Michael Perito: Yes. No. I mean, it is — I guess so — I guess, maybe that’s a opens up a broader question then. It’s just I mean, do you guys as it stands today, do you feel you need to add some type of capital at the bank sub in the fourth quarter potentially given your rates or?
Barry Sloane: No, nothing at the bank. Nothing. The holding company listen, the other thing too is if money is available to you at a fair price, you can make money off via take it. So, I believe, frank, with you, I’m less enthusiastic about selling shares. There would be a debt, although the debt markets haven’t been really that in the last month or so. So, it’s a really hard thing to do this, which I’m sure you could appreciate. Like, I don’t know, or is bank holding company debt going to be able are you going to be able to do it at 7.5 or 9.5 in the fourth quarter? I have no idea. It’s hard to tell. And I’m not sure we need it. So, as we do this, what we try to do is put our best guesses out there and we always want to never overpromise and underdeliver. So, obviously, that’s a little bit of a drag, but I wouldn’t say that that’s something that you can absolutely count on at this point.
Michael Perito: Okay. So, from here, you’re right. It’s a conservative assumption that you might add some capital at the holding company level at some point, but that might not happen?
Barry Sloane: Might not happen. And clearly, I don’t need it at the bank. And the only capital I needed the holding company would be to do the non-conforming loans because there’s nothing else that needs or eats capital.
Michael Perito: Okay. Perfect. Thank you, Barry. And then just two more. Just on the I believe in past conversations, Barry, you’ve talked a little bit about, you know, the credit on the, the NSBF portfolio, particularly some of the vintages that happened during the pandemic, you know, based on where the kind of gain gains and losses were on the felines around fair value. It didn’t really seem like there was any credit deterioration, but I was wondering if you could just spend a minute talking about any delinquency trends in the SBF book that that you guys are seeing? I mean, it’s kind of a — you drafted a little bit in, I think, in the prior question, but just wondering if you can go kind of a layer deeper on that for us?
Barry Sloane: Sure. And I think the NSBF portfolio, we have at fair value. So, the NSBF portfolio does not have what I would call, you know, a traditional bank loan loss reserve. I believe we’ve got that portfolio valued at a from here and a good chunk of it is seasoned. 20% cumulative, default rate. That’s going forward and approximately 45% — so I mean, we’ve got that portfolio fairly conservatively valued. Nick, was the market clearing yield on that like, 8.4% net of those charge offs?
Nicholas Leger: Yes. That’s correct, 8 4%.
Barry Sloane: Okay. So, net of charging off historically over time, that amount of charge off, and I would say 40% of the portfolio is three to four years old. We think that portfolio is fairly conservatively valued. So, now if you were to ask me, well what do you think of the environment going forward? The one thing I can almost bank on, it will not be as good as the one we’re coming at, I which means I’m probably wrong, but from a Goldilocks scenario, you couldn’t have had a better economic climate, particularly when our customer pays for PPP and EIDL loan, see credits, of which, by the way, we’re still working that with customers. So, I just think that it’s going to get a little worse. The other thing too, it’s just a season portfolio.
it’s only to look uglier and uglier as time goes on. And I want to brace you and other people for that. I mean, it doesn’t get any better because you’re not anything new to it, right? It’s only going to get worse from a percentage standpoint. I also want to point out, when I look at like non accruals, right? And I think this is really important for the 7(a) business. The only thing that really matters is fair value. The original cost is irrelevant. Now why do I say it’s irrelevant? We already took the charge. Similarly, we already got the gain on sale and you have a nice high coupon. So, I let people say, oh my god. It’s 13%. Well, first of all, the other thing is we’ve gone through COVID where you couldn’t foreclose on stuff, and we chase personal guarantees.
So, unlike a bank that when the thing goes bad, they just bang it out. This is a non-bank asset, and it’s driven at a non-bank level. So, it’s going to look very different than in a bank environment. I just want to point that out. And the other thing is we look at losses over the life of the portfolio, not in any given year. So, like we’re very comfortable with CECL, which is sort of similar, but not exactly. But I think I think these things you’re pointing out are very important differentiators between NewtekOne and most of the organizations that are in this particular structure.
Michael Perito: Got it. Very helpful. And then sorry to ask so many, but just a couple quick ones. Just on the, the loan portfolio buckets. maybe this is a question for Nick or Scott, but just can you remind us, I know the NSPF, the answer is no, but as we think about go-forward provisioning costs. Do all the other buckets, the loans that amortized cost, the conventional loans, does everything kind of flow through a CECL provision other than the SPF bucket? I apologize, kind of a basic question. I just want to make sure I have it right?
Barry Sloane: Scott, I’ll let you take that one.
