Good day, ladies and gentlemen, and welcome to the Newtek Business Services Corporation Q1 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. [Operator Instructions] I would now like to turn this conference call to Mr. Barry Sloane. You may begin, sir.

Thank you operator, and welcome everyone to our first quarter 2015 financial results conference call. This is our first conference call with a full quarter as a new business development corporation. Jenny Eddelson, our Executive Vice President and Chief Accounting Officer, is here with me today and she will be presenting. And for those of you that would like to follow the PowerPoint presentation, you can go to our website, www.thesba.com, go to the Investor Relations section and in presentations you will be able to see a PowerPoint presentation. Jenny, do you want to read the forward looking statement?

Sure. This presentation contains certain forward-looking statements, words such as believes, expects, plans, anticipates, forecast and future or similar expressions are intended to identify forward-looking statements. 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, 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 turn everyone’s attention to second page of the presentation, where we will go over our first quarter financial highlights. As I mentioned before, this is our first full quarter reporting as BDC, we’re proud to report that the net asset value equaled to $169.6 million or $16.61 a share, up from $16.31 a share, a 1.9% increase for the quarter, so the straight line is we get close to about 8% total increase in NAV for the entire year. The adjusted net income was $5.2 million or $0.51 a share. We pay our cash dividends, primarily out of the adjusted net income. We want to do that obviously because we want to pay our cash dividend out of earnings. Our adjusted net income includes short-term capital gains from loans sales of the government guaranteed SBA portions, which we have shown historically is a reoccurring event. Our total investment income for the quarter was $4.8 million. We expect Newtek to fund between $240 million and $280 million of 7(a) loans for the year, which will be about 29% increase over 2014. Our loan servicing portfolio through servicing our own loans as well as through third-party servicing, which is known as Small Business Lending Corp, a wholly-owned portfolio company is in excess of $1 billion as of this day. We’re proud and happy to announce that JMP Securities, initiated a research coverage on Newtek Business Service Corp on February 23, Ladenburg Thalmann initiated research coverage on April 22, and Singular has set research coverage and Lisa Springer is our analyst on that. Dividend distributions; on April 13, we paid our first quarterly dividend as BDC, $0.39 in cash, that was $0.01 higher than previously forecasted, and represents about 76.5% of the Q1 adjusted net investment income.…

Thank you, Barry. Good afternoon everyone and thank you for joining the call. I’d like to start with some highlights from our first quarter 2015 consolidated statement of operations. As Barry mentioned earlier, this is our first full quarter reporting as BDC, so there is no comparable prior period consolidated BDC financial statements to refer to. Please turn to Slide 35, we had investment income of $4.8 million, which included approximately $2.2 million of interest income, substantially all interest income for the three months ended March 31, 2015 and 2014, was derived from our SBA loan portfolio, which generated $2.1 million and $1.5 million of interest income respectively. The increase in interest income can be attributed to the average outstanding performing loan portfolio increasing from $94.2 million to $125 million quarter-over-quarter as a result of new loan originations over the 12 month period. Servicing fee income, which we earn on the guaranteed portions of loans that have been sold in the secondary market increased $211,000 for the three months ended March 31, 2015 compared to the same period in 2014. The increase was attributable to the growth and the size of the total SBA loan portfolio for which we earn servicing income. Dividend income was approximately $1.1 million for the three months ended March 31, 2015 and represents dividend declared from our controlled portfolio companies. Our expenses for the quarter totaled approximately $7.2 million and includes salaries, interest expense and other SG&A such as rent, marketing and referral fees. As an internally managed BDC, we do not pay any incentive or base fees to an external manager. Our net realized and unrealized gains for the period totaled $12.5 million of net gains, the components consisted of $7.7 million in realized gains, which were generated from the sale of the governing…

Thank you, Janny. Operator we’ll take questions now.

[Operator Instructions] Our first question comes from Chris York with JMP Securities.

Good morning guys, or good afternoon and thanks for taking my questions. I’ll lead by congratulating you on the progress you've made in your hiring initiatives and in the recent partnership with lending club, and then now the new expansion in the 504 loans. So on the new aligned partnership, could you help me understand how you guys think about that opportunity for the small business loan product on Newtek platform, and then maybe the volume levels that you think are realistic in 2016?

