Good day, welcome to the Newtek One, Inc. First Quarter 2023 Earnings Conference Call. At this time, all participants are in listening-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] 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, President and CEO of Newtek One Inc. Please go ahead.

Good morning, and thank you very much. I appreciate everyone attending, and welcome to our first quarter 2023 financial results conference call. Obviously, this is our first conference call as a financial holding company owning a nationally chartered technology-enabled bank, and we appreciate everyone’s attendance. Our call today is going to be quite detailed to give investors and analysts an opportunity to begin to model our organization, which is clearly a differentiated business strategy and operation, one that will be different than any other financial holding company or bank holding company that you’re familiar with. So we appreciate everyone’s patience. We tried to give as much detail and transparency to try to set a baseline foundation so that people can begin to model up Newtek One, a very unique, differentiated financial holding company. Joining me on today’s call is Nicolas Ledger, EVP and Chief Accounting Officer; Nick Young, President and COO of Newtek Bank NA; and John McCaffrey, Chief Financial Officer of Newtek Bank NA as well. We’ve also invited our analyst coverage. We have several analysts that are on the call that might participate in Q&A. Chris Nolan from Ladenburg. Crispin Love from Piper, Paul Johnson from KBW, along with Mike Perito. Marel Ross from Compass, Bryce Rowe from B. Riley and David Feaster from Raymond James. So we welcome calls coming in on the Q&A to try to get our story out in the market, and we get people to follow the very unique repositioning of Newtek One, a unique financial holding company. I’d like to call everyone’s attention to the forward-looking statement on Slide #1. I should remind everybody that is not familiar with Newtek One, our PowerPoint presentation is on the Investor Relations section of our website, and you could follow along. Slide #2, our first…

Thank you, Barry, and good morning, everyone. You can find a summary of our first quarter 2023 results on Slide #44. We are proud to report our first quarter financial results for the first time reporting as a new financial holding company. As you’ll see in the consolidated statement of operations upon conversion from our previous BDC investment company accounting, where our portfolio companies did not consolidate into the BDC’s financials and those activities would historically be reported as a dividend income from the investments of the BDC. Now as a financial holding company, we are now consolidating those portfolio company operations into our financials. As a result of this conversion, there is no comparable prior period consolidated financial statements to refer to with the two different types of accounting. I’d like to start with some highlights from our first quarter 2023 consolidated statement of operations. On a consolidated GAAP basis for NewtekOne, Inc., our first quarter results are as follows: Net interest income for the first quarter was $4.6 million, which is comprised of $18.7 million of total interest income on loans and fees on loans offset by $14.1 million of total interest expense. $8.8 million of the interest expense is driven by the interest expense on the notes and securitization. In addition, $3.9 million is due to the interest from the bank and FHLB borrowings and $1.5 million of interest expense on deposits. In the first quarter of 2023, the company has implemented CECL on Newtek Bank’s loan portfolio, resulting in a $1.3 million provision for a loan credit losses. The net interest income after the provision for loan credit losses is $3.3 million. Focusing on total non-interest income of $42.8 million, $4.4 million as a result of servicing income, $6.5 million of net gains on the sale…

Thank you, Nick. Operator, I’d like to open it up to the analyst community for Q&A.

Thank you. [Operator Instructions] Our first question comes from Crispin Love of Piper Sandler. Your line is now open.

Thanks. Good morning, everyone. First, can you just speak to the loan demand that you’re seeing from your borrowers and your appetite to continue to grow at a fast clip. Looking at your origination guidance, it looks to be down about 25% from your previous guide for 2023 and mostly driven by the lower nonconforming C&I. So just curious if you can speak to what’s driving the key differences and lower non-conforming expectations?

