loan portfolio from higher originations in the 7a portfolio. On the non-interest expense side, we saw increases due to a prepayment penalty.

I do want to focus my comments on the noninterest components of our P&L quarter over quarter since I feel like I have.

At least tried to cover the net interest margin sufficiently.

Sufficiently.

We did see increases quarter over quarter, and noninterest revenue, mostly from higher loan volumes, which include origination fees on loans. So we've elected the fair value option on.

We also saw increased gains and valuations on the loan portfolio from.

From higher originations in the 7% portfolio.

On the noninterest expense side, we saw increases due to prepayment penalty prepayment penalty, we terminated one of our warehouse lines in the fourth quarter. We also saw increases in slight increases in our salaries and benefits costs and then also we saw higher loan origination expenses for airlines under the fair value option, so with that.

I'll turn it over to the operator for questions.

Scott Price: We terminated one of our warehouse lines in the fourth quarter. We also saw slight increases in our salaries and benefits costs, and we also saw higher loan origination expenses for our loans under the fair value option. So with that, I'll turn it over to the operator for questions. Thank you. As a reminder, to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

As a reminder to ask a question at this time. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment, while we compile our Q&A roster.

And our first question is going to come from the line of Crispin Love with Piper Sandler. Your line is open. Please go ahead.

Thanks, Good morning, Varian, Scott Hope you're well.

First just looking.

Guidance on page 23, but the EPS projections show a meaningful ramp through the year I know you typically build on EPS through the year, but I thought last year included some elevated expenses early in the year from converted to a bank. So just curious if there's anything to call out on the expense of revenue revenue side in the first quarter.

Operator: One moment while we compile our Q&A roster. And our first question is going to come from the line of Crispin Love with Piper Sandler. Your line is open. Please go ahead.

Crispin Elliot Love: Thanks. Good morning, Barry and Scott. Hope you're well.

For 2024 part of building later in the year or is it business as usual.

Barry Scott Sloane: First, just looking at your guidance on page 23, the EPS projections show a meaningful ramp through the year. And I know you typically build on EPS through the year, but I thought last year included some elevated expenses early in the year from turning into a bank. So just curious if there's anything to call out on the expense or revenue side in the first quarter of 2024 prior to building later in the year or as business as usual.

Sure Scott I'll throw out two items and then maybe you got some other thoughts one item, Chris but obviously for Q1 2023, we had the NOL that affected your earnings and.

The other thing is most of the loans that were originated in Q1 2023 were done a new tech small business finance. So there was no seasonal or is there a was done at fair value.

<unk>.

By being in a bank and reserving that.

Loan loss reserve upfront.

Barry Scott Sloane: Scott, I'll throw out two items, and then maybe you can add some other thoughts. One item, Crispin, obviously, for Q1 2023, we had the NOL that affected the earnings. And the other thing is that most of the loans that originated in Q1 2023 were done in Newtek Small Business Finance, so there was no CESA reserve. It was done at fair value. So by being in a bank and reserving that loan loss reserve up front, it really knocks your earnings down precipitously early on, but then you pick it up in the future, at least with respect to that aspect.

Really not your earnings down precipitously early on but then you pick it up out of the future at least with respect to that aspect.

Scott any other thoughts you might have regarding.

The seasonality and the ramp up.

No I mean, if you look at the loan production volumes crisman as we as we go through the year.

The first quarter is just naturally.

Slower time for businesses.

Most everything ramps up in the second quarter. So we've seen this pattern over time over the company's history and so we're just trying to be transparent with you guys and help you.

Scott Price: Scott, any other thoughts you might have regarding... Do you see any seasonality in the ramp-up? No, I mean, if you look at the loan production volumes, Crispin, as we go through the year, the first quarter is just naturally a slower time for businesses. Most everything ramps up in the second quarter.

Build out your models as you get to know us better.

But this is what we expect and this is what we're seeing over overtime.

Perfect.

So with the detail there unless we have the knowledge and then second question for me just on credit quality.

In your comments, but credits remained strong but just curious if you can just put some numbers around that just looking at the consolidated portfolio can you just discuss what youre seeing in delinquency and non accrual.

Crispin Elliot Love: So we've seen this pattern over time, throughout the company's history. And so, you know, we're just trying to be transparent with you guys and help you build out your models as you get to know us better. But this is what we expect, and this is what we've seen over time. Perfect. Yeah, I appreciate the detail there and the seasonality.

