NewtekOne, Inc. Depositary Shares, Non-Cumulative Perpetual Preferred Stock, Series B (NEWTP) Q2 2026 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the NewtekOne Second Quarter 2026 Earnings Conference Call. [Operator Instructions] 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 Sloane, President and CEO of NewtekOne. Please go ahead.

Thank you very much, everyone, and welcome to our second quarter 2026 financial results conference call. We appreciate everybody attending, and thank you for tuning in today. I wanted to also let everybody know that presenting, in addition to myself, will be Frank DeMaria, EVP, CFO of NewtekOne, the publicly traded holding company, stock symbol NEWT, and Newtek Bank, National Association. We appreciate everyone patching into our call and we always sort of start off with why should you care about NewtekOne? The company was established in 1998. I'm the original founder of the company established out of a spare bedroom in a New York City apartment. So take a look at the business model that we have today and look at metrics such as return on average assets, return on tangible common equity, the dividend yield, the book value growth over time, all things that we'll talk about extensively today. It's a very interesting, what I would call a value and a growth story. However, three and a half years into our inception, we're still evolving and we're appreciative of things that are changing in the marketplace today and we're adopting to all different changing conditions. Obviously, if you take a look at our presentation today and recent presentations, more things are being done out of the bank than in the bank holding company. We recently acquired or merged the payroll solutions business into the bank. We are doing our commercial and industrial long-am loans out of the bank. And one thing that's important to notice, you'll see that our income, our net interest income at the bank is growing, particularly on comparisons. We'll talk about that in the call. So I think going forward as we transform, you'll see a little bit less gain-on-sale, more net interest income, more use of the balance sheet and the portfolio. I think as we've grown in this particular space, obviously we traded at market multiples to earnings of 5.5x to 6x where the banking industry is trading at 9x or 11x. So from our perspective, our goal is to do good credits, do what's best for shareholders. Most importantly, really do a great job for our customers. Let's go to Slide #3. Newtek's mission statement hasn't changed from 1998: To provide business and financial solutions to this sort of underserved demographic, independent business owners in the United States. Most importantly, we provide real good products and solutions for our customers for the purpose of making them more successful. Many times I am asked, "Barry, is there a comp? Is there a company like yours?" And I have to say, not really. Sometimes historically that works against you, but from our perspective, we believe we've got the right business model, the right way to handle our customers, work with all of our employees, associates in-house to provide the solution to the client and really provide a valuable service to the independent business owner community. Which on Slide #4, we can see that utilizing technology, which we've done over two decades, is extremely important. Instead of traditional bankers, branches, we use technology to exchange data, analyze the data, put the data in a better decision-making mode. We've recently started to use AI when we're analyzing data coming to us from the customer. It reduces friction, increases speed. All these things are extremely valuable. So we look at what we do, which is a technology-oriented company, and there to serve the independent business community across the United States. We believe we have taken on some of the tasks in a bank holding company, owning a nationally chartered bank, that we think most of the market and the industry is interested in adopting, too, in a very big way, but is slow to adopt. Number one, the high-cost infrastructure with branches and traditional bankers. For those of you that haven't used our solutions, you get an executive on camera 24/7, and you also get great software to exchange data that has minimal amounts of friction and, important for us, accuracy. [ Two ], and by the way, the existing bank model is extremely costly. We think going forward the giants of the industry, the top four players, are pouring huge dollars into the space to do what we believe we have done