Good day and thank you for standing by, and welcome to the Newtek Business Services Corp. Q3 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. 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 CEO and Founder, Barry Sloane.

Good morning, everyone, and I appreciate you all attending our third quarter 2022 financial results conference call. First, I'd like to welcome John McCaffery to the call, who is our SVP of Accounting and Finance. Subject to regulatory approval, John will become the Chief Financial Officer of Newtek Bank. In addition, we also have Nicholas Leger, our Chief Accounting Officer of Newtek Business Service Corp., who will present the financial part of the presentation towards the end of the call. The voice you hear is Barry Sloane, President, CEO, and Founder of Newtek Business Services Corp. We have many new people on this call, and I'd like to provide a little background. Newtek was founded in 1998 in a New York City apartment. We reverse merged into a publicly traded company in September 2000. We've probably done about 88 to 89 of these quarterly earnings reports and conference calls. As they say, it's not our first rodeo. We've been through up markets, down markets, up credit cycles, and down credit cycles. We've seen it all, and we have a very experienced management team and Board that have been able to manage through these turbulent times. I would like to welcome the analyst community that follows us, including KBW, Raymond James, Ladenburg Thalmann, and Compass Point. We appreciate the work you do on our company and the reports you publish. For those of you looking to follow along on the conference call, the presentation is located on our website, newtekone.com, in the Investor Relations section. You'll be able to follow along with the PowerPoint or go to the webcast where the PowerPoint is also available. We believe today's call will help demonstrate our tremendous operating performance over the first nine months of this year. We’re excited to tell our story. Clearly, we are in turbulent times in the capital market, and we see somewhat of a disconnect between capital markets and what’s actually happening within the company. We hope to clarify some of that and depict a robust nine-month recent quarter and operating history of the company. I’d like to move forward to Slide #2. As many of you are aware, we are undergoing a potential and likely transformation to acquire the National Bank of New York City and to become a publicly traded bank holding company. On August 2, we entered into a stock purchase agreement to acquire the National Bank of New York City for approximately 100% of book value, which we are very excited about. This acquisition is subject to government regulatory approval from the Federal Reserve to allow us to become a bank holding company and from the OCC to approve the acquisition of the bank. We've been working on this for over a year and believe we are very close. During a special meeting of the shareholders on June 1, we received 89% of votes cast in favor of withdrawing our election as a business development company and granting the Board the authorization to withdraw that election. This decision potentially frees the way for us to acquire the bank and use leverage to grow both the bank and our business going forward. The rationale for transforming Newtek Business Service Corp. from a BDC into a bank holding company is clearly outlined in the May 2 proxy that we issued. However, it’s important to restate our rationale: We anticipated that rates might rise and quality spreads might increase. As a growing company, we believe that being a bank holding company, owning a bank, provides a better financial structure. Importantly, this will not be in the traditional sense that most of the 9,000 financial institutions operate today. We will position ourselves as a technology-enabled bank that offers real value to our clients, which you’ll see through our discussion of our technology, The Newtek Advantage. When you look at the highlights of the proxy statement: 1) BDCs are limited to leverage, cannot grow more than 2 to 1, typically hovering between 1 to 1 and 1.5 to 1. This cap means if you’re growing—as we historically have—our dividend earnings payout over the course of our BDC life in eight years has grown tremendously, especially from 2014-2015 when we became a BDC until last year. We believe we’ll leverage the bank’s balance sheet correctly with the risk-reward structure in banking to avoid diluting shareholders too much and to utilize more cost-effective debt through core deposits rather than expensive BDC debt. On Slide #3, we discuss unlocking the value of our homegrown technology. We've been in business for over two decades and have grown without brokers, branches, bankers, or BDOs. We leverage technology to acquire clients, establish strategic alliances, and develop The Newtek Advantage—our dashboard for business clients. Companies like Live Oak have done great things with nCino, and we believe we can follow them and unlock the technology we have developed better as a bank holding company—owning a bank—and potentially offering some of that technology to other players in the space beyond our current position as a BDC. On Slide #4, we present The Newtek Difference, highlighting our unique offerings. We aim to provide our clients with personalized banking relationships along with analytics in The Newtek Advantage. Our software and transactional capabilities set us apart from banks. A snapshot of the dashboard is on Slide #5, showcasing relationships clients will get upon opening an account. They will have direct access to a deposit specialist, lending specialist, payroll and benefits specialist, technology solution specialist, and payment processing specialist, providing more relationships than our competitors typically offer. It’s about giving them a comprehensive service, not just a piece of software. On Slide #6, we talk about giving our business clients a management asset. We believe our offering is unique, developed through years of experience across various businesses such as payroll, health and benefits, tech solutions, loan processing, and more. We are excited to push The Newtek Advantage out into the market to offer business clients what they genuinely want: multiple relationships with an organization, with real humans to assist them, not just software. Now, turning to Slide #7, I want to address the big question: What's the status of regulatory approvals and timing? This is the dollar question, actually more than a million dollars. We think the acquisition awaits approvals from the Office of the Comptroller of the Currency regarding the acquisition of the bank, along with the Board of Governors of the Federal Reserve, as well as the Small Business Administration approving our capital plan, which they historically have done. We anticipate maintaining our status as a BDC through December 31, subject to the Board's decisions and necessary regulatory approvals regarding our transformation into a bank holding company. On Slide #8, I want to note the extensive efforts of our staff in running our businesses and servicing our clients while simultaneously preparing to open Newtek Bank and secure all regulatory approvals. We have successfully prepared ourselves for the transition, ensuring we have capable staff in place and ready to support the bank once established. Notably, we've brought in individuals who support our growth strategy, including John McCaffery as the future Chief Financial Officer, Nick Young as the future President and COO, and other key personnel who are crucial for operating efficiency. It’s true that these preparations may have some short-term impact on our numbers this year, but we are confident about our future trajectory. Additionally, we will discuss the $50 million shortfall in fee income from PPP in 2022 compared to 2021 and the shift in gain on sale margins, which we expect to be about three points lower this year than in 2022. Despite these challenges, we still intend to distribute an estimated $2.75 in dividends for the fiscal year with a forecast of $0.70 for the fourth quarter. I want to emphasize that this company has had a remarkably strong year, and I extend my gratitude to our associates and the Board for their contributions through the first nine months as we report today. Regarding our rebranding of Newtek Business Service Corp. to NewtekOne, we aim to position ourselves as 'the one company for all your business needs.' This change is pivotal to align ourselves with our philosophy developed almost three decades ago, focusing on providing a unified set of branded financial solutions to independent business owners. Moving onto Slide #10, I want to share that we saw record funding for Q3 7(a) loans at $223 million, a 36% increase compared to $163 million the year before. This trend continues with our Newtek Small Business Finance having funded $355 million in units, another record. Over the first nine months, we've funded $586 million compared to $362 million previously. From January 1 to October 31, we have recorded $650 million in funding. Because of our strong performance, we’ve increased our guidance to $775 million for the end of this calendar year. Even with a rise in funding, we’ve maintained the credit quality of our borrowers, tightening our credit standards. On Slide #11, we continue to believe that technology underpins our growth. Our borrowers appreciate the frictionless method we’ve created — they don’t have to chase down bankers or brokers. Our system allows for rapid responses and personalized scheduling for loan appointments, allowing clients full control over their engagement with us. We receive 1,000 to 1,500 referrals a day, which we consider an essential funnel. NewTracker has historically been effective in streamlining this process, and we have seen no shortage of opportunities despite the overall market conditions. On Slide #12, our pipeline growth is promising, with both 7(a) and non-conforming business demonstrating positive trends. On Slide #13, we note that referral growth has been consistent as we continue to enhance our relationships with various partners. On Slide #15, it's crucial for us to maintain high distributions as a RIC. The forecast for Q4 2022 is a cash distribution of $0.70 a share, with the aim to distribute 100% to 102% of our earnings to avoid issues related to RIC status. We're continuously engaged with investors regarding our distributions and earnings. It's essential to clarify our distributions have historically not come from capital, despite some misconceptions. Alright, moving to Slide #16, I want to highlight our total investment income this quarter, which reflected significant growth. We reported approximately $23.6 million in total investment income versus $12.4 million the prior year, showing a 90% increase attributed to various factors, including dividends and overall portfolio management. Overall, we achieved a net increase in net assets of $11.4 million this quarter, ending with NAV per share at $16.04. I’d now like to pass the call to Nicholas Leger for further financial details.

