Good day. Thank you for standing by. Welcome to the Newtek Business Services Corporation Q2 2021 earnings conference call. At this time, all participant are in a listen-only mode. After the speaker's presentation, there will a question-and-answer session. To ask a question during this session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today. Barry Sloane, thank you. Please go ahead.
Thank you very much, operator. Welcome everybody to the Newtek Business Services Corp. Second quarter financial results conference call. I would also like to announce and welcome Nick Leger, our EVP and Chief Accounting Officer, who will share the presentation with me today. I'd like to point out to all listeners that they can follow the presentation by going to our website, NewtekOne, newtekone.com. Go to the investor relations section. There actually are two decks as part of the presentation. Deck number one will be the second quarter 2021 financial results conference call. Deck number two will be the second addendum to the investor presentation dated August 3rd, with a current date of August 10th on it. We'll be using both of those decks today. We're excited to report our first half earnings as well as our forward look for the second half of the year.
Company's doing really well. We have a bright future. Company and business extremely well positioned. We have also addressed some slides to talk about talent pool that we've recently added. Obviously, a lot of people are intently focused on the results that we put out last night through the first half and the second half, as well as the recent announcement of a contract to acquire National Bank of New York City. Before I get into our focus today, which obviously will be focusing on the company's performance as well as the acquisition. I do want to point out that there clearly has been more activity and questions coming into the company relative to the acquisition. Broadly speaking, because we'll get into this in a little bit deeper, we've got the same business. Newtek was the same business a month ago. It'll be the same business a month forward.
We basically, if in fact the transaction goes through, and we expect that it will, which is why we moved forward on the transaction, and we'll be recommending it most likely to shareholders. It's the same business in a different structure. I think that's what's real important. This business has been built over a long period of time. We do most of the things that banks currently do. We were excited about converting to a BDC in November of 2014 when that made the most sense for the company and its shareholders. We're excited about the potential conclusion of the transaction subject to regulatory approval and shareholder vote. We look forward today to discussing our earnings in the first six months of the year, recent quarter, projections going forward, and the real strong performance that we've had.
I'd like to call everyone's attention to slide two of the conference call review earnings deck. On slide number two, we talk about proven shareholder value creation and track record of successful growth. Important to note, Newtek has always been a growth company. When I say growth company, growth in revenue and growth in earnings. When you take a look at our stock price year to date through August 5th of 2021, up 42% for the year. 10-year return, 754%. five-year, 222%. three-year, 71%. One year over the last 12 months from that particular date, 50%. I think it's once again important to note that the reason why we're able to generate these returns, and these include dividends plus share appreciation, is the company is a growth company. It's always been a growth company.
We believe that despite the fact that the Business Development Corp. has been a great vehicle, our ability to grow the business, grow the cash flows are better suited from a total rate of return basis in a bank holding company. We believe that the transaction that we have announced and hope to proceed forward with is a great transaction for all shareholders. I have to point out that if you would have earned a 10% dividend with no appreciation over a 10-year period of time, that's a 200% return. Obviously, there are dividend-oriented shareholders that are somewhat concerned about not getting that regular cash flow. If you've got share appreciation, you could just get that cash flow by periodically selling off pieces of your shares.
At the end of the day, Newtek Business Services Corp., in its form, will continue to be going forward and has always been a growth company growing its cash flows. We're excited about reporting our third quarter results, our first half results, and projections. Let's go to slide number three. Important adaptability of Newtek business model. Well, nobody expected a pandemic to really wreak havoc on our health and business in 2020 and 2021. Clearly, these were extremely challenging years in our 23-year operating history. We were able to demonstrate the ability to shift our business model quickly. I think that's really important. Being able to transform to current market conditions and position yourself so you could provide good results for all of our stakeholders. We've also proven that Newtek, in its current form, is vital to the economy.
Essentially, you could look at what we have done, particularly with respect to our SBA activity. We partnered with the government and for all of us who can see going forward, particularly in the foreseeable future, government keeps getting larger and larger. Partnering with the government is not a bad position to be in. I think the financial results that we've been able to deliver through a tough 2020 and 2021 have demonstrated that. We believe the company's firing on all cylinders. What does that mean? As the economy opens up, we believe that we'll be able to grow our payments business, our tech solutions business, insurance agency, payroll, and shift the lending focus from PPP, which is a product that effectively sunsetted, with the exception of forgiveness, which we're working on with our customers.
Shift the lending focus back to 7(a), 504, non-conforming, and secured line of credit. We think Newtek is extremely well-positioned to capture those market opportunities. For those investors that aren't totally familiar with our model, and there are many new investors that are attending today's call. When we go out to the marketplace, we have a big funnel. Businesses come to us not for a PPP loan or a 7(a) loan. They come to us for financing. We'll talk about the amount of referrals that we get. The referrals come in the funnel. We use technology to parse that funnel out to get borrowers pre-qualified quickly and then figure out what the right product is. For months, the shifting of PPP to 7(a) to 504 to secured line of credit or non-conforming, that's just what we do. It's what we've always done.
This is not a big issue for us. We're excited about being able to continue the success and the profits and the capability that we've demonstrated over the last one year, two year, and actually 10 years over the course of time. We will provide forecasts across several key metrics for 2021. Really reflect the growth of our many, many faceted earning stream, whether it's from payments, tech, whether it's gain on sale income, whether it's servicing income or spread income. We're very excited about what we are doing and what we're positioned going forward. We're also indicating that on a going-forward basis, given the potential change to a bank holding company, our forecast in 2022 will be limited to a quarterly basis. Approximately 30- 45 days, we hope to give some additional transparency and forecast a dividend for Q1 2022. Going to slide number four.
2021 key metrics. We've clearly positioned ourselves for a midpoint dividend of $3.15 for the year. That'll be a 53% increase over the year prior. Our SBA 7(a) loan forecast for the year, $550-$600. We dropped the lower end from $580-$550. From our perspective, there's been tremendous receptivity for price appreciation, which we'll talk about. Our gain on sale metrics can easily be met within this new footprint, or I should say forecast of a range. This isn't necessarily indicative of anything, of a slowdown, of a change in growth. As a matter of fact, we outperformed in the second quarter our PPP fundings where we funded $722 million worth of loans instead of a previously forecast an analyst review of $600 million worth of those loans.
This is just a little bit of a shifting around, and we feel very comfortable with these changes. Our 504 business, we're forecasting $125 million-$150 million. That's up from a previous forecast of $125 million. We'll talk also a lot about our non-conforming conventional loan business going forward. Clearly a growth engine, particularly in 2022 and beyond. Let's go to slide number five. On August 10th, our company's board declared a third quarter dividend of $0.90 a share. That's a 55% increase over the same quarter last year of $0.58. With the payment of the third quarter dividend, it was paid out $202.10 over the first three quarters of 2021. That will be a 32% increase. If our forecast is accurate, the fourth quarter should deliver $1.05 dividend or 123% increase over the fourth quarter of the prior year.
Our prior year and prior quarter. Once again, we're reaffirming our dividend forecast range with a midpoint of $3.15. We look forward to continuing to hit on all cylinders as we go through the third quarter and the fourth quarter. Moving to slide number six, the second quarter financial highlights. The difference between the second quarter and the first quarter were primarily dominated by a shift in PPP revenue recognition, where we had in 2020 more PPP revenue recognition in Q2 than Q1. In 2021, that was more of PPP income from the first quarter to the second quarter. You could see there was a little bit of a shifting around.
