Prepared remarks
Good day, and thank you for standing by. Welcome to the NewtekOne, Inc. Second Quarter 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, President and Chief Executive Officer, Barry Sloane.
Thank you, operator, and welcome, everyone, to the NewtekOne NASDAQ NEWT Second Quarter 2025 Financial Results Conference Call. My name is Barry Sloane, CEO and President of NewtekOne. Joining me here today on the call will be Frank DeMaria, Chief Financial Officer of NewtekOne; and Scott Price, the CFO of Newtek Bank National Association. I also want to introduce Bryce Rowe, who is not on the call, in charge of Investor Relations. Bryce joined the organization recently from the firm of B. Riley, where he represented us. Bryce, when he was there, he was the equity analyst for BDCs and banks, been very helpful and instrumental in shaping our presentation and deck to make it a little bit more digestible and understandable. I also want to give a couple of shout-outs to some additional new hires, Andrew Kaplan, our Chief Strategy Officer, joined us from Flagstar Bank, and has been incredibly instrumental in helping us with various developments for the future of our digital account opening and instant merchant account openings.
I also want to announce Vik Mahajan has joined us recently. Vik has had a long-term career as an M&A banker, having been our banker at Credit Suisse and Deutsche Bank. Vik is the Chief Investment Officer of the bank and has been working very closely with the bank President, Peter Downs, in buying and selling loans and particularly developing a process for moving non-performing loans off the books in the balance sheet. With that, I'd like to encourage everyone to follow along on today's presentation. Please go to newtekone.com, navigate to the Investor Relations section, where the PowerPoint is available. On Slide #2 of the presentation is our note regarding forward-looking statements. Please familiarize yourself with that note. On Slide #3, an important part of our discussion today is really looking and focusing on what is NewtekOne? What does it do? What's our mission statement and what's our purpose?
Well, it all starts with the customer. We provide business and financial solutions to a target market of over 33 million independent business owners in the U.S. Some participants refer to them as SMEs, SMBs or small and medium-sized enterprises. Recently, we acquired a federally insured depository. It's important we prefer not to be looked at just as a bank holding company and bank because as you go through this presentation, we really don't look like most of the bank holding companies and banks. We differ in various ways, in terms of how we approach the customer, and how we provide frictionless opportunities for clients, as well as the type of revenues and earnings that come through our system. We look forward to discussing that presentation with you here today. The importance of the SMB, SME, or independent business owner class in the United States cannot be overstated. According to the U.S. Chamber of Commerce, small businesses employ almost half of the American workforce.
We believe that this will continue to be a prominent part of employment opportunities in the U.S., especially as we move forward with artificial intelligence. SMBs represent 43% of U.S. GDP, and 99% of businesses in the United States identify themselves as small. Moreover, according to the SBA's data, over the last 5.5 years, NewtekOne has been one of the more active 7(a) lenders through its non-bank and bank subsidiary, supporting and stabilizing over 110,000 jobs. Our service indeed fulfills a public purpose and a public good. We're not just an SBA lender, as you will see throughout this presentation; we offer all types of loans to this demographic. It's important to note that an SBA 7(a) loan is one that isn't available under normal bank circumstances. There's a test called the credit elsewhere test that states these types of loans do not qualify for a normal bank loan. Therefore, we have greater losses and greater provisions, but net of those losses and provisions and expenses, we provide greater returns.
Comparatively, while some metrics may not present NewtekOne favorably alongside the rest of the banking industry, it's important to emphasize that NewtekOne is a financial holding company regulated by the Fed. We focus on using proprietary and patented technological solutions to acquire customers and serve them cost-effectively. Most bank holding companies possess minimal assets, while we are extremely active as a bank holding company, evidenced by Newtek Merchant Solutions, which generates about $17 million in pretax income and EBITDA. Our alternative loan program business, which includes loans made through joint ventures and various structures, has a balance sheet of approximately $450 million to $500 million. We provide a full menu of best-in-class on-demand solutions for our independent business owner clientele, without using traditional bankers, branches, brokers, or BDOs. Through this methodology, we have garnered 19,000 depository accounts since inception.
