NewtekOne, Inc.

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Good day, and thank you for standing by, and welcome to New Tech Business Services Corp Q3 2022 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 this session, you'll need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would not like to end the conference over to your speaker today, President and CEO and Founder, Barry Sloan.

Good morning, everyone, and appreciate you all attending our third quarter 2022 Financial Results Conference call. First, I'd like to welcome John McCaffrey to the call. Today, John is our SVP of Accounting and Finance, and John was hired with our intent that's subject to regulatory approval. John will become the Chief Financial Officer of New Tech Bank. In addition to John being on the call today is Nick Ledger, Nick is Chief Accounting Officer of our publicly traded company, NewTek Business Service Corp, and he'll be doing the financial part of the presentation toward the end of the call. And the voice you hear today is Barry Sloan, President, CEO, and Founder of NewTek Business Services Corp. We have many new people that are attending today's call. Just a little bit of background. NewTek was founded in 1998 in a spare bedroom in a New York City apartment, 120 West 18th Street, apartment 4B. We reversed Merge into a publicly traded company in September of 2000. I say that because as I do a little bit of counting on my fingers and toes, we've probably done about 88 to 89 of these quarterly earnings reports and conference calls. As they say, not our first rodeo. We've been through up markets, down markets, up credit cycles, down credit cycles, up rates, down rates. We've seen it all, and you've got a very experienced management team and board that has been able to manage through all these turbulent times and turbulent waters. We'd also like to welcome the analyst community that has followed us, KBW, Raymond James, Ladenburg-Dalman, and Compass Point. We appreciate the work that you do in our company and the reports that you put out. For those of you looking to follow along, on the conference call, the presentation is located On our website, newtechone.com, N-E-W-T-E-K-O-N-E.com, in the investor relations section, you'll be able to follow along with the PowerPoint, or you can go to the webcast, and the PowerPoint is available there as well. We think that today's call will help demonstrate that we've had, through the first nine months of this year, tremendous operating performance. We're very excited about telling our story, and obviously we're seeing very turbulent times in the capital markets. And there's somewhat of a disconnect, we think, between the capital market and what's actually going on within the company. We hope to clear up some of that and depict a very strong nine months, recent quarter, and operating history of the company. I'd like to roll forward to slide number two. Obviously, for those that have been following the company, many of you are aware we're going through a potential and likely transformation to acquire National Bank of New York City. and to become a publicly traded bank holding company. On August 2nd, we entered into a stock purchase agreement to acquire National Bank of New York City for approximately 100% of book value. We're excited about that potential acquisition that is subject to government regulatory approval from the Federal Reserve to approve us as a bank holding company and the OCC to approve the acquisition of the bank. We've been working on that for over a year and believe we're very, very close. On June 1st, at a special meeting of the shareholders where the company issued a proxy previously, we got 89% of the votes cast at that special meeting in favor of withdrawing our election as a business development company and giving the board the authorization to withdraw that election, which potentially would free the way for us to acquire the bank and then use leverage to grow the bank and our business going forward. As described in the May 2nd proxy that we put out, the rationale for us transforming NewTek Business Service Corp, potentially from a BDC into a bank holding company is laid out very well in the proxy. But it's important to restate the rationale. Way back when, when we announced the deal, and obviously the decision to potentially pursue the bank and transform the company was made prior to that, we did think that rates might rise. We did think that quality spreads might rise. We also believe that as a growth company, the better financial structure to be in would be a bank holding company owning a bank. But I want to make it very clear, as you'll see in our presentation, not in the traditional way that most of the 9,000 financial institutions exist today. I say that credit unions, banks, et cetera. We will be positioned as a bank of the future, a technology-enabled bank, and a bank that offers real value to its clients, which you'll see through our discussion of our technology, the New Tech Advantage, and many of the assets that we talk about in this particular presentation. So when you look at the highlights of the proxy statement, number one, BDCs