I think important to note, adjusted ANII for this particular recent quarter that we're reporting today came in at $27.1 million, $1.20 a share. It was a decline from the year prior, it was clearly a stronger number than consensus estimates by about $0.46. We had a $0.77 guess, a $0.65 guess, an $0.81 guess. Fourth analyst didn't guess, we were able to beat the numbers primarily based on the outperformance of the PPP business and the ability to actually close and fund, I believe, close to 16,000 units for the year in this particular round of PPP funding. Net asset value also increased at June 30th from $16.38 a share to $15.45 on December 31st, 2020. On slide number seven, we're talking about PPP resources, which are really important.
We're estimating, and obviously this is subjective, about 65%-70% of our resources in lending that were focused on PPP financing are now going to be shifted to the other four product lines. Once again, I think it's important to note, and I'll go into this a little bit further in the presentation. In calendar year 2019, there was no PPP. There was no pandemic. It was a very clean year. We're going to look to give analysts and investors somewhat of a base of what we think we can project going forward, taking some of the PPP noise out. We're excited about the shift of resources. The shifting of the resources is going to give us the ability to do more business in 7(a), 504, non-conforming, and secured lines of credit.
I should also note that given the volumes that we did, particularly with respect to units, we wound up making 46 net new hires in the calendar year of 2021, and that's not over yet. About a 25% increase in staff. For those of you that are trying to figure out, gee, are expenses going up? Are we able to handle it? We're very comfortable, as we're growing our revenue side, to be able to grow our headcount. We also believe that we're getting greater returns on our equity and our assets by doing this as we make technological changes. One of the technological changes that we've made is we're pushing out fact-finders to referral partners early, and we're giving referral partners the ability to set calendar invites for our internal staff.
These are all things that are expediting our ability to get loans into pre-qual and underwriting sooner and earlier and larger to get to these borrowers real quickly. Moving forward to slide number eight, our six-month comparison ended June 30, 2021 versus June 30, 2020. Increases of total investment income, ANII. I'll point out that ANII up 43% for the year. Net investment income actually was a slight decrease. I will comment that in Q1 and Q2, we did not distribute any income coming up from the portfolio companies to the BDC to be paid out in the form of a dividend. That was held back. That was a conscious decision at each particular portfolio company. That cash and earnings still resides at the portfolio company, which can be dividended or distributed out in the future when needed. In the meantime, it's good to have that cash.
We could use that cash to lend to the BDC to make loans or provide greater returns on capital. I think it's just important to note that that withholding of that dividend, I do believe, does provide a negative drag on net investment income. Once again, we're excited, and we believe that the six-month results give us a more accurate depiction of the company's performance, particularly due to the uneven distribution of PPP income between Q1 and Q2. On slide number nine and slide number 10, they kind of go together a little bit. There's been, obviously, a lot of discussion on forecasting. We try to be conservative in that, but try to give as much transparency and ideas for the investment community and analysts to base some of the forecasts, particularly given as things are changing and potentially capital structures and legal structures are changing.
As I mentioned, we plan on issuing 2022 Q1 dividend guidance in the next 30-45 days to give greater transparency to the market relative to our next few quarters of operations. I think it's important to note that in 2019, the full year NII was $2.33. I bring that up and people have said, "Why are you bringing that up?" Well, you've got PPP noise in 2020, and you've got PPP noise in 2021. I say noise, that was good noise and a very good indication of how the company is able to shift through change in conditions, change in market conditions, as well as changing technology and structure. We look at that as a good base ANII to try to establish a projection in the future for what gross earnings can be.
I'd like to draw everyone's attention to slide number 10, so you can take a look at the adjustment of NII and the trend in the forecast. As I said at the beginning of the presentation, Newtek Business Services Corp. is a growth company. It's been able to grow its earnings on a regular basis. As you can see, the trend here is clearly up. You could put some fairly high numbers when you actually calculate what the trend is over that period of time.
We were affected by the pandemic in 2020 with really primarily relying on PPP and taking a hiatus in some aspects of our business lending with an uncertain, unquestionable view towards credit, which I think at this point in time has primarily corrected itself. I think it's important to note that the street estimates for 2022 going forward as a BDC, approximately $2.29 is the average amongst the four different participants. I look at the $2.29, I look at what we did in 2019, I say, "There's no growth." Frankly, I just don't see it. Whether you put a 25% number of growth a year, you put a 15% number or a 10% number or a five or zero or negative, put whatever number you like on it.
I think this is a good way for all of us to try to calculate what's our earnings capability going to be as we go forward. We want to be careful, try not to confuse the market too much relative to the transition of becoming a Bank Holding Company versus a BDC. We'll do this in bite sizes. For many of you, hopefully, this will give you a good base to configure what we look like. The one thing I feel fairly strongly about, we are a significantly bigger, better, stronger, more efficient company in 2021, going into 2022, than we were in 2019. I feel great about our prospects. I hope that analysis is helpful to investors and the analyst community. Going forward to slide number 12, we talked about our PPP results. $722 million of loans, 15,800 units.
On an aggregate basis in 2020 and 2021, 26,000 PPP customers that are all available for discussion about other things that we could do for them. $1.9 billion worth of loans. I will point out that in excess of 99.6% of all these loans were sold to third party. No balance sheet implications, just income, and move them off the balance sheet. I think most people on this call are familiar with all the PPP information. There is information on our website to take a look at what the PPP program was about, which we talked extensively about in prior calls if you need to get that data. On slide number 13, we talk about our SBA 7(a) fundings, which we are transitioning back into on a very full basis. $94 million of loans during the three months ended June. $198 million for the first six months.
Forecasted range $550 million-$600 million. Once again, a reshifting or redeploying of assets. We have held over approximately $26.7 million of guaranteed portions of SBA loans that are available for sale going forward. Slide number 14, just some information on other portfolio companies, particularly NBL, Newtek Business Lending. Newtek Business Lending is our origination unit that does the 504 loans and also originates non-conforming loans for the joint venture. We funded or closed $49 million of 504 loans for the three months ended June. There was nothing that was done in that quarter in the year prior. $72 million for the first six months. That's an $18 million increase over the six months of last year. We bumped our fundings up in a range of $125 million-$150 million. Our credit facilities of $175 million with Deutsche Bank, Capital One Bank, respectively are in place.
On slide number 15 is a good snapshot of our pipeline. You could see it's real strong, robust, puts us in a great spot to be able to fund, close 7(a) loans in Q3 and Q4, and well beyond that. We're real excited about the shift back to regular courses of business as business owners are looking forward to getting back on track, and growing through the effects of the pandemic. On slide number 16, obviously, COVID-19 and the pandemic affected our workforce. We were able to shrink our real estate footprint by closing down offices in Milwaukee, Irvine, San Antonio, Dallas, and New York City.
We've demonstrated the company's been able to manage our employees efficiently working remotely through our Time Tracker program, which gives us the ability to monitor and manage remote workers with respect to time on the phone, who they're calling, outbound calls, inbound calls, as well as knowing what customers they service within different hours of the day. Our staff has been able to benefit by not having long commutes. We have adapted well to the remote work environment. We do believe going forward, we'll operate on some kind of a hybrid structure. We thought the go back to work might begin September 1. Given the current conditions, that might get pushed back another month or so.