Sure. I think – Crisp, thanks for joining. A couple of things. One, I’ll take this piece by piece. In the 7(a) portfolio of opportunity that comes in through our referral system, we are rejecting about 10% more of loans that are in underwriting going into committee than normal. Obviously, we’ve got to be concerned about rising rates and people being able to make debt service coverage ratio, etcetera. So I think that that’s just an interesting fact. Now the other thing I would say is the movement of PLP from the bank to – from the SBLC to the bank, it seems like, just pick my pencil out. I can’t explain how disruptive that was to our flow. So I don’t think that we’re going to, at the moment, make any adjustments to those volumes. But right now, the ability to amortize the loan over 10 to 25 years under the 7(a) program takes borrowers that banks are going to push out of their portfolio into this program. So we’re still constructive and optimistic on 7(a) loan growth. Relative to the other categories, – it’s a great time to have capital and to be able to make great loans in a great environment. This is when you slice making a lot of loans. Now the concept of loan demand is very interesting. We look at GDP moving up or down, plus or minus 1% or 2%. I mean, it’s such a small number, but yet people go crazy over it. So here’s my point. If we do our jobs, there is plenty of good borrowers to be able to pick through and find that our model will generate them. So I’m not overly concerned about us being able to find greater credits. We will probably have to kiss a lot more frogs. But because of our model, which is sort of non-brokered BDO oriented, we’re actually able to do that in scale quite efficiently.

Alright. Thanks, Barry. Another question on the income statement. Can you – you went over it a little bit on the call, but can you just explain what the net gains on loans accounted under the fair value option are? And if you’d consider that to be core earnings. I think the comments you’ve made imply that, that fair value option would be going away in the second quarter. Is that correct? And would you expect a similar amount of those fair value adjustments to be part of gain on sale revenue going forward? Or am I thinking about that incorrectly?

No, I think you’re thinking about it correctly, but it will go up as well as down. So I think that is core. It’s part of our model versus others and that we believe in that particular portfolio of assets, marking to market is important. So I would say that is a core movement in both directions. Just like the write-down in the fourth quarter was important because based on how market conditions were.

So that fair value line is going to be sticking around, but it could go up, could go down just depending on the quarter?

Absolutely. Yes. And that’s pertaining to Newtek more business finance.

Alright. Thank you, Barry.

Thank you.

[Operator Instructions] Our next question comes from Christopher Nolan of Ladenburg Thalmann & Co. Your line is now open.

Hey, guys. Thanks for taking my question. On Newtek Advantage, given the seizures of multiple banks over the last month, I think the risk calculation by depositors has changed to a degree in terms of the bank that they deal with. Why should a depositor have not only the deposit relationship, but also all these operational things such as managing their websites payment processing, everything with an organization institution, which potentially could be seized over the weekend by the regulators.

Chris, the only thing I could tell you is with 24 years’ worth of experience in dealing with these customers. We do know what they like. We do know what they don’t like. And it’s a bit of a crazy time right now. With respect to our organization, we’re well capitalized. We’ve been around for 24 years. We have a really good solid business plan and model. And we do have relationships with the clients that they can get to us. I think conceptually, the small business owner today has multiple parties that they wind up dealing with. They might deal with GoDaddy for their website, Fiserv. I mean so one would say, gee, I’m a small business owner, I like diversification. We get it. They may not look to do – by the way, we’re under no falls pretest they are going to do everything with us per se. However, we had a client recently, for example, they were having problems with their technology. They didn’t know whether it was their POS system, their gateway or their payment processor, okay? I would tell you, it is just my opinion only that the media is greatly exaggerating the issue with the banking crisis. Now I don’t think it’s a crisis. I do think it’s a bit of a change in NIM over the course of time, which is going to change profitability. But the concept of it being a crisis, I think, is overblown. And I’m hopeful they kind of get tired than this, to be honest with you, because I don’t see them as helping. With respect to what we’ve seen in talking to our clients, – we have clients that are ready to move the depository accounts to us because we process their payments and because they do their payroll, and there is one organization for them to watch and follow and monitor, problem is with Silicon Valley and Signature, – there was absolutely no time, no advanced warning for anybody to make a change. I mean, people lined up at the door almost 2 days, and it was done. So it’s a huge problem for the business in the industry that this business industry is going to have to deal with in some way, shape or form and maybe all FDIC insured deposits is one of the ways to reduce anxiety, but I will tell you, we’re obviously not JPMorgan, but we had little or no customers leaving and look at all the deposits we were able to gather.