are limited to leverage. You can't grow more than two to one, and typically, most BDCs kind of hover between one to one and one and a half to one. Number two, that Cap basically means if you're growing, which we have historically grown, look at our dividend earnings payout over the course of our BDC life in eight years. You could see it grew tremendously, particularly from 2014, 2015 when we became a BDC to last year. Tremendous growth in earnings and dividends. You always have to continue to sell shares of stock. We believe that we'll be able to use the bank's balance sheet and the appropriate leverage risk for reward in the banking structure to take advantage of the fact that we will not have to dilute shareholders as much, and also we'll be able to use more cost-effective debt through core deposits versus expensive BDC debt. We view that as the low-hanging transformative fruit in the transaction. Also importantly, leveraging the company's patented technologies, New Tracker, the Dashboard, the New Tech Advantage. Some have patents that are existing, some that have patents that are applied in patent spending. We are very, very excited about this opportunity, and we'll be discussing it throughout the presentation. On slide number three, we talk about unlocking the value of our homegrown technology. Once again, addressing the history of the company. We've been in business for over two decades, and we've grown our business without the use of brokers, branches, bankers, or BDOs. We use technology to acquire clients. We use strategic alliance relationships. We've created the New Tech Advantage, be a dashboard for business clients, which we'll talk a lot about today. And we look at organizations like Live Oak, who we applaud, and things that they've done with Encino. And we believe that we can follow in their footsteps and unlock the technology that we've created much better in being a bank holding company, owning a bank, and also spinning out some of that technology and offering it to other players in the space than just being in our current position as a BDC. We believe that the technologies that we have, the ability to unlock further shareholder value, which is not currently apparent in our market to our investor base, as well as the NewTek Advantage, is really going to give our clients a very important asset and a major advantage to doing business with us versus doing business with traditional banking relationships. On slide number four, we talk about the NewTek difference. It's really important to be different and be different goods. Obviously, that is our goal. That's our aim. That's what we've demonstrated over 20-plus years in business. We believe we're a differentiator. We believe we're a disruptor. And what is that new tech difference? We're going to wind up giving our clients personal banking relationships, and we'll talk about that. Analytics in the new tech advantage. Software and transactional capabilities other banks simply do not have. A snapshot or screenshot of the dashboard is on slide number five. We refer to this as the new tech advantage. When you look down one side of the page of the screenshot, those are the relationships you will get upon opening up an account. A licensed insurance agent that you can click on, get them on camera. A deposit specialist, click on them, get them on camera. A lending specialist, click on it, get it on camera. A payroll health and benefits specialist, click on, get it on camera. A technology solution specialist, what does that mean? Managing their IT remotely, disaster recovery, whatever it might be in the technological realm, we can help the customer with that. Merchant accounts or payment processing. They'll get a specialist to help them take Visa, Manage to Discover, American Express, or ACH. They will have the five to six relationships with the NewTek Bank that they simply do not with the other competitors in the marketplace. If they're lucky, they may know a banker somewhere. And at the end of the day, the banker's got to bring in all these other resources. And in most cases, the resources are not present in the bank if, in fact, the bank does offer payroll, workman's comp, a payment processing solution, whatever it might be. The dashboard will be a very important growth mechanism and vehicle to provide a better solution and asset to our business clients. Slide number six, in further discussions about the new tech advantage, we talk about giving our business clients a management asset. We believe it's unique and not that easy to replicate because we've been in all these businesses for over 10 plus years. That's payroll health and benefits, 50 state licensed insurance agency, tech solutions company, payment processor, lending, et cetera. These are businesses that we have people, process and software that exists that are all getting pushed up into one common interface, the new tech advantage, which will be integrated into a core we are very very excited about the opportunity to push the advantage out of the market to give business clients what they really want multiple relationships with an organization with real live human beings it's