We do plan on getting back into the office and develop as well as a great environment for people to work out of their house, a sense of camaraderie, coordination, communication by coming to the office a couple of days a week. Slide number 17. For those that aren't familiar with our ability as an SBA lender under the 7(a) program, there's some good data on here, which really just talks about the profitability of the program, our ability to access the markets through rated securitizations with average uninsured but non-subordinated participation certificates of $170,000, and fairly high attractive coupons on the uninsured of 6% floating with no caps. Slide number 18 talks about growth in loan referrals through our patented NewTracker system, which would be something that clearly would carry over to the bank and the bank holding company. Once again, getting 109,000 loan referrals.
Many of these loan referrals would qualify for more traditional types of bank lending, C&I loans, commercial real estate loans, that we're able to fund with our lower cost of retail deposits. I think it's important to note that we don't see National Bank of New York doing car loans or consumer credit cards. We will be focused on the things that we currently do best, which is lend money, process payments, which we do through our payment processor, provide payroll and other cash management systems for our business clients. We'll talk about that NewtekOne dashboard, which we talked about in previous presentations. Once again, not a major change in shift in business, but important to note, we get lots of referrals. We have a database in near time of 1.5 million customers in our database.
1.5 million that have passed a referral to Newtek seeking a product or a solution in one particular area or another. The cross-selling efforts should be enhanced significantly through the NewtekOne dashboard, which is clearly a bank product that we'll be rolling out. The one solution for all your business needs to be able to go to that dashboard, see your deposits, see your loan information, be able to make your payroll, be able to get human HR tools right on the dashboard, to be able to have all of your important organizational documents saved and stored there. Obviously, a lot of these forward-looking comments relative to the bank are subject to regulatory review and approval by our application through the Federal Reserve and the OCC.
These are the things that we believe and are hopeful that we'll be able to do if the regulators approve our transaction, and if the shareholders vote for the conversion into a bank holding company. Our 18-year track record of loan assembly, underwriting, and technological expertise really has made it a leader in the areas of lending. We look forward to getting through this pandemic and its finality, and getting back to a more normalized business process. Slide number 19 talks about premium trends. One of the reasons why we were able to cut back on the amount of loans we're doing is because of these higher prices that we're getting. These higher prices should go away by September 30th.
I say that because due to the COVID relief bills passed in Congress, some of the fees that were charged to borrowers and originators like ourselves were waived, which enabled us effectively to sell higher coupons. Projecting forward, I would look at the numbers from 2016 to 2020, maybe even part way through 2021, give us a little bit more normalized type pricing for gain on sale. Clearly, this has been helpful to us. We've taken advantage of it, and we realize that based on our projections, we'll go back to a more normalized type of a market, which we saw as a company way back when in 2019. Slide number 20 shows the seasoning of our portfolio. Real important. We have a seasoned portfolio that's primarily sitting in securitized structures. That's good.
We have an analysis in our deck that from Standard and Poor's that basically shows when defaults are particularly occurring or accelerating. We're comfortable that obviously we're doing new loans to put on the books, but our seasoned portfolio hopefully has experienced a good portion of the stress relative to seasonality. With that said, we're still going through the effects of the pandemic. A lot of businesses that are coming out of the pandemic are struggling somewhat. So far, we feel pretty good about how our portfolio is performing, as evidenced by our currency analysis of our currency portfolio on slide number 21. We see that from 03/31/2021 to 06/30/2021, slight deterioration, but not significant. Obviously, we've had the reduction of the 1112 payments for a quarter, so we were comfortable that there wasn't a major shift in those particular metrics.
Slide number 22 and 23 are slides we've used for, God, 15 years, I believe in these calls. For those of you that are not familiar with it'll show how an SBA 7(a) loan is funded, how the government guarantee piece gets sold, how income is booked, and how cash is created. Slide number 24, going into the portfolio company review. These are our controlled portfolio companies. Our 504 loan program, we talked about how well it's done this year versus last, particularly with growth and originations looking for $125 million-$150 million. I do not believe we've dividended money up from NCL. I believe in the first or second quarter. That's dollars that will go back into making additional loans that potentially can get distributed in Q3 or Q4. Slide number 26 demonstrates for those that aren't familiar with 504 lending.
It gives the ability to make a 90% LTV loan to a business owner that's fully personally guaranteed. When we make the loan with respect to our underwriting guidelines, the SBA and the Community Development Corp., the CDC, has already approved it. The 40% second lien gets taken out by the government. We're left with a 50% first lien, which we typically sell into the market for gain on sale. Slide number 27 is illustrative of that. When you look at our 7(a) business getting high returns on equity and assets, our 504 business also high returns on equity and assets. You could see why we're able to generate larger returns, obviously as a BDC than other BDCs. We do believe that that will carry over into a bank holding company and bank structure. Once again, subject to regulatory review and shareholder vote.
Slide number 28, we talk about our conventional loan program. We are working at the moment on a potential small private securitization with our partner in the first JV. We're excited about that. We think that'll give us good validation. On slide number 29, we signed up a second joint venture partner and currently working on a third. These programs do take a while to put into place with respect to getting a securitization done, getting our leverage lines in place. We feel pretty good about the program, and we expect to fund up to $50 million of non-conforming conventional loans either through JVs or on our balance sheet through the second half of the year. Slide number 30, we talk about our payment processing companies, that being Mobile Money and Newtek Merchant Solutions.
We've come up with a total enterprise market multiple value of 8.5x 2021 EBITDA numbers. We feel good about that. I also want to make a note that we also did not distribute earnings out of NMS or NTS through the first half of this year, and that's something that can be done. In addition, it could also provide funding to the BDC for making loans. We've got a lot of flexibility in our business model. That's an important aspect of investing in Newtek, to have many different levers, many different diversified streams of income, and we try to be as transparent as we can to our analysts in the investment community. Slide number 31, we talked about our payments business in the prior slide. We obviously have an increase in record volume coming off of the pandemic.
We anticipate continued growth in processing volumes for the remainder of 2021. Slide number 32, we talk about one of our important solutions that'll be very valuable, particularly in the bank holding company or bank structure. Being able to provide POS software directly to a customer to enable them to do their payroll, e-commerce, integrate to their accounting GLs, integrate the e-commerce and the in-store, integrate to food delivery services. We already have an existing book of business in this particular space, and we're very excited about everything that we're doing in the payment space, particularly with our software solutions. Slide number 33, technology portfolio companies. We have a real nice turnaround at NTS. We're forecasting revenue between $40 million-$50 million for 2021, an EBITDA of about $6.2 million, a very realistic multiple of 6.7x , particularly for a growing tech business.
This business obviously had grown, had a consolidated EBITDA in 2020 of about $4.3 million. We're looking at $6.2 million for this year, and we're excited about what we're doing in Tech Solutions. I want to encourage listeners and analysts, go to our website, see what we do there. We're not just a value-added reseller. We are able to provide great solutions to our customers, manage their technology 24/7. Moving to slide number 35, just as a comment. We've recently embarked on several broker-dealer initiatives as more broker-dealers have RIAs and brokers working remotely to be able to give them their total solution, charge them on a per-seat basis, and really enable people to work at home safely, securely with 24/7 helpdesk to be able to do remote compute. I think, once again, we see cloud services as a significant market opportunity, and Newtek is very well-positioned for that.
