Good day, ladies and gentlemen, and welcome to the Newtek Business Services Second Quarter 2013 earnings call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference is being recorded. I will now turn the call over to your host, Barry Sloane, CEO and Chairman. Please go ahead.

Thank you very much operator and welcome to our second quarter 2013 financial results conference call. Joining me on the call today and I am Barry Sloane, President and CEO of Newtek Business Services, stock symbol NEWT, is Jenny Eddelson, our Chief Accounting Officer. And I’d like to ask Jenny to help read the safe harbor statement.

The statements in this slide presentation including statements regarding anticipated future financial performance, Newtek's beliefs, expectorations, intentions or strategies for the future maybe forward-looking statements under the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the plans, intentions and expectations reflected in or suggested by the forward-looking statements. Such risks and uncertainties include among others things, intensified competition, operating problems and their impacts on revenues and profit margins, anticipated future business strategies and financial performance, anticipated future number of customers, business prospects, legislative developments, and similar matters. Risk factors, cautionary statements and other conditions, which could cause Newtek's actual results to differ from management's current expectations, are contained in Newtek's filings with the Securities and Exchange Commission and available through www.sec.gov.

Thank you, Jenny. I’d like to call everyone’s attention to the PowerPoint presentation, which can be found on our website at thesba.com in the Investor Relations section, and obviously the audio version of this call to be archived on this site as well as long as the PowerPoint presentation but you can follow along with us by turning to page three of that presentation. Looking at the Q2 2013 financial highlights, we’re happy to report that 2013 diluted earnings per share increased by 66% to $0.05 for the quarter. We do anticipate achieving at least 20% growth in diluted EPS for the full year of 2013. We’re real happy with where our financial results came in. We believe it’s a function of being in the three right key markets; one, Small Business Lending; two, Electronic Payment Processing; and three, offering Managed Technology Solutions for small and medium size businesses, all across United States. In addition, we obviously have a quality management team, and these are all significant growth segments in the market today. In the Small Business Finance segment, our results were driven by the fact that we funded approximately 43 million loans in the second quarter, a 103.7% increase over Q2 2012, and the company is on track to fund approximately $175 million of SBA 7(a) loans in the full year of 2013. In the Electronic Payment Processing segment, our pretax income increased by nearly 30%, and revenues were increased by 10% for the quarter back to double digits that we’re real happy with. We expect to process about $4.5 billion of annualized electronic payment processing transactions on run rate by the end of this year. In our Managed Technology Solutions segment, Q2 2013 revenue increased by approximately 1% to 4.6 million, now as a sequential increase in both…

Sure, thank you Barry. To summarize our consolidated results for the quarter operating revenue was $37 million, an increase of 14.5% over the second quarter of 2012; consolidated pretax income was $2.9 for the quarter, a 48% increase over the year ago period. And net income attributable to new tax was 1.8 million a 48% improvement and we reported EPS of $0.05 per share, a 67% increase over the second quarter of 2012. Please turn to slide 25 for a summary of the second quarter 2013 segment results compared to the second quarter of 2012. In the electronic payment processing segment revenue grew 10% to $23.4 million, the overall increase in revenue between years was due to growth in processing volumes which on average increased by 8% on merchants, partially offset by lower average pricing between years. Pretax income for the segment increased by 28% to $2.5 million for the quarter, principally due to the margin dollar increase of $292,000 and a reduction in salaries and benefits and depreciation and amortization between the years. In the small business finance segment, revenue grew by 40% to $8.4 million in the second quarter of 2013 and pretax income increased by 37% to $2 million for the quarter. The primary contributor to the increase in total revenue for the segment was premium income which more than doubled for the quarter to $4.9 million, due to an increase in the total amount of loans originated and sold. The average sale price on guarantee loan sales was 12.5 with 1% servicing and we funded $42.8 in FDA loans during the quarter doubling our volume in loans funded from the $21 million funded during the second quarter of 2012. Total servicing income decreased by $412,000 period-over-period. External servicing portfolio income decreased by 39% which was partially…

Operator we'd like to take some questions now.

(Operator Instructions). Our first question comes from Matthew Paul with Sidoti & Company. Your line is open. Matthew Paul - Sidoti & Company: In regards to the Technology segment, how much if possible can you attribute to the cross marketing, cross selling strategy been employing. In other words how many I guess customers that are coming through leads from the finance segment are you able to sell some of your technology solutions to?