within our confines already. Second, inefficient lending margins from loans that bear very little risk and frankly just really tight on the margins. Deposit products that we're able to offer our business clients with historically we're competing against zero interest paid and excessive fees for the business client. I think it's important. Our goal is to manage risk, not avoid it, put a fair product and price onto our customers, beat the competition like merchant cash advance or daily debit type loans, and basically provide our banking solution in a safe and sound manner. Slide #5. These are things that you've heard previously. It pretty much labels all the things that we do. Slide #6, we talk about the importance of our target market, that SMB, SME, independent business owner. There's 36 million of them in the United States. According to the Chamber of Commerce, it's 43% of U.S. GDP. And importantly, over the last six and a half years, according to the SBA statistics, have supported or created 280,000 jobs, the second highest amongst all SBA lenders in the 7(a) program. The independent business owner is a huge economic demographic, and even the top four large institutions struggle with acquiring the client, solutioning the client, and therefore what we have built, our technology, our infrastructure, and we'll take you through some of those things today, we think is extremely valuable. We don't believe it's fully reflected in our current stock price, which is mostly driven by the typical analytics of taking the call report, pushing it through a model, and coming out with numbers. By the way, I will comment, you know, the concept of loan loss provision and things of that nature. At the end of the day, it's a business expense. That's what it is. Now, you don't want it growing or going out of control. Mind you, it's an organization that's been in this space for over 23 years, lending to SMBs, 17 securitizations, never credit watched, never downgraded. So we're proud of what we've been able to accomplish. Slide #7 talks about the quarterly highlights. Obviously, we came in within the range between basic and diluted, $0.48 and $0.47, respectively. Importantly, book value, we have a slide to address that, continues to grow very nicely. And that's really important. That's value to our shareholders. We continue to capture the operating leverage and growing a business with asset growth of 50% and expenses just up 3.6%. At the holding company, our ROA is 2%, compared very favorably to the industry. We recently switched to putting our C&I lending business down in the bank versus doing it up at the holding company. We believe this will pay great dividends going forward. We'll continue to securitize the C&I loans out of the bank. We've had tremendous success in our digital account opening with deposit gathering focusing on business and consumer-type deposits. So in 14 quarters since our inception, we've grown from $142 million to $2.2 billion. Non-affiliate deposits increased in the quarter by $15 million. And obviously, the core consumer deposits, which are very sticky, not very transactional, with basically close to zero acquisition costs, climbed by $297 million in the quarter. And we're very proud of how we've been able to get deposits digitally. It's part of our technological advantage. Slide #8, we focus on tangible book value per share growth. You can see all the math, and you can see that when you add the dividends in, it's been a nice run since we've gotten into this financial holding company owning a nationally chartered bank structure. You can see that the tangible book value has grown 75.3% in 12 quarters since converting to a technology-enabled financial holding company. Extremely important. We're very proud of growing tangible book. Obviously that's the value portion of it. Slide #9 shows the profitability of NewtekOne with all these different data points. Slide #10 really drills down on the deposit growth. We talked about the non-affiliate deposits, we talked about the total deposit changes, deposit accounts, 1,471 accounts, quarter-over-quarter, core consumer, 2,600 accounts. I believe combined you're looking at about 40,000 depository accounts. Important to note, 81% of our depository accounts are insured under the $250,000 balance. Loan-to-deposit ratio about 90%. You know, when we think about deposits, we're extremely pleased with how we acquire them, extremely efficient, and we give a great value to consumers and businesses that do business with us. And that's very important for branding and brand loyalty. Slide #11 talks about the three active C&I long amortization loan securitizations. There's a lot to talk about this. We spent a lot of time in prior calls, which are all archived on our website. I think the important aspect of the C&I LA securitization business is what we refer to as the over-collateralization, that's more loans versus the bonds, and we hyper-amortize the bonds and drive the cash flow to pay the bonds down. So the current over-collateralization, for example, on the 2026-1 deal, which is just done, started off at $47 million, it's grown by $11 million. 