Good morning, everyone, and welcome to our first quarter 2022 financial results conference call. Today on the call, thank you, Jayne Cavuoto, Director of Investor Relations, I am also here today with Nick Leger, our Chief Accounting Officer, and we will be making the presentation. We are very, very excited about reporting our first quarter results. We are proud to announce that we beat analyst estimates of $0.62 adjusted NII a share for the Q1 consensus coming in at $0.72 of adjusted NII. I'd like to move everyone forward -- move everyone to the forward-looking statement slide on number one. Please take your time with that forward-looking statement slide at your convenience. It's important you absorb that. Slide number two. Historically, the company has proven shareholder value creation with a great track record of successful growth. We are projecting March 31, 2022. Obviously, we are all well-aware the financial markets have been pretty difficult in Q1. When you take a look at our 10-year returns, five-year, three-year, and one-year, all stellar, particularly against most market indices, particularly the Russell 2000. Our market capitalization is little over $620 million as of today's date. And we're very excited about delivering our earnings results to you indicative of the successful track record and growth of the business, its plan and its objectives. I would like to report that in the first quarter NEWT total return was down 101%, which was better than the decline in the Russell of down 7.5% for the first quarter. Slide number three. Obviously important position and topical with respect to investors' investment in Newtek as it has announced back in August its intent to acquire National Bank of New York City subject to a proxy vote and regulatory approval. On May 2nd, very recently the company with confidence…

Thank you, Barry, and good morning, everyone. You can find a summary of our first quarter 2022 results on slide number 45, as well as a reconciliation of our adjusted net investment income or adjusted NII on Slide number 47. For the first quarter of 2022, we had a net investment income of $973,000 or $0.04 per share as compared to a net investment income of $15.2 million or $0.68 per share in the first quarter of 2021. Please note that income related to the PPP of $24.2 million is included in the first quarter 2021 investment income. Adjusted NII, which is defined on Slide number 46 was $17.3 million or $0.72 per share in the first quarter of 2022, as compared to $23.5 million or $1.05 per share for the first quarter of 2021. Focusing on our first quarter 2022 highlights, we recognize $20.3 million in total investment income of 41.2% decrease over the first quarter of 2021 total investment income of $34.7 million. The primary driver of the decrease in total investment income was primarily due to the $24.2 million in fees from the PPP in 2021. Dividends from portfolio companies is $8.5 million in Q1 2022 helped offset the decrease of PPP fees. In addition, interest income increased by $1.1 million resulting from a year-over-year increase in the accrual loan portfolio. Servicing income increased by 14.6% to $3.2 million in the first quarter 2022, versus $22.7 million in the same quarter of 2021. Distribution from portfolio companies for the first quarter 2022 totaled $7.8 million, which included $4.5 million from NMS, $1.5 million from MTS, $525,000 from NBL, our 504 business, and $1.3 million from NCL, our conventional loan joint venture, as compared to non-distribution from portfolio companies in the first quarter of 2021. Total expenses for…

Thank you. Jayne, one more time could you go over how to call in?

Sure. Okay. So, for everyone who would like to ask a question, I'm just going to review again, if you have joined via webinar, you can press the -- or click the 'Raise Hand' icon, and then we will bring you in and allow you to ask the question. If you have joined via dialing in, you can press *9, and then once you get my prompt, you will be allowed to talk, and to unmute you will press *6. So, we would also ask everyone to please state your name and organization prior to asking the question. Okay. I actually have the first question here from Paul Johnson. Paul, I'm going to allow you to talk right now. Okay, Paul, you should be able to ask your question.

Paul, you might be on mute.

Paul, can you unmute your line?

There we go. Can you hear me now?

Yes, we got to know. Thank you.

Yes.

Okay. Sorry about that. It kind of broke me three times. Yes, thanks for taking my question this morning. My first one is just -- can , I guess expect the dividend that you just recently cleared, $0.75 for the second quarter, should we expect that to be the filed dividend as far as the BDC goes?

Good question, Paul. We have probably stated that we believe that our best guess, subject to the vote, an approval, we would look to have the bank transaction closed in the third quarter. So, with that said, there would likely be some true-up between that dividend paid and when the transaction would close. So, I would say, I will guess, and it's only a guess, is that this will not be the last dividend, from a BDC perspective.

Got it. Thank you. And then, just asking about the JV, I'm just curious, you're obviously getting close to getting the new JV started with the new partner this quarter, does the partner -- did they provide any sort of capital or resources into the relationship, or is this viewed as more of just kind of the capital provider in those types of investment?

No, I think the JV partners that we've historically have relationship with like BlackRock TCP and the new entity going forward, they're sophisticated, they're knowledgeable, they have equal say in the management of the JV going forward with respect to credit, and securitization, and financings. So, they do provide a lot of expertise. Obviously this is primarily our area of credit understanding. However, they do provide a lot of expertise outside of that, that we value.