not just a piece of software and potentially we do think that our clients want to have their deposits their payroll and their payments integrated into an accounting geo That is something that is out there in the future subject to regulatory approval, and we'll be pushing that to get that in place. On slide number seven, the big question I'm asked about 15 times a day, what's the status of regulatory approvals and timing? That's the million-dollar question. It's actually more than a million dollars, but that is the big question. So we state the acquisition is pending approvals of the Office of the Comptroller of the Currency for the acquisition of the bank, and the Board of Governors of the Federal Reserve as well as the Small Business Administration, approving our capital plan, which historically they've done, at all the entities that we've been in. We anticipate remaining our status as a BDC through December 31, and that obviously is up to the Board of New Tech. A, obviously receiving regulatory approval to transform into a bank holding company, owning a bank, and B, electing that RIC status. But our best guess is That status probably will be maintained through December 31st, 2022. And obviously the final decision and the timing of the company's discontinuous and regulation as a BDC and the withdrawal of our election as a BDC and the RIC status will be determined by the board of directors as the authority and authorization granted by the shareholders. Slide number eight. This is an important slide for me. And I wanted to note that the efforts of our staff in operating our businesses and fully servicing our clients with all their needs while simultaneously preparing for the openings of NewTek Bank and getting regulatory approval. No small task. I want to point out because people have said to me, gee, you don't know what it's like being a bank. You don't know what the regulation is like. You don't have enough people to do this. Who are you going to hire? Well, we're ready. We've been positioned and we've brought people in that have helped NewTek as a BDC throughout the course of the year. and are positioned and ready to go when we're ready to open up the bank. John McCaffrey, who's joining me on this call, is one of those such people who will be chief financial officer of the bank, subject to regulatory approval. John's been with our organization, I believe, around six months. Nick Young has been with our organization as chief risk officer of the BDC for over a year. Subject to approval, Nick will become the president and chief operating officer of the NewTek Bank. Kelvin Liu has been with us, I believe, around nine months. Kelvin is the chief digital officer. and has helped us with our technology solutions. John Vivona. John joined us about three months ago as Chief Compliance Officer. Tom Susi, who recently joined us in the last couple of weeks, as SVP of Loan Administration. So these are five individuals, just to give you an idea, that have already been added to the payroll. Obviously, those are headwinds on our numbers this year, but preparing us for growing next year. In addition to the fact, the legal expenses, the accounting expenses, the advisory expenses, these have all been somewhat of a drag on our dollar performance, but positioning us for the future. A tremendous investment that we are very confident will bear real good fruit for our shareholders and organizations going forward in the future. We'll also talk about in this call the lack of $50 million of fee income from PPP in 2022 versus a 2021 comparison, as well as a change currently for the first nine months of this year for gain on sale margins to come in about three points less than they were in 2022. When you add all these things up, it's pretty incredible. It's almost $2.50 to $2.70 of earnings that existed in 2022 that didn't exist this year, yet we still hope and intend to finally distribute and dividend out an expected $2.75 with the forecast of the fourth quarter at $0.70. I just want to note, this company has had a real, real strong year. I am very, very thankful. to the associates, to the board, for everything that you've done during the course of this particular calendar year in the first nine months as we report here today. Slide number nine, we put out a press release recently. I think there's some more language in the press release that will be helpful for people to go back and take a look at. The rebranding of New Tech Business Service Corp. to New Tech One. Renaming the public company New Tech One, really important. We're the one company for all your business needs. We're the one company that makes you successful. We're the one company that can help position you with analytics, with relationships, and with transactional capability that will make your business better. It's all about being number one. We've had an almost three-decade-old philosophy that was developed way back when, actually prior to the company being formed in 1998. where we recognize that providing a single set of branded and financial solutions to address the needs of independent business owners in the United States was very useful. We believe we