This was the third.

Expectations as you move through the next few quarters.

Sure so.

When we look at the consolidated portfolio, it's important to take them in sections.

Barry Scott Sloane: So and then second question for me, just on credit quality. I saw your comments that credit was made strong, but just curious if you can just put some numbers around that, just looking at the consolidated portfolio. You just discuss what you're seeing and delinquencies, non-accruals, and losses, if there are any. And there are expectations as you move through the next few quarters. Sure.

Item number one is MSP app.

Sps is a very large portfolio of loans that are sitting in securitization.

The securitization cost of funds.

Much much higher.

Where we are for the bank cost of funds with respect to the creditworthiness of that particular book of business, which I believe is about $400 million of.

Current pay loans.

Barry Scott Sloane: So, when we look at the consolidated portfolio, it's important to take it in sections. Item number one is NSVF, um, NSVF is a very large portfolio of loans that are sitting in securitization. The securitization cost of funds is much, much higher than where we are for the bank cost of funds. With respect to the credit worthiness of that particular book of business, which I believe is about 400 million in current pay loan and I think um, $70 million in face value, I think it's about $35 million in fair value. So the important part is that portfolio has already been written off, the balance sheet and the income statement for the non-accruals, okay? That portfolio is probably 40% seasonal, 36 to 38 months. And the rest of it, when I say season, you know, it's through the belly of the default.

And I think.

$70 million of space I think it's about $35 million of fair value. So the important part is that portfolio has already been written off the balance sheet and the income statement for the non accruals okay.

That portfolio is probably 40% season 36 to 38 months.

And the rest of it.

Yes, Neal it's through the belly of the default curve so.

60% of the portfolio is probably.

2019, 2000, 22021, and 2022 2023 type of origination sitting in NSP, yes.

We have an assumption that thats going to default and a 19% rate.

<unk> of 45% to 50% severity so.

Hit pretty heavily.

And even after that loss frequency and severity on this is usually not a conversation that we have with the bank analysts because.

You guys will look at this stuff this way that portfolio I believe is on the books.

Barry Scott Sloane: So 60% of the portfolio is probably, you know, 2019, 2020, 2021, 2022, 2023 type origination sitting in NSBF. We have an assumption that that's going to default at a 19% rate and approximately a 45 to 50% severity. So that's hit pretty heavily, and even after that lost frequency and severity, you'll be not a conversation that we have with the bank analyst. You guys will look at these stuff this way.

Seven point I think it was 775 yield.

Loading rate over prime.

Bottom line is that's just marked very well even with the expectation of higher charge offs on that portfolio going forward. The major difference between the way we do our business.

Just as a traditional bank traditional bank low margin.

Many cases fixed rate.

Where do they make their money is frankly bike.

Not paying favorites of full rate on their deposits. We had the opposite we do high rate, but very well reserved now when going into the bank, we have a six and three quarter seasonal reserve in a brand new portfolio so portfolio of trade in the bank.

Barry Scott Sloane: That portfolio, I believe, is on the books at a seven point, I think it was 7.75 yield, floating rate over prime. So, bottom line, that's just marked very well. Even with the expectation of high charge-offs on that portfolio going forward. A major difference between the way we do our business versus a traditional bank. Traditional bank, low margin, many in cases, fixed rate, and the way they make their money is, frankly, by not paying Sabres a full rate on their deposit.

I don't think we have any defaulted loans from the 700 portfolio in the bank that is going to happen.

But we have a very high reserve on that.

And then you've got the CRE portfolio, which we just did purchase accounting on.

Barry Scott Sloane: We have the option. We do high rates, but they are very well reserved. Now, when going into the bank, we have a six and three quarters CECL reserve but a brand new portfolio. So the portfolio looks great in the bank. I don't think we have any defaulted loans from the 7A portfolio in the bank.

<unk>.

In January six.

This is very well booked I think that's really important to get across to you. The other analysts and investors when they look at our organization relative to what the quality of your portfolio, obviously is going to be a lot more detail in the K, but just as an overview. This is a very good quality pour.

Barry Scott Sloane: That's going to happen, but we have a very high reserve on it. Then you have the CRE portfolio, which we just did purchase accounting on on January 6. This is, this is very well booked.

