Good day, ladies and gentlemen. Thank you for standing by, and welcome to Newtek investor 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 will need to press star one one. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker host, Mr. Barry Sloane, President, CEO, and founder of Newtek Business. Please go ahead, sir.
Thank you, operator. I certainly appreciate everyone attending today's investor analyst call. As we near the end of the third quarter, it's somewhat of an understatement to take a look at all the markets, look at the amount of volatility out there, and make a comment. There are a lot of questions that people have, A, relative to the overall macro conditions in the market, and also potentially questions about Newtek Business Services Corp, as it's in a transitory position, where it's announced a change potentially from a business development corp to owning a bank and owning a bank holding company.
The purpose of today's call was to get together with shareholders, investors, and analysts with a brief update on where we are with things, open it up to Q&A, and then let everybody get back to making their investment decisions. Clearly, I think it's important from our perspective, and we've been a public company since September of 2002, so we're probably looking at 80+ quarters of quarterly earnings calls and transparency with the investment community in a public setting to make sure that people have as much information as they possibly can. With that said, we put out a release this morning, which you should take a look at. It went out, I think, about 8:15 A.M., where Newtek Business Services Corp. has elected the Apiture digital banking platform to power Newtek Bank.
Obviously, that is still the acquisition of the bank, still subject to OCC and Fed approval. We'll talk about that a little bit. We put out a press release yesterday, forecasting a fourth quarter 2022 distribution of $0.70 per share. We'll chat about that a little bit as well. Clearly, the one primary topic of our investor base is the announced acquisition of National Bank of New York City, which we announced a little over a year ago. We're working through the regulatory process to get approved by the OCC to acquire National Bank of New York City and then for the Federal Reserve to approve the publicly traded Newtek Business Services Corp to be repositioned as a bank holding company and electing financial holding company status going forward. We've been through that process.
It has been a very thorough process. We compliment both regulators for working through this process with us. We've been extremely transparent, giving them a ton of information. Obviously, because this is not a bank-to-bank deal, which typically gets done rather quickly. Although in today's environment, everything is being done a little bit more slowly than usual, based upon the backlog of activity. We feel pretty good that we're pretty close to being at the end of the road. We've recently indicated that we thought a decision on the applications both to own the bank and be a bank holding company, would be forthcoming in the third quarter or in the fourth.
Well, we're running out of days in the third quarter, so now the decisioning for approval looks obviously more likely in the fourth, and we'll keep you all posted on that. Yesterday's press release that we put out regarding a $0.70 distribution was important to put out there. Number one, $0.70, it's a forecast, hasn't been declared yet by the board. We'll do that a little bit down the road. We'll get a little bit more information to firm that up. That's with the understanding that we believe the conversion and the approvals will take place. We're optimistic about that, although it's never done until it's complete. That's a guess on our part based upon conversations that we've had.
However, the reality of it is this isn't horseshoes, and anything could happen, and we are clearly humble and respectful of the authorities, final decision-making in both cases, at the OCC and the Fed level. With that said, the $0.70 is based on the earnings expectation for Q4. It's based on spillover income. That is income that's been retained historically as a BDC, which would need to be distributed and the potential to, at the end of the calendar year, de-RIC and convert from a '40 Act company into a '33 Act company. We feel pretty good about the return of cash of $0.70. That would be a cash distribution and dividend in the calendar year of approximately $2.75.
Taking a look at just $0.70 for a three-month holding period at the current stock price is a pretty attractive yield. I also want to point out that, if you take a look at where we are as a BDC versus other BDCs, I only mention that because, you know, the investment community today is looking at us, you know, in the middle of a transition, and that's actually caused some consternation. I would say perspectively that uncertainty might, I use the word might, be creating a discount to where things should be. We're trading at around NAV. Most internally managed BDCs are trading at around NAV. The universe of BDCs is trading at about 70% of NAV. You know, typically, Newtek has always been an outperformer.
We feel pretty good about where we are relative to other BDCs, and also relative to the concept of a bank investor, making an investment in it. Most of the bank investors can't or won't buy BDCs. Many of them are institutionally oriented, and therefore, they can't buy another mutual fund. They have the AFFE issue. We're kind of in a unique position where we've given a reasonable amount of information for people that have loved the historic dividend and the fact that we didn't have to pay any tax, a reason to sell, but haven't really been able to open up the gates to those that wanna buy bank stocks. Number one, we're not yet approved. Number two, many of the people that buy bank stocks can't buy BDCs, won't buy BDCs, and are waiting for these approvals and the closure.