I think that in looking at Newtek we believe we are unique in the lending business in that if you look at on deck they’re primarily very focused on smaller merchants, short term amortization, tying it to a merchant processing account. Some of our other competitors are very much wedded to hire coupon loans, and some which is not bankable. We want to be positioned as a company that when a business comes to us, we want to be able to fill them. So from my perspective, for the most part, we are a principal player. We are a principal player in a line of credit if it’s backed by an account receivable, a healthcare receivable, which is great for doctors, dentist, lawyers and all medical practitioners or inventory. We are a term financer in the 7(a) program, in the 504 program now and eventually down the road we will have a conventional term product as well. So we want to be able to satisfy customers of all sizes. We are not typically an unsecured fund, when I say typically we just don’t do it, this is not what we do. I should add that our $130 million Jenny of participations. $130 million are senior secured participation certificate, so from a quality standpoint – there is senior secured participation certificates. So looking at us in the marketplace, I want to be able to look at opportunities where they may want to lend secured and they would be willing to pay a double digit rate or rate in 27% and lay it off to a third-party. So where we looked at in 2014 $5 billion worth of fundings -- $5 billion worth of referrals and basically funded $200 million of 7(a) loans we probably funded 12, tech 12 million of monthly purchases in the line of credit business. Now we are planning on growing our staff, looking a more opportunities and closing more opportunities with borrowers if that’s a good explanation. We want to widened the funnel and widen our close rates and we want to be able to be very consultative to borrowers that our independent business need to get funded. Unlike walking into a bank and your business owner, you got one specialist this credit cards and once that’s done they may do a conventional loan, it’s really hard to find a participant that can help you. Our business service specialists, we currently have 10 of them and that will be growing, really a very consultative and their goal is to take in the information and to give the customer with the best available solution, whether it’s on our books of the principle or we give it to a third-party as an agent because that’s what they want, it’s not something that we’re interested in.

That’s great, that color is helpful. And then talking a little bit about competition in the 7(a) business, last quarter you talked that some banks started incrementally pick up volume a little bit. Did you see that throughout the quarter and then can you talk a little bit maybe about competition thus far in the quarter-to-date.

I mean, I don’t think that that’s intensified, I think that status quo and I don’t think it should impede what we’re doing. I think that our biggest impediment is improving our process, getting more familiar with each, we’ve changed the process, we’ve a lot of new people in the organization, and I think that we’re working hard at our ops and our process flow is going to improve our ability to fund more. I do not have any concerns over the competitive nature. Putting that aside in our current volumes, you heard of somebody comes in and you lose $10 million or $15 million worth of loans or opportunities in the quarter, the answer is yes. But from a long-term perspective, which is always how we’ve run the business, I don’t have any concern that we’re not going to be able to be $260 million fund this year and grow 15%, 20%, 25%. We want to grow in a controlled normalized fair fashion. We’ve done this for 11 years, we want to do it for another 11 years. My view only the gist of that for somebody in the finance business is to grow exponentially.

Sure, helpful. Switching gears, just a little bit maybe on the expense side, you talked about building out the platform making new hires and I think many of investors are going to appreciate you being internally managed. So I know your lease expires in October, so have you any thoughts about maybe moving or renewing that lease?

Chris, you’ve never been to our headquarters in New York City, maybe some of the people on the call. We actually did re-roll that loan over, New York City space at which we only have about 30 people, most of our staff is in much lower cost locations. So we’re a $30 a square foot, I think for year and a half and then it bumps to like $43 year after. It’s not very expensive. Putting aside, one thing that’s important, all the new hires that we have and we opened up in Boca, we also opened up a small office in Dallas, all those numbers are placed into our projections. So everything you’ve seen, I had a couple of people said that you got lot of people. The expense projections, they’re all pretty well baked in. And we are going to need additional space in a variety of different locations to handle our growth.

And then lastly. So being a BDC and distributing essentially all your income out to shareholders, have you guys thought about putting in place a dividend reinvestment program?

We do have a program, it is available to shareholders for the second quarter, and I have to check, but our shareholders should have been noticed or should be getting notices. Probably the next time we declare the dividend, when the board declares a dividend I think a notice probably will go out. There will be a drift plan in place.

Okay. Thanks Barry.

Thank you.

Next question comes from Stanley Grossman, who is a private investor. [Author ID1: at Fri May 8 06:29:00 2015 ] Q - Stanley Grossman[Author ID1: at Fri May 8 06:29:00 2015: ] [Author ID1: at Fri May 8 06:29:00 2015: ] Hi, thank you for taking my call. I wanted to know if you had any estimates, $40 million that you had reserve for the special dividend, how much per share would that be?