Folio and we're going to add Investor base CRE at current market spreads and Investor base C&I at current market spreads. It's a great time to have capital and make loans.

Barry Scott Sloane: I think that's really important to get across to you, the other analysts, and investors when they look at our organization relative to the quality of the portfolio. Obviously, there's going to be a lot more detail in the K, but just as an overview. This is a very good quality portfolio, and we're going to add investor-based CRA at current market spreads and investor-based C&I at current market spreads. It's a great time to have capital and make loans. Great, thanks Barry. I appreciate you taking the time to answer my question. Thanks.

Okay. Thanks, I appreciate you taking my questions.

Great.

Thank you and one moment as we move on to our next question.

And our next question is going to come from the line of Tim Switzer with K VW. Your line is open. Please go ahead.

Hey, good morning, Thanks for taking my question.

You guys gave a lot of good color on the guidance and you just touched on it a few minutes to go but could you maybe talk about what the puts and takes arent guide that would maybe drive it from the low end or the high end over the course of the year.

Crispin Elliot Love: Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Tim Switzer with KBW. Your line is open. Please go ahead. Hey, good morning.

Yeah, Tim I'm going to focus on the asset side I'll, let Scott talk about the deposit side.

Operator: Thanks for taking my question. You guys gave a lot of good color on the guidance, you just touched on it a few minutes ago, but could you maybe talk about what the puts and takes are in guides that would maybe drive them from the low end to the high end over the course of the year? Yeah, Tim. I'm going to focus on the asset side. I'll let Scott talk about the deposit side. On the asset side, a lot of it has to do with the alternative loan program, and we're probably going to need to spend more time with The Analyst, maybe at Analyst's Day or just with investors to explain what that program is. But that program is done up at the holding company in terms of funding.

On the asset side, a lot of it has to do with the alternative loan program and we're probably going to need to spend more time with you.

The analysts the analyst maybe at the analyst day or just with.

With investors.

To explain what that program is but.

That program is done at the holding company in terms of the funding.

And.

It does require more.

Capital utilization and then down at the bank.

So the volumes there because the alternative loan program generates.

<unk> income because it is.

A portfolio that is originated at the bank level basically.

Sold into the Holdco.

And there is a gain on sale aspect to it because it goes into joint ventures with other funding partners and its Levered, then issued out and finance long term through Securitizations. So that's a big.

Barry Scott Sloane: And it does require more capital utilization than down at the bank. So the volume is there because the Alternative Loan Program generates..., of loans are sold into the holdco, and there is a gain on sale aspect to it because it goes into a joint venture with other funding parts, and it's levered and issued out and financed long-term through securitizations, so that's a big. The other is the price of the government guarantees market, which is moving in that direction, and the ability to do that volume. I think on the asset side, it is doing more AoT loans and hitting our numbers with good pricing on 7A, and all that Scott handled was the deposit side and the expense side. Thanks, Barry. Hey, Tim.

The other one will be the price of the government guarantee market, which is moving in our direction and the ability to do that volume.

I think one of the assets.

Doing more aoc loans, hitting our numbers and good pricing on <unk> I'll, let Scott handle the deposit side and the expenses.

Thanks, Tim I think it's important to note that we're we're a different animal as we continue to try to help everyone understand our business model.

Importantly, it's important to understand where we've come from Barry mentioned, the NSP Securitizations earlier.

Scott Price: I think it's important to note that, you know, we're a different animal as we continue to try to help everyone understand our business model. But, importantly, it's important to understand where we've come from. Barry mentioned the NSPS securitizations earlier, and those will most likely be coming up for a potential cleanup call during the quarter. So we're going to evaluate those going forward. We've got some alternative scenarios built into our forecast where we could potentially bring those in. So I think you've got, you know, some. We have to figure out how we're currently funding those if we decide to exercise.

Those will most likely be coming up for a potential cleanup call during the quarter. So we're going to evaluate.

Going forward, we've got some alternative scenarios built into our forecast were.

We could potentially bring those in.

So I think you've got.

Some we've got to figure out how.

Currently figuring out how we're going to fund those.

If we decide to exercise so that's going to be a pretty big mix shift.

