Barry Sloane: The way to think about that at this point is those returns are based upon income that’s generated at the bank, the fee income and servicing income going forward as well as the equity in the JV. So the equity in the JV would be a subset of the total amount of income that’s generated from the activity. Important to note that we really get a lot of leverage out of our intake. So we take all those referrals, and some of those referrals now go into non-conforming. Some going to 504. Some come to 7(a). And they get dispersed based upon borrower need investment for the customer, and the fee income would go into the bank. The servicing income would go into the bank, and that starts to pick up because you start to put 100 basis points of income on, and you do that going forward.
That kind of compounds and ands on each other creates a nice growing stream of income. So as you and others, Paul, we appreciate you writing on us as a bank. Obviously, you are a BDC coverage, so we appreciate that. But you’ll start to see the stuff starts to ramp going forward, particularly when you look at, for example, the CECL. You do a loan in Q3 and Q4, you’ve got a huge loan loss reserve. And you haven’t got the coupon for a couple of months, right? So because you’re not valuing in fair value, you’re taking the hit, and that starts to flow through in the following year when you’ve got a really nice high coupon versus your cost of funds and your margin starts to pick up. So this is new accounting. It’s new modeling. And we look forward to questions like you’ve asked today because it really will shine a light on what we’re trying to do going forward and how this business model is going to be very advantageous to our shareholders.
Paul Johnson: Got it. Okay. Yes. So I understand it’s — obviously you were talking about 20%, 30%. We’re looking at the bigger picture of what you’re generating off of those portfolios for the business.
Barry Sloane: Well, thank god today, everything consolidates. So we don’t have to deal with portfolio companies. Everyone is going to be able to look and have full transparency into how all these businesses are doing, and they’re going to be segmented in the Ks and the Qs. And you guys are going to be able to model the business and have a better understanding of the full value creation far more easily using consolidated accounting and the right segment reporting than you historically have been able to do as a BDC. Not that the BDC is bad, but all these businesses were based upon fair value. And we reported that way, and it worked well. But now we could take advantage of lower cost of funding, diversified liabilities. We can diversify the loans that we make because now we can also add higher quality loans, which to the book will minimize on a total basis and types of loan losses.
But at the end of the day, we make money on both. We’ll make money on a tight margin that has 15 basis points of charge-off a year, which is what most banks do. But most banks can’t grow their business because that’s their whole portfolio. They’re locked, we’re making residential loans, car loans. They really haven’t developed the expertise that we have in these greater risk/reward type opportunity. So that’s kind of where we look to hang our hat and make our mark. And then down the road, we’re more effective in the deposit category, which we hope to outperform what we stated that we’re going to do there. That will also pick up. So we have real good aspirations with respect to really benefiting from lower cost deposits with all the bundled solutions that we have coming out of the Advantage, diversifying our lending book to have A credits as well as less than A credit in the SBA business.
So I think we’re well set up for the future.