Slide 36. We talk about our payroll and insurance solutions. We're excited about the performance of those businesses. They have historically been slow growth. They're growing nicely this year. We'll probably have some more information at the end of the third quarter. We look for them to finally begin to contribute to earnings and dividends to the BDC. Slide 37. In summary of our earnings report for the first half of this year with a forecast of the second half as a BDC. Clearly, we've demonstrated a diversified business model, a proven track record, an ability to take a business that's consistently outperformed the Russell 2000 and the S&P 500 for over a decade. We have over a 19-year history through lending cycles and great depth of management. I think it's important to note that management's interests are very much aligned with shareholders.
I think that's very important. We own about 5.1% of the outstanding shares. We love dividends. We love share appreciation. We are an internally managed BDC. I think that's important to note. We're not getting paid for growth in assets. We're getting paid for performance. Very important to note. I will comment that from an individual perspective, my cash bonus for last calendar year was zero. I did get long-term compensation in form of stock for 12, 24, and 36 months worth of work. In Newtek, you perform, you get paid. You don't perform, you don't get paid. We believe that what we're suggesting is not self-enriching any of the executives or people from making this decision.
We believe this is in the best interest of all of our shareholders and stakeholders, and that's why we've contracted to buy National Bank of New York City and look forward to discussing that transaction a little bit further. I'd like to turn everyone's attention to the second deck, the second addendum to the investor presentation, dated August 3rd, 2021. I want to also relay that information regarding the proposal to withdraw Newtek's election to be treated as a business development company will be contained in the Newtek proxy statement when the document becomes available. Stockholders should read the proxy statement once such document becomes available. The proxy statement may be obtained free of charge, when available, from the SEC EDGAR website and the company. With that said, I'd like to turn everyone's attention to that particular deck.
I will probably read this again at the conclusion of this discussion, just to make sure everyone's heard it. Looking at the information that's in the second deck for today. The purpose of this deck is to kind of separate real important salient facts, provide some more information, why we think we make sense dropping our business into a bank holding company and subsequently buying a bank. I've had people say, "Gee, why are you buying banks? Banks are out of favor. Nobody likes banks." Being that banks are out of favor and being able to buy a bank at 100% of book is a good thing. Why sell out of BDC? Interest rates are low. People are buying yield. That may not last forever.
Particularly, as we're looking at current market conditions and rates rising, we just think that given our current business model, which is a growth business model, we're better situated in a financial structure to be able to benefit from a better growth structure than a BDC, which is really not situated typically as a growth structure. Let's go to slide number three. As we go to slide number three, it's a slide that talks about the actual transaction to acquire National Bank of New York City. Basically, a $20 million cash price for book, intensified at 100% of book. We believe that what we can add to National Bank of New York City is a great digital platform to be able to provide financing and digital solutions. We believe we can transform our combined entities into a technology-enabled bank.
We believe that we don't need, nor do we want or desire, a large real estate footprint, nor do we need or want or desire commercial bankers all over the United States. We are a technology-enabled bank utilizing technology to provide the best products, services, and solutions to our customers. I think it's important to note, Newtek's got approximately 450 employees. We're not short of human beings that can work with clients digitally or telephonically to be able to provide the solutions that they need, for loan assembly, for payment processing, for tech solutions, for insurance or payroll. I'd like to go forward to slide number four. This is an anticipated well-capitalized institution, that being Newtek Bank and Trust the banking subsidiary, and the potential holding company.
You could see, looking at these ratios, once again, this is illustrative of what our current capital base looks like, plus a projection or an estimate what the bank will look like on a going forward basis. When we said the other day, this is a well-capitalized bank, some people go, "Oh, that's 10, that's 11, that's 12." No, we have a lot of capital going into this particular institution. The holding company and the bank will prospectively, on a guess, on an educated assumption, start up as a well-capitalized institution. Slide number five. Once again, our potential profitability targets for the bank holding company. For those people that invest in banks, a bank with strong ROA, 1 1/2, maybe some at two . Why are we able to achieve these? Well, we've got a business model that is a growth-oriented model.
We are the business model that we've managed over the course of time and been able to perfect it where others have not really done that well in SBA 7(a) lending or 504 lending or payment processing or payroll solutions, and be able to put those into this structure. Obviously, diversifying our cost of funds, continuing to use some commercial sources of funding, and use core retail deposits, which tend to be more sticky and a lower cost, clearly beneficial. You could see that by increasing those deposits, we'll be able to generate higher rates of return. You could see these profitability targets on an after-tax basis. We believe keeps us in the game with respect to potential market multiples on similar institutions and product categories, which all of you can make those assessments yourself.
Even in a stress case where deposit costs are higher than we currently estimate, we're still able to generate very exciting ROAs and returns on average tangible common equity. Let's go to slide number six. Profitability targets. Well, a lot of bank holding companies and banks today, they love to get that other income versus spread income. Most banks are primarily driven by interest income less the cost of deposits. It's fairly stable, not very exciting. That's why banks typically trade at book, and that's typically why they can't grow very much. However, we're seeing that the world is changing and the market is changing, and tech-enabled banks such as a Live Oak Bank, a Square, a SoFi, and other institutions like LendingClub are positioning themselves in the market to be able to safely and conservatively grow the book and grow earnings and revenue over time.
When you look at, on slide number six, the pre-tax income, other business lines, you got payments, you got tech, you got pay, you have all these other incomes that are coming in. You got gain on sale, you got servicing income. You could see that we do believe and would target, obviously, this particular bank holding company and bank to be a growth vehicle. Go to slide number seven. These are benchmarking illustrations of where we'd like to take the institution. Obviously, you look at ROAs significantly higher than traditional banks that are not tech-enabled. Same thing for return on average tangible common equity. Obviously, we start off with high percentage ratios of tangible common equity, significantly higher than most other institutions in the space. When we hear about comparisons to NAV and tangible book, that's fine.
There are others that may compare us to that, and there are some that may not. There are some that might just look at growth of earnings over time, which we're anticipating and potentially projecting. All of that will show up in the proxy prospectus. I think it's also to note the price multiples of some of our competitors in the market, whether it's tech-enabled bank or commercial finance companies. We do believe we look more like them than the traditional bank that's making car loans or credit card loans to consumers. I'd like to move everyone's attention to slide number eight. I think the important aspect of, once again, this slide is to give an illustration of what we think the bank holding company, BHC or FHC, financial holding company, which is an elective under the Bank Holding Company Act that we may decide to take.
Once again, very well capitalized. I do want to point out, we have a note at the bottom of the slide talking about the $173 million of goodwill. I think it's important to know where does that come from. In the BDC, we've got our payments business, which has got a very healthy + $100 million valuation, our tech solutions business, other portfolio companies that I believe the total value of those businesses is around $250 million. Net of that, it gets down to $173 million. Well, in a BDC, you've got to purge your earnings. Those assets are on our books at zero. When they get transferred to the bank using purchase accounting, I do want to point out, these statements are not audited and can't be relied upon, nor any of my forward-leaning comments here. I really enjoy making those statements, by the way.
I want you to know that. Relative to that particular $173 million number, we've had people look at it and go, "Well, gee, that's just your typical basic grandmother or grandfather's goodwill, where I bought $100 million of assets, and I paid $110, $120 because I like to have the whole thing fit together because I'm paying a premium above book or it's on the books." Well, it's the same principle, and most likely this will be GAAP-based goodwill. Understand, these are assets that are throwing off $14.5 million- $6 million of EBITDA, $20 million-$25 million of cash flow. That's a different kind of goodwill than just paying a premium above book value of assets.