can deliver the solutions that business owners need today. So we're excited about the rebranding of NewTekOne. People have said, why haven't you done this before? When you think about businesses, their relationship with their bank, it's extremely important. It's direct. It's a relationship that typically go to three, four, five times a week, 20 times a month. And launching the Advantage at the same time is the right time to really unleash the power of what we've done and developed over the course of 20 years. We're very, very excited about that. Subject to approval, we hope to have a call similar to one we have today to talk about the actual technology of NewTek Advantage and share it even prior to the opening of the bank. Prior to the opening of the bank, NewTek Advantage 1.0. will be unveiled and our clients will be able to have access to that. So we're very, very excited about that. We'll be redesigning our corporate website at newtech1.com, so stay tuned for that. Once again, this rebranding strategy, real important, very targeted to independent business owners that the SBA, by its records, indicates there's 30 million of them in the United States. Moving forward to slide number 10. and focusing on the third quarter financial highlights. Record funding for Q3 7A loans, 223 million, which represents a 36% increase, or 163 million a year prior. Also in units, very important, we're doing more units with lower loan balances overall. NewTek Small Business Finance has funded 355 million of units, a record again, up from 219 for the same period last year. Same record, Fundings over nine months, $586 million versus $362 million. From January 1 to October 31, funded a record $650 million. Because of that trend and funding track record, we've bumped our guidance up to $775 million through the end of this particular calendar year. We funded $64 million of loans during October. That first month is always important. Also important to note, that even though we have increased our fundings, we've done it without reducing the credit quality of our borrowers. We've actually tightened our credit standards. The weighted average FICO score in NSBF's recent securitization was 725 on its guarantors versus the weighted average FICO score on the portfolio at 12-31-2021 of 704. Once again, we talked about our premium gain on sale for the quarter, 9.4%, slightly up from the prior quarter sequentially. in the second quarter of 2022. So we go to slide number 11. Obviously, we believe our growth is based upon technology. We have a frictionless way to acquire loan opportunities. Our borrowers love it. They don't have to chase down bankers, brokers, or BDOs. They put a referral in. They get a fact finder. It comes back almost, depending upon how quickly the information passes back and forth, can come back within a half an hour, an hour. If they come back with the right answers, we immediately book a loan appointment when they're available. Not when we're available, when they're available. We don't tell them we're showing up on Monday, Tuesday, Wednesday in the middle of their workday. We give them a calendar and they've got the full gamut of calendar to pick to get a real live person on a camera to help them assemble their loan with our file goal. No emails with PDFs attached. Secure file vault, it works really well. A frictionless way to get those best credits in real quick. We're getting 1,000 to 1,500 referrals a day. That's the big funnel. It's important to note, those referrals could be for 7A, 504, non-conforming, and in the future, subject to regulatory approval, when and if, and hopefully it's when, most likely we believe it will be, on a bank, conforming C&I loans and conforming CRE loans. Important to note, the new tracker system It's been our system over 20 years. It's been great for us. We have over one, actually, it's over $2 million, 2 million referrals that we've historically gotten for a new tracker. It's about $75,000 a quarter. And these are referrals that can basically go into any particular loan product or category. Also important to note, we've made some really good changes through the pandemic. All reporting to Peter Downs, who is a 22-year veteran of NewTek, actually, you know, I'm sorry, that was summer of 2003, so approaching 20-year veteranship for Peter Downs, chief lending officer of the company. Slide number 12 talks about our pipeline growth. You can see the numbers, real, real exciting, both for 7A and the non-conforming business, which we'll talk about. 504 kind of flattish, however, the fundings are setting records, both through October 31, which we'll talk about, and our estimation through the calendar year. Slide number 13 also talks about the full pipeline through October 31 of 17%. 