I mean, that's kind of one explanation as to why things are where they are. I take a lot of calls and questions both from street analysts as well as investors. I will point out that our current analysts are basically all BDC analysts. We don't have a bank analyst. The projections in the market are based upon a BDC and not based upon a bank. This obviously makes things a bit more difficult for us. We do appreciate the uncertainty, but I also think it's important to explain to the investment community why things are where they are, what we can answer, what we cannot answer, and we put things out in the market that are really well thought out, have good backing or within the context of what we think good and appropriate disclosure.
One of the questions I've been asked recently, obviously, rate increases and inflation are on the minds of many investors. Important to note that a major portion of our balance sheet is SBA 7(a) loans. For those that aren't really familiar with SBA 7(a) loans, our portfolio are floating rate loans. They float over prime. They do not have a cap. Prime today is 6.25%. That's not assuming that the Fed will do additional rate hikes. The current margin on our loans that we're taking loans in is prime plus 300. That's 9.25%. That's a very healthy rate, particularly for a bank. I'd ask many of you to take a look at banks, or for that matter, even BDCs. That's a good portfolio for that.
That does not include the 70% portion of the loan that we create and typically sell for approximately plus or minus a 10% gain on sale. We've also indicated that because the Fed has been slow and behind the curve to raise rates, the gain on sale margins have been under pressure in Q2. They'll continue to be under somewhat pressure in Q3, although we've indicated we think they'll be a little bit better than they were in the prior quarter. That still remains to be seen as we have a couple of days left of selling in the market. We'll stick to that current statement that we've made previously, we think will be a little bit better. Our portfolio performance at the end of Q2 was good. Our current rate was very high. We're pleased with that.
We don't see major changes of that between Q2 and Q3. We're very pleased so far that people's concerns about a recession and consumer spending slowdown have not yet hit the portfolio. Although you can rest assured that the company and the management team that has been in the business for over two decades is cognizant of the fact that the economy will most likely slow from where it's been, and we have our portfolios marked at appropriate levels and believe that we have a good handle on reserves. Mind you, being in business since 2000, we've seen up cycles, down cycles, up credit, down credit, survived 2008, 2009, survived the pandemic. This is a company that is extremely nimble, entrepreneurial, can adjust on the fly, and is to be able to have good forethought into what we need to do going forward.
This company has always been run for the long term. That's in the shareholder's best interest. We don't run it for the next day, for the next month, or the next quarter. It's really to preserve long-term shareholder value. I think it's important to point out, you know, and I've been asked this quite frequently, you know, are you disappointed in your decision to potentially become a bank holding company owning a bank? I think if you go back and you look at what's transpired over the last year, BDCs are currently financing their debt with a seven handle. I point out a recent deal that Owl Rock did, a significantly larger BDC and a very big brand in asset management. I believe the coupon was around 7.75%.
In addition to that, to grow and we're a growth BDC, we'd have to be continuing to sell shares of stock. This is not a time where you prefer to sell less equity than more equity. The conversion into owning a bank and being a bank holding company is the ability to use the core deposits to be able to finance the 7(a) business and the 504 business without having to sell a dollar's worth of stock and a $1.30 worth of BDC debt. The only thing I could say is we've evaluated that. 89% of our shareholders recently in the proxy vote to give us the approval to withdraw our election also believe that.
We do believe that despite the fact that our stock has come under some pressure recently, and when it was a material overperformer on the upside, as we all know, sometimes that reverts back and you become an underperformer on the downside when things come back. I think that the one thing I wanted to do today, and I'll try to keep this short and get everybody back to the markets and open it up for Q&A, was to give investors an understanding as to A, why they may wanna look at the company going forward if they're not in it, and B, for those that are in it, why continue to stay in it? Well, we continue to perform, in my view, as a BDC.