2025-1, a little bit more seasoned, started off at $31.6 million. Current OC is $45 million. So you can see it's really nice growth there, about $13 million to $14 million. The 2024 deal, also $14 million increase on the OC. You can see that the notes have paid down across all three issues. And obviously the collateral is paying down too at the same time. Let's go to Slide 12. This is Newtek Bank financial highlights. You can see by putting more of our activity down in the bank, we believe will provide much greater efficiencies, much greater value. When you think of things like payments or insurance, those are both eligible. We want to do this slowly, we want to do it methodically, we want to do it correctly. When you look at our ROAA, our ROTCE, these are numbers in the final column on Slide #12 that are just extremely attractive. I will point out the net interest income, Q2 2025, $16.2 million, Q2 2026, $25 million. That's the reoccurring income that most people that invest in institutions like ourselves really want to be very involved with. I also like to point out the cost of deposits over this window has been pretty flattish, which we're really appreciative about as you go from Q2 2025 to Q2 2026, actually declined from Q1 2026 to Q2 2026. Also a very nice NIM. That NIM is helped by putting more SBA 7(a) loans on our books and holding them prior to a potential sale, but we're going to hold more of these on our books. And in addition to that, the C&I LA business provides some nice NIM to the bank, while we're accumulating for securitization. We take a look at our capital ratios. They're all in line with what we consider a more than adequately capitalized bank. Obviously, we always focus on our cushion with respect to our ACL in particular, and we're pleased our ACL ratio to unguaranteed loans 5.31%. When you exclude the government guarantees that are on our books that are in an non-accrual category, it's 4.14%. So it's a ratio we keep close attention to, to make sure that we've got the right amount of reserves because, as I said, we manage credit risk, we don't avoid it. These things are marked-to-market on a quarterly basis with our CECL calculation. So we're very pleased with how our performance has been over the course of three and a half years. Many of you will see that we increased that provision on a quarterly basis and net charge-offs went down. So once again, we are pleased with how we're handling and managing risks. Slide #13, a little repetitive here with some charts and graphs. Particularly I just discussed the provision for credit losses versus net charge-offs at the bottom right category. I will point out that although you see 30 days past due increasing somewhat, we believe that this is a brand new bank with a brand new portfolio. So when you're starting from zero, it's almost impossible as you're climbing that default curve, with most loans defaulting in the 30 to 36 months, we've only been around for three and a half years, that is going to grow and it's going to begin to flatten. So, once again, having the right reserves with the right underwriting and the right mix of assets is extremely important. Needless to say, most of that comes in from the SBA 7(a) business, but by adding the higher quality C&I LA, the CRE book, the C&I short-am book to the portfolio, I believe that our uninsured 7(a) balances are about 42%, down from close to 50%, and we want to continue to diversify our book of business. Slide #14 gives a nice quarterly profitability snapshot at the bank. You can see these numbers that don't look, frankly, they're really high. I'm sorry to say. I know that sounds funny, but people look at it and go, "How can you do that?" Invest in assets that provide an attractive return, net of the anticipated and expected losses, and continue to manage that risk quarter-to-quarter, you'll do just fine. With that said, I would now like to pass the presentation off to Frank DeMaria, EVP and CFO of NewtekOne and Newtek Bank, N.A.