14 talks about growth in loan referrals, talks about the units, the referral system, the way to acquire clients cost-effectively with alliance relationships like UBS, Morgan Stanley, Raymond James, Meineke Muffler Trade Association, True Value. These are our referral partners that have been with us for long periods of time. We do a great job of servicing them. and helping their clients get loans, get workman's comp insurance, get a payment processing solution, get an e-commerce solution, get a payroll health and benefits solution. That's the core and nature of our business, broker list, BDO list, and branch list. Slide number 15, we talk about dividends. Obviously, as a 40s Act company, we must pay out between 90% to 100% of our earnings in the form of dividends, and we have to do that as a RIC. We cannot retain any earnings. that will be an advantage to us converting into a bank holding company and a bank. Less need to constantly sell shares. When stock price is high, it's better to share and sell shares. When stock price is low, you'd probably rather do it with debt. And you'd also probably rather do it with core deposits than expensive commercial funding as a BDC. We have forecasted a Q4 2022 cash distribution of $0.70 a share. Important to note that in the event that we get which we hope in the near term, in the quarter, we will look to distribute all of our income for the quarter as well as spillover income. So it's important to get to that 100% mark. So for those of you that are used to seeing distributions at a lower level than the income with a gap in there, our goal is to get to that 100% mark, not be under and potentially be over if we need to, just to make sure that we don't have an issue with the RIC status. I think it's really important to note that You know, I sometimes take calls from investors and say, gee, you know, you've distributed earnings historically, you know, out of capital. That hasn't happened. I don't know where people get some of their numbers sometimes, but I get a lot of questions. Some of them are quite bizarre. But that's what I wanted to clear up today. I also want to note that subject to the forecast being accurate, the dividends and distributions for the full calendar year paid in cash would be estimated to be $2.75. Slide number 16, once again focusing on the third quarter financial highlights. Total investment income, 23.6 million versus 12.4 in the quarter year prior, 90% increase. Net investment income, pending a share, that's an increase of a loss of 30 cents. or 103% increase. Adjusted NAI, 15 million versus 12.3 million, also an increase. Little higher debt-to-equity ratio when you get the broker receivable out, as it should clear within a week to 10 days. That number gets knocked down to 1.26. Total investment portfolio increase, NAV down a little bit, 16.04, not really alarming considering the cost of capital increases that we've experienced in Q3. I think it's important to note for comparisons versus the consensus, these are the numbers that we have based upon an KBW report from 8.8, Raymond James report from 8.8, Compass report from 8.11. Adjusted NAI, KBW, 8.8 report, 54 cents for the quarter. Raymond James, 65. Compass, 57. As I calculate that, that average is 58. To me, that's a beat. NII, negative a penny, KBW. Negative a penny, Raymond James. Negative 0.13, Compass Point. We averaged that up. That's negative 0.05, also a B. That's my calculation based upon those reports. Slide number 17, financial highlights nine months ended September 30th. These were all fairly ugly comparisons. I think the important issue here relative to the ugly comparisons is the $50 million of fee income from PPP. PPP was a tremendous opportunity and benefit. You know, people could argue whether or not this was a useful tool for government spending. That's not my job. Our job is to do our job, participate in the license, and continue the mission as an SBA lender, which was to put this money out to businesses, which 65% of the funds needed to go to employees for payroll in order to get loan forgiveness. And we did that. We did that all to about the tune of $2 billion with 26,000 customers. However, that income had to be shifted back to our core business. So $50 million of income, if you take that out of the equation at the current share count, that's about two bucks a share. The other thing I want to point out, which we'll do in pricing shortly, is the gain on sale margin of three points. So I'll try to draw the comparisons. I think the important part to note is, We have made a tremendous changeover in 2022, preparing to acquire a bank, preparing to become a bank holding company, getting staff in place, getting software in place, potentially for a bank opening, repositioning the company to get back to its core operating business of 7A, 504, non-conforming lending, getting those lending agreements back in place, as well as having this tremendous headwind of no PPP fee income and a three-point differentiator on if you round it to $800 million, that would be $600 million of gain on sale. That's almost $18 million of profits or about 72% chance of share. Major difference. And this is what I was talking about at the beginning of the conversation. We're very excited about how our company has performed in this calendar year. We're very well positioned for the future. And eventually, growth stocks or people with an imagination that like to buy low and sell high might look at new tech as an opportunity. But obviously, that choice will be up to the people listening on the call