Thanks, Barry. And I guess as a follow-up, given all the turmoil in the banking industry, have the regulators requested or higher capital ratios for Newtek bank?

So I mean Newtek Bank is risk-based capital, I think it’s between 30% to 40%. So I don’t know how much higher they want to go.

Lower threshold, actually

You mean to reduce it?

Yes. I’m just trying to see whether or not there is an elevated level of minimum capital that they might earn.

I appreciate that. No, no matter of fact. – without going over the line, our projections that we have in the market are based upon the original plan, and we’re comfortable with those projections. So you could confirm what you like from that. But now we’ve had no changes or any cause of concern about what we’re doing, how we’re doing it or how we’re managing our business none whatsoever.

Okay, thank you for taking my questions.

Thank you.

Thank you. One moment please. Our next question comes from Bryce Rowe from B. Riley. Your line is now open.

Thanks a lot. Good morning. I wanted to maybe start with the deposit levels that you are showing here post first quarter relative to the forecast. And then they also get an understanding of how the current I guess capital structure of the debt might change over the next year. Will you continue to hold the unsecured notes on your balance sheet that existed when you were BDC?

Sure. So, Bryce, two important questions. Number one, we exceeded our deposit gathering capability in the first quarter after a very slow start. So, I had some sweaty palms and some sleepless nights. But we really came on like gangbusters, and it’s still coming in like crazy. So, I feel very comfortable about our deposit raising capability. I mean one of the things we are going to have to think about is, do we let some of the brokered “deposits” that are not redeemable for some of these lower duration type deposits that are coming in. So, that’s something we will need to think about. But for the most part, I don’t see that changing. We are very pleased with the mix of money that’s coming in and how it’s coming in and the types of customers. Relative to the other question, I think that right now we are in compliance. We have got headroom. We are comfortable with it. So, we are just going to keep monitoring the markets and the situation. And we have got that factored into our projections going forward. So, now we are in good shape on that. And I can’t tell you – put it this way, of I could figure out whether the next 100 basis points or 200 basis points of rate improvements, where they are going to be, I would be able to answer that question, which is why people have tried to get me to answer certain questions like, how do I know, I can make a guess. But I certainly didn’t predict Signature Bank and Silicon Valley. If that makes me dumb or not, but I didn’t quite see it coming. But no, I think we are in good shape and I think that right now, that’s core funding that can sit out there as long as we stay in compliance, and we will be able to do that, that’s not a problem.

Okay. And then maybe just one more around the deposits. And I have got a got another question or two. But in the forecast here, you are showing, let’s call it $244 million of deposits at the end of the second quarter, you highlighted, there being $300 million plus, at the end of April. So, just making sure we are thinking about it correctly, that you expect some runoff based on some of those broker deposits, or maybe the forecast is just a bit conservative?

I think we are going to need to take a step back and look at, do you want to return some of these deposits, because we have had so much success or make certain adjustments in the model. As you can imagine, I have got an accounting and legal and professional department that is drinking a lot of coffee. So, I think that’s just something to keep an eye on. On a good note, we have got a unique, I will say problem, it’s a problem. It’s, we are getting a lot of deposits. And you can go to our website and take a look at where we are. I mean we are not over the market, we are one of the higher payers, but we also can put money to use with a great NIM. So, that’s just something we are going to have to figure out from an asset liability standpoint. So, I would tell you that what you see in the projection might need to be changed or adjusted and modified as we get through the quarter.

Okay. Just switching topics here, you made note of valuations on the control investments as a BDC versus now as a financial holding company, essentially. Now, the fair value got wiped away with the accounting change. Can you talk about – and helpful to see what projections are from an EBITDA perspective for both NMS and Newtek Technology? Can you talk about how those valuations as a BDC will come to, for those control investments, especially relative to those two bigger control investments or former control investments?