We execute loans digitally and remotely, handling our clients' ability to send and receive money, process payments, manage payroll and offer insurance. In essence, we are a technology-oriented financial holding company, operating a digital bank functioning exclusively through an online banking platform, deviating from traditional models seen in banks and bank holding companies. We firmly believe that the future of the banking industry will be significantly enhanced through technology and artificial intelligence, which we are embracing and utilizing. We perceive that many institutions you are familiar with will not resemble their current forms. From our standpoint, we already perform what they aspire to do. They want to acquire customers remotely and automate their business processes while leveraging AI. These are things we are already implementing as you will see in this presentation. Slide #4 focuses on Q2 financial and operational successes.
Firstly, we are maintaining our earnings per share guidance of $2.10 on the low end and $2.50 on the high end for the calendar year 2024. Additionally, we had 15% revenue growth in Q2 2025, with $70.2 million compared to $61 million in Q2 2024. Other operational and financial highlights include significant growth in business deposits. Business deposits typically come in on a less expensive basis and are more transactional. To attract business deposits, we believe that noninterest-bearing depository accounts are set to diminish over time. For instance, if you visit platforms like Coinbase and you own stable coins, you might earn 2% to 3% interest on your funds. We are pleased to have increased business deposits at the bank by $50 million sequentially, with most of the influx coming in the DDA account. The opportunities for this growth stem from our lending, merchant services, and payroll, all tied into an integrated solution.
Consequently, our cost of funds at the bank has declined significantly and is expected to continue decreasing. The best is yet to come. We experienced a 28 basis point reduction in our cost of funds, approximately reaching 3.71%. The net interest margin at the bank surged 56 basis points. We are pleased with the developments concerning our cost of funds, which is critical moving forward, as we are gaining deposits below the risk-free rate we've mentioned, which corresponds to the bill rate or NAV of a government-guaranteed money market fund. It's worth mentioning that losses continue to shrink in Newtek Small Business Finance. In recent quarters, we saw reductions in losses from $10.7 million to $4.9 million and subsequently to $3.7 million. Newtek Small Business Finance, a prior non-bank SBA lender, is in a rundown mode and is holding on at the holding company, no longer lending. We will dedicate considerable time to discuss our alternative loan program today, aiming to position it effectively so all stakeholders, including shareholders, can appreciate its value.
Importantly, our alternative loan program, having successfully completed three securitizations, is expanding, consists of high-quality loans, and significantly contributes to our earnings per share. We will also discuss our captured operating leverage, supporting above-average profitability. When you review our ROAAs, ROTCEs, and expense ratios, they are exceedingly favorable on a comparative basis. A final note from Q1 to Q2, an $18 million unrealized gain did cause some confusion among our investors. It's essential to clarify that upon selling government-guaranteed loans and transferring ALP loans into the securitization, we addressed that confusion. The government-guaranteed 7(a) loans were liquidated for cash, and the ALP loans were written down at full value to par for equity in the securitization. We make loans and sell them, whereas most banks hold their loans, something we believe distinguishes us from 95% of other banks.
We're excited about our current business model after 10 consecutive quarters of success. We anticipate extensive discussion regarding our ALP business through future slides to enhance your understanding of our operations. It's worth noting that the residual interest in the ALP's recent securitization in the 2025 deal is marked at a 14% yield, including a historical loss severity and frequency or charge-off rate of 3%. This consistent practice has been maintained through our three securitizations in 2022, 2024, and the latest in 2025. Moving forward to Slide #5, we are addressing our second quarter CEO highlights. For this earnings period, our basic and diluted EPS figures stand at $0.53 and $0.52, respectively. For the first half, our basic and diluted EPS reach $0.89 and $0.87, both above the midpoint of our guidance, which ranges from $0.78 to $0.92. We are sustaining our annual EPS guidance of $2.10 to $2.50.