Obviously, we didn't have $50 million of PPP income that we had in 2021, which created $50 million of revenue. You take $3.47 of adjusted ANII, and you take $50 million out of that, and it almost knocks you down $2- $1.47. We're clearly well beyond that. As a matter of fact, adjusted ANII, I think, for the first six months of this year, was about $1.46. I think we also paid out, like, $1.40 in dividends for the first six months of the year. I've had a couple of investors question me recently about our payout ratio. I really don't know why people are in, thinking that we paid out more in cash than our earnings. Historically, that has not been the case.
Now, we've indicated in the recent press release for Q4 as we wrap things up, or hope, anticipate, and if we get the approval, that we will wrap things up as a BDC. The goal is to pay out the retained earnings and all the earnings. Matter of fact, if you've got to err, you wanna err on the side of maybe returning a little bit of capital. I mean, that is a possibility going into the fourth quarter relative to the $0.70.
On a going forward basis, prospectively looking at us as a bank, we do not have a forecast for 2023 and 2024, either as a BDC or a bank, although we have put out an illustration, which you can find on our website, which is sort of indicative, which will need to be revised once we, and hopefully, get regulatory approval. You know, that illustration indicates that on an after-tax earnings per share, we have pretty reasonable earnings per share, pretty reasonable growth, and apply any kind of a reasonable market multiple to that, and you kinda get a different stock price than you get today. I ask the investment community to go take a look at what's out there, draw your own conclusions, and do your own research.
One entity that's not an exact comparable, but a reasonable comparable, Live Oak Bank, which is the largest SBA lender in the United States, trades at about 14 times earnings per share. I think when you take a look at our organization versus others, there's clearly a reason to take a look at it. Obviously, we don't talk about the stock being rich, cheap. We leave that up to the investment community. We try to provide the information in a transparent and as pure manner as we possibly can. You know, we say when things are forecasted and estimated, and that's up to you to determine, you know, on our track record of being able to forecast and estimate. The one ultimate thing I'd like to say before I turn this over to Q&A is the concept of realignment of interests.
I still represent the single largest shareholder of Newtek Business Services Corp. There is no real economic benefit to myself individually, and more importantly, representing all the shareholders, than the alignment of interest between all the existing shareholders and me. National Bank of New York City is currently a $200 million asset bank. I don't think anybody can expect me to get a Jamie Dimon-type benefits package at a National Bank of New York City, or that my compensation is gonna increase wildly for owning a $200 million bank. This transaction was done because we were concerned about rates rising. We're concerned about quality spreads growing. If you read the Apiture release, Newtek Bank, subject to approval, is positioned to be the bank of the future. We think that has a lot of value.
We think the technology that we have built over 20 years will add a lot of value. I just gotta be frank with the group. I feel very, very good about where we are. We're hitting on all cylinders. Everything we need to get done from a financing perspective, we believe it sits in a good spot, and we're very, very optimistic about the future, despite the fact that the markets are extremely turbulent and kinda crazy. I can only reflect back, you know, into March, April of, you know, 2020 during the pandemic, you know, when the stock was trading down precipitously and even trading in the $7-$9 type range. The company took a look at the landscape, it repositioned itself, it shifted itself, and boom, we had a great year in 2021.
For those of you that point out that there may be a dividend cut in the future, typically, for a dividend-paying stock, it pays out a material portion of its earnings in the form of a dividend. You gotta understand that we'll be retaining the remainder of those earnings. We do believe that over the course of time, this structure will give us the ability to grow earnings precipitously and really create greater shareholder value. For those of you that have received dividends, question is, did you put it back in the stock market that's now down 20 or 25%? Did you leave it in cash that lost money versus inflation? What did you do with it? We typically get a return on equity that's in the double digits. That's a good investment.
That's why this transaction potentially makes a lot of sense for us in so many different ways. With that said, I hope this has been helpful to the shareholder base. I'd like to open it up to any questions that the group might have. Operator, if you could open up the questions, that'd be great.
Thank you. Ladies and gentlemen, to ask a question, you will need to press star one one on your telephone keypad. Again, that's star one one. One moment for our first question. Now, first question coming from the line of Paul Johnson from KBW. Your line is open.
Yes, good morning. Thanks for taking my questions. Just real quick on the announcement with Apiture this morning's statement. How does that affect, I guess, the Newtek dashboard app and the development for that? Is that accelerated? Does that replace essentially what you had been working on? Just curious how that affects, I guess, the ecosystem of your dashboard.