Scott Price: So that's going to be a pretty big mix shift, you know, and then there's a question of how we would fund it. Would it be in the bank? Some other kind of, uh, wholesale uh funding that's more of a public nature, so we're evaluating all that. There are certainly some wide disparities between uh those funding costs. If you think about deposits, and we raised a whole lot of deposits a year ago, and those, you know, range anywhere from, you know, six months to one year to two year tenors. And if you look at where we are on the curve and what's happened to rates since, we're going to have natural increases in rates as we move through time just because we're refinancing a lumpy CD portfolio. So that's a variable that has to be considered. And then, you know, we keep on harping on the fact that we want to roll out business checking during the year. That's because it's a rollout.

And then there's a question of how we would fund it would it be in the.

Bank would it be through some other kind of.

Yeah.

Wholesale funding.

More public nature, so we're evaluating all of that.

It's certainly some wide disparities between those funding costs.

If you think about deposits and we have we.

We raised.

A lot of deposits a year ago, and those range anywhere from six months to one year to two year Tenors and if you look at where we are in the curve.

And what's happened to rates.

We're going to have natural.

Uh huh.

Increases in rates as we move through time.

Because we are refinancing a lumpy CD portfolio.

So that's a variable that has to be considered and then we keep on harping on the fact that we want to rollout business checking during the year.

Scott Price: So we believe that we can generate very good volumes, and we believe that we are currently demonstrating that we have the ability to manage the risk. And so, you know, we don't know how much we're going to get out of it and at what cost, but we do have assumptions in there. We believe that we'll bring in business deposits, at least from a checking standpoint, at 1%, potentially offering an excess funding account, like a money market account that would pay a higher rate. And then, you know, we're going to see how the economy fares. I mean, this entire forecast is based on a static rate environment.

The rollout so we believe that we can generate very good volumes and we believe that we.

<unk> currently.

Currently demonstrating that we have the ability to manage the risk and so.

We don't know how much we're going to get off of that and at what cost.

But we do have assumptions in there we believe that will bring in business deposits at least from a checking standpoint, 1%.

Potentially offering.

And excess funding account like a money market account that would pay a higher rate.

And then.

Yes.

We're going to see how the economy lands. This entire forecast is based on a static rate environment.

Scott Price: So no changes to rates. The Fed's trying to pull off a soft landing. We'll see how they do.

So no changes to rates.

The fed is trying to pull off a soft landing well see how they do.

Scott Price: But with the short-term nature of our loans being priced off of prime on the 7A portfolio, we're asset sensitive, and we have a lot of variables to consider. I know I tried to give you enough. I wish I could give you a two sentence answer, but unfortunately, we're just not that kind of company. No, no, that was helpful.

But with the short term nature of our.

<unk> loans being priced off prime on the 7% portfolio.

We're asset sensitive and we have a lot of variables to consider.

I know I tried to give you enough.

Wish I could give you.

Two sentence answer, but unfortunately, we're just not that kind of company.

Tim Switzer: Thank you. Um, the last question I had was, could you guys expand on your comments around the SBA premium guys are earning year to date? It's pretty high.

No no that was helpful. Thank you.

Last question I had was.

Could you guys expand on your comments around the SBA premium guys are earnings year to date is pretty high.

Barry Scott Sloane: You know, how is competition looking in the space with your peers? And, you know, I guess it's like what's driving the upside there and do you think it's sustainable? Yeah, I think in the government guarantee market, you talk about the shape of the yield curve. There's no better place to be on the yield curve than on the short end, and he got a short end government guaranteed floater.

How is competition looking on a space of your peers.

And I guess, it's like what's driving the upside there and do you think it's sustainable.

Yes, I think the.

And the government guaranteed market.

You talk about the shape of the yield curve.

There is no better place to be on the yield curve then.

On the short end and he got a short and government guaranteed floaters. So.

Barry Scott Sloane: So, you know. I can't tell you how many times I get into conversations with people over the pricing of 7A, the government guarantee, and trying to figure out what it's going to be. Also, I will tell you, supply and demand are extremely important. So if you get a big seller in here, it can really push prices down. So we feel pretty good about where we're currently priced, and we don't see major movements in Fed activity.

I can't tell you how many times they get into conversations with people over pricing of seven a government guarantee and trying to.

Figure out what it's going to be also I will tell you supply and demand are extremely important. So if you get a big seller in here.

Really push prices down.

So we feel pretty good about where we are currently priced we don't see major movements in fed.