The midpoint indicates an EPS growth rate of 17%, a benchmark not typically observed among most banks or bank holding companies. We discussed our efforts in core deposit growth, and we are seeing reduced headwinds from our SBA non-bank lender, Newtek Small Business Finance, highlighted by a first half '25 loss of $8.7 million, compared to a full calendar year loss of $28.7 million in 2024. Consequently, we clearly see improvements taking shape. Additionally, we have a slide to convey this information. It's also important to emphasize that NSBF's non-accruals decreased quarter-over-quarter. The prices for SBA 7(a) loans remained consistent with our fair value marks. Our unrealized gains on the 7(a) loans sold in the second quarter necessitated an unrealized loss transfer to eliminate the unrealized gain, producing a realized gain into cash. We have effectively sold around $22 million to $23 million of 504 loans at a pricing point of 104.75% with 40 basis points of servicing, which was also quite profitable.
Notably, we retain some government-guaranteed 7(a) loans on our books for profitable acquisition at a prime plus 3 or a 10.5% coupon. This dynamic positively influenced the NIM at the bank. The alternative loan program has performed exceptionally well. In June and July, both Deutsche Bank and Capital One have increased the sizes of their credit facilities, which we leverage for funding and warehousing ALP loans before securitizations. Deutsche Bank sized up from $120 million to $170 million while Capital One Bank increased from $60 million to $100 million. We are excited about our capacity to continue expanding this business. Profitability and operating leverage remain very promising. Our year-over-year efficiency ratio at the holding company saw improvement from 66.3% to 60.3%. When we consider our ROAAs and ROTCEs, they showcase exceptionally strong performance. Slide #6 features our annual forecasts.
Reflecting on our business model, as expressed in previous presentations, we address three primary challenges within the banking sector. Firstly, we acquire deposits below the risk-free rate due to the Newtek Advantage. We provide customers with analytics, transactional capabilities, and data, enabling them to send and receive money. We have integrated solutions between the bank deposit account and merchant account that handle chargebacks, refunds, batches, all facilitated through the Newtek Advantage. Furthermore, we allow for payroll to be conducted via the Newtek Advantage. By owning payroll and merchant services, alongside capabilities like ACH and wire transfers, we are positioning ourselves effectively for future solutions like stablecoins. We foresee considerable financial transactions occurring, especially for international dealings, and we will adapt accordingly. Banking institutions that fail to present a seamless opportunity for their customers to manage money transfers will struggle.
Therefore, it's imperative we deliver value to the customer. Furthermore, unlike other firms, we are entirely digital, devoid of branches or traditional bankers. We excel at client acquisition. By year-end, we estimate our loan book will encompass around 10,000 borrowers and $4.4 billion in servicing. At the bottom of Slide #6, you can view our forecasts for the remainder of the year. Our second quarter ROAA stands at 2.5%, and our ROTCE at 19.4%. These numbers are ambitious, based on our model. It bears repeating: making loans and selling them is our forte. We’ve done that for the past 20 years and will likely maintain that trajectory for another 20, yielding exceptional returns and risk-adjusted returns. Please refer to Slide #7 to review performance metrics—net income, diluted EPS, and pre-provision net revenue. The substantial growth in tangible book value per share has also been observed.
We are thrilled to report that we managed a 3.7% sequential increase quarter-over-quarter and a 21% year-over-year increase. This growth coincided with a healthy dividend offering, which provides an appealing opportunity for shareholders. Slide #10, an important part of our presentation, is indicative of the significant contributions from Bryce. Many investors that we interacted with sought clarity regarding asset breakdowns, assessing the different categories. This detail is crucial for evaluation purposes in understanding what resides on balance sheets and what is technically off-balance sheet on a non-GAAP basis. The many ALP loans in joint ventures or securitizations carry weight. Our ALP portfolio has historically seen charge-offs at 1%, and it is important to emphasize our standing as reliable lenders. We’ve maintained this standard for 20 years and regularly emerge favorable in terms of risk-reward.