Well, I think that the one thing I would say is I would try to be realistic. And for me to project, huge growth in those two organizations at this point would be contrary to what the Presidents and Chief Operating Officer told me they are going to do from a budgetary perspective. So, basically, what you see there is what we have approved from a budget. Am I happy with what I will call flat to maybe down some and reoccurring, no. Are they happy, they shouldn’t be. But I also think that it’s realistic. So, with that said, I mean those are goals that we believe are achievable, which is why we put them out there. But as we position ourselves as NewtekOne, which is new branding, with a much wider universe of customers that are now talking to us much wider than before, as a BDC. It’s like night and day, people want to come to us because of the many things that we can help them with. I think those businesses will flourish. The ability to deposit money in someone’s in account, same day on the merchant side. The ability to store one’s data is going to lead to other questions. Where do you have these servers, who is managing them, what do you pay, are you better off using us to do that 24/7, what about your mail. So, I feel pretty good about those relative to the concept of the valuations. I just think that as a BDC, I can’t tell you how many people said, you are never going to trade above NAV. And I remember coming out, we only converted 33x into a 40x, we raised money like a 15 to 17 point discount to NAV. And then pretty much the rest…

I will step back and see you Barry, appreciate the time.

Thank you.

Thank you. One moment, please. Our next question comes from Paul Johnson of KBW. Your line is now open.

Yes. Good morning, very congratulations on the first quarter under your belt as a – officially as a bank. I missed part of the call, so I apologize if you had talked about this already. But in the last presentation and the results for last quarter, you included some guidance for 2024. I am just wondering if that’s still good, or if that’s basically under reevaluation, obviously, because it’s kind of recent events in the market. But any sort of commentary you can kind of provide on your sort of previous guidance for 2024?

Yes. I have meant to put that in my notes. It’s buried somewhere in this big stack of papers here, but I missed it. So, I am glad you asked the question. Now, we have decided to – I am going to use this term, I would probably withdraw that, because as I mentioned earlier, with the 2 year moving 25 basis points in the morning or in afternoon, it’s pretty hard to forecast the next couple of quarters versus a year out. In addition to that, the cost of capital has changed dramatically. So, I could say that, we are just not going to change it, but I think it’s – I wanted to be very clear where we are drawing that.

Okay. Now that’s clear and I appreciate that. And then kind of bigger picture. I mean if you could kind of snap your fingers today and get your wishes in terms of what you would like portfolio to look like in a year from now and maybe 2 years from now? Do you have any kind of idea in your mind, what you sort of expect the long-term percentage of the portfolio to be in terms of SBA loans versus other loans, commercial, CRE, etcetera?

I think that at the bank level, important to note that it will be diversified between 7(a), 504, conforming C&I and conforming CRE. So, on the 7(a) side, and I will say this with respect to the uninsured, piece, okay. So, I am glad your question maybe think about something else. A lot of people look at the bank as a little bank. But I mean this little bank is going to do a lot of loans, because the 7(a) business, you do $875 million worth of loans, only 200 and change show up on the balance sheet. But you still have the resources to do them in loans, and get that amount of gain on sale and get that amount of return on equity and profit out of it. But now I want to go back to answer your question. The – I mean so we will make over $1 billion of loans this year. That doesn’t make most $500 million banks or $600 million, they don’t do that, right, okay. Now, I will go back to your question. The balance sheet should be pre-diversified. And maybe the biggest concentration is 7(a), and 30% to 35%. But the rest of it will be broken up evenly between 504, which is there for sale, not for permanent, conforming C&I and conforming CRE. So, we are going to balance the 7(a) side off, which could have like an 8% seasonal adjustment to blend in at 3.5% to 4%. So, the other ones obviously have a much lower reserve or CECL just because of the quality of the loans.