I think that in looking at Managed Technology Solutions being the benefit of cross selling and cross marketing, only a limited amount comes from the lending segment at this point and I want to explain that. Our lending customer base is the smallest customer base, probably if you take our own serving and serving for other it's probably 1,400 or 1,500 client currently; however, many of those clients we are having conversation with from a serving perspective how you doing, how is the business, and we’re setting up calls with those business owners and our technology growth and we recently done some nice transactions and opportunities in that segment. From a unit perspective, the bigger portion of cross selling for Managed Technology Solutions really comes from electronic payment processing space and we think that there is prospectively a myriad of cross selling opportunities when you talk about eCommerce and people using payment gateways, hosting solutions, point of sales terminals, and have those solutions hosted in the cloud. So from a peer customer count, more cross selling comes from probably the Payment Processing segment but we recently had a client that was a lending client of ours, move all their servers to us, represented approximately $12,000 a month of recurring revenue and we think we’re going to get more and more of that. cloud is a very underutilized product in the small and medium size independent business owner space and frankly we can save most business owners a significant amount of money by moving their products into our cloud environment, getting their servers out of the closet, getting their towers from under their desk and being able to service their hardware and software remotely 27x7 in a paper what you use environment.

Our next question comes from Igor Novgorodtsev of Lares Capital LLC. Your line is open.

Hello Barry, thank you for taking my question. Well first of all great quarter and I’m sure a lot of shareholders today were happy, but I would like to ask a couple of sort of more detailed questions. First of all, do you see any threat to Electronic Processes Services segment from a startup such as Square and Intuit has a solution where you can use your iPad or an iPhone to run the payment? Do you think that in a couple of years you maybe in the situation based given there is no need for a middle man such as Newtek and everyone who has a smartphone will be able to directly run the payment via the credit card or as a direct payment?

I have looked at that, studied it, and run my hands over it for the last several years and at this point I will be honest with you I’ve come to the conclusion I don’t have any concerns over that, and my reason is for this, number one, Square is really focusing at the low end of the market, small payments mobile users not big users and that’s not really the bulk of the payment processing space. I think that there will always be a need for the intermediaries like ourselves that know how to deal with small business clients. As a matter of fact, America Express just went the other way and introduced their AMEX One Point product which is a similar model to what a MasterCard do where historically you couldn’t get residual off of AMEX, they’re embracing entities like ours to break clients to them to actually earn residuals and what they recognize is, at the medium size business owner needs an intermediary to A, help them get setup, have the right technology, have the right security and manage the risk, because they’re not positioned to do that, that’s just not what they do and importantly service their customers' needs on the backend. So I don’t have any concerns over the giants that are remediating us. Our competition will be the Heartland Payment Systems, the (inaudible), the intermediaries that are super ISOs and processors like us and we just think we’re just better positioned because of obviously we’ve got companies that can do technological aspect as well as do the payments aspect and products becoming more and more the technological solution.

Okay great and if I may, another hopefully short question, there is going to be a top budget negotiations coming up in Congress and I know especially in the house, SBA program does not have a lot of fans, especially on the republican side, do you see any threat coming out of Congress in the fall, threat being program being curtailed or changed in some way?

I think that when you talk about the SBA, obviously we are focused on SBA 7(a) so we are not focused on 504, disaster loans, SBI fees or other areas. The 7(a) program has been around for 53 years, the premiums that the treasury takes in versus the loss rates on 7(a) have a zero budget effect, so the SBA 7(a) program is not in the budget it’s one of the few government programs that actually does well and returns money to the treasury historically. And the other interesting thing of that obviously the 7(a) programs small business is clearly a republican as well as a democratic issue, it’s probably one of the few areas where there is positive by partisan support. I would say yes, the program typically is more of a democratic winning program than a republican program but there are some very strong sponsors of the SBA 7(a) program from the republican side. So in the past I had probably more concerns about the SBA program in general but unlike Fannie Mae Freddie Mac or other programs that have actually cost the government historically overtime the 7(a) program isn’t even in the budget.

Our next question comes from Harold Elish with UBS. Your line is open.

Barry with respect to the joint ventures you are doing on the processing side with Valley National and other things you have been announcing recently, where does Newtek stand in terms of its back office capacity to be able to handle that? is there a level at which if you begin to ramp that up more, there is going to be a corresponding increase in cost in terms of investment in the back office?

The Valley National transaction which went on at the very end of June, we moved load servicing assets over from them. We recently took on an additional 11,000 square feet in our Hampstead operation. that real estate is already in our budget and there is plenty of capacity there. We have been adding additional servicing talent and recovery staff to the servicing group really on a variable basis. So it’s a very easy manageable product for us. In this particular space Harold there is 14 7(a) non-meg learning licenses out there, there is probably only two or three of them that are actually active. So the amount of talent in the market that exists in the space is plentiful and also we have been FDIC contractors. so we have really been able to scale the business up on an (inaudible) basis so we are pretty excited about that. So from a real estate standpoint, human resource standpoint we are very comfortable with our ability to scale up on a variable basis so, so far so good…

And the pricing is such that as it comes on, the variability, obviously it continues to be a profitable addition every time you bolt something on?