We encompass approximately $1 billion in bank and over $2 billion in the holding company, managing a substantial operation that generates roughly $1.5 billion to $2 billion in loans annually. Thus, because we resale the government guaranteed portion, we often don't receive full acknowledgment of our activity. In essence, we are adept at selling loans, thereby creating securitizations through special purpose vehicles that are matched-funded. Slide #11 perhaps embodies one of the most significant slides in the deck, capturing a lesser understood facet of our business. ALP securitizations value residual interests at a 14% yield, which reflects a default frequency of 15%, severity of 20%, and a charge-off rate of 3%. We regularly mark these to market every quarter. To put it plainly, the spread income from the securitized ALP loans bears a weighted average coupon of 13.3% in our 2025 deal, while the notes carry an average yield of 6.6%.
After accounting for 100 basis points for servicing fees, this results in a 570 basis point spread. I pose a question to everyone on this call: if I presented a bank of our size and stature the prospect of obtaining a 570 basis points match-funded arrangement with no employee overhead following loan transfers to special purpose vehicles, wouldn't that be appealing? We have successfully executed this with $218 million in loans, $180 million to $185 million in bonds, structuring the securitization known as NALP 2025-1. We are committed to regularly executing ALP securitizations with loans on our balance sheet. If you were impressed by our recent work, prepare to be excited again, as we have approximately $138 million in ALP loans on our balance sheet and anticipate another securitization in the fourth quarter. Following the placement into special purpose vehicles, loans are written down, and the residual piece receives valuation based on the yields discussed, which are market-clearing yields.
This activity provides significant operating leverage while ensuring our ALP business maintains an average loan size of approximately $5 million, compared to the average loan size of $400,000 to $450,000 in the 7(a) business. Achieving about $1 billion in loans comprises approximately 200 units. We will likely manage 2,500 to 2,700 loan units this year; this is within our capabilities. Moreover, our vast pipeline, informed by our lending programs, spans 600 to 900 businesses daily, amounting to a database of $2.5 billion, enabling us to confidently reach our customer base. Slide #11 elaborates on the mechanics ensuring market understanding of asset flow through our income statement and balance sheet. Unrealized gains on securitized loans that appeared in Q1 were reversed when they transitioned to the securitization stage. This means that unrealized gains related to the residual book, of which roughly 87% of principal value transferred into rated debt instruments, was affected.
The 13% detail refers to the equity piece; servicing assets created are reflected as the 100 basis points mention. Furthermore, prepayment penalties feature prominently within these loans, maintaining them on the books and retaining high coupons, thus preventing premature repayment. The duration of these particular loans typically falls between 4 to 5 years, crucial information to factor into assessments of our ALP business, particularly regarding the insights on Slide #11. Notably, the net income within the securitization is priced approximately at a multiple of 5.5 times cash flow. Hence, I ask the participants on this call: would you rather cultivate assets and appraise them at 5.5 times cash flow in a business that thrives without the usual expenses once placed into securitization? We find our business operations to be highly favorable. Transitioning to Slide #12, we revisit credit quality.
We've covered this in previous presentations. The non-accrual increase in NSBF is slowing, with some quantified figures provided. Importantly, as a non-bank lender, we typically retain loans in default, liquidating them rather than selling them off. Now that we're engaged in this sector, and considering heightened sensitivity toward non-accruals, marked adjustments have occurred, with liquidations progressing toward cash transitions. We anticipate some activity soon which should validate our valuations while returning capital and adjusting our metrics to more typical ratios. Again, it’s essential to note that ALP loans are performing well, and a look into balances of on and off-balance sheet ALP accounts reveals a historic charge-off rate of 1% as of June 30, 2025. The data outlined in the chart here is significant while avoiding exaggeration of the NSBF portfolio, especially in light of past concerns.