Yes. That makes sense…

Very diversified. And then at the NewtekOne level, you will have the non-conforming in the securitizations. You are going to get the merchant services business and tech solutions business. We get payroll and insurance on track of re-occurring cash flows, without having to put capital in. It becomes a very compelling model.

Got it. Appreciate that. One or two more questions, the realized loss on the SBA loans this quarter that Nick mentioned, and I believe you said $7.5 million. I just want to make sure I am clear. So, is that the actual loss that was charged on the portfolio, or is there any kind of like, one-time sort of CECL adjustments that were made due to the merger in the quarter?

Nick, could you answer that?

Yes. So, those were the legacy NSBF loans that are at fair value. Those are not any of the loans that are in the bank as a result of CECL.

Got it. Okay. So, that’s the actual realized loss for the SBA portfolio. And then I guess my last question just kind of the, in terms of how the merger is going. I mean do you feel like at this point the bank and sort of all the back office technology, etcetera, is that pretty much fully integrated at this point, or do you still kind of feel like you are working on some loose ends to tie everything together. And then I guess along with that, the PLP sort of temporary disruption in the quarter, obviously, moving that over to the bank was a little bit challenging. But is that pretty much over with at this point? I guess does it seem like everything is settled and integrated the way you would like it to be?

I still think we got some work to do, Paul, in the second quarter. And I think the – some of the projections, you will see have us better in the third of the fourth quarters. I still think there is some work to be done relative to continuing to bolster the staff. I mean the other thing, obviously, we are going through original examinations. So, I don’t know if you can – I am a financial guy as well. But unfortunately, for the last 24 years, I have been pushed into this operational role. And the amount of – I can used the word distractions, but we have got a – we are standing up this entity almost from the scratch because the prior bank didn’t look and do anything like we are doing. It really didn’t have tremendous digital deposit gathering. The amount of loans they did versus what we do, I mean it’s night and day. I mean we fund hundreds of loans a quarter, it’s maybe like 1 to 10 or 20. So and you can’t get into the bank before the deal closes. So, there is still, I want to say I am incredibly appreciative of all the associates in the company that really have worked immeasurably hard to get us where we need to be. But now I would say, there is still going to be a drag in the second quarter.

Got it. Appreciate that. That’s all for me. Thanks for taking my question.

Thank you.

Thank you. One moment please. Our next question comes from Scott Sullivan of RJ. Your line is now open.

Hi Barry. Congratulations on really crafting a unique and elegant solution, so in a very tough time, so absolutely congrats on that. I am wondering if you could speak a little bit more in terms of asset liability growth. You have mentioned, obviously, deposit momentum has been astounding in a very tough, almost bubble like money market situation. So, if you could speak to the deposit growth, as well as the liability growth?

I think on the deposit side, if you are able to pay a fair market rate for deposits, and that rate is determined by what you could see on a bank rate or a go-bank rate or by just Googling, best high yield savings accounts, etcetera, you will get money. And we have had success in drawing in insurable deposits. And those deposits that are coming to us are considered depending upon the channel non-broker and core. Although we are not under the delusion, but those deposits are very rate sensitive. But we are okay with that because it’s part of our model. We pay a market rate of interest, not a problem. Now in fact, it’s astounding how we are able to raise these deposits in this particular manner. I think we show well, we have a good history. I think the bank is about 60-years-old. We have been around for 24 years, so we have got, being a public company, people are comfortable, and we have seen that. Particularly, we have seen that in the worst of times. So, I would say that, I don’t know how in my lifetime and I am 63 years old, I have never heard such discussion about bank runs and people being concerned about. So, the good news is, in the worst of times, we are able to really fund our funding needs. And that’s the big deal. And that – so we have reduced our dependency on commercial funding, right. So, then you hear, which is in the marketplace, but the larger institutions, they are going to reduce their amount of lending. Well, that’s not great for a lot of non-bank lenders. So, I think from our standpoint, no concerns about being able to fund our business out of the bank. We have got plenty of capital in the bank, $78 ish million of capital in the bank. We have a lot of cash right now. We are waiting for the SBA loans to close for the quarter. We use that up. We will sell the government guaranteed piece, and that’s where we are going to be able to fund that growth out of the bank. And I am very pleased with the execution on deposit gathering strategy. Now, the second leg of that execution will be, which I am not saying as a second quarter, again, hopefully it’s third quarter and fourth quarter with respect to utilization and Newtek Advantage, the ability to get payments accounts, to open up deposits, payroll accounts, etcetera. That will reduce the cost of the high costs and make them more sticky. So, we are not under a delusion, because we are getting all these deposits that they are in love with us, okay. They like us. We are credible. We pay them, I will call a market rate of interest.

