NewtekOne, Inc.

Good day, and thank you for standing by. Welcome to the NewTekOne Inc. Third Quarter 2024 Earnings Conference Call. At this time, all participants are in 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 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Barry Sloan, CEO and President. Please go ahead.

Thanks very much, Gerald, and good morning, and welcome to our third quarter, 2024 Financial Results Conference Call. Today's call is hosted by myself, Barry Sloan, CEO, President and Founder of NewTek One, and Scott Price, the Chief Financial Officer of NewTek One and NewTek Bank National Association. Also joining on the call is Nicholas Young, president and COO of NewTek Bank. Once again, I want to thank you all for attending. We're very, very pleased and proud of the results for the third quarter. I want to make a couple of quick additional announcements. As many of you have seen, we put out a press release recently that we have hired Ron Lay as the chief technology officer for NewTek Bank NA and NewTek One, a publicly traded holding company. We've also added the staff that we put out a sec document on this cj burnett cj previously was cio and cto of the publicly traded new tech entities and was also the president and ceo of new tech technology solution so we've clearly added continue to add to our star-studded staff of a management team to be able to help us grow manage risk we'll talk about that a lot on the call but particularly with respect to information technology i want to thank the management team for putting up a great performance this year as well as support from the board. Today's presentation will be a little bit unconventional. We're clearly working very hard with analysts in the street to be able to better explain what a differentiated organization like ourselves looks like. We clearly have a differentiated business model and approach to both providing business and financial solutions to independent business owners in all 50 states, something that we've been doing now for well over two decades. And that unconventional approach leads to a little bit of unconventional numbers, unconventional analysis. So we're going to focus a lot about things you don't necessarily want to hear. And I will try to stay away from repeating the things that are obvious in our press release. Some of the things that are obvious was recorded in one of the notes from our analysts this morning. We reported 45 cents of earnings per share for the quarter. I do want to point out that we actually had a tax charge for deferred tax liability. Without that, that would have knocked it up to 47. So actually, and Scott will talk about this in the MD&A, without that tax charge, we probably would have had two cents better. The street consensus was about 43 cents. Also point out that our return on average assets at the Holdco, we'll focus on the bank as well, 2.8% consistent with recent quarters, almost three times the peer median. A 2025 guidance, which we gave $2, 2025 cents, midpoint of $2 and 12 and a half cents. Street consensus is currently 207. So we're extremely appreciative. I also want to point out one other item, which is important. This is something that we will spend a lot of time tackling. The provision was higher than expected. New tech book, 6.9 million of provision, but we're going to talk about this and specifically spend a lot of time on risk adjusted returns, which is most important. Typically, this industry does not really focus on risk-adjusted returns. We do. It's been in our DNA for over 20 years. It's really what matters. People in this industry typically invest in very low margin, low charge of assets. So we intend on working hard to continue to get industry participants more comfortable with what our financial numbers actually mean. For those of you following along in the presentation, you can go to our website, newtech1.com. investor relations section. We have a PowerPoint hung for this presentation. I'd like to suggest to everybody that we fast forward to slide number three. Significant events in Q3. We talked about the earnings beat. We didn't want to go to core, non-core. We're just leaving it 45 cents per basic diluted. Remind you about a $527,000 tax charge based on the PAL talk. merger with NTS, which is a divestiture, which we'll talk about, that would have added about two cents to that number. We confirmed our guidance, 185 to 205, midpoint up 95. That's what we think you should focus on. We'd like to think we can gravitate more towards the upper end of that range, but that'll remain to be seen. We're in an extremely volatile market. We wanted to give ourselves cushion. And at the current stock price, we think there's tremendous value based upon these types of numbers. The obvious. Deposit growth, 12% at the bank. Loan growth, 17% at the bank. Net interest margin at the bank, 5.29%. Loan loss reserve coverage, 500 basis points. You don't see these types of metrics in this industry. It doesn't exist. We understand the uncomfortability with these metrics. We're going to spend a lot of time going through it. We're making a lot of progress visiting with investors, visiting with analysts, And getting us to better understand our model will keep our head down and do that. The Eternal Loan Program picked up traction. That's a very important accelerator to us being able to get our EPS in the future higher into the twos. And at one point, many of you remind me frequently that we actually had a $3 number out there. And that's based upon our ability to grow faster, which we throttled