Acknowledging the implications of the great financial crisis, which in my perspective, manifested between 2021 and 2023 for SBA lending due to amplified rates, we incurred considerable losses in that portfolio vintage. Moving to the next slide, #13, insights into the percentage of portfolio-aged loans demonstrate no presence of loans aged less than 24 months. We’ve observed a seasoned portfolio; we believe the major challenges in the NSBF portfolio are behind us. It is paying down quickly, with around $200 million worth of capital in NSBF expected to free up as these securities reduce, accompanied by cleanup calls—an advantageous avenue for debt payments, stock buybacks, and dividends—things shareholders value immensely. Consequently, the NSBF portfolio remains on track for quick payoffs, evidenced by a paydown of approximately $102 million or roughly 30% during the past calendar year. We believe the peak of non-accrual inflows in the NSBF occurred in Q2 2024 and continues to decelerate.
We anticipate that NSBF will provide significant opportunities moving ahead. Many of the remaining loans in NSBF are effectively secured in 3 securitizations—the 2021, 2022, and 2023 deals. Therefore, prepayments and loan liquidations are retained for bondholders. Once these bonds reach their cleanup call or pay off, all cash flow and equity will become available for a range of beneficial uses. I'd now like to pass the baton to Frank DeMaria for Slide #14 and beyond.
Thanks, Barry. Turning to Slide 15. We provide some context around the held-for-investment loan portfolio at the bank. We account for the bank's held-for-investment portfolio on a cost basis compared to the fair value accounting that's applied to our other loan portfolios. 61% of the bank's held-for-investment portfolio consists of unguaranteed SBA 7(a) loans, which were built from the first half of '23 after the bank started originating 7(a) loans. Prior to that, the 7(a) loans were issued by our non-bank lender. The bank has been establishing an allowance for credit losses against that portfolio, of which more than 90% pertains to the unguaranteed 7(a) book carrying an allowance equating to 8.3% of unguaranteed 7(a) balances. 70% of the 7(a) allowance is collectively assessed, with less than 5% of the total ACL related to qualitative adjustments, and 30% of the ACL is maintained against individually assessed loans.
While our ACL continues to build, the rate of increase is lower than in previous quarters, resulting in a sequential decline in the provision, which continues to cover net charge-offs. Moving to deposits on Slide 16. Barry talked about the success we're having on the business deposit front, which was up $50 million sequentially and now represents almost 30% of deposits. We saw another meaningful move lower in our cost of deposits and believe the cost could continue to decline as we execute on business deposit growth. Our loan-to-deposit ratio is north of 90%, and nearly 80% of our deposits are insured. We're using these deposits to fund loan growth, especially as the bank's bond portfolio is only $14 million on a $1.3 billion bank balance sheet. On Slide 17, we highlight NewtekOne's strong pre-provision earnings profile, which is a function of the wider lending spreads we capture, our healthy levels of fee income fueled by selling, securitizing, and servicing loans, alongside our broker-less branch with a scalable operating infrastructure.
As we introduce more securitizations and scale the ALP business, our impressive pre-provision earnings should further enhance. Lastly, it is worth reiterating on this slide, the year-over-year revenue growth is 15%.
Slide 18 supports the scalable operating infrastructure comments I just made. The balance sheet climbed 37% over the last year, while operating expenses increased by just 4%, and the efficiency ratio has improved year-over-year. We believe we have the infrastructure to manage a much larger balance sheet. And with that, I'll return it to Barry for Slide 19. Thank you for your excellent queries. On Slide 18, regarding the average net premium from SBA 7(a) loans, we averaged 110.91 for the second quarter of 2025. It’s crucial to note that the SBA altered some regulations; we anticipate the market premium for government-guaranteed 7(a) loans in the second half will stand around 110. This is crucial information included in our earnings guidance. The notable differential in price hinges on a 55 basis point fee; some loans in the pipeline may be offered without this fee. The SBA's re-implementation of this helps balance its loss reserves, which is sensible.