Barry Scott Sloane: I do believe, however, that if rates begin to drop, these loans are quarterly adjusted. So when rates are going higher, it actually hurts Newtek relative to the frequency of the adjustments versus when rates are falling. There's a bit of a lag, and that's helpful to us because we're able to maintain that higher coupon, I think in terms of loan volumes. We try to emphasize this. We don't look like anybody else in the market.

Activity I do believe however that if rates began to drop these loans are quarterly adjust so when rates are going higher it actually hurts new tech relative to the frequency of the adjustments versus when rates are falling and there's a bit of a lag if thats helpful to us because we're able to maintain.

Maintain that higher coupon.

Sure.

I think in terms of loan volumes.

We try to emphasize this.

We don't look like anybody else in the market. So the way that were acquiring credits.

Tim Switzer: So the way that we're acquiring credit. Assembling loans. Thank you, putting them through underwriting, using our technology to extract a full plethora of data from customers in as frictionless, effortless a manner as possible, with differential. So we see our growth in 7a volume, actually being one of the market leaders taking market share from other people. So, you know, we like this kind of double-digit, low double-digit growth in 7a. It meets our resource capability and meets our business plan, so we feel pretty good about it. Great, thank you guys for all the color.

Assembling loans.

Putting them through underwriting using our technology to extract.

Full plethora of data from customers and as frictionless effortless manner as possible.

Differentiates us so we see our growth in <unk> volume.

Actually as being one of the market leaders taking market share from other people. So we like this kind of double digit low double digit growth in <unk>.

<unk>.

It meets our resource capability and meets our business plan. So we feel pretty good about it.

Tim Switzer: Thank you, Jim. Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Christopher Nolan with Landberg-Thalman. Your line is open, please go ahead. Hey guys, um, am I correct that there were no net charge-offs in the quarter? Scott, do you want that one?

Great. Thank you guys for all the color.

Thank you Tim.

Thank you and one moment as we move on to our next question.

And our next question is going to come from the line of Christopher Nolan with <unk> Thalmann. Your line is open. Please go ahead.

Hey, guys.

Correct that there were no net charge offs in the quarter.

Scott Price: On the bank portfolio, that is correct. We did see a couple loans in the bank, a few 7A that are microloans that are showing signs of weakness. We also saw a few loans that were from the acquired portfolio that we expect 100% recovery on that are showing some weakness, but no charge-offs at the bank. And as a follow-up. Following your answers to Crispin's question on the guidance for the first quarter, if I understand correctly, that's really for an upfront CECL reserve, is that correct? For small business lending?

Scott you want that one.

The bank portfolio that is correct, we did see.

A couple of loans in the bank.

A few <unk> that are micro loans.

That are showing signs of weakness we also saw a few loans.

So we were from the acquired portfolio.

We expect 100% recovery on that are showing some weakness, but no charge offs at the bank.

And as a follow up.

Following your answers to <unk> question on the guidance for the first quarter, if I understand correctly, that's really for.

Upfront seasonal reserve is that correct for small business lending.

Barry Scott Sloane: That's one of the big differentiators in that, in calendar year 2023, there was no CISO reserve. Okay, on that basis, what should we think about the low loss reserve ratio following that?

That's the best one of the big Differentiators in that in calendar year 2023, there was no seasonal reserve.

Okay on that basis, where should we think about the loan loss reserve ratio.

Scott Price: So I think that you need to focus, Chris, on the fact that we're originating mostly 7A loans. If you look at the mix of production, we expect, over time. I want to point out that the 504 production is typically, we have a fair value option election on those. So we carry those at fair value at origination because we intend to sell them. Same with the alternative lending program. So really, the reserve applies to the 7A portfolio that we retain, as well as conforming bank loans. The conforming bank loans carry a reserve on a weighted average basis of about one and a quarter percent, and the 7A production.

Phone.

So I think that you need to focus Chris on the fact that we're originating mostly 780 loans. If you look at the mix of production we expect.

Over time.

I want to point out that the $5. Four production is typically we have a fair value option election on those so we carry those at fair value at origination because we intend to sell them same with the alternative lending program.

So really the reserve applies to the <unk> portfolio that we retain as well as the conforming bank loans or conforming bank loans carry a reserve on a weighted average basis of about 1.25%.