Sure. Thank you, Paul. The announcement with Apiture, as we've put into the release, it's a delayed announcement based upon obviously what we've been working on with Apiture over many months. Apiture is an organization that we believe has done online banking, mobile deposit, account opening for hundreds of institutions. They're really a high quality organization. Their technology in conjunction with our tools will be integrated together into the current existing National Bank of New York City's core, so that there will be no core conversion or transformation of customers from that particular core.
This announcement is totally consistent with our desire to deliver the Newtek Advantage, which when we deliver that to our clients, will be the one company for all your business needs, the one dashboard for businesses to acquire such relationships, analytics, such executive relationships with Newtek, analytics, transactional capability that do not exist in banks. When you look at the Newtek Advantage, which will be the tool that we're gonna be giving to all customers eventually, initially just depositors. You'll be able to do payroll from the dashboard. You'll be able to see your Google Analytics from the dashboard. You'll be able to see your merchant processing data from the dashboard. You'll be able to store all your organizational documents in the dashboard.
These are the things that we're taking the Apiture technology, which they've done a fabulous job in providing online banking capability as well as mobile deposit opening, and merging that into the existing Newtek technological tools that have been developed over the course of 20 years. This is what I refer to as the unlocking of value in what we've built over 20 years, which you really can't see. When businesses go to their dashboard, they're never gonna have to say anymore, "Gee, I didn't know you did insurance. I didn't know you did payroll.
I didn't know you could do a virtual desktop or give me a 24/7 help desk." Or, "Gee, I didn't know you design websites," or, "I didn't know you can do workman's comp or health insurance." Or for that matter, they go to their banking portal a couple of times a week, 10 times a month. They go to us for webinars, seminars, product information. It'll be the central place that business owners can really help themselves manage their business. These are the intrinsic and tangible things that will enable Newtek to really position itself as the bank of the future and achieve higher levels of greatness going forward.
Thanks for that, Barry. Appreciate that, lot of color on that recent announcement. I guess just maybe for investors in the market, I was wondering if you guys had any update on what pro forma book value would be for closing the bank transaction. I think the last, the most recent presentation I may be off here, I have a 10.74 or so in front of me or somewhere in the 10 range. Do you guys have any update on that?
Yeah. It's a good question, Paul, because for investors that are obviously familiar with us at NAV, okay, this is once again really important to note. We have a valuation, I believe it's around $115 million for Newtek Merchant Solutions and $30-$40 million for tech solutions. So there's like $150 million of value that rolls into NAV. That will not be part of tangible book. In a bank environment, once again, you know, we're not your mom and dad's or grandpa or grandma's bank. We're gonna look differently. It's just like we're a different BDC. We're gonna be, you know, a different bank holding company. So that will actually come out of what traditionally is looked at as, you know, a tangible book.
We may wind up creating a valuation to adjust that to add this back in because there's clearly value in those businesses, but they're not part of book. So you could probably play around with those numbers and come up with your own definition of what that might look like. There's no question we're gonna be trading at a multiple of tangible book. However, from our perspective, as long as we grow earnings, and I would strongly suggest for those that haven't done it, go take a look at our website, the August second, third illustration with the banking BDC. You know, we think that we could achieve ROAs north of 3%, returns on tangible common equity in the double digits, high double digits. Unlike most banks, if they get 10 or 11, given what they do, it. You know, they're lucky to do it.
All the things that we do, once again, we got to get approval to be able to get these things done, which is one of the reasons why it's taking so long because, you know, the regulator is looking at all these different things, as they should. We're confident they do fit the regulatory environment. Most importantly, they're great for our clients. These are different businesses that generate great cash flow, don't require capital like the merchant business or minimal amounts of capital in tech solutions, but generate that non-banking recurring income with growth. We're very excited about the model. I will give you a hint. My guess is from an accounting perspective, those valuations which are part of NAV will have to come out of NAV.
Thanks, Barry. Appreciate that. Yeah, I appreciate it. You know, very complicated matter. Obviously, there's a lot of moving parts to this. As you said, the transaction still hasn't closed. There's, you know, a little bit of maybe forecast built around this. I appreciate all that. Just to be clear, I wanna make sure. You know, the $10-$11 range, you know, $10.74, does that sound reasonable to you in terms of where you stood at the last presentation?