For sure.

Our next question comes from Peter Lee with Plough Penny. Your line is open.

Guys your growth expectations for this year are very good relative to the market. Can you just recap the specific drivers of this growth that you expect and what has to happen and how are you going to make it happen on the non-lending businesses in order to sustain this kind of growth heading into 2014 and then moving forward?

So the consolidated growth for 2013 is 13%. So you are okay with the lending, you just want to address the payment processing and the managed tech solutions?

Yes.

In the payment side, we've added a group of Lewisville that's focusing on independent selling organizations known as ISOs and Randy Sagar heads that group up and his team of William Berry and Mike Valerio underneath them are dealing with agent bank relationships and independent agents. When this group formerly had worked at entities like NPC with syndicated Bank of America which syndicates (inaudible). At times in the market they were bringing 7,000 clients a month. Obviously that's far greater than where we are in the business. If we were able to add a fraction of that, we're probably bringing in right now on the add somewhere between 350 to 400 a month. So as this group starts to get its feet underneath them, which is about now because it took a while to get them situated, get out of the market, get the contracts done and obviously we had significant change over in our management staff and we are walking with Eric Turille joining and now Tom Harkins joining Eric, we anticipate picking up some growth in this space in the second half of the year. In addition to that we believe we are better positioned technologically by owning our own gateway, by being a hosting company and being able to offer our products in the cloud through the Newtek advantage product. So that’s where we see our growth and we think that we are going to wind up being a winner in a market that does churn and consolidate in the payment processing space. Also for the most part, the horse of our business is the NewTracker system. So we are bringing in the independent Asian market which is lower margin, just to add customer account and grow the business but the NewTracker model that we’ve historically relied upon has got pretty big margins. So we're excited about the opportunity in this particular space. In the Managed Technology Solution space, huge trend in cloud-computing and we've got to get the message out and let people know that we have these solutions and the marketing message to 27 million independent business owners is pretty simple. Cut your ID cost; be in a more secure environment. We actually own the trademark for things like insured webhosting. We have a surveillance product that we may release to the market where people would be able to have their website surveyed and protected for a fairly low price point on a monthly basis. So I feel extremely confident and good about where we are in these other two spaces and as we position ourselves in the market as a small business authority; we are going to get that message out. Our national TV campaign is also constructive. We may have some of the commercials focus on these particular areas. So I feel pretty good about our growth rates in these segments.

(Operator Instructions) Our next question comes from Frank DiLorenzo with Singular Research, your line is open.

Being that you’ve had a very strong first half and it looks as though there was good momentum going into the second half of 2013, I was wondering why you decided to leave the guidance unchanged for the year. Thanks.

Frank that's a good question. Look I think from our perspective, we are building our business, we are hiring important staff, for example, we recently hired Tom Harkins, hired Head of Human Resources, hired Petrosky; so we are adding a lot of staff to be able to fuel the growth. So we are very comfortable with the $0.18 number and that’s why we left the guidance there. We are hopeful that we'll continue to hit our strides. Typically we have stated that the second half of the year is typically stronger than the first half of the year. At this point in time we have made an adjustment. We look at this all the time. And maybe we will need to take a look at this somewhere in the third quarter, to take a closer look, but at this point in time we are going to stick to the $0.18 which is 20% growth in EPS, and the 13% growth in revenues.

One other quick question with regards to The Valley National deal, do you see any impact in the second quarters, like the second half of that?

That’s almost all second half. That had practically no effect in the second quarter. It is on probably two days.

Okay, great, just to follow on to that, do you have any visibility for a potentially additional deal similar to that Valley National deal going forward?

We do, and we have a nice pipeline. But at the end of the day, done is done. But we have a nice pipeline of servicing deal which is why we forecasted year end of sharing on a million now. You could take a look at where we are at and then you can add the remaining originations which we feel good about. Then you got put and takes, you might have people itself there, portfolio and service for others and we may pick up some others. So, we feel pretty comfortable at the $700 million number, but there could be some upside to that. And I don’t mean to be obtuse, there could be some downside. But I think you could get a feel for where we are in this side of the business. We addressed it because we think it’s important, its significant and it’s a good growth opportunity for us. We are unique, we are S&P rated servicer. We are one of only two servicers that are named as Select for Company Guarantee Loan Obligations.

And I am showing no further questions. I will turn the call back over to Berry Sloane for closing remarks.

Operator, thank you very much and we appreciate the opportunity to present today, and the real good questions from the audience and investor support. So we look forward to going back to work tomorrow and producing good results for the third quarter. Thank you very much.

Thank you ladies and gentlemen. That does conclude today’s conference. You may all disconnect and have a wonderful day.