Got it. I appreciate that. And then, just on the trends as far as activity in this quarter, obviously pretty high for the first quarter in the year. Would you say that's just more of a function of borrower demand, or is this something potentially like more efficient SBA, or you're just being more active with originations coming out of the BDC, what exactly is driving, I guess, the higher activity for this time of the year?

Sure. If you look at the SBA lead tables, which came out, I believe towards the end of April, we looked at the top originators, and they were pretty flat. Matter of fact, not positive, but I think is number one, I believe, I'm going to say flat to slightly down, according to SBA statistics. So, we think there is good business demand when you reach out the businesses and make them aware that you are in the market, but it's not overwhelming, and it does not support the amount of fundings we are doing. The amount of fundings we are doing we believe is really better supported by our market presence or technology, and our ability to convert and get to more of these clients, and the best clients and pick the best credits quickly. So, we do think this is a tremendous outperformance relative to the marketplace that will continue. Clearly the second quarter pipeline is up. So, we are very excited about the future in this area of business. And in addition, the technological advances that we've made with respect to data transfer from borrowed application to approval, and make it seamless and frictionless, will be something that we will further develop and drive into payments, payroll, tech solutions, and insurance.

Got it. I appreciate that. And then, I think I talked about this a little bit last quarter with you. I'm just curious about how the dynamic and the relationship kind of works with as far as, you know, rates moving higher this year, and the forward rate curve moving higher. How does that generally borrowers for, I guess, the relationship with prepayments, does that internally cause borrowers to faster, slower? What's that relationship like you've seen in the past?

Yes. And I appreciate the question. I think it's important for everybody to have an understanding. On the servicing side, we have been trumpeting for at least six months now to borrowers to deal with the fact that rates will be rising in the future. So, it's important for businesses to prepare. It's funny. One of the questions it's posed, is, you know, why not 75? At the end of the day, your job isn't to like just play around with the capital markets. Their businesses and consumers out there that have floating rate loans, and doing it slowly over time to allow them to adjust for the fact that their expenses are going to go higher, is a good thing. So, that's one of the things that we are doing now. What's happening from a dynamic perspective is, inflation is up, asset values are up, and it will lead to, we believe, faster prepays than slower prepays. And that's one of the potential depressants on price. But I think we're going like 1/10. No, doesn't really work that way, and it's not that short, but I would expect to see slightly higher prepays. And the coupons on the bonds obviously, they have actually been somewhat depressed in the first quarter, and potentially in the second quarter, because up until yesterday, you couldn't get the full coupon, because of prime, right? But investor's cost of capital was higher. So, it actually had somewhat of a depressing effect on prices. I don't want to just give you really hyper technical answer on a bunch of things. But I don't see any major changes. I think prepays will be a little faster. I don't think you'll see 1/13th, but I don't think you are going to see 1/10s.

Got it. Yes, I appreciate that. I understand it's a complicated subject, so appreciate that. Lastly, I know I generally ask this every quarter, but given that you guys have had a lot of hiring growth obviously in anticipation of closing the merger and potentially the bank conversion. Is there as far as salary expense goes, I mean is this a pretty sustainable level of $5 million or so per quarter, or would you expect that to moderate down or not at all?

I think for -- Nick, would you say for conservatism that's probably a good number for the next couple of quarters?

Yes.

Yes.

Okay, thanks. Appreciate that. Those are all my questions. Thanks for having me today.

Thanks, Paul, appreciate it.

Okay. Our next question is here. And can you please announce your name and organization?

Maybe I knew whomever that is.

Was that to me? Unfortunately, the conference call system was talking to me at the same time.

Hey, Robert.

Yes, Robert. Hi, Robert.

Robert, you don't have to -- you don't have to stay tuned in, Robert. It's that Brooklyn accent that gets me…

Thank you. It gets me in trouble sometimes. So, on the outlook for lending, I mean, obviously $750, the $155, how are you looking at that now given you expect higher prepays? I think there may be higher prepays which really is high defaults, , right, because what drives the prepays cycle in guaranteed 7(a)s, so what's your comfort level of growing the book that much with a time when you expect prepays and defaults to be rising? And how does that balance?

So, I want to be as crystal clear as I can. I didn't use default, you did, which is fine. And, would rising rates put more pressure on borrowers? Certainly could. I would say that this is probably one of the most liquid environments that we've ever seen for business owners coming out of PPP, ERC credits, idle financing et cetera, I believe that that aspect will clearly cushion borrowers. Another aspect, Robert, that will cushion borrowers will be the increased prices of the real estate which I think is about 55 to 60% of our portfolio -- to be able to cushion them in the event that they need to sell. Now what we've seen in Q1 so far from a pricing perspective is that it's been fairly modest. I mean there have not been tremendous changes in price because there is a pretty good demand for government guaranteed floaters. So, to be frank with you, this is such a volatile environment. So, on an agreement, default should go higher but I don't think markedly. I think prepays will go up which prospectively could put a damper on prices. Value of collateral is materially higher and the value of the businesses are materially higher. Those two things I believe will set the default number.