in the investment community. Slide 18 is a common slide we have in the pro forma debt-to-equity reconciliation. Slide number 19, also a common slide. Please note that the average loan size of the uninsured loan participations on our balance sheet keeps declining, $150,000. We like small loans. We like diversification. Important to note, most of those loans are sitting in non-recourse securitizations at NewTek Small Business Finance, or they're sitting in our Capital One line. We go to slide number 20. This is what I was referring to on the net premium trend. So, you know, this slide goes back to 2018, but if you really look for sort of an equilibrium, probably over the course of 10 years, the equilibrium price on these Prime Plus floaters is somewhere between you know, 110.5 and maybe 112. Maybe it averages, you know, 110.5, 111, maybe a little shade above that. But obviously, for the first nine months of this year, we've been averaging 10.02. Last year, 13.05. That's three points. On an $800 million a year, and I'm rounding up from our $775 billion guidance, that's 600 million of government guarantees, three points. That's $18 million of pre-tax profit. It's almost 70 cents a share. Well, that has to be made up somewhere. So we're very proud of the performance that we've had. In addition, on slide number 21, another headwind that we've had is the fact that Prime has been lagging the treasury market. And it's been lagging short-term rates as well, which we've been basically been financing historically over LIBOR. So our NSBF net interest trend, even though the gross interest keeps growing as rates rise, which we're happy about, but our cost of funds, which is adjusting monthly, hitting us where the quarterly adjusts on the loans are lagging. Next year will be the year for catch-up. And I think it's important to note, as we talk about in our press release and in parts of this discussion, we're looking at probably in the first quarter of next year, our portfolio having a coupon of 10 to 10.5%. If you go to bank rate, which is typically where the higher cost of bank deposit money is going to, You're looking at 3.5%, 3.25%, 3%, 4%. That's a pretty good NIM, particularly given that 75% of the loans in the 7A business have a big premium for gain on sale. We like our business. We like our model. We've been in this for over 20 years. We manage it well. The trend should bode well for us in 2023. In 2022, I get asked this question a lot. How do you protect yourself in the current environment, meaning rates rising, and there's some level of credit deterioration. And we basically acknowledge that we've been tightening our underwriting criteria as we anticipated that the Goldilocks scenario of aggressive monetary and fiscal policy would some point come to an end. So how do you combat that? Higher FICO and SPSS scores. Two, underwriting with stress tests at higher levels of interest rates and starting points. Loans that you're putting on the books today are being stressed up 2% to 3% at the current levels of rates. The newer loans, frankly, in these climates, tend to be better performing loans than the older loans. I think it's important to note, when we make these loans, we want to make sure that the businesses have got a very substantial amount of excess liquidity in the event that the historic and the future projections are missed. It's important to note SBA loans are loans that are made to businesses. It's a business loan. It's a C&I loan. And if the business cannot show that it can make payments and service the debt, either on historic performance or projections, that loan does not get made. So we look to lend to businesses that can liquidate collateral, have unencumbered borrowing power to survive unknown circumstances, things that just don't work out as well as they had planned, so they can get through the tough economic time and climate. Like I said, we've been doing this for 20 years, up cycles, down cycles, up credit, down credit, up rates, down rates, not our first rodeo. Slide number 23. You can see our currency rate on our accrual portfolio still remains very high. I have to say we don't expect it to remain this high. I said that in the last quarter. You're going to start to see some deterioration here as rates and inflation creeps into it. We do think we'll have higher charge drops that we've experienced over the last two years. That's clearly factored into our forecast. We've seen this before. We do not believe this is 08-09. We think it is you know, a lesser issue with respect to that. Our clients still have a reasonable amount of liquidity, and the economy is still on a pretty good footing. But once again, we just want to be careful that we have a very good feel for these markets. We've been in them for over two decades. We know how this works. It's not our first rodeo. We have very experienced people making these decisions. Slide number 24 and 25 are illustrations that we've existed for those 88... conference calls and really demonstrate the economics of a 7 loan. Slide number 27, the SBA 504 loan program. Important to note, through October 31, we closed 101 million of SBA 504 loans, a