Thanks, Barry. Barry's covered most of the highlights for the quarter, but I wanted to touch on a couple of noteworthy items that are outlined on the next couple of slides. The pre-provision net revenue continues to grow in absolute dollar terms with balance sheet growth. As a percentage of average assets, the PPNR was down year-over-year from 5.25% for the second quarter of 2025 to 4.22% for this quarter, but still remains well ahead of the industry average, which is below 2%. Moving to the next slide, we provide some details on the bank's loans held for investment at cost, which is the loan portfolio against where CECL is applied. Consistent with past quarters, as Barry mentioned, the bulk of our CECL reserves are about 89% of our allowance for credit losses is directed at the unguaranteed SBA 7(a) loans. The ACL coverage ratio on that portfolio was about 8.56% of that portion of the loan portfolio, which is elevated to appropriately reflect the higher loss characteristics of those 7(a) loans. With that, I'll turn it back to Barry for some closing remarks before we take questions.

Thank you, Frank. Slide #18, I think this is an important slide. It's the technology. When you look at how we do our business, how we acquire clients, 600 to 800 unique business referrals a day. How we open up accounts for a digital account opening. How we process loans through our Secure File Vault in an automated and frictionless manner. How we have rolled out our real-time payments offering so businesses can move money quicker, faster, cheaper with real-time information through the Newtek Advantage in an automatic manner to do so. NewTracker referral system, which is how we track referrals, manage the opportunity as it goes through, whether it's payroll, whether it's insurance, whether it's loans, whether it's deposits, everything is in NewTracker. At Newtek, if we say it's not in NewTracker, it doesn't exist. And the very important Newtek Advantage, which is the business portal for the customer that really helps the client with so many different things, to be able to make payroll from their banking interface, to be able to look at their credit card batches, refunds, chargebacks from their banking interface, to be able to look at their line of credit, to be able to see that they're not being charged for an ACH or a wire. It really is a tool that gives the customer an advantage and helps them manage their business. What makes NewtekOne unique and special is the fact that it has innovated and put technology in a banking environment for the benefit of this huge tremendous demographic that we have almost an exclusive focus on, the SMB, the SME, in all 50 states in the United States, and are able to do so in an efficient way where 98% of the banks, that's just a guess on my part, are still operating with branches, with traditional bankers, high-cost manner, not paying businesses a fair rate for their deposits, charging them excessive amounts of fees for moving money, not allowing them to move it in a real-time basis, not giving them the analytics and information and tools that can track their business, analyze their business. So when it comes to our organization, and I will tell you, technologically, I'm getting a lot of organizations coming to me looking at what we're doing that we believe isn't necessarily reflected in the markets that are looking at what we do, how we do it, and seeing basically taking this and putting this involved in their infrastructure would be immeasurably valuable. We greatly appreciate the time you spend here today. As you can see, many of you have labored through much longer presentations. There is a very exciting appendix that's hung on our website that has a lot more data on things that we've covered. Many of you are familiar with that, and obviously you'll be following shortly. With that, operator, we'd like to open it up for questions.

[Operator Instructions] Our first question today is from Tim Switzer with KBW.

I was wondering if you could maybe provide a little bit more color on the strategy about holding more guaranteed portions of the SBA loans on your balance sheet than you have in the past. And it seems like this might have a near-term impact on guidance. I know previously you guys were guiding like $0.79, $0.89 for Q4. Could you maybe talk about the impact that will have near term and then the longer term impact of that?

Yes, so I think that organizations that do not have our ROAA, ROTCE, and business model that is, I wouldn't say focused, but drives a lot of gain-on-sale income, but basically have net interest income and net margins that they view as more long-term and more stable, has entered into our thinking that we're going to continue to do both. We're going to continue to grow that net interest income line. And yes, I would say on a top line category, it probably will affect the net next couple of quarters coming up. However, it could provide a more stable stream of income and we also hope to obtain the P/E valuations that other industry participants do that don't have our technology, don't have our innovation, and don't have the capability to service the customer. I mean, there's almost a five-point spread between where we are and others are that have that different type of income. So we're going to put our toe in the water and start to drive toward that. And yes, it could potentially affect that top-line headline EPS, which we're appreciative of and proud of, but frankly it's left us with a low earnings multiple.

Okay, all right. So right now the near-term impact is the lower gain-on-sale revenue, not fully offset by interest income, but it will be in future quarters.

Well, you said fully offset. I've got to be clear. I've got a lot of lawyers on my shoulder. So, we haven't fully run these numbers through, but over the long term, adding more net interest income and giving up some of the gain-on-sale income is definitely something that is in the cards for us. So we are holding more government guarantees on our books. Some of them we're setting them up and then selling them into the market. But with that said, I think you'll see a mix and a change going forward. Also, the C&I LA business is now on our books. That's going to add to net interest income while its incubation period as well. So yes, there'll be a bit of a change. I think that people that invest in our organization should be investing not quarter to quarter, but should be looking at the business model, looking at the technology, looking at what we do differently and figuring how in effect these things that we have put into place and are working would be extremely attractive in a bigger customer base that we acquire organically as well as possibly other things down the road.

Okay. Can you talk about with the ALP loans, have there been any benefits now that you're originating them through the bank? And what are the challenges with that?