What I'm telling you isn't GAAP, but it's an important thing to note when you try to figure out what the tangible book value of this business is, and you don't necessarily include that because those will perspectively be cash flowing earning assets. Slide number nine. One of the comments I heard is, "Gee, you're going to need to add all these people. You're going to have all these expense." We have the mother of all advisory teams, from legal to individual advisors to prospective bank boards. I've got the biggest consulting team I could ever imagine. With that said, we have expensed this bank going forward. We have factored that since when we come out with projections in the proxy prospectus. In addition to that, these are people who currently work for the company. I don't think people realize we do most things that banks do today.
When you look at a resume of a Brian Schulman, who was EVP, Chief Credit Officer, Al Spada, who ran the ABL business at Banco Santander , Brian Lawn, who's SVP of People's Bank's Commercial Real Estate Business, Mike Ogus, it goes on and on and on, including Peter Downs, a Chief Lending Officer, he's got 20 years of experience in banks, and Nick Young, who'll be the President. We've got the talent. Please don't underestimate Newtek. With respect to don't underestimate Newtek, you go to slide number 10. Slide number 10, a little bit of an unusual slide. I want to comment that past stock performance and circumstances are not indicative of anything that one could estimate going forward. This is a very good example of our history, particularly as a BDC. When we completed the conversion on November 12th, and we did a REIT IPO transaction.
I think it was $12.50 stock price, not including the fee to the banks. That was fairly transformative. A lot of people asked the same questions that are being asked today, but in reverse. Why are you going to a BDC? That doesn't make any sense. No one's going to understand you. We believed at that point in time that that particular capital structure would work for us. We could make it work. Although we don't look like any other BDC, we're not even close. We were able to make it work, and that structure fit us well. We were able to raise more equity. We were able to raise more debt. Well, we're a much larger company today. We're much better capitalized today. As we look forward, we see continued growth in our future.
A structure that enables us to grow past a 2:1 cap that we have in a BDC, that enables us to retain earnings so that when we grow, we could potentially grow a portion of our business with bank depository money instead of having to sell $1 worth of stock and $1.03 or $1.04 of debt every time, which is very dilutive from a share count. With that said, this is an indicative slide that one could look at and draw their own conclusions from. Moving to slide number 11. In summary, we have a diversified business model providing multiple streams of income, gain on sale, servicing income, payments, tech. Mind you, a lot of these businesses will be sitting up at the bank holding company, and we certainly appreciate that diversified stream of income. This isn't our first rodeo.
We've been a publicly traded company since September of 2000. We've consistently outperformed the Russell and the S&P. We do believe that the bank holding company will be in the best long-term interest of the company and all the stakeholders. It's the same company, just dropped into a different structure. You're not going to be seeing us sell toasters and making car loans. I do believe we're going to round out our product offering by being able to offer the NewtekOne dashboard to clients and be able to resell that to other financial institutions. To me, that's extremely exciting. Our interests are very much aligned with shareholders. I mean, I don't know how anybody could say they're not aligned. If you think the dividend's going to get cut, we're cutting our own dividend to ourselves.
We believe in this particular transformation, just like we believed in that transformation a long time ago in November of 2014 into a BDC. We also think that shareholders can gain from stock appreciation, which they've done in a big way, as well as prospectively, subject to regulatory review and earnings received and board declaration, a bank dividend. We believe by changing our corporate structure, we're going to broaden and enhance our access to finance its growth and actually reduce the risk of the overall company. We also believe we're going to be in a structure that's more readily accepted by a bigger pool of investors. I also relate back to 2014 when we did a reverse split and people said nine out of 10 business do a reverse split, the stock was down 19 out of 20, 99 out of 100.
Well, it actually worked for us, and we did that to be able to broaden the base of people that could buy the stock. Well, we're doing that now. This will be a structure that doesn't alienate existing shareholders that have gained from historic capital gains and dividends. We can't talk about the magnitude at this point in time, but we plan on continuing our business model, which is to grow that business and grow the cash flow over the course of time. We're excited about the NewtekOne Dashboard. We'll be able to talk about that more and more as that further develops, and certainly appreciate everyone for paying attention. I know we covered a lot of information today. I'd now like to pass the presentation to Nick Leger. One other thing I want to repeat.
Information regarding the proposal to withdraw Newtek's election to be treated as a business development company will be contained in Newtek's proxy statement when such document becomes available. Stockholders should read the proxy statement when such document becomes available. The proxy statement may be obtained free of charge and available from the SEC EDGAR website and the company. Go ahead, Nick. Nick? Nick? Operator?
Yes, sir.
Okay, Nick's call got dropped, and he's dialing back in. Okay.
Okay.
Operator, any chance you could try to give him a call?
Hey, Barry, I just got reconnected.
Okay. Go ahead, Nick. You're up.
Thank you, Barry. Good morning, everyone.
You're welcome.
You can find a summary of our second quarter 2021 results on slide 39, as well as a reconciliation of our adjusted net investment income or adjusted NII on slides 41 and 42. For second quarter 2021, we had a net investment income of $15.5 million, or $0.69 per share, as compared to a net investment income of $29.7 million, or $1.42 per share in the second quarter of 2020. Please note that income related to the PPP is included in investment income. Adjusted NII, which is defined on slide 40, was $27 million, or $1.20 per share in the second quarter of 2021, as compared to $28.5 million or $1.37 per share for the second quarter of 2020.
Focusing on second quarter 2021 highlights, we recognized $36.6 million in total investment income, a 21.6% decrease over the second quarter of 2020 total investment income of $46.7 million. Interest income related to the fees from the PPP was the primary driver for the decrease. We recognized $25.5 million of income related to the origination of PPP loans on $297.6 million of PPP loan originations during the second quarter of 2021, as compared to $34.7 million of income related in the second quarter of 2020 on $1.1 billion of PPP loan originations. Moving on. There were no material distributions from portfolio companies for the second quarter of 2021, as compared to $2.3 million in the second quarter of 2020. Total expenses increased by $4.1 million quarter-over-quarter, or 24.2%, mainly driven by an increase in SBA 7(a) loan referral fees due to the higher loan origination volume.
Complication-related costs and other loan administrative expenses. Realized gains recognized from the sale of the guaranteed portions of SBA loans sold during the second quarter totaled $14.1 million, as compared to $1.7 million during the same quarter in 2020. In the second quarter of 2021, NSBF sold 142 loans for $87.4 million at an average premium of 14%, as compared to 20 loans sold during the second quarter of 2020 for $19.1 million at an average premium of 7%. The increase in realized gain was attributed to higher SBA 7(a) loan origination volume in the second quarter of 2021, combined with higher average premium prices when comparing to the second quarter of 2020. As I mentioned earlier, income related to the PPP is included in investment income, not in realized gains.
Realized losses on SBA non-affiliate investments for the second quarter 2021 was $2.7 million, as compared to $2.9 million in the second quarter of 2020. Overall, our operating results for the second quarter 2021 resulted in a net increase in net assets of $17.4 million, or $0.77 per share. We ended the quarter with NAV per share of $16.38. I'd like to turn the call back over to Barry.
Thank you, Nick. Operator will take questions now.
If you would like to ask a question, simply press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Mickey Schleien from Ladenburg.
Yes. Good morning, Barry. Hope you're well. Barry, a high-level question about the conversion to a bank holding company. My understanding is part of the rationale for that is to lower your cost to capital by collecting deposits. Could you describe to us how Newtek will compete for those deposits? For example, do you see yourself competing with online banks who tend to pay more for those deposits than brick-and-mortar banks?