Appreciated, Stanley. My Chief Accounting Officer is frowning at me. That’s the number that we have put out in our offering document. We get asked that number quite frequently. There are lot of interest in the special for obvious reasons. As I said earlier on in the call, we have not updated that number, it’s going to be based upon our tax return and in terms of estimating it per share, it would require knowing what the shares outstanding are at the time. The only I could point you to is the offering document that was circulated in November, and there was information on that. You get back at some of your numbers baked upon the estimate of last June and you look at $10.2 million share you could probably come up with your own number, but – and that will be in cash and stock and we talked about that as well.

Thank you very much.

Thank you.

Our next question comes from [indiscernible] with UBS.

Hey Barry, congratulations on your first quarter as a BDC.

Thanks Mike.

Question for you, so you were talking about your One of 14 Non-Bank SBA Government-Guaranteed Lender Licenses, a license that’s no longer issued. I was kind of curious, so with the non-bank space growing so much without them, what kind of status does it have, is that a mark that kind of differentiates you, is that something that just sort of flags you, it sound it’s been around a while, what kind of value does that definitely if I’m a lender and I’m looking at Newtek Business or a small business loan?

I think one way to look at it is number one, people just can’t come into the space from a competitive perspective. We believe that our 11 years worth of history in relationship and performance are valuable and important. Mind you, if we have one of these licenses you are in a shared risk relationship with the government. So the government – I mean you can have a lot of capital and they wouldn’t necessarily give you a license or chance for the license to you just because you have a lot of capital. They want to make sure that you’ve got the expertise and the experience particularly in this area the policy and procedure manual for the SBAs and I think it’s in excess of 1,000 pages. So it really requires a specialized assembly, specialized underwriter, specialized servicing staff. A lot of the banks that do this business don’t wind up doing it well because they wind up using people that are familiar with conventional assembly underwriting and servicing and it doesn’t work out well because they wind up in violation. So I think it should be viewed by the marketplace as not only a valuable asset, but one that we’re operating well and generates high rates of returns that I don’t think easily get arbitraged to weigh it by competition.

And do you know if most of your competitors like some of the comparable companies you mentioned like on deck and lending club, do they have these, are they operating without them or…

They don’t have, they don’t do what we do.

Okay. Alright Barry thank you.

[Operator Instructions] Our next question comes from Adam Morton with RBC Capital Markets.

How are you? Great, quarter, congrats. [indiscernible] storm from one of the previous questions about the lending club. So I totally get the agent relationship and I think that’s a great way to make sure you guys are sort of all things to everyone coming in. My question really though is, is that arrangement have the ability for some reciprocity from the lending club to come back into you guys and sort of cross pollinate referrals into your core businesses?

The answer is yes, that is the anticipation. We expect to have an agreement in place between us, where they can cross refer opportunities back into our business. The lending club is little misunderstood by some, it’s really a marketplace that brings funders and borrowers together. We should be viewed as a funder. So we do envision that we will be working with the lending club and they will be referring borrowers to us for our loans. So the answer is yes. We think – and we think that could be extremely helpful. Given the way that we want to do, enter into this relationship with obviously that is a very busy company and we appreciate their partnership with us. And we put a lot of work into this relationship. This was done over a long period of time.

Okay. And then lastly, other bank opportunities out there where you might see relationships with banks, I know you had some affiliates I believe locally that referring agents, are there more opportunities like that as you guys continue to grow here?

Very much the office that we just opened up in Boca on May 1 has 21 seats, we have seven people filled in it. We are going to need to, we do expect to significantly grow our referral count and we’re going to need to have people that can process on a consultative basis, the opportunity with, better business owners that want to borrow and we need to be able to suite them with the best program and product before them. So we have quite a few others in the pipeline and we’re working existing relationships. The UBSs, the Morgan Stanley’s, and we’re looking for a lot of others help grow the overall opportunity.

Fantastic. Thanks on a great quarter guys.

And I’m not showing any further questions at this time, I’d like to turn the conference back over to our host.

Okay. Everyone, thank you very much for your participation. We were very happy with our first quarter results and looking forward to reporting great results in the second quarter as well. Thank you so much.

Ladies and gentlemen, so that concludes today’s presentation. You may now disconnect and have a wonderful day.