back after the 2023 banking. I'll call it banking crisis with Silicon Valley Bank. signature bank, silver gate, et cetera, et cetera. We'll talk about a little bit more in this call. Important to note the efficiency ratio, 39%. I mean, if I would go to a bank executive or bank holding company executive, and I would talk to them about these ratios and tell them 65 to 70% of our income is for non-interest bearing, they would salivate. They would trade their seat for my seat all day long. Our job is to get people comfortable with the model. people comfortable with risk-adjusted returns, and that these are going to continue to happen. They've happened for four, seven quarters. We're going to continue to track. We feel good about this. We're not new to this rodeo. We've been doing this for over 20 years, and we feel really good about where we are. Last item on slide number three, we completed a registered public offering of $75 million of bonds, NEWTH, 5H coupon, Listed on the NASDAQ, Triple D Plus by Egan Jones with a positive outlook. Going to slide number four. These are the things we kind of hammered on. I'm going to dust over them because you've seen them. Looking at third quarter, 2024. ROA, 6.3. ROTC, 49%. Efficiency ratio, 39.4. These are sort of unheard of. NIM, 5.29%. Yield on loans, 11.12%. and that does not include the gain-on-sale income that we get from selling the 7A business, government-guaranteed participation, which we've done for 20 years. So people don't like gain-on-sale. I can understand that. If gain-on-sale is an anomaly because rates move up and down or spreads change, yeah, but this is our business. This is what's going to continue on and on, and it's a cash gain. We sell a government-guaranteed piece, we get cash for it. It creates capital, by the way. Average rate on funding. This is interesting. We're high here. But you can see, as we're gaining speed in business depository accounts, that number will start to come down. That's an execution thing. We have to get the people, the software, the process in place. We're tracking. The third quarter was the first quarter I would say we were all in. The Wilmington office is set up under our chief operating officer for the digital bank, Jennifer Merritt. staff with about 25 people in addition to other people at the bank we're going to talk about staffing this is an organization that staffs first ask questions later we are poised for growth and i do want to point out i'm reading from a report when growth is the problem i'm sorry growth is never the problem growth is good it's being able to manage the growth and manage the risk and we have a star-studded management team and look If we had issues, we would be scaling back our growth. We'd be scaling back our projections. Otherwise, I'd be doing the wrong thing here on this call. Growth is not the problem. That is an oxymoron. I'm reading directly from a report. Let's go to slide number five. Now, this is the hold code. A lot of our competitors in the space that we're being managed against, and I might suggest we might be better off in a technology segment than in this segment. But another time, another story. We're going to stick here. This is where we're going to be, and we're going to be a standout relative to these metrics, as we are today. We can clearly show, which we will in slide number seven, how we stand out against our industry peers. But relative to today, and the Holdco has some fair value in it, It has their ALP business in it. We're going to talk about that today and provide more disclosure. We need to do an enhanced job in giving the market more information on stuff that isn't readily apparent from K's and Q's in the presentation. Once again, ROA at the home code 2.9. NIM grew from second quarter 2024 to third quarter 2024, 3.08. Part of that is because we're putting the LP loans on our books, not in joint ventures. In joint ventures, They don't consolidate that way. Average yield on loans, 9.32%. So let's move forward to slide number six, our forecast for 2025. So we're very comfortable with a $2 and $2.25 EPS range for diluted earnings per share for next year. Between the low end of the range and the high end of the range and the midpoint, that's an 8% to 12.5% range of increase over 2024. So here is an oxymoron. An institution like this that's actually growing its bottom line in double digits. And we're comfortable with that. We think we can do that. We've done this for our entire history. Historically as a BDC, and now we're in the seventh quarter of our transition into a financial holding company. We've accomplished growth in the ALT business, growth in business deposits, We're going to talk about our payment processing segment. Nobody talks about it. You're going to see some numbers that you need to look at. It's diversification. It's a business that isn't directly tied to rate movements and credit movements. It's reoccurring income to business we've been in for over 20 years. And now that it's part of a bank, there's advantages to the customer. By the way, all of this is about the customer. If we focus on the customer, just like Apple, just like Amazon, just like the four seasons, we're going to win. Now, I realize this is a financial conversation, but at the end of the day, we are very focused on a frictionless environment for the customer. We have brokers, bankers, bank, traditional bankers, branches or BDOs, giving them easy technology, allowing our staff to use the greatest and latest technology, many of which we've developed ourselves in-house to make the experience