Well, one of the challenges, Tim, I try to be as transparent as possible. With rates at these levels, it certainly makes it a little harder. I think businesses are a little bit more reluctant to take it. But the good news is these loans are well underwritten. They have good debt service coverage, strong guarantors, and they actually fit well in the banking environment.

Okay, are you planning to still do some more securitizations and any update on size for Q4?

Yes, we will do a securitization out of the bank. And, you know, I think that securitization size will be, I'm going to say, between $300 million to $400 million.

Okay, that's helpful. And then on credit, I'm looking at your call report and it looks like really good improvement in the net charge-off rates. That's good to see. But NPL were up a little bit and it seemed like a lot of it was on the guaranteed loan balance for a lot of loans. Can you provide some color on these guaranteed NPLs? Were these loans you repurchased after you previously originated, or were these loans that went NPL after issuance? Whatever color you can provide would be helpful.

Sure. And I appreciate the question, Tim. When you do a 7(a) loan and you sell it in the secondary market, which at points in time in our career and history, we've been, you know, as much as 95% of all of our loans got sold to the secondary market. And I believe as of today, we are the second largest lender by volumes and the first by units. Okay? So when you put that into the market, you know, these are credits as defined by the SBA's SOP that are technically not bankable, meaning that without the guarantee and not the program, you wouldn't be able to make the loan. So the guarantee provides a significant amount of the credit support. However, when you have situations where those loans go bad and there's a lot of sensitivity in the market today, that has to get bought out. So either the government buys it out or we buy it out. And we have chosen to be more aggressive in those buyouts that's helpful to our partnership with the SBA. And what we then wind up doing in many cases, and this gets really into the weeds of when a loan should be bought or not, you could have a situation where the loan might be in bankruptcy, but it's still in that bad category and they have to get worked out and there's partial payments or things of that nature. We've made decisions to increase that purchase rate, which helps the partnership with the government agency.

Okay, interesting. And is the guarantee on that portion of the loan still covered by the government if it goes bad or some of these loans you might need to pay for a long time?

No, no, no. Guaranteed participation certificate. The government guarantee is still on it when we buy it back. Subject only to repair and denial, which we have reserves on our books for.

Okay. All right. Understood. Thank you, Barry.

Our next question is from Joe Yanchunis from Raymond James.

I wanted to follow up on Tim's last line of questioning there. And I might have just missed this and could get it in the transcript. Can you go back through the rationale versus buying out the problem loan versus having the government buy it back? And I guess, have you ever had a government guarantee on your books that was removed?

Only in the case of what I would call a repair and denial, and that's been historic, and we have reserves for that based upon the history. But Joe, what you're asking is, and I can be honest with you, it's a little incredible to me, and I'm not being a jerk on this, there's other top five lenders in the United States that have this. Just look at their call reports. So this is not new, and it's not something that hasn't been done probably for 25 years. It's just something that we've historically not done much of, but at this point in time, our view of this is we have a joint relationship with the SBA. We're putting this on our books. These are government guaranteed obligations and the guarantee's good.

All right, well that horse has been beat. So you mentioned that, you know, what Newtek has built from a technology standpoint could be valuable to, you know, other institutions if they were to put it in their own infrastructure. How realistic is it to outsource, you know, a white-labeled, your NewTracker or Newtek Advantage, other banks? And can you talk through some of that opportunity?

Yes, we have opportunities in the pipeline now that we're working on with some material players. In addition, when you look at the business model, which is to utilize non-branches, non-brokers, no BDOs, no bankers, and to be able to outreach to an existing book of SMBs in a large bank's portfolio, much more cost effective on camera, with this technology to be able to effortlessly take a payroll app, take a merchant app, take loan app, take a line of credit out. This is a big deal and we don't believe we've been given. It's different. And once again, I don't believe there's anybody else doing what we're doing. So there's no, I get asked all the time, where's the comp? Well, there isn't any. Okay, except that based upon the conversations I'm having, everybody wants to go in this direction. Everybody wants to go in an automated manner. And we're using AI tools particularly in gathering the data, putting the apps together. Human beings are still reviewing everything, but we're taking the mundane tasks out of it. So we think it's very realistic. However, as you can imagine, Joe, change occurs in this world at slow rates, particularly when you're dealing with other financial institutions. But we have been at this for a while. We're getting good traction. I will tell you, our referral system, we get 600 to 800 referrals a day, is kind of predicated on these types of relationships. That's like putting your toe or your ankle in the water.