I'm sorry. Could you repeat that, Paul?
Just the pro forma tangible book value that I've sort of just, I guess, calculated from some of your recent presentations. I think I came to a number around $10.74. I mean, is thereabouts, I guess, sounds accurate to you? I just wanted to be clear on that.
I think the information that you're taking from an illustration that we put out is reasonable if you were to assume that the valuations that I mentioned would come out of NAV. You could come up with a number that is somewhere around that number plus, or minus.
Got it. Appreciate that. My last question, I think I asked you on the last earnings call, but just kind of refreshing my memory around this. I'm just curious what happens to prepay rates in your sort of typical SBA 7(a) portfolio that you guys have operated with. I guess, you know, maybe just for instance, like back in 2017, 2018, as rates were going higher back then, and the prime rate was moving up. What sort of, I guess, what did you observe from the peak prepay rates within your portfolio?
Yeah, I think that what you see in an SBA portfolio when rates rise is borrowers that have real estate collateral, that have improving cash flows, that have demonstrated good pay histories for two, three, four years, will opt to potentially get a lower rate, cash out on the valuation of maybe the increase in the real estate, and refi. Speeds do pick up. Do they pick up precipitously? Do they go from like 16%-22%, or a bigger number? Yes, but it's not like they go to 50%, or it's not as sensitive as getting a refinance in a residential mortgage loan, if that's helpful.
Yes. That is. I appreciate that, Barry. Thanks for taking my questions this morning.
Sure. Okay.
Thank you. One moment for our next question. Now next question coming from the line of Scott Sullivan from Raymond James. Your line is open.
Hey. Thanks for taking my call. Quick question on the return of capital. My assumption would be that if there was any return of capital in the next dividend, that would be based on you guys trying to avoid, you know, really onerous tax situations. Is that correct?
100%. I mean, you don't wanna be, you know, 98 or 99 when you do the final. You know, when you do the final, it's based upon where you think the tax return's coming out. We have a lot of work to do. We're doing it. We're in the midst of it. We're paying attention. To try to be as transparent as we possibly can to the investment community, that for those people that have a position in the stock and they wanna keep an understanding that they're gonna get cash, we thought that this was a good way to, number one, forecast. Then we obviously anticipate delivering that; otherwise, we wouldn't have forecasted it. If you're gonna de-risk, you can't be at 90. Does that-
Right.
Does that? You get that?
Absolutely. Makes perfect sense. Yeah.
You need to be at 100% or at 101% or 102%. You don't wanna be at 90%.
Right. Totally. Just wanted to clear up that confusion. In terms of-
This is why we do these calls. That's a really good question for people to understand. I mean, the other thing is people are, like, trying to figure out, geez, you know, they're right up into the number of 100%. Well, most BDC analysts will say, "Well, gee, that's not very good." We're transitioning out of being a BDC, so therefore you should start to see leverage go up. You should start to see the payout ratios be close to 100. That's what we're supposed to be doing. That's called preparation. That's a great question. Thank you for bringing that to the surface.
Oh, no worries. Next question I have is sort of based on the overall pro forma optics or, you know, actuals, I guess. You're kind of creating a new bank category in my mind's eye, and it's. I know you may not want a fintech type of label because you're really not. You know, I see it as a branchless model, which is always interesting. Obviously SBA and non-conforming focus in terms of lending with the small business offerings. How would you look at your pro forma in terms of offerings compared to a Live Oak?
Um-
Further, what pushes your positive opportunities versus them, the advantages, et cetera?
Thank you, Scott. First of all, the question definitely melds into a recent press release we put out where we talked about the prospective branding of the company to be called, number one, NewtekOne. NewtekOne, the one company for all your business needs, has a vertical of banking. It also has a vertical of lending, but as a vertical of banking. It's important to note that although NewtekOne will be a financial holding company, owning a bank, we don't wanna be. First of all, we are not gonna look like any other bank. I say that from the perspective that, first of all, we're gonna give customers six executives to have relationships with. A licensed insurance executive, a payroll health and benefits person, a payments executive, a loan executive, a deposit executive, and a relationship manager.