record. We're forecasting 150 million of loans closings for the full year. That would also be a record. We have plenty of credit availability on our lines as we sit here today to be able to grow this business. We like the 504 business quite a bit. It's a loan that's made for most people that are familiar with it. It's a 90% LTV with a 40% second taken out by government ventures. So we're left with a 50% LTV against commercial real estate first, and they all have personal guarantees and good positive debt service coverage ratios. On slide number 28, New Tech Business Lending is the entity that originates the 504 loans and the NCL loans. So these are the non-7A loans. Historically, we don't really report this portfolio because they're done out of controlled portfolio companies. However, we thought it was important to demonstrate to the market, out of 388 million loans that have originated since 2017 and 132.5 million that originated since 2019, we have not experienced any defaults or charge loss to date. And that's just a $500 million worth of loans, no defaults, no charge loss. We're very proud of our portfolio performance in this particular category. Slide number 29 depicts what a 504 loan looks like. Slide number 30 talks about the return on equity in this business, which is very high, as well as the 7A business, which is why as a bank holding company, owning a bank, we believe we can generate really high ROAAs and really high ROTCEs. We're excited about how we would look as a bank. For those of you that are familiar with our company, on the investor relations section, there's an old illustration. I'll point out old. It'll have to get updated, but it's old based on old data of where we think the bank might look at at that point in time for ROAA and ROTCE high numbers. Go take a look at that. Slide number 31, talking about a nonconforming conventional lending program. Well, we've been in the business since 2019. We're in this business because it's very accretive. We get tremendous operating leverage out of being able to do loans that don't fit the SBA box. So when we use the term non-conforming, we're referring to it non-conforming to a 7A or a 504 or government programs. So we did a securitization in January, $81 million worth of loans. It was 16 units rated by DBRS. They're in a trust. You could take a look at how that portfolio is performing. No defaults, no delinquencies. It's doing really, really well. And this was our first example of a real good exit and a financing and a good ROE. Slide number 32 says, We talk about expanding this program. I want to note that we've made some tremendous headway in this calendar year in a tough market. Obviously not that easy to attract capital. Things are moving along quite quickly. But we have a transaction with a joint venture partner. The joint venture is funded by a $15 billion asset management company to provide up to $100 million of equity capital. We will match that equity capital We have and we're prepared to close on a $150 million leverage facility from a well-known investment bank. We believe that we can grow that facility to greater numbers as well. And we do believe, as we move forward to slide number 33, and the rationale for growing this nonconforming conventional loan business, which will be done at the BDC level through controlled portfolio companies or in a bank holding company out of the bank. We are looking to originate about $600 million of these loans in 2023, $1 billion in 2024. Once again, with the expectation they'll be funded through joint ventures, help the bank holding company. This will give us additional origination fees, additional servicing income, the ability to asset liability, match the loans while they're in the credit warehouse facility through hedging that we've done historically, as well as once they go into securitization, totally match-funded. So slide number 34, we continue to talk about the securitization that we did on January 28, 2022. Slide number 35, we go to another one of our successful controlled portfolio companies that was established in 2002, our merchant processing business. We generated EBITDA of a little over $14 million. I think it was about $14.5 million of all of our payments business last year. We've had some nice growth this year, up to $16 million of EBITDA. We have a very reasonable multiple on that business. And that's an important part of our ecosystem of being able to offer value to our customers to help them move money, bill, invoice, use POS systems and all state-of-the-art e-commerce to be able to take payments and use the payment processing system. Very important function of a bank. Slide number 36, New Tech Technology Solutions, a Phoenix-based cloud computing business. We're forecasting $4 million of EBITDA. Between that and the NMS business, it's about $20 million of EBITDA. Both businesses will be held up at the bank holding company. Slide number 37, many people aren't aware of the fact that we own 60% of an organization that provides a POS to our customers that can be white labeled for our alliance partners. And we're really excited about the growth and the opportunity in competing