And the seven day production keep in mind that the $925 million were projecting is the full 100% of the alone we keep 25% of that.

Scott Price: Keep in mind that the 925 million we're projecting is the full 100% of the loan. We keep 25% of that. And of the 25% that we keep, we put about a six and three quarters, call it, reserve on that. So, if you look at the balance between 7A and that we retain 25% of the 925 and the conforming bank loans, we're going to naturally go higher as an overall allowance to cover loans coverage from where we already are, which is high for the industry. I'd point out that there's a reason that that reserve is high. There's a reason we set aside reserves because we will need to use them. We are going to have charge-offs. That will happen, but I hope that everybody understands and looks at the level of reserves relative to the industry, and we have adequate reserves to cover it. They're appropriate,

And of the 25% that we keep we've put about six and three quarters call. It.

Reserve on that so if you look at the balance between <unk> and that we retain 25% of the 925 and the conforming bank loans, we're going to naturally go higher as.

As an overall allowance to loans coverage up from where we already are which is high for the industry.

I would point out that there is a reason that that reserve is high there is a reason.

There's a reason we set aside reserves, because we will need to use them.

We are going to have charge offs that will happen, but I hope that everybody understands and looks at the level of reserves relative to the industry and we have adequate reserves to cover it.

Scott Price: And we also have plenty of capital, so we believe we're well positioned. We believe we're managing risk prudently. Charge-offs will happen. There's a reason we have that high of a rate.

There are appropriate and we also have plenty of capital. So we believe we're well positioned we believe we're managing risk prudently and.

Charge offs will happen. There's a reason we have that high reserves alright.

Christopher Nolan: I appreciate the guidance information, it's very detailed, and I appreciate the work going into the presentation. I would really appreciate going forward if we can get a lot more detail on credit, 60 days plus non-received delinquencies, net charge-offs for the current quarter, as well as the drivers for any changes in the reserves.

Alright I appreciate the guidance information is very detailed and I appreciate the work going into the presentation.

Really appreciate going forward, if we can get a lot more detail on the credit metrics.

60 days plus non received delinquencies net charge offs for the current quarter.

As well as the.

The drivers for any changes in the reserves.

Christopher Nolan: Noted. Thank you, Chris. Thank you. And again, ladies and gentlemen, if you would like to ask a question, please press star 11 on your telephone. One moment for our next question. And our next question is going to come from the line of Steve Moss with Raymond James. Your line is open. Please go ahead. Good morning.

Just wanted to.

Noted.

Thank you Chris.

And again, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone one moment for our next question.

And our next question is going to come from the line of Steve Moss with Raymond James Your line is open. Please go ahead.

Steve Moss: 4-1-1 hiring. Good, thank you. Maybe just going to on the 7a side of things, you know, curious here. I see your pre-qualified is up modestly, flashed up modestly, but your improved, your approved loans and underwritings are up pretty significantly. Just curious, you know, if you're seeing any mixed shifts or some of the drivers of that?

Hi, good morning.

Good morning.

Thank you.

Sure.

Just gone to on the 700 side of things.

Curious your I see Youre prequalified as up modestly flex up modestly, but you improved your.

Loans and underwriting pretty significantly just curious if youre seeing any mix shift.

Or some of the drivers of that.

Barry Scott Sloane: Yeah, and I appreciate you pointing that out. I know my chief lending officer will be happy you asked that question, as well as Justin Gavin, who manages that part of the business. What we've been able to do through the utilization of technology is really clean out the prequels pretty quickly. So we're able to get to the best credit in a rapid fire and get them in underwriting. So I think it's important that although it looks like it's weak, it's actually a sign of strength.

Yeah, and I appreciate you pointing that out.

I know my Chief lending office, you'll be happy you asked that question as well.

Test and Gavin who manages that.

Part of the business.

What we've been able to do through the utilization of technology is to really.

Clean out the prequel is pretty quickly.

We're able to get to the best credits in rapid fire and get them in the underwriting. So I think it's important that.

That is a.

Looks like it's weak it's actually.

Barry Scott Sloane: The other thing I want to state is that we did many, many more loans. I don't have the numbers handy. I don't know if Scott does, or maybe Nick Leger.

A sign of strength the other thing I want to state as we.

We did many many more loans they don't have the numbers handy I don't know, if Scott does but or maybe Nick ledge, we did many more loans and units in calendar, 2023% in 2022.