I also want to mention ALP loan originations for the second half of 2025 are projected at around $250 million, which resides within our midpoint guidance of $210 million to $250 million. On Slide #19, we present what you may refer to as an adjusted net margin—a non-GAAP analysis incorporating all our loans, both on and off our balance sheet—to provide a picture of our adjusted net interest margin. We project this will continue to grow as our ALP business is on a solid growth trajectory and performing remarkably well for our organization. With that, operator, we're now open to Q&A.
Questions and answers
Our first question will come from Tim Switzer from KBW.
The first question I have is on the deposit trends with the growth in the commercial deposits and lower deposit costs overall. Can you talk about some of the drivers there? What helped bring in, I think it was that $50 million of growth on the commercial deposit side? And then what are your expectations going forward for that initiative and then bringing down deposit costs going forward?
Thank you, Tim. It's important for our organization that our primary business account offers 1% yields, while our business savings stands at 3.5%, and it is entirely a 0-fee opportunity. Through the Newtek Advantage, we provide significant benefits through integrated merchant services and payroll solutions. The dependency on a standalone depository account, not linked to solutions for businesses to send and receive money, is becoming impeded. Success in our lending sector is tied to our borrowers making payments from their Newtek Bank accounts. To be forthright, we need to enhance the utilization of our accounts; the total business account portfolio currently includes about 4,000 accounts. We feel the level of utilization is below what we desire, but we are committed to improvement. Moreover, we are integrating credit lines into our offerings tied to business accounts to deliver comprehensive solutions for our SME and independent business owner clientele–that's our priority.
And then I apologize if I'm missing this somewhere, but what were your total charge-offs this quarter for your held-for-investment portfolio?
Frank, could you assist with that?
Yes, it was $5 million, Tim.
Okay. So pretty flat with last quarter?
Yes, $5.1 million to be exact.
Okay. So exactly the same as last quarter. And then the other question I had is you guys did a really good job of last quarter, helping us kind of break down the various drivers that went through that net fair value line item. And obviously, it was a negative $11.8 million this quarter. And I know that the securitized loans had an impact on that and the reversal from the held-for-sale SBA loans last quarter. Can you give us the different pieces of that and particularly what the gain was on ALP loans this quarter?
Frank, I'm going to let you handle that with the numbers and specifics.
Yes, that's fine. So Tim, the previous unrealized gains we discussed earlier on the ALP loans were $35.1 million. That was reversed, which constitutes the primary component, as you mentioned, of that $11.7 million. By 'reverse,' Barry, you mean written down to zero, correct?
Correct. Written down to the par value.
This was written down to par value prior to being sold into the securitization, ultimately resulting in a net gain of about $32.4 million on the value of the equity interest. For the quarter, the gains from ALP loans were approximately $6.3 million, contributing to offsetting that net loss, alongside unguaranteed 7(a) loans held on the books before sale.
And Tim, also, I think if you go to Slide #12 and compare the numbers, you will see a significant degree of stability. Notably, I wish to emphasize that a considerable proportion of the bank's held-for-investment portfolio is mature.
Barry, I think we lost you there. You may have to repeat that.
Pardon me, please stand by. Mr. Sloane, are you able to hear us? Pardon me, please stand by. Your conference will resume momentarily.
Barry, I think you are back.
Operator, are we reconnected?
Yes. Are you able to hear us again?
I hear you. Yes. I wanted to point out, on Slide #12, there is ample stability when you assess the NPLs across on and off balance sheet, excluding NSBF. The exclusion of NSBF is due to its continued rundown as a difficult portfolio. That said, the provision at the bank for Q2 was lower than in Q1, resulting from a lack of non-accrual rollovers into the books. We expect this will rebound, and we are reserved for it. The reserves are nearly equivalent to capital, as a loss directly offsets the reserve. Therefore, we are optimistic about the business and not overly concerned about credit aspects due to the reserves.
Our next question will come from Crispin Love from Piper Sandler.