Sure. I think that, first of all, Mickey, there's such a, I'll call it delta between currently financing growth with $1 of equity through a share issuance and $1.3 million of debt, where our baby bonds are 5% or 6%, to being able to raise money at core retail deposits, whether they're at 1% or 1.5% or even 2%, right? It's debt and using the capital base and the leverage, right?
Yes.
How we go after that, we get 100,000 referrals a quarter. It's 400,000 a year. When you look at that NewtekOne dashboard, which is an aggregating tool for a business. It's the single sign-on, deposits, loans, payroll, Google Analytics, Visa, Mastercard, this day this year, this day last year, this quarter this year. We're going to have the tools that others are imagining. By the way, all this stuff is in place. It's just a function. Easy for me to say. My development guys are probably going to shoot me for this. They just have to put it together, make it work, and present it. With that said, that's currently being worked on. It's not a fantasy. It's not a dream. These are tools that we currently use today. We talk about unlocking shareholder value.
This is going to unlock shareholder value that you can't see in a BDC. Most BDC investors don't see us as an operating business.
I understand, Barry. I want to make sure I have your thesis correct. Are you going to go after the small business borrowers that are your target market in terms of their cash management? Are you also going to go after the owners of these businesses in terms of their personal cash as well?
It's a good question, Mickey. It's a great question, actually. We're not intending to be a, well, I'll call it a consumer bank. However, a majority of the deposit money in this country is from business owners of banks that have their commercial account and maybe a personal account in the bank. We might do an accommodation loan here or there, but we want the business banking relationship. We want to provide those business solutions. We're not going to be in the securities business at all. That's not what we do. We're going to stick to the core things that we do today, lending, payments, insurance, payroll health and benefits, HR solutions, things of that nature. From that perspective, not that much of a change.
That's helpful. If we think about all those borrowers that are already existing customers of Newtek, you've underwritten their loans. You have a sense of, well, more than a sense, you know their balance sheets. Any scope of how much cash is on all those balance sheets that you might be able to capture, at least partially, their deposits?
I can't speculate a number, but it's unfathomable. We want to be careful not to step on our alliance partners, and we won't do that. I've got 25,000 PPP loans. I've got 100,000 referrals a quarter. It's just big numbers. We also have a lot of borrowers today that come into us directly. We've developed quite a significant viral marketing plan because of what we're doing. The concept of, at least in today's world, getting $300, $400, $500 million of deposits, that's currently within my imagination. That shouldn't be a big deal over a fairly short period of time.
Okay. That's helpful. I understand. I'm going to just switch gears a little bit toward the 7(a) market. As we know, the Federal Government temporarily suspended the 55 basis point guarantee fee and increased the guarantee to 90%. If I'm not mistaken, that expires next month. That's helped drive up the secondary market prices. I realize that the question I'm going to ask is difficult to answer. Given your experience, when we think about the 7(a) market next year, with the economy doing well, without those two catalysts, along with the potential for interest rates to climb, how do you see 7(a) pricing developing next year, and how do you see 7(a) volumes next year versus this year, which is going to be a phenomenal growth year for the economy?
Sure. I'll give you a fairly wide range, Mickey, which hopefully, probably won't help you that much. If you go back and you look at the history, it's a 110.5-112 type market. It depends upon whether you're doing the 10-year paper or the 25-year paper in the mix. Plus, from our standpoint, we look to enjoy the benefit of expanding our loan products. Those referrals, they don't come to us for 7(a) loans. They come to us for loans. Many of those clients would qualify for bank loans. With the lower cost of deposits, you can put that business on and make good money off of it.
I think it's important to note, we're still going to focus on, obviously, the attractive business that we've been in 7(a) and 504 and non-conforming, but great growth opportunity for us. I think the market next year, one thing that I don't think we need to be afraid of. Well, who knows? I'm not an economist, but people are talking on CNBC this morning about 5% GDP, 9%, big numbers. You put all this government spending and stimulus out there. You got the question of rates rising, which by the way, that's good for banks. That's one reason why you want to buy the out-of-favor bank, because the out-of-favor bank didn't really look good when rates were flat. Nobody wanted to buy banks, and people say banks are highly regulated.
I would like to point out that the OCC put out a bulletin just last week on SBA and small business lending, which we read that they want banks to do this profitably and have the right risk measures in it. It also indicates that they want financial institutions to provide funds to this important segment of the market.
Thanks for that, Barry. That's helpful. My last question, just sort of looking at next year versus 2019, which as you pointed out in your prepared remarks, was sort of the base year we can think about. How would you compare the time and resources it takes to underwrite a PPP loan versus your non-PPP loans, the ones you've done historically? How much unit volume do you think the company can now support with its current head count, but more employees working remotely compared to 2019?
It's a good question because PPP loans to assemble and fund, I would say it's probably 30%-50% of the labor. The back end, however, which is the credit memo, the committee, and the funding, because you got to take liens and do a lot of other stuff. It's not just the amount of labor, it's the fallout rate from a PPP loan, once you have it aggregated, is not very high. You'll have a greater fallout rate. When you talk about how we've improved our capacity to do more business, and that's why I go back to that 2019 adjusted NII to current dates, particularly in this construct that will enable us to grow more. These are all very powerful additives that put us in a position for the future that we want to have the best corporate structure to take advantage of it.
I'm going to tell you, I'll put it this way. Let's say the 25,000 units, I'll just cuff a number, and this is not a number that you should rely upon. Let's say it's equivalent to 5,000 units. I mean, the ability to do significantly more loans has been enhanced. These loans are bigger sizes as well. I mean, the average loan size of non-conforming is $5 million. The average loan size, I think, of a PPP was like $50,000. The average loan size of our 7(a) business is about $800,000. I'm not suggesting that we're going to do $5 billion of 7(a) loans, but you can see that with the advancements that we've made in technology, in management changes, we've grown the business significantly, and I believe in the right direction, and are well-positioned for growth in the future.
I appreciate your time, Barry. That's it for me this morning. Thank you for taking my questions.
Thank you, Mickey.
Your next question comes from the line of Pa ul Johnson from KBW.
Good morning, Barry. Thanks for taking my questions. Congrats on a good quarter and obviously being an important facilitator of a critical program for the U.S. economy. As you approach, I guess, the closing date or the proposed kind of closing date of the merger or the acquisition of the bank, do you expect to make any changes to your capital structure along the way in anticipation of the conversion?
No, I don't. I don't expect to see changes in the capital structure. I do not.
Okay. What about loan originations? Is it pretty much business as usual, or do you expect to make any kind of changes to, I don't know, the type of yields that you're putting into the book or the type of loans that you're underwriting? Any changes to your underwriting practices?
Yeah, obviously, we're a little bit more selective relative to credits coming to us that we think are pandemic or COVID problematic. Things like gyms and hair salons, for example, which we wouldn't have thought twice about, now we do. We're a little bit more selective in certain categories, and other categories we like a little bit more. I think it's still a very big diversification box with respect to SIC codes, industries, and geographies. Narrower with respect to the mix, no. I think we give pretty good guidance on what we think the 7(a) book will look like, the 504 book, the NCO book. No. I think it's a good question because once again, I want to repeat this. This is the same business that's going to be dropped into a different structure. We're going to add a few product lines to it.
We're going to be positioned in a different light. Newtek Bank and Trust and Newtek, the bank holding company, will be looked at entirely different by customers than Newtek, the BDC. Particularly with the dashboard.