Got it, I appreciate that. Certainly exciting. It will be something to monitor from our perspective. So can you talk about what was in the other income bucket on the P&L? It looked to be abnormally large and just curious what drove that increase and the sustainability kind of behind that line item.

All right, now I pass the baton to Frank. Frank.

Thanks, Joe. So we did, with the securitization, we did see some increased payoffs and paydowns in the securitization, as you saw on that slide with the loans kind of getting paid down. So that's what drove that little bit of an increase that you're seeing quarter-over-quarter and especially year-over-year in that line item. So it's mainly due to the loan paydowns on the securitizations.

So should that normalize in future quarters back to a more historical norm or would you remain--

Yes, I would anticipate that to normalize. I don't anticipate to remain elevated.

Got it. All right. Well, thanks, gentlemen, for taking my questions.

Our next question is from Crispin Love with Piper Sandler.

Hey, good afternoon. This is Ben Graham in for Crispin Love. I'm just wondering if you could give some background on the $15 million loan to Simad Holdings, the company that operates summer camps in light of their June bankruptcy. Seems like a big loan for Newtek. And I would just be interested to hear the background of the sourcing, underwriting, and then any recent updates on that loan. And lastly, where that loan was marked at March 31 versus now, if you could give color on that. Thank you.

Sure. That loan is in a securitization. I believe it's in one of our prior securitizations. So it is sitting in that. Now the loan has seven or eight camps collateralizing the loan as collateral that is outside of the camps in a lot of different categories. And I believe the fair value of the collateral, I believe it's somewhere in, I don't want to guess, but it covers the loan amount. That loan is in bankruptcy. As you're aware based upon public information, those camps are being sold, those camps are operating, those camps are cash flowing generally speaking. And I don't have the exact mark on that, but I would believe that we will have full recovery. I am familiar with the loan. I believe we'll have full recovery on the loan.

Awesome. Thanks so much for the color there. That's all I had, so I'll step back, but thank you so much.

That's the key to having, I can't tell you for sure, because there's a bankruptcy going on here, but it's important to have good cash flow on the businesses which are still operating, and liens. In this case, there's liens that are outside of the camps. It's on other assets.

Got it. Thank you so much.

Our next question is from Hal Goetsch with B. Riley Securities.

Hey Barry, just you know with maybe holding more loans in the books, is this putting more pressure on your deposit franchise and gathering deposits? Could you comment on that for a moment?

So Frank, I believe as of this date or recent days our deposits are over $500 million.

Our cash that we're holding at the Federal Reserve.

Sorry.

Yes.

Cash at the Fed, right?

Yes. That's correct.

So Hal, we're pretty liquid. It's indicative of A, our view on where rates are, and B, I want to be a little careful here. We believe I'll have good use for the money. Well, why are we good at acquiring deposits? We're good at acquiring deposits, so if you go look at our Trustpilot scores in the bank and in the holdco, it's 4.6 to 4.9. Jennifer Merritt and her team, fabulous job. We have a gentleman, Rodney Becerra reports to Andrew Kaplan, Chief Strategy Officer, Client Success and Services. We're talking to our customers and we answer their questions and we're available on demand. So service is extremely important. Because we have a very low cost of acquisition, we're able to pay the client a fair rate. So we don't need branches. I don't need bankers taking people out to the Masters. As you can see from our insured deposits, which are north of 80%, these are retail deposits. They don't move around that much, particularly in a high-yield savings account. Yes, it might be a high rate, but money sits there, they're not moving it, they're not calling up people, they're not transacting. So we really like our strategy for deposit acquisition. Matter of fact, the brethren, the industry, would actually calculate the expense that they pay to go acquire the deposits and service the deposits, they would probably be very interested in our digital account opening and the way we wind up servicing our customers. That's a very good question. We have, knock wood, been very good in this particular area.