Most businesses, if they're lucky, may know their banker. Most of them do not. That's a huge differentiator. Businesses will actually have relationships with people. We say we're branchless. They're gonna be able to go to the advantage and pull up people on a camera and be able to have that's the bank of the future. That's the technology of the future. That's where we're going. In addition to that, they're gonna be able to get multiple solutions that're gonna make their business more successful. It's gonna make their business better. We're gonna give them value. Instead of just taking their deposits and the customer hoping they get a loan, we're gonna give them analytics, transactional capability, so that we don't wanna be a bank or thought of as the other. We don't wanna be thought of as a bank.
As long as we're the new bank, the Newtek Bank, the new bank. Fintechs are typically software. They're not people in process. They provide software, and they give it to the bank, and then the bank has issues in looking at it. Relative to the comparison with Live Oak Bank, who I have tremendous respect for, they're a great institution. They've done exceptionally well in the market. They recently announced that they hired 13 bankers, and they're about to look to hire a lot of other bankers. That's not what we're doing. We've got tremendous capability to leverage the infrastructure and put on sizable amounts of business with the current staff that we have, without bankers, brokers, BDOs, or the physical location of branches.
We look forward to ultimately being able to brag about our efficiency ratios, the ability to leverage, to put more business on without killing the expense line. That's a major difference between Live Oak and ourselves. Live Oak's done a very nice job of creating technology, which is software, and spinning it out like nCino. Kudos to them. They did that with Finxact recently as well. But they're still using a lot of humans and manual labor, and they also, you know, they don't own and operate the businesses that we've owned and operated for 10 years. They could buy them. They could start to integrate them. I wish them luck. I've got 20 years of scars on my back from this. We're here, we're positioned, we're just waiting for approval, and hopefully we'll get it soon.
Oh, fantastic. I really appreciate that color. Lastly, can you give any kind of guidance for 2023, 2024 or goals, if not permissible?
Yeah. Well, I think, look, I think what we should look at, number one, for investors currently in the stock, I think we have performed in earnings and dividends for this year, particularly assuming that we're recovering from COVID. You pulled out PPP. We had to shift back to our normal business. We had record financings in Q2. We have a couple of days left. I wouldn't be shocked if you see record loan closings for the third quarter as well. That's something to look at. It's not a forecast. It's not a prediction. I just say stay tuned for that.
Relative to 2023, 2024, provided that we get approval, I think the illustrations that exist in the August 2, August 3 deck, and they are just illustrations, are the closest thing that one could come to being able to think about what we could be, to envision what we could be. When you look at those illustrations, you're looking at ROAs that are 3% plus, well north of where banks are. You know, you're looking at illustrations of, you know, $2.10 after tax in the first year, $3.10. You split that in the middle, you put a reasonable multiple on it. I mean, I can't tell you that those are forecasts or predictions, but those are potential illustrations.
Without the deal closing, I should say, being approved, I can't with real certainty tell you what goes where at this point. I think those are good guesses for you to take a look at and maybe base some decisions off of. Right now, unfortunately, because we don't have bank analysts looking at us, we don't have forecasts in the market. The stock is trading where it trades, and it is what it is.
That's very cool. I definitely appreciate that and obviously respect your patience and perseverance in the whole transition. Thanks a lot.
Thank you. Appreciate it, Scott.
Thank you. Our next question comes from the line of Robert Dodd from Raymond James. Your line is open.
Morning, Barry. Just two questions. One, to follow up on the book value question, the bank tangible book, obviously, and yes, it's different. I understand it does include asset values from the BDC. Does that call it mid-tens, 10-11? Does that include an expected loan loss reserve, or is that before the assessment of that? Because I presume that's part of the conversation with regulators on what the appropriate scale for a reserve, if any, is.
Robert, thank you for joining. I appreciate it. The number that you reiterated based upon that illustration, that would be. I don't even know how to answer the question because that's. I think what you're asking me is if you had to make a guess on what the tangible book would be, is that tangible book net of everything? And the answer is yes. Now to point out the concept of multiples to tangible book in a banking environment, or for that matter, multiples of NAV in a BDC environment, and we've had these questions numerous amounts of times. When we were in the middle of PPP, and we were breaking records for earnings and paying dividends, I think we got as high as 2.5x-2.6x to net.