I just want to follow up on the net gain in residual and securitizations line. So $32 million in the quarter. I'm just curious on the go forward there. Will those only occur when you do ALP securitizations? Just curious what's changed there and what should we expect moving forward?
Yes. Go ahead, Frank, you can respond.
Yes, exactly. What's changed is that this is the first time we’ve done this while owning 100% of the residual. Previously, we were executing these through 50-50 joint ventures, which is why prior residual value was captured in the joint venture and non-controlled interest line. We plan to employ these types of structures in the future, but this illustrates the distinction between the previous ALP securitizations.
And regarding the SBA rule changes effective June 1, you indicated the margin and gain on sale margin impacts. However, I'm curious about potential volume changes in the 7(a) product. What are your overall thoughts on these changes, and have you noticed any significant differences in recent months since implementation?
Crispin, it's an astute question. I believe that for us, the impact has been minimal. The non-bank lenders in this arena are facing significant challenges due to staffing and compliance issues regarding the new changes. In contrast, we're proud to say we are well-prepared. We are maintaining our guidance aiming for $1 billion in 7(a) loans for the year. The 110 in our estimates may vary between 10-year and 25-year loans, impacting the gain. As of now, we’re staying the course. It's harder to locate sound credits, and tariffs have indeed affected the borrowing appetite of many customers. However, we have seen an upswing in optimism as tariff situations improve, pointing towards a positive second half of the year.
Our next question will come from Marc Silk from Silk Investment Advisors. Please ensure that your line is not muted.
For question number one, as a shareholder, I'm perplexed that your stock trades at a P/E ratio around 5 or 6, while the industry trades higher. Can you explain why you think that is?
I appreciate the concern—our narrative is indeed getting clearer. We've undertaken significant changes within our operations, transitioning from a traditional brick-and-mortar bank model to opening 19,000 depository accounts, servicing 2,500 unique borrowers digitally. Our focus on embracing AI for data handling over manual processing may make us appear somewhat different from typical banks. Moreover, while several institutions talk about engaging in innovative business practices, we have executed these strategies since 2019. I believe it takes time for market participants to comprehend our unique model, to examine our accounting, and ascertain our performance metrics on a quarterly basis. During a recent conference, I encountered an exceptionally talented attendee wondering if we wouldn't generate any loans next quarter—of course, like any business, a pause in activity would result in a loss. We create loans and sell them—a model we've sustained for two decades, yielding attractive returns even in a loss-incurring environment. That's part of the challenge—recognizing the difference between our identity and traditional banks is key. We’ll continue to generate profits, and by presenting this effectively, we hope to attract more investors to join us along the way.
I’m trying to understand your business acquisition mechanisms—are you creating opportunities based on payroll services and payment relationships for new bank accounts? Can you give a sense of the differentiation within this mesh of business?
In the near future, you will see us announcing and launching technology that facilitates obtaining an approved merchant account alongside opening a bank account—essentially a one-application process yielding dual access. Importantly, we aim to keep our services fee-free to attract customers, subsequently guiding them to the Newtek Advantage. A bank account becomes pivotal for processing electronic payments; thus, our aim is to incentivize utilization. The integration is crucial for optimal functionality; as a note, clients will always be informed and will need to engage with us to activate accounts. We aim to demonstrate that we offer not only competitive rates but superior analytics that align with business needs. Our strategy embodies tying payroll and lending seamlessly into our offerings to provide comprehensive solutions—similar to conglomerate models adopted by companies like Amazon.
I am showing no further questions from our phone lines. I'd now like to turn the conference back over to Barry Sloane for any closing remarks.
Thank you very much, everybody, for attending. I appreciate it. We look forward to reporting next quarter while continuing to generate the types of earnings and returns you have now grown accustomed to. Once again, I would like to immensely thank my senior management team. While I named a few people, I can't acknowledge everyone—each plays a vital role in supporting our stakeholders, shareholders, customers, and employees. Thank you very much. Have a fantastic day.
Thank you. This concludes today's conference call. We appreciate your participation. You may now disconnect. Have a great day.