for the staff clean, easy frictionless that results in transactions which you can clearly see from the numbers once again uh our midpoint of two dollars and twelve and a half cents for 2025 starting consensus is two dollars and seven cents we're clearly constructive about where we are slide number seven is real important i'm going to leave this to all of you to dig into this and look at it and analyze it look when you look at yield on earning assets, 1 to 3 billion, 3.5 billion commercial banks, 5.53, 5.65. Look at the bank, 896, 882. It's 3 to 350 basis points greater. You can't ignore that, or you choose to so far, but it doesn't include the gain on sale, the servicing income. And the other thing is this book of business is going to start to grow. So you can see we're growing the traditional bank and bank holding company type income all at the same time continuing to get great returns on equity and assets as we make things and then sell them for gains. If you look at our profitability numbers, clearly dusting others, credit quality, which we need to tackle and cover. This is the big ugly duckling, so to speak, although we're comfortable with it because once again, in today's environment, we have plenty of reserves, plenty of capital, very adequate, checked on a regular basis by two regulators, outside auditors, internal quality control people, all historically from the banking environment. So despite the fact that these numbers are bigger on a risk-adjusted basis, we win. We win all day long. And it's frankly less risky, although it's not tagged that way, than making a CRE loan at 250 off the curve at 65% LTV that you're totally banking and hoping that the deposits don't go away in the middle of the night, and you're hoping that your banker doesn't leave its type to those deposits, or that you don't have a signature bank or Silicon Valley bank situation where these deposits that are discounted to the risk-free rate by 250 to 300 basis coins because of that relationship, and the bank arguably doesn't offer a lot. We love our model, and we believe very confidently we're going to win in our model. Slide number eight, Live Oak is our North Star. Great company. Please take a look at these numbers. Look at the PE ratio. Look at the fact that it takes them $12.5 billion worth of assets at the bank versus our $914 million asset size to generate net income. Something's off here. You need to take a good hard look at this. Look at the efficiency ratio. That's what you get from technology. This is the future of this business and industry. And by the way, our clients, They love speaking to our staff on camera. They love using our technology. Now, I'm not telling you it's perfect. I'm not telling you our staff doesn't need to get trained better, but we're winning. We're putting on more loans. We're putting on more deposits. We're driving the numbers. And I think it's the first or second inning of a long game. And the best is yet to come. Once again, Live Oak, North Star, we aspire to be like them and the success they've had in the business. And I'll have to say, we don't compete. Yes, our assets look similar. I think we have a similar philosophy with technology. Now, by the way, they create technology and spin it off for huge gains. But they don't get criticized because they get gains on sale for spinning it out. We get criticized for making a loan and selling it every day, every week, every month for the same cash gain, and that's reoccurring. Well, I'd rather bet on us making loans and selling them over the next one, two, three, five, or ten years than creating the next greatest technology like a Zeno. But that's beside the point. But they get great valuation for that. We're working on it. We appreciate it. We appreciate you paying attention and doing the hard work that's required to look at making an investment in NewTek One. Slide number nine. This is the meat of the presentation today, and I'm going to go through these one by one. These are some of the things that are missing, okay? Once again, I'm going to stay away from the highlights in the press release. You can all read them. You can all see the growth and deposits. You can all see the RLA. You can all see that stuff. And Scott will handle that also in the MD&A. And Scott Price, our great CFO. Growth in the payment segments. Let's go to slide number 10. So look, I don't know why this constantly gets ignored, but I really can't find a lot of information on this in the market. This is a segment. in our queue pre-tax income for the quarter of 32 and a half percent to 5.3 million pre-tax income for the nine months of 43 to 14.2 million forecast the pre-tax income for 2024 17.7 million forecast for next year 2025 19.6 million now ask why is this growing the business we've been in a long time now the customer it always goes back to the customer our customers love the fact they're now dealing with a bank and a payments business together there is a payments ecosystem through the new tech advantage many of you have heard me talk about the new tech advantage it's on our website we have videos what is the new tech advantage the advantage to the business client and there's 30 million of them in the united states was defined by the small business administration we identify that customer base as independent business owners small medium-sized businesses small medium-sized enterprises so in that identification that customer that business owner they want to have analytics they want to have data and they want to have transactional capability so by taking our payments