Now, how did it get there? Very simple. You earned it. As long as you can earn and generate the cash flow, the stock price is gonna go. Banks trade at these multiples, and BDCs trade at these multiples because they're not growth vehicles. We broke that mold in BDCs. We believe we will break that mold in banks because we're unique and different, which is why it takes us, frankly, longer to be understood. There's more explanation. That's the value prop. I do realize that we will be, and I'll use this word, hazed by analysts and investors. What's your multiple of tangible book? It shouldn't trade at the big multiples of book. It's not like other banks. I mean, that's fine. We'll just earn our way through it.
To answer your question, if we were to put out a pro forma, and historically we've only pulled out an illustration, which we think is different, it would include all charge-offs and expenses. Yes.
Got it. I appreciate that clarification, Barry. I think that the multiple the bank get or BDC gets tends to be driven by its ROE as well as growth. Your ROE has been higher than average. Part of that is the success, obviously, in the growth of the SBA 7(a) business. Can you give us any color on the licensing situation? Because obviously you have a preferred lender license within Newtek as it stands today, but you're gonna drop the people into the bank, right? Is the license gonna transfer as is as a preferred lender license from Newtek as it exists today?
To the bank on a go forward basis.
The plan is that National Bank of New York City, which currently has a lending license, but obviously it doesn't have our infrastructure or our capability, we're gonna wind up putting probably in excess of 200 employees in the bank. We'll be able to obtain that preferred lending status in the bank. That is one of the things that we will be executing on. I mean, I think there's a list, Robert, of about 70 things we have to execute on. That's one of the items. Yeah, that's on the list. We envision that the bank will be a PLP lender. We've had conversations with the regulatory bodies about this.
Yes, that's an important part of, you know, our ability to affect this transaction and be successful at it.
Got it. I appreciate it and thanks for the update and good luck on getting final approval and getting this thing wrapped up.
Robert, thank you for working with us all these years. I appreciate all of your thoughtful questions and effort. Thank you.
Thank you.
Thank you. As a reminder, ladies and gentlemen, to ask a question, please press star one one. One moment for our next question. Our next question coming from the line of Doug Astarbee. Your line is open.
Yes, good morning. My question has to do with the bank purchase agreement or the bank purchase. Once you get approval for the bank purchase, can you go over how you're going to address the precondition regarding the notes about refinancing the notes?
The answer is I can't address that. I can't address that at this point in time because it depends upon the timing of the approval and the circumstances.
Well, or re-asking the question, the notes can have language that requires the BDC or has the BDC language in it, which needs to be eliminated. I mean, there has to be some approach to getting rid of that, right?
Doug, I didn't understand that question.
Yeah, I mean, the reasons for the notes to be refinanced apparently has to do with the fact that the language in the documents that have to do with the business development company needs to be eliminated. That's the reason for the refinancing, I suppose. How is that going to be addressed? All right. I guess you just said you can't answer that.
That's correct. Although I will tell you that it will be addressed. We've had private conversations about this, Doug, and I appreciate you coming on today, and we wanted to take your question. You know, the answer that I give to you and I've given to other investors that have contacted us in transparency is we will be in complete compliance with all of our covenants. We're aware of it. We've got great counsel representing us, and investors will be protected.
Okay. Thank you.
Thanks, Doug. Appreciate the call.
I am showing no further questions at this time. I will now turn the call back over to you, Mr. Sloane, for any closing remarks.
Great. I wanna thank everybody for attending this morning. Given the nature of the questions, it was really good that we had this brief call. Hopefully, this clarified things. Obviously, for anybody who has other further questions, please send us an email or call Jayne Cavuoto in Investor Relations. We're more than happy to answer any and all questions. We realize, you know, there's a fairly big transition going on that's, you know, left a bit of a vacuum on a variety of items, but we're trying to be as transparent as we possibly can. When we can answer questions, we try to be as forthright as possible. That's been the company's twenty-year tradition. We feel really good about where we are, and we'll hope to continue to deliver good news and good reporting. Thank you once again.
I appreciate your time, everyone. Have a great day.
Ladies and gentlemen, that does conclude conference for today. Thank you for your participation. You may now disconnect.