Sure. Then switching over to the salary expense for the quarter, it's understandable that that's obviously higher quarter-over-quarter. I know you noted that you increased headcount by about 25% or so. Do you expect salary expense to be kind of running around these levels sort of up into the acquisition or do you expect them to moderate at all kind of post-PPP?
Could you repeat that, Paul? I'm sorry. I'm not sure I gathered that.
Sure. Yeah. I'm just asking about the salary expense. Do you expect-
Oh.
To be running higher salary or even just higher overall G&A kind of heading into the acquisition at all?
Yeah. I think you've already got it embedded. What you've seen through Q1 and Q2, I think it's already there.
Okay.
Yeah. I think it's important to note, Paul, we've been adding to staff for growth. We've added to the staff to do PPP. No, I don't see any major change. Frankly, I could tell you expenses that'll get reduced from being in the bank holding company and the bank structure than being in a BDC structure. A lot of these entities are going to wind up going into the banks. You don't need tax returns. You don't need independent SOC 1s. We've got this well calculated, so no, we don't see expenses going crazy in here.
Do you think that you would have to make any additional hires prior to closing for the bank?
Maybe one or two, but I think the hiring of Nick Young. I mentioned in the second addendum deck some of the in-house talent that we have that have 20 years, 30 years experience in the bank environment can fill some of these things in. Obviously, we're very well advised, we're very well schooled across the board from our advisory team. We know what we need to do, what we need to put in place. We're doing what we need to do to position ourselves. Obviously, a lot of that will also come out based upon our discussion with the regulators as we go forward. No, I think we've got good estimates out there of the business in whatever form we wind up in.
That makes sense. Thanks for that. Last thing, my question either for you or Nick, if you can answer this, but I realize you chose to retain income down at the control income or the control company level for this quarter. We haven't seen the filings yet. You would expect to see that be showing up, obviously, in slightly higher marks, maybe for the control investments. I see there is roughly like $8 million or so of unrealized depreciation in the affiliate investments this quarter. Is there anything in particular that was driving that depreciation?
Nick, can you answer that one?
Yeah, I think that was just when we took a look at some of the run rates on some of the portfolio companies, just making sure that the multiples are in line with the forecast. Nothing out of the usual.
Got you. Okay, thanks. That's all for me.
Thank you, Paul.
Your next question comes on the line of Scott Sullivan from Raymond James.
Good morning, congrats on a good quarter.
Thanks, Scott.
You're kind of breaking some interesting barriers in the fintech space here. The only one in theory to be serving the middle market business. Pro forma, how do you compare Newtek versus LendingClub, SoFi, Square, or even a Live Oak?
They're kind of interesting comparisons, Scott, in that LendingClub, SoFi, were non-bank lenders that wound up merging into or acquiring a bank. Live Oak, I believe, started off as a bank with a technology bent to it. They're all a little bit different. LendingClub and SoFi, consumer lenders. Live Oak is probably the closest thing to us relative to a fairly significant footprint in government-guaranteed loan programs, as well as only having one branch. Their expense ratios are entirely different than ours, which we're proud of ours versus theirs. I think that they're all very decent comparisons, particularly when the market looks at them and doesn't value them at multiples of tangible book because they all trade at two, three, four times tangible book, not too dissimilar from how we traded at a multiple to our BDC NAV.
At the end of the day, stocks trade based upon, it's the old adage we learned in school. It's future earnings stream. The reason why banks typically traded at low multiples of book was because they couldn't really grow the business much because they did very few things and in a competitive environment. By the way, no different from a BDC. The fact that we were different than every other BDC is what enabled us to get that stock price appreciation as people begun to become more comfortable with us and familiar with the model. Those that got in early when we made that transformation did well. What we're trying to do here is to educate people in as best way as we can with being transparent and give as much information without going too far ahead of ourselves.
I think those are decent comparisons for us because in all cases, those are organizations that felt that a banking structure and a banking environment reduces risk and improves their ability to grow and diversifies their funding sources.
Fantastic. Thank you. Don't want to put words in your mouth, but I believe I heard you say CapEx is not going to be materially higher. Can you speak to any development costs with the dashboard or any other technology enhancements you see before you?
Obviously, we've begun discussions. I should say we will be beginning discussions, I don't know if they've actually taken place yet, with the core platform provider to begin to integrate what they have into the dashboard. Obviously, the payroll software we've got, the insurance agency software we've got, the vault we've got, the NewTracker system we already have. We have the capability to project all of that other data that I talked about, the Visa, Mastercard. These are all pieces that we have. It's really a function of our internal development team putting that product together. We've actually got some time to do it before opening day, which we forecasted 6- 12 months out. We have some work to do, but we've always been a bootstrap company, and we've been able to develop real good technology without spending crazy dollars on it.
That's terrific. Thank you, and congratulations. Good luck.
Thank you, Scott.
Your next question comes from the line of Robert Dodd from Raymond James.
Hi, Gary. Barry. Sorry.
My bad. One of the slides, you said in 30 days, 45 days you'll give some preliminary guidance for the first quarter 2022 dividend. The footnote obviously says, presuming you're still a BDC. If things go according to your expected timescale, which I recognize is tricky, would you actually expect to still be a BDC in the first quarter? You've said it could take 6-12 months to get approval for the bank purchase, and would you leave the BDC election potentially, presuming it's approved, to the very end, or would you anticipate doing that earlier in the cycle?
Without getting into the precise timing of what transpires, I do think it's more likely than not, as a probability. I'm saying it could go either way, but more likely than not, we'll probably be paying a BDC dividend in the first quarter.
Understood. Thank you for that. On one of the questions, kind of follow- up to Paul's questions. The BDC baby bonds you have outstanding, to your point, they're quite expensive by a lot of certain competitive deposits. When would you anticipate potentially refinancing those out? Or do you currently expect that you're just going to roll those into the bank liability structure?
Thanks for the question, Robert. By the way, that's a great question from a transparency standpoint. My belief is that the covenants in those bonds are really leverage covenants. That theoretically, as long as we don't violate that leverage covenant on a consolidated basis, they can remain outstanding. One of the bonds is fully callable. The other one, I think, is callable after February with some kind of a May call provision for a 12-month window. I think that we will wind up working through that with bondholders, and we've got a lot of options on that. That isn't a concern. We've had conversations with several of our bank lenders.
We're going to need to make some adjustments on that here and there, but not a big major I'm not overly concerned about the baby bonds or where we're situated with some of our other lenders at this point in time.
I appreciate that. The covenants were exactly what I was getting at, so understood on that front. Just last one, if I can, follow- up to Mickey's question.
Please. Your questions are good. They actually help me.
Thank you. Most business deposits in the U.S., there's a lot of them, but they're not typically in time locked, CDs, et cetera. Would you anticipate that your deposit targeting, sourcing, and cost of funds, is that anticipated more be short-term callable deposits, or do you expect CDs to play a material role in that? If so, where are you going to get the CD source from? They're typically not going to be, I wouldn't think. Business deposits aren't typically locked up like that.
Sure. I think the answer really, Robert is a little bit of both. Once again, I go back to the dashboard, the relationship that we have with borrowers, and the ability to offer them more than just a rate. No, I see us with having developed both core retail deposits, and in some cases, which you've described, some of the other fintech lenders have tapped into, like Square, for example. I believe the entity they acquired was an industrial loan corp. I can't say for sure, but most ILCs are limited and they can't take demand deposits. Those have got to be retail-related and brokered, so to speak. I think that we'll have a mix of both, but I do believe we're going to be able to bring in with our reach core retail deposits as well as a full mixture of funding.