business pushing it into the advantage the client at night can do the following they can look at their bank balance they can see all their bill pay money leaving their account checks that are cash checks that aren't they can see their electronic billing, invoicing, and the money coming back. They can see their Visa, Master, Discover, American Express charges in the Advantage. They can see their batches from the day. They can see their refunds. They can see their chargebacks. Everything is in the Advantage. I will tell you, this is extremely unique. And we've recently passed a divide where the bank is now integrated into QuickBooks. Therefore, we are working on taking the balance sheet and the income statement and giving the customer view in the QuickBooks. So if you're a business owner, rather than going to two, three, four different systems, or for that matter, having to go to your external accountant who is, in fact, doing your books and records, you can go online and see everything. We have customers now that are willing to come to us. Price is not the big issue on the payment side. And the deposit side, which we'll talk about, they love our no fee business accounts. No fee. No wire fee. No ACH fee. No monthly statement fee. No abandonment fee. No refund fee. Go to our website. We have a calculator there. It makes it very easy. It's an immediate savings. Immediate savings. And they don't get 10 or 20 basis points from the top four banks. They get 1% on checking and 3.5% on business savings. It's a tremendous value add. This is why just in early stages, the sampling of people coming to us for our typical payment processing business is growing. There is the advantage. Slide number 11, nice charts and graphs. I've been told about this presentation, it's too long. Some people say it's too short. Some people say it's just right. We try to take all this comments and put it together, but we want to be able to educate people I don't know how you could ignore this business. It's very valuable. I want to make one other point about this business. When we were a BDC, it was valued at fair value. In a holding company, it's not. It was basically not part of a tangible book, extremely important. We have a slide to address that. In this business, you put a seven or eight multiple on it, which is probably down many, many turns from a public comp. It would have $125 to $150 million valuation. Perspectively, you figure it out. I don't do that. net of debt. But if you hypothetically use those numbers, 125, 150 million, it's five or six bucks a share that would go back into what you would call adjusted book. So people look at us at book. You shouldn't look at us at book, but if you have to look at us at book, you may want to look at this business, which is very liquid, very valuable, put a number on it and then say, yes, this is something that they could probably sell. Not that you have any interest in doing that in a short period of time. And yet it's not a loan. It doesn't have a tangible book, but it's incredibly valuable. Most financial institutions don't have things like this, particularly in the segment that we're in, which is subpar $500 million of assets, which is an issue into itself because we're even below the small cap hurdle at this point in time of $500 million. But anyway, let's continue. Slide number 12. We put out a press release on this. Early redemption of the 2018-2019 securitizations. These are assets and liabilities that are and were located in NewTek Small Business Finance, a segment in our queue. What we said was when we raise the $75 million, we're going to take a piece of it and pay off the debt in the securitization. Why is that important? Those securitizations, the way they're structured, they trap all the P&Is and they trap liquidations of ALP and reserve funds in the securitization. So by paying off the debt, which netted $18 million, you can see it on slide number 12, net of the cash reserve funds, we were able to free up approximately $68 to $69 million of performing loans and 15-ish million of non-performers. When you add that up together, it's a fairly healthy number. Here's the important aspect, and this is just an estimate. It's rough. But the cash flows that would come in off of that, $37 million, $32 million off of NSBF flowing into NSBF. Why is that valuable? Well, that's cash that can be used to repurchase stock. It can be used to pay off debt. It can be used to fund ALP. We have $280 million of equity that is sitting in NSBF, New Tech Small Business Finance. People don't think about it, but this is burning down or self-liquidating and I've heard somebody describe it I'm reading a report as an old legacy investment well that old legacy portfolio has 280 million of cash of achieving equity in it well I don't know I'm not sure I would call it a legacy portfolio and downplay I think it's as it pays down it's an attractive asset now it's also the least attractive component to making an SBA loan of which you get a gain on sale upfront. You get a servicing asset. Now I say it's least attractive. The coupon on those assets are currently 11 and a quarter. They are financed with expensive securitization debt. That activity going forward is going to be done in the bank at lower cost. Very important item to think about. Let's go to slide number 13. We'd like to get some credit from the fact that we've been in the banking business now for seven quarters and We've got a book value per common share going from 865 to 1007 and a tangible book going from 735 to 950. That's nice growth. And once