Okay, . Second question is this is broad question because I remember the election shortly after presuming you received approvals from the shareholders?

It's a good question, Robert. I think that -- I have one vote, so it's just one vote, I mean intuitively my thought process would be that the election would be exercised at the time of the close of the transaction, but that's entirely up to the Board. You just heard my guess on May 5, which I have the right to change. That was covering myself, but no, I think that's a very good question, that would be my guess, which leads into -- we think we are going to provide and we could vote, do change, so let's talk about that as a possibility or probability, whatever you want to look at it. Do you think there is another -- I mean there is more likely than not another dividend payment for the quarter or maybe two, but that's just based upon my guess as to what I think could happen, which is kind of out of my hands, because there is a lot of other people that are going to be making those decisions.

Fair play is just obviously the earlier they do it the early you get rid of the AFFE issue about deterring some institutions and buy the stock, at the margin. Anyway, last question, in the proxy, which I didn't read, there is multiple comments about obviously various things being annual elections, right, so I mean BDC election is an annual election, big election, an annual election when you file your tax return. If you convert in the quarter some time, is the result that you end up paying corporate taxes for the full-year, or it only a partial step, given that it's an annual tax return election rather than something that's done day-to-day?

It's up in -- I guess it's up until the time that you withdraw the election, and so it's not necessarily for the calendar year, it's up until the time of the election, but I would have to check with tax experts, but that would be my guess. Nick, would you guess the same, or different?

Yes, correct. We pulled back the election and filed our final BDC with C Corporation for the remainder of the year.

Got it. Thank you.

Thank you, Robert. The next question I have is Steven .

Hi. Thank you for taking my question. I'm largely enquiring about Newtek's intensions for the post bank holding company conversion, I've got two quick questions, first one is once the BDC conversion finishes, how quickly will Newtek leverage up it's balance sheet, and what is the ultimate maximum level of leverage that banking operation will use? And the second question is what factors and considerations will Newtek use to decide how much leverage , and what net interest margin could Newtek earn on this leverage? Thank you.

Appreciate the question, Steven. So, couple of things, one, the only way that question could be answered would be based upon where we get final guidance from the OCC on our application and the business plan that we provided, because the regulators have got a tremendous say in how we run the business. We have provided an illustration. Previously in early March, which I still believe is on our Web site at this point in time, sort of give you an indicative amount of capital that's there, I think that we will grow the business prudently, just as we've managed our own business over the course of time, I don't think it wouldn't be prudent to just all of a sudden, zoom right up and use all of that excess capacity. I will also tell you that, we've got a lot of experienced people, that'll be on the board and on the Alko committee, so we feel pretty comfortable about the ability to prudently with our management tools, grow into the capital, utilize it over the course of time, and grow the business prudently. The illustration that we've put out, I will also remind you, it was in a different interest rate environment. So, a lot of things and variables have changed. But I still think that's a reasonable assumption based upon when we put it out to base some of the answers to your questions on.

I think you're on mute, Steven.

Yes, I think last question was, I don't think you've touched on that was just how much expected net interest margin could Newtek expect?

Good question. Look, I think that, when we look at our competitors in the banking space, we see fairly tight margins, without putting a number on it, the return on equity and the return on assets in our business are materially greater. Once again, I would point to that illustration that's publicly available information to be helpful. But we're not. We will have a lot of, what I will refer to as conventional assets in the bank. We think that's important, that gives us diversification. It balances out the whole portfolio. But for example, that generates on a coupon, a net interest margin, that's pretty wide, same thing for the 504 business. So, we're looking at NIMs that are probably well in excess of 4%. I mean, I think that one of the benefits of what we do is taking some of these businesses that are going to go into the bank and benefiting from being able to use core deposits versus commercially defund deposits to be able to grow the business and then to use the leverage prudently as well over time.

Okay, so just to wrap up my question, you think Newtek would probably a leveraged up, slowly and cautiously, but the extra leverage would earn a lot more net interest margin than most other banking operations would?

Yes.

All right, thank you.

Thank you. Appreciate the question. Thank you.

Okay. The next question comes from . Steven, you should be able to speak. Just check you're mute. Steven, you are on mute.

Pardon me. Okay, can you hear me now?

Yes, you are good now.