Got it. Thank you.
Thank you, Robert.
Your next question comes from the line of Rob Brock from Point Partners. Sorry.
Congrats on a great quarter. Congrats on your decision to change your corporate structure. I think it's going to create a lot of value for your investors. My question this morning for you, Barry, has to do with the operating businesses, like your cloud business and your payroll business. How might these change or benefit as part of a bank holding company?
I think that all of the portfolio companies are projected to be part of the Bank Holding Company. Merchant Solutions, payroll, insurance, Tech Solutions will be part of the Bank Holding Company. Obviously, we will be having discussions with the regulators. We feel pretty good at this point that what we have will fit into a Bank Holding Company or a Financial Holding Company structure. It's conceivable it may not, and we'll have to deal with that if that occurs.
We think that going to your financial institution and being able to have all of your organizational documents, your operating agreement, your secretary certificates, your leases, your insurance policies, employment agreements, all your core documents stored there, which is what we do today in our secure file vaults when we take in loans, or we take in data using the file vault through the other services or solutions that we have, is a great value add for a customer. That's where we see that fitting in. Remote work, remote computing, mobile computing, whether it's through a smartphone or a laptop today, really important. Businesses that are five to 50 employees, they can't afford a CTO or a CIO. Those entities really can't go to Azure or AWS. They need somebody that can help them, that'll pick up the phone and answer questions.
That's what we do in Managed Technology Solutions. It always hasn't been a bed of roses, but it's been pretty good lately, as you can see by the pickup. These tech businesses typically trade at really good multiples and derive cash flow and provide other forms of recurring income rather than spread income that you get from a bank on coupon versus deposit expense. We're pretty excited about putting these solutions together. We think we're going to get a lot of traction. We think that there's good reason to be doing this.
Great. Thanks, Barry. Good luck.
Thank you, Rob.
Your next question comes from the line of Arham Khan from Arham Khan and Partners.
Hi. Good morning. This is Khan. How are you doing?
Good morning, sir.
Hey. How's everything? Just wanted to start with some high-level questions for you. I wanted to ask you about diversification as we move out of COVID. We're still kind of in this area where we're vaccinated, but we're not fully protected. We're still learning. I wanted to know if there's opportunities that you're looking at now that you might not have looked at 12 months ago, that are starting to become attractive.
Is that from a lending perspective or a business perspective?
Yeah, from a lending perspective.
I would say we're cautious because of the Delta variant. Although speculatively, I think the Delta variant will come and go quickly because of the level of vaccination. It's still all over the news. This morning, Southwest, for example, reported that they've got a lot of cancellations on flights in near- terms, which is indicative of the fact that consumers are being concerned and changing some of their behavioral patterns. I just think that, no, we still have a bit of a caution flag for things like travel and entertainment and businesses of that nature. No, we're not. As a lender, if we get a coupon, we win. If the business goes bad, you get a haircut. We try to be cautious from a lending standpoint.
Okay. Just to follow- up on that, regarding geographic diversification, are there any regions that you're looking at? Anything that's shaken up over the last year that you're seeing maybe there's regions that you want to diversify into that you don't have a presence in?
Yeah.
Any demographic shifts?
Yeah. By the way, diversification has been a great asset to Newtek. I think we've got one state that's at 11%. Then everything else was below double digit. When you take the top four states, Texas, New York, Florida, and California, that probably represents about 65% of GDP, and we're probably half of that when you add up all those states for us. You really didn't want to have too much in New York City or too much in L.A. Who would have ever believed we were going to have a pandemic?
Some of the things we're saying or seeing is like, who would ever believe that would ever happen? It did, which is why diversification's really good. No, we're not looking to undiversify, we're not looking to concentrate in a Texas or a Florida where there's growth. We like diversification. We think that's the best way to manage a risk.
Okay. Got it. To follow- up on somebody else's question that I've actually spent some time on, not particularly because I'm interested into it, but because you just can't avoid it at this point, it's about the LendingClub and many other of these Fintech lending platforms, some of which are nothing more than simply just aggregators. Some of them do more, as you see, some of them are acquiring banks. I think they all tout different things. Some of them have predictive modeling, underwriting, different things like that. At the end of the day, what I believe they're really disrupting is just enabling some technology that certain banks in the past, a lot of them had not embraced. You're coming in from a BDC structure, but you're already Newtek, where you have technology-enabled infrastructure for your clients.
Where do you stand in incorporating that kind of technology? They are taking some market share away from certain banking institutions. They're doing that through what I believe is either coming down on the spreads between, for example, credit cards versus personal loans or just enabling technology. How do you come in and make sure that doesn't happen?
One could take the position that a consolidation loan from a LendingClub is a termed-out credit card that gives the borrower a benefit because they've got term, reduces their payment, and they're able to utilize technology to come to the same credit decision as they did in a credit card. That's not Newtek. We do any loan over $350,000, government and uninsured piece, we're doing a full underwriting, 20-25 page credit review. We use technology to expedite some of the processes that banks have used. For example, we don't need branches, and we don't need 200 or 2,000 commercial bankers because of our utilization of technology. However, people that can put credit memos together, lawyers in-house that know how to gather the documents and close a deal and make sure we get all available liens, closers, that's not something that we skimp on.
We think that we've actually got the technological solutions that not only our Bank could use, but other banks can use to be able to reduce losses. When you look at some of these other Fintechs, the credit review from a personal standpoint, it's really not much more different than a consumer loan. I guess my point being is, I don't know, once that activity gets sort of filled, where they go with it. They are taking advantage of that low-hanging fruit. We are too, or as well, but we do have a much more longer-term vision with respect to utilizing technology to acquire clients, to get 100,000 referrals, to be able to fill up a file vault securely so that the borrower can connect their lawyer, their internal controller, their tax return preparer.
Those are the things that improve a customer experience but don't cut on being able to underwrite and put a fully funded package together. That's a major difference between us and them at this point in time. We don't have a black box. There's no algorithm. It's basically five Cs of Credit, which can be converted into some of that, but it's still a full underwriting.
Mm-hmm. Okay. Got it. Okay, that goes to all my questions. Thank you very much. Best of luck to you, and congratulations on the recent announcements.
Thank you for your interest. I appreciate it. Operator, anyone?
Yes, sir. Your last question comes from the line of Mickey Schleien from Ladenburg.
Sure.
Barry, just a quick follow-up. Do you think the federal regulators are going to require Newtek to appoint a CFO to meet their regulatory requirements?
Yeah, we will most likely have a CFO at the bank level, for sure.
Do you have candidates inside the organization that you can think can take on that role?
I do. I will say that I think from our perspective, that the candidate or candidates need to have extensive experience dealing with bank regulation, compliance. I think the forms are the 1313 forms for making sure that all the ratios are intact. Yeah, we have a pretty good pool of applicants, internal and external to the company at this point in time to be ready, if that event does take place.
I understand. That's it. Thank you for the update.
Thank you.
There are no further questions at this time.
Well, I want to thank everyone for joining the call. Greatly appreciate the interest. I know this was a long one, but very worthwhile, and gave us a good opportunity to disseminate a lot of information under fair disclosure to all the investors and analysts out there. Thank you very much. Look forward to reporting the third quarter. Have a good day.
This does conclude today's conference call. Thank you for your participation. You may now disconnect.