against Toast, Square, and others to be able to provide this attractive software. Slide number 38, two other important portfolio companies that we believe really experience tremendous growth based upon their positioning in the NewTek Advantage, NewTek Payroll Benefit Solutions, and NewTek Insurance Agencies. These are businesses that will consolidate in our financials going forward if, in fact, we get regulatory approval, become a bank holding company on a bank. Important to note, everything will consolidate. So all the accounting will change over from 40s Act accounting to 33 Act accounting. We plan on being very transparent. So there'll be financials on the bank, financials on insurance, financials on payroll, and everyone will be able to do their in-depth evaluation. Going to slide number 39, from an investment summary perspective to sum up things before I turn the call over to Nick Ledger, important to note, and I really wanted to emphasize this, we've been publicly traded since 2000, and the company was established in 1998. I'm one of the original founders. Important to note, the insiders of NewTek own approximately 6% of the outstanding shares. So our interests are very much in line with shareholders. As we've talked about, we believe very strongly that the best opportunity for NewTek Business Service Corp, future NewTek One, will be to unlock the value of its technology that's built over 19 years, which will be much easier to do and display as a bank holding company and offer much greater rewards to its current customer base. Obviously, BDC dividend investors have been rewarded with high dividends during this window of time. But realistically, they've had fairly perfect information with respect that we are no longer going to be distributing 90-100% of our income out, and many of our BDC investors are retail, and they want the dividend and really don't want to hear about anything else. We appreciate that. We understand that. I happen to be a shareholder, and I happen to be a major beneficiary, and I've enjoyed those dividends. However, the new structure... will allow for increased total participation. Number one, BDCs are excluded from the S&P 500 and the Russell 2000. I think it's important to note we've had estimates from researchers that indicate that there could be about two million shares of NewTek buying just going into the Russell 2000 alone. I wouldn't rely upon that statement, do your own research, but however, going into the Russell without market cap could add a lot of institutional buying. In addition, institutional investors really have a hard time buying BDCs because of the AFFE issue. A lot of people don't know about this. They don't understand it. They don't know what it means. Well, I don't want to get too much into the weeds here, but we're an internally managed BDC, not externally managed BDC, which is an advantage, by the way. So we don't further our nest as management participants taking fees out of the entity. Our dividends are after those fees. With that said, Because we're internally managed, it's the SG&A that hits this number. It makes it very difficult for institutional investors to actually own NewTek or other BDCs. So we do believe that this is going to open up the box to a lot of additional investors to NewTek. We are looking forward to declaring, which we have not yet, but we have forecasted, a $0.70 cash distribution for the fourth quarter. And obviously that's coming up rather quickly because we're already in November. So the return on that cash return is pretty high. So we look at going forward. If we get the regulatory approvals, which we hopeful are imminent, but anything can happen. As I've said to many people, this isn't horseshoes. Clothes is nothing. So you get the letter, you never know you're there. So once that occurs, we will try to turn around and provide earnings forecasts for 2023 and 2024. We've given some idea what that could generally look at by the August 2nd or 3rd discussion. If you go to the investor relations section, I think the thing is labeled August 4th presentation. Well, that's when it's been put up. But anyway, so look for that August 2nd, 3rd, or 4th date. You'll get a feel. But I think importantly, we put that out. There'll be some nice guidance for the market. We haven't been able to do that at this point in time. because we want to know what the final structure is, subjecting regulatory approval. We're also hopeful that our sell side analysts will transfer coverage for BDC analysts to bank analysts. We don't have a lot of guidance out there. It's been very difficult. Also, earnings multiples are depressed for both BDCs and bank stocks currently. And obviously, we talked about gain on sales margins being depressed and lags in prime. So lots of headwinds. With that said, I hope we've been able to illuminate the quarter and the performance year to date and how excited we are about our future, despite the fact it's a tough news channel out there. But we still feel pretty good about it, and we're very optimistic about our future. I would now like to turn the financial review over to Nick Ledger, our Chief Accounting Officer.