again, does not include anything obviously from the payment processing area. Fourteen, insurance agency, which is currently in one of the segments and it's not broken out. This is something you may look at breaking out next year, but I think it's important to note net active policy since we became a bank grew by 1,429 units to 37%. Now, this is illustrating the benefit of having everything at a business owner's fingertips and being able to provide team and life and other insurance to people that are taking out loans. Look, you can see we do a lot of things. I wish we could do all these things simultaneously at the same time. We can't. We have to continue to make our numbers quarter by quarter. We have a lot of initiatives. We prioritize them. With that said, The insurance agency business, a reoccurring fee-based business, very well positioned in the Advantage and as part of the new Tech One ecosystem. We now have the capability to provide key man life on every business loan, which we're doing with the policy pre-assigned to the loan. So it's pledged. All done automatically in a period of seven to 10 minutes without a medical exam. Automation. The insurance agency, with its automation, is going to be able to provide these policies to a variety of customers, not just lending in the vertical. Let's go to slide number 15. Many of you are familiar with the fact that we have to divest of our technology unit, which basically, as we transition to a financial holding company, the company made a commitment to the Board of Governors of the Fed to divest or terminate the activities of NTS. So we're there. We have signed an agreement. It's public. We're merging it into an existing public company currently known as PalTalk, stock symbol P-A-L-T. Now, it gets a little confusing, but I want to make a couple of comments. PalTalk will have to divest of all its business, and the business of NTS will basically become PalTalk. So PalTalk will change its name to Intelligence Protective Management Systems. Stock symbol is anticipated to be IPM. NTS has 17,000 customers. it provides what the market is thirsting for. The market needs outsourced IT, particularly the SMB market or the independent business owner market that's getting hacked. They have cyber risks. They're getting interlopers going into their system. They're stealing money. They're stealing wires. This is a big need in this marketplace. So the new code, which will be public, will wind up being a pure play in this particular space. Cybersecurity, outsource, outsource managed IT, and professional services. So it'll be sort of a little, little, little, little mini AWS or Azure, but with real people that answer the phone, helping customers 24-7, 365. It's a business we've been in since 2004. We really didn't want the best of it. However, we're going to own 4 million shares of newly created non-voting preferred and we'll get four million of cash um and there's also a potential five million of earn out to the transaction uh this most likely is scheduled for the first quarter stay tuned uh pal talk is doing what they need to do um and we're excited about it this year we think nts which is a segment will generate between 25 to 30 million revenues adjusted ebitda of 2 million i suggest you take a look at pal talk Look at their cash on the balance sheet. Look at the cash that they anticipate getting from a lawsuit. Add this in. I think you'll find it interesting. We'll also get one representative to the PAL Talk Board of Directors from NewTek. Slide number 16, I think this is the most important slide in the whole presentation. Our credit thesis as a high-margin loan originator, extremely important. High-margin loan originator and risk adjusted, extremely important. We've been doing this for over two decades. We've done it through 08, 09. We've done it through the pandemic. We are good risk managers. I say that in 08, 09, we stopped lending for a period of time. That was a smart thing to do during the pandemic. We stopped making SBA loans for almost four months because we didn't think it was prudent to do when people were told to go in their home and we didn't know what the effects of the pandemic was going to be. And we switched to PPP that turned out to be immensely profitable for the company. It shows you how nimble we were. As a small company competing against the giants, we did over $2 billion of PPP loans to 26,500 customers that now happen to like us because we provided them with those funds. I want to go back to the adjusting for credit losses. Slide number seven, when you look at those yields again, the banking yields for $1 to $5 billion banks, 553 yield, 565 versus an 896 or 892. after the anticipated charge of we've got 20 years worth of experience in high rate in low rate in small economies in quick economies we understand the concept of risk adjusted spread in addition loan loss reserves of five percent we've already taken the pain we've done it up front we monitor this quarter to quarter please understand this is different the typical i'll call it investor in this space looks at deposits, which we're high on, but that'll be coming down with the growth of the business accounts, and they look at credit, which we're also high on. But they're not looking at the other half of the business. They're looking at a body builder that's great from the waist up and has skinny little legs. That's not our business model. You've got to look at the entire body. We reject the notion that although it is totally appropriate to consider a small and medium-sized business loan based on