Thank you. I'm going to read this because I think it's very seriously, and I help you bear with my reading voice. I am a retired shareholder who needs my dividend stream to pay my bills and help provide for future generations of my family. I'm not a graduate of the Ross Business School or any other business school, yet I feel fairly comfortable about the financial fundamentals of NEWT. And I am wondering why we have to choose between NEWT as a bank holding company and NEWT as a BDC. Couldn't there be a separate organization? Sorry, I need a technology company. Could they be a separate organization that would be a BDC within the new family of companies. From your comment about shareholders who cashed out -- Yes, sorry, your comment about shareholders who cashed out indicates to me that they were thinking along the lines, I was their dividends were becoming more uncertain. Personally, I think NEWT is well aware of the concern of investors about continuing dividends. And I'm looking forward perhaps optimistically to dividends from a bigger company. Just like your thoughts about those things.

Sure, Steven, I appreciate it. And I think as evidence that we care about all of our shareholders, the ones that are in the majority, the ones that are in the minority, the ones that are in the middle is that we want to hear everyone's thoughts and opinions and make ourselves available. So, I appreciate your comments. I think that the board, when they looked at these types of decisions, makes decisions based upon the best interests of all the shareholders. With that said, I think you pointed out that we have the opportunity to continue to grow and get bigger as a bank holding company, excuse me for a minute. Unfortunately, they're conducting the annual sprinkler test. So, bear with me for one second. I'm unmuted, okay. Can you hear me? Okay, great. So, Steven as we get bigger, and continue to grow, which you've demonstrated over 10 years, whenever the dividend payout or philosophy of the company is or whatever form, we hope that will continue to pay greater and greater dividends. I think it's important to note that we look at the company and put it in the form that we think is best suited to get a total return to its shareholders. And that was why the board decided to make this recommendation, board's interests are aligned with the shareholders. And that's the best answer I can give to you at this point in time.

Thank you, Barry.

Any other questions?

Yes, we have one more question. I've just allowed to talk, could you please just unmute and state your name and organization, please?

Hey, Barry, this is Scott with Raymond James.

Hey, Scott, how are you doing?

Doing well. First, just to comment, you know, congrats, kudos on the fabulous loan growth throughout all your different product offerings. And to that, I was wondering if it'd be possible to rank those loan types in terms of expectations for growth for '22 and beyond?

Yes, Scott, I appreciate your good question. Yes, we've been fairly tight on guidance. I think I can kind of give you a feel for the second quarter. But I can't go beyond that, and a lot of just, the transformation of the company. And we're just trying not to go too far out. However, I think that for the 7(a) business, probably look at I'd say $180 million to $200 million of fundings for the second quarter. I think the 504 business will be similar to the first quarter, $530 million of closings approximately. And we had given annual forecasts 7(a) business coming in at a conservative $750 million, and the 504 business coming in at a conservative $150 million. So, that's pretty much where we are for the calendar year for both businesses in 7(a) and 504, that I can business a lot of it depends upon being able to get our JV wrapped up which we're really working at an accelerated pace right now. And hope to do $300 million in the second half of the year that that one might be a tad aggressive.

That's fantastic. And the new JV, how does that stack up in terms of the SBA in terms of net for your bottom line in terms of $4 million loan?

Yes, it is a great question, Scott, I think the one thing about the JVs in a BDC format, and most likely in a bank holding format, they show up as equity investments. So, they'll actually be, they'll be generating basically dividend and distribution income. However, it does provide the servicing income, which is valuable throughout just for a round number, a billion dollars of loan originations, that you're servicing at 1%, it comes out to be quite a material number on a reoccurring basis without that portion of a capital contribution. And then you've got the spread income, which we talked about earlier, and then the equity that goes into the JV. So, we're very optimistic about the business, but that business which we have not given future guidance on could be extremely beneficial and give the company really additional engines.

Fantastic and it seems to me that your special sauce in the lending side is definitely NewTracker. Would I be correct in that assumption?

Yes, and to expand upon it, it's NewTracker from the standpoint of acquiring clients and getting referrals, which is probably what's most visible. However, NewTracker has been updated and improved to where an alliance partner and internal managers at NewTracker can see every email, every text, every phone call that's recorded frictionlessly and seamlessly get to borrowers directly. Get them a Fact Finder, which can get filled out quickly, and get an appointment said, we book about 150 to 175 appointments a day, with clients, with no human interaction. So, that's totally different than walking into Bank of America branch as a bit as a small business owner, or calling up an 800 number for Bank of America and trying to get a business loan. It's like night and day. And we're able to get the data transferred into a Secure File Vault and in a very frictionless manner, pre-qualify a client, it's now the clients working with you to get a loan, different than going to a broker that takes a loan package and auctions that off to three or four or five banks or funders.

Okay, fantastic. Well, congrats on the loan growth, specifically and good luck on the transaction. Thanks.

Thank you so much.

Those are all the questions. Barry?

Great. Everyone thanks very much for the participation. We always appreciate the questions. We look forward to reporting our second quarter and making progress on our business plans and our business model. Thank you very much.