Right. Fantastic. And in terms of NIM and margins, can you speak to the effect as your somewhat Newtek process moves out? And is there any AI overlay in there?

It’s an interesting thing. It was funny, I was listening to Charlie Munger talk about artificial intelligence. And he made a comment I have said, you don’t have artificial intelligence yet for somebody that’s intelligent, to set the artificial intelligence. So, it’s got to start somewhere, right. I think that what we do does lends itself to that. I mean I would be delusional at the moment given all the things that we have to do to say, we are there. But we are approaching the customer with an air towards having that intelligence because we have the data. So, for example, when you apply for a loan, we take your merchant statement. We take your insurance policies. We have the ability to take advantage of that. Then you might say, currently, why aren’t you doing that, and that’s in the plan. And that’s frankly, up for us to be able to artfully quote clients using that old technology called the phone. Phones, phones are still really good today, so I like phones. We actually have a verbal communication with a client, and then show our pretty faces on the camera. Notice, I am talking to my staff as well, to connect with the client say, hey. I see what you are doing and by the way, we can help you, not too hard. That’s I will call that our version of artificial intelligence.

Fantastic. Any comments on the syndication market, I guess vis-à-vis the game on sale as far as you can see.

Yes. I mean right now the market for the government guaranteed pieces is very strong, because it’s a government guaranteed floater that investors don’t have to worry about duration risk for marking to market. And where they are being criticized for not having assets, interest rate sensitive assets on their balance sheet, they could diversify with this. So, that market has been pretty strong, despite the fact there was a little bit of disruption, where Signature Bank was one of the pool assemblers. Now, they have got taken over. They are still in the business. But there were some questions as to what would happen with them. And there was another market maker that recently left the business as well. So, against that backdrop, the markets actually held up pretty well.

Perfect. Last question, given your market cap size, etcetera what’s your personal speculation on a Russell 2000 inclusion?

Well, we are hopeful. We certainly have the market cap. And our designation as a financial holding company owning a bank was recently changed by them from a close dents on. So, we are hopeful that would be very useful and valuable to us, but we don’t know.

Terrific. Thanks for the color.

Thank you. One moment please. Our next question comes from Sean-Paul Adams from Raymond James. Your line is now open.

Hey guys. Good morning. Can you explain your plans for the legacy BDC baby bond, which contains the 1940x leverage compliance covernant in the documentation. It would appear that you would have to be a priority given the leveraging parameters today for the business.

It’s not we are in complete compliance. And we certify that with the trustee. And I will also – let me finish Sean. I will also add that we have covenants with Capital One Bank. I mean there is four or five institutions. So, we are in complete compliance with those covenants.

Very helpful. Thank you.

Thank you.

Thank you. One moment please. Our next question comes from the line of Steven Nemo. Your line is now open.

Hi. I am an individual investor and I have been doing my own due diligence and I have a few questions lined up for today. So, this might be a repeat. I didn’t hear it quite clearly the last question, but Newtek has 2024 and 2026 notes outstanding, needs [indiscernible]. And these have covenants that binds Newtek to the 150% assets coverage requirements under the 1940 Act. But Newtek is no longer a BDC, so that seems to suggest that unless those notes are paid down or got where they have been some way, you won’t be able to leverage up the balance sheet up to the typical 10 to one of the bank. So, what are Newtek’s plans regarding new C and new L in the near future?