regulatory standards, a higher level of risk, on a risk-adjusted basis, our 20 years of experience in the category, gives us the confidence that we continue to manage this risk and get higher rates of return. I am much more comfortable doing this than betting on the fact that those deposits aren't going to disappear in the middle of the night because there is no duration on a checking account. There isn't any. So then you're betting on the stickiness. You're betting on the brand. Look, For the top four banks in the United States, it's great. But for everybody else, I don't know. And it's way too easy to move your money today on a phone. This is the single most important slide in the deck. When you look at our capital, when you look at our provisions for loan loss reserves, and when you look at our coupon, the map is showing over seven quarters and it's going to continue. Some of you are alarmed at the ramp up. We had a pretty heavy ramp up In Q1 from Q2, less of a ramp up in two to three. We think this trend is going to continue because we're through what we consider the belly of the default curve. But look, I can't sit here out on a crystal ball and tell you where the economy is. But we've been going to go. But we've been doing this for a long period of time. And I would say we're very good at it. Slide number 17. This is all about scale. 360 employees at New Tech Bank. The whole coast got 570. $1.7 billion of assets. I want to read from a report. NewTekOne is an uneasy amalgamation of a legacy portfolio of securitized 7A loans, joint ventures, which we're going to talk about, and non-controlled investments that dwarf its depository. That is factually not correct. First of all, I don't like the word dwarf. Secondly, the bank's got $900 million of assets and $1.7 billion. I don't know about an $800 million dwarf. That's not a dwarf. As a matter of fact, it looks pretty even to me. That's GAP. Putting that aside, we're going to talk about the holding company and what's in there. And as we're moving from joint ventures to on-balance sheet funding of ALP, which we'll talk about. By the way, nobody asked me that question. Why don't you do more on balance sheet? It's all about capital allocation. We might go back and forth. We're going to do what's in the best interest of our shareholders. We are good risk managers. We've proven that over two decades. And at the end of the day, I have to be honest with you, if you don't want to invest in the management team, you're on the wrong foot, okay? You've got to have some level of comfort. We're going to be here. We're going to keep doing this. We're going to give you the comfort. We're going to be extremely – nobody can say we're not transparent. The size of my deck says we are extremely transparent. Our financials say we're transparent. We go to all these conferences, which we talk about. Important to note, some of market participants have questioned, can they manage the risk? 24 months, we've got a chief strategy officer. We've got a chief technology officer. We have promoted Dan Enzo, the chief information officer. We have a chief risk officer. We have a chief financial officer. I mean, we've got so many chiefs. There's a lot of chiefs going on here. This is a stacked company that can manage multiples of the asset size. We step first. We ask questions later. I think that's extremely important. And the level of sophistication, it's been said, gee, you're doing this business with BDC talent. Well, I don't mean to insult Peter Downs, but before he spent 21 years here, he ran the SBA business at Citibank and had a 15-year career in the banking space. We have career bankers here. Nick Young, Scott Bright, Frankie Maria, Taylor Quinn. It's in the appendix. Go look at the talent we're putting in this organization. These are career bankers with an exemplary track record. This is not a small, little company. Very scalable. Let's go to slide number 18, alternative loan funding court. So we have begun to start to put the loans on our balance sheet versus in joint ventures. Some people say, why are you doing that? Well, look, first of all, it's a bit of a capital allocation issue. Operationally, it's easier to do. And we always want to do better with our joint venture partners, whoever that might be. And we have quite a bit of them we're talking to right now in the queue. Scott Price, I, Dave Leone, Director of Capital Markets. Spent two days at ABS East of Miami. We had 26 meetings. Very interesting. And we are out in the market talking to the biggest and the brightest, and they know that in this space of lending, and once again, I want to very much focus on the core credit. Some people look at the things we do as lender of last resort, bad credit. No, that's wrong. I say it's wrong. I'm not saying these are AAA credits. What I am saying is the borrowers appreciate a 10- to 25-year AM with no balloons. That AM schedule changes the debt service coverage, and it would take a loan that wouldn't fit at a bank and make it eligible for debt service. Now you'd say, well, gee, you're not getting your principal back. You're not reducing your risk. What our experience has showed this over 20 years is I'll take a personal guarantee, joint and several for a 20% owner or greater, with liens on business and personal assets all day long over a short AM and covenants. And we can absorb these losses and trade-off versus the coupon. You've got a group here that is, in my opinion, looking at this business and industry and the way it needs to be looked at for the next one, five, and ten years. The rest of the industry, 98%, is in a totally different model. And it is Regulatory friendly, regulatory compliant. We provide funds to SMBs all over the United States. 