Okay. And, you know, with the commentary in the press release on your guidance going forward being re-evaluated, what kind of timeline you could get back to that guidance at some point or, can you give us kind of a path to like more visibility on that?

Yes, I know I just gave all you guys heartburn. I'm sorry. I think we're going to be looking at, I'm going to say, a 45-day window, give or take, maybe 60. We have to do a lot of calculation. We've shifted a lot of things around. I also want to point out that although we've historically not been an SBA Express lender, I think we're going to go toward that model where you're able to get a much more generous rate which makes it beneficial to hold on our balance sheet. I think it's up for the really small loans, it goes up to prime plus 6.5% and up to $500,000 I think it's prime plus 4.5%. So you still get obviously the government guarantee with it, it's a smaller guarantee, but at the end of the day, we've got to do a lot of number crunching. These are decisions we've pretty much made more recently. So we do need to crunch some numbers. I realize we've given you some heartburn here but we're not really trading in crazy market multiples, although some people might think they're crazy, but you can interpret that both ways. I don't want to get yelled at by my chief legal officer.

[Operator Instructions] Our next question is from Christopher Nolan from Ladenburg Thalmann.

Hey, guys. Frank, why did the NIM contract so much in the quarter? And NIM at the holding company?

And NIM at the holding company?

Yes.

Well, we're moving most of the operations into the bank. So you're seeing that expansion at the bank. So you're having less income generating operations up at the holding company while we still have some assets, as you know, left up there, as well as some of the debt that we are paying down, as you've seen, quarter-to-quarter, which is a little bit more expensive debt than you see typically on the deposits, hence the shift in the operations. So with everything moving into the bank, that's really driving the compression.

Yes. And Frank and Chris, I got to add one other thing to that. When you do securitizations at the holding company, which we've done historically, there's a lot of interest income that is now folded into the securitization. So it doesn't show up in the NIM. So we have fewer and fewer loans with just interest coming in at the holdco. And a lot of that has been converted into a spread in the ownership certificates at the holding company.

So is it fair to say in terms of part of the strategy to move more of the activity to the bank is to capture more what is gain income as net interest income, which bank investors generally prefer and thus hopefully improve the stock trading multiple?

Well, I think, and I can't answer the last part of it, Chris, but what I can tell you is that we have a lot of staff down in the bank, and by putting things like payroll in the bank, and maybe other things in the future. We want to be methodical. We want to give our regulatory agencies that we have a good relationship with, comfort that we could manage these things. So certainly by doing the lending out of the bank, it's tremendously advantageous, particularly based upon the cost of the deposits and things of that nature. By putting payroll into the bank, which really is a core function for any business, it ties right into the operator, ties right into the loans, helps you control the situation. You can see, are they making payroll? Are they balancing payroll? It's incredibly valuable. So having less activities at the holding company and more down in the bank is definitely of interest to us. Yes.

As a final question, Barry, on the move to the bank, does that give you any flexibility on capital ratios at all?

I think I'd pass on that question, but you can see what the ratios are and I would say they're competitive and a well-capitalized market. No, I think they've actually been a good partner with us in terms of working with us, educating us, helping us really develop a bank that's safe and sound. So, no, we've been appreciative of that relationship.

Great. Thanks for taking my questions, and I appreciate the more expedited format of the call. Good job.

It took him three and a half years, but eventually we listened, Chris.

You're getting there, Barry. Sounds good. Thank you.

I am showing no further questions at this time, so I'd like to turn it back to Barry Sloane for closing remarks.

We're extremely thankful for the thoughtful questions and the work the analysts put into our business and business model. We look forward to keeping our head down, plowing ahead, and really doing a great job for our clients, the small to medium-sized business customer in the United States that is a major driver of the U.S. economy, employment, and also helps our shareholders. Thank you very much.

Thank you for your participation in today's conference. This does conclude the program, so you may now disconnect.