Scott Price: We did many more loans and units in calendar 2023 than 2022. I think we are approaching in 7A. I'd say we are approaching 2000.

I think we've approached in seven day.

I'd say we approach.

Barry Scott Sloane: I know we had a couple of quarters in excess of 500 units per quarter. So I think what you've looked at is it's efficiency. It's not not a negative.

2000, I know, we had a couple of quarters in excess of 500 units per se.

So I think what you would you have looked at is it's an efficiency, it's not not a negatively we feel pretty good about getting loads internet, a prequel right away and getting them into underwriting.

Barry Scott Sloane: We feel pretty good about getting loans in and out of prequel right away and getting them into under. Yeah, Barry, just to expand on that, we had about a 50% increase in units over the course of 23. So to your point, technology enabled us to increase that throughput. And, quite frankly, with minimal increases to headcount.

Yes, Barry just to expand on that we had about a 50% increase in <unk>.

And so over the course of 'twenty three.

So to your point technology enabled us to increase that throughput.

So.

Quite frankly with minimal increases to head count.

Steve Moss: Okay, that's helpful. And then in terms of the cleanup call that you guys mentioned, sorry if I missed the number, but how large could that be? Is that the full 400 or so million that was mentioned earlier, or just kind of tied up? Yes, well, no, no, no, it's not that many.

Okay.

That's helpful and then in terms of the.

The cleanup call here.

As mentioned.

Sorry, if I missed the number but how large could that be is that the full.

400, or so million that was mentioned earlier.

Yes.

Yes, no no no it's not.

Barry Scott Sloane: So it's the 2018 and 2019 deal. It is subject to SBA's approval, it's subject to us putting a funding line in place, which we're kind of operating from scratch. We did not hit the call in the current quarter. It might happen in the next, but it should not be the current quarter or the current month. It might happen next month, and it would be a call for around, you know, 40 to 45 million in bonds. And one thing that's important, what it would do, Since all those loans and securitizations, all the principal goes to pay down the debt.

Not that many so it's the 2018 in 2019 deal.

It is subject to <unk>.

<unk> approval would subject us.

Putting a funding line in place, which were kind of operating from scratch.

We did not hit the call in the current quarter it might happen in the next.

I should not in the current quarter in the current month.

What happened next month and it would be a call of around 40 to 45 billion in bonds.

Okay.

And one thing that's important what it would do us.

All of those loans in Securitizations, all the principal goes to pay down the debt.

Barry Scott Sloane: What would happen if you cleaned it up is now you get the P&I, and it's flowing down into NSBF, and it's available for other uses. So we've got a lot of capital that's in there right now that could be used for other purposes. Okay, great. Those are my two questions at the moment.

What would that what would happen if you clean it up is that you get the P&I, it's flowing down into SPF and it's available for other uses so we've got a lot of capital. That's in there right now that could be used for other purposes.

Okay great.

Those are my two questions really appreciate all the color here.

Steve Moss: I really appreciate all the calls out. Thank you. Thank you. I would now like to hand the conference back over to Barry Sloane for closing remarks. Well, we can't thank everybody enough. We did try to speed it up.

Thank you. Thank you I would now like to hand, the conference back over to Barry Sloane for closing remarks.

Well, we can't thank everybody enough.

Barry Scott Sloane: I think Scott and I will regroup again for the next quarter to see if we can condense and get a little bit more concrete. Maybe we'll have a bit of an appendix available for other investors that want more detailed information. Now, you know, I would say the amount of information that we give out is the strength of the business. We have many different business lines that are providing cash flow and capital to the overall strategy, and we're proud of what we do, and we look always forward to telling our story each quarter. So thank you once again. We look forward to having a good first quarter as well.

We did try to speed it up I think Scott and I will regroup again for the next quarter to see if we can.

Condensed and get a little bit more concrete and maybe we'll have a bit of an appendix available for other investors that want more detailed information now.

I would say the amount of information that we give out.

It's a strength of the business we have many different.

Business lines that are <unk>.

Providing cash flow and capital to the overall strategy and.

We are proud of what we do when we look always forward to telling our story each quarter. So.

Once again, we look forward to having.

Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Click to watch the disc pedestal scene! Good luck! Notice the interruption in the video Normal vlogs cry, but not you.

A good first quarter as well thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.

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