30% of them happen to be women and minority-owned businesses. And we take deposits all over the United States. Important to note, BlackRock TCP joint venture is on our books. It's marked to the market, fair value. Net of loss of area and frequency, approximately 12%. Same thing for the TSO joint venture. You'll see that we've got recent AOP. on our balance sheet and you'll see that going forward from a pipeline perspective six to nine hundred referrals today we fund less than one percent uh we think we'll have 200 million alp loans by december 31 2024 that prospectively gives us the opportunity to do a securitization which we saw the last time we have a slide on it very profitable probably in the first quarter so we're going to go back and forth between balance sheet jv partnerships diversification of capital joint ventures senior debt bank lines equity preferred we go back and forth slide number 19 important cumulative sba 504 and alp loan origination volume since 2015. so people look at these not performing loans they go oh my god what are they doing we see that there's a lot of charge up it scares the heck out of me look You give me a set of criteria, like a 504 loan that's a 60% LTV against the real estate, after a second lien by the government, which doesn't sit on our balance sheet when they take it out, it's pretty clean. What do I mean by that? We have never experienced an unrealized, realized loss over the life of a 504 loan program, cumulatively $632 million, slide 19. Zero. ALP. size 394 million cumulatively we have experienced three million unrealized losses we haven't resolved it yet but you can see if these were put into your matrix or whatever you do for the evaluations which goes no but I get it listen I understand you have a way of looking at these businesses we're good with that but we need you to consider that we're a good lender we know what we're doing slide number 20 alignment of interests I put this out there. Look, we're aligned. We're very aligned. I will tell you for myself, went from big dividend paying stock to less dividend paying. That was so impunitive from a cash flow perspective. I've been a major investor in the company myself. I'm going to continue to buy. Very comfortable with it. Important to note, 80% to 85% of our employees now are participating in the company stock play. We recently did a grant. It's alignment of interest. I now have 570 owners, my employees, my shareholders, which I think is an extra 20,000. I work for you. I work for the employees. I work for creditors. I work for everybody. It's a great situation. We're happy. We have alignment of interest. People in our organization are personally involved with the company, interest or alignment. Slide number 21, I'm going to ask everybody to Read the press release. On deposits, I'll leave that to Scott. Zero fee bank accounts. We've researched this. We believe there are few to no choices for zero fee bank accounts. Our clients have the opportunity to use our depository accounts with lower expenses, higher interest, use our deposit calculator. Zero really means zero. There's no hidden fees. There's no minimums. We're going to be announcing this. We think this is going to be a big deal. We think we're going to get a lot of deposits. We could take deposits without anybody going into a bank branch. You can't find a bank branch here. You could do it online. A big, big deal, big opportunity. Slide number 22 speaks for itself. Once again, please read the press release. Slide number 23, we've got tremendous pipeline growth. We're good on all our numbers. Step 30, 2024, I want to point out, we have 120 million of ALP loans on our balance sheet, mostly funded with cash, equity, and a leverage. and the entity Holdco 6, which is broken out in our financials, we created a DBA called New Tech Alternative Loan Program Holdings. That'll make it easier to define the ALP business. So the ALP segment in our queues going forward, I'd like to suggest that we use that DBA. I don't know if we're getting it in this queue in the future, but we can start to talk about ALP, have that broken out separately. 24, we've talked about in previous calls. Same thing for 25. 26, obvious, read the press release, talks about guidance, talks about where we came in. 27, nine-month numbers. Scott, please take over for 28 and 29.

Thanks, Barry, and good morning, everyone. Slide 28 shows our yields and rates. We experienced nice margin expansion resulting from lower deposit costs as we continue to bring in lower-cost deposits. from business checking and business money market accounts. We raised debt in the public markets for two consecutive quarters to one, refinance maturing issuance, and two, fund our future investments in our ALP loans. So as you look forward, I believe that you can expect to have higher balances, but that will result in higher loan balances as well, and that's reflected in our guidance. Turning to slide 29, We lowered our CD rates in July and saw a decline in our CD retention numbers, which was anticipated. This was partially offset by increases in our business checking and business money market accounts. We also saw some growth in our high-yield savings accounts, which has followed through the month of October. I'll point out again that we managed to keep our average balances on borrowings down and the costs flat. And with that, Barry, I'll turn it back to you.