Sure. Steve, appreciate the question. Right now, those have been factored into the projections that we have in the market. So, we always hope, though it doesn’t always happen that way, and respect that the community because we have been doing this for over two decades. NOIs, we have put out there and that’s already factored into those particular tests. And I am not sure you heard the prior answer, but we are in complete compliance. We are aware of those tests. And we will be able to manage through those tests with respect to what we have in the market.

Okay. Great. I have two more quick questions. So, when Newtek issues a loan, it has the choice to sell the SBA guaranteed portion and retain the unguaranteed portion on the balance sheet. But going forward does the bank, will the loan book be comprised of entire SBA loans, or just have the unguaranteed pieces or something in between? I feel like the percentage of the loan book, but unguaranteed pieces is a number that’s worth reporting for investors.

I am not sure I understand the question. What was the question?

So, as the bank, Newtek would have loans of assets. Will these loans be entire SBA loans, or will they be just the unguaranteed portions that are not sold off?

Okay. So and I will just focus on the 7(a) business. When a 7(a) loan is made, it’s a whole loan and you have got to participations government guaranteed participation, and an uninsured participation. So, what sits on their books is the uninsured participation in the 7(a) loan. Typically, we sell the government guarantee participation into pool assemblers who pull them and aggregate them and they pay premiums for that.

Okay. So, going forward, it’s going to be or probably going to be the unguaranteed pieces that are retained on the books, and…?

Yes. The current strategy is to, which is what we have done for 20 years. And it’s been a re-occurring event is to make the loan sell them guaranteed piece, we think that’s the highest return on equity for us and the best way to manage our capital.

Okay. One last quick question and this is related to the unguaranteed loan pieces. So, what are Newtek’s plans regarding securitization trusts going forward? The language in some recent news seems to suggest they are legacy. And so Newtek won’t issue any more securitization trusts and notes on the unguaranteed portions anymore. What are the plans going forward on that?

So, when the references to legacy, we try to refer to the legacy assets there in Newtek Small Business Finance, which are in a rundown mode. And there is a current position of uninsured loan participations in Newtek Small Business Finance in the warehouse line, that I will use the word not to get ahead of ourselves it could be securitized.

Okay. So, by legacy those – so by saying legacy, it doesn’t rule out the possibility of issuing more securitization trusts in the future?

No, I mean it’s unlikely we would do it out of the bank, because right now, the bank has about a 350 basis point interest funding advantage as well as not having to raise equity. Do you follow me?

Yes.

So, let me just finish, Steven. Going forward, the SBA loans will be done out of the bank and NSBF with its legacy securitizations, loans against securitized debt will be in a runoff mode. So, all of [indiscernible] will be done at the bank. Hopefully that answers your question.

Right. It’s the better economic choice to keep the loans rather than try to sell them again.

Well, when you do a securitization, it’s actually treated as a finance since 2010. So, I think the better way maybe to state that is financing you on a short loan participations in a bank is far more effective than financing them currently through securitization.

Okay. Thank you. Thank you for your time.

Sure. And Steven once again, if you go back and you read the transcript, we talked about when you do it out of the NSBF and before acquiring the bank, you only got a 55% advance rate. And you are paying, 8.25% and 8.5% on the rate. So, 45% to maintain your ratios in the BDC had to be funded with equity. So, the $500 million loan, you need to put $50,000 of equity, and $550,000 of expensive leveraged bank debt. Now, you could fund it with 5% to 100% deposit money. Does that make sense?

Yes. That’s all for today, I have.

Okay. Thank you.

Thank you.

Alright. I think that’s last question, right, operator?

It is.

Well, I appreciate all the input, all the questions, a lot to digest here today, a lot of reading to do. And we welcome the opportunity to report again next quarter. Thank you very much everyone. Thanks for your participation.

Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.