Thank you, Barry. Good morning, everyone. You can find a summary of our third quarter 2022 results on Slide #41 as well as the reconciliation of our adjusted net investment income on Slides #43 and #44. During Q3 2022, we reported net investment income of $205,000 or $0.01 per share, compared to a net investment loss of $6.7 million or $0.30 per share in Q3 2021, which is a 103% improvement per share. Please note that PPP income from the prior year is also a contributing factor. For Q3 2022, adjusted NII was $15 million or $0.62 per share compared to $12.6 million or $0.56 per share the same quarter last year. We reported a total investment income of $23.6 million, reflecting a 90.3% increase over the previous year, primarily driven by dividends and interest income. Additionally, we saw total expenses increase by $4.3 million largely due to higher interest costs. Our operating results resulted in a net increase in net assets of $11.4 million, yielding a NAV per share of $16.04. I’d like to turn the call back to Barry now for the Q&A session.

Thank you, Nick. Operator, we'll open it up for Q&A now.

Thanks very much. Congrats on a great quarter. I am wondering if you could provide some color on loan demand, considering the rate hikes and potential recession.

Thank you. Loan demand is usually assessed broadly. While the market seems softer, we are positioned to selectively choose the best credits. While the overall climate is challenging, we are not struggling to find opportunities to lend. Many strong borrowers have emerged seeking loans, and we have a robust pipeline of credit-worthy clients. Moreover, the tightening of other banks' lending standards creates further opportunities for us.

If you could detail your preferred loan mix for the future.

Certainly. We would like to continue growing our 7(a) lending while capitalizing on the operating leverage with non-conforming loans as well. We aim for a well-diversified portfolio that covers various angles in lending.

Good morning, Barry. A question regarding dividends, Slide 16. On the transaction and regulatory approval timing, could you clarify how that will affect your distributions?

Yes, the $0.70 forecast for Q4 earnings distribution aims to be 100% by year-end, dependent on receiving Board approval. We expect shareholders will receive all earnings promptly if the Board decides to withdraw from BDC status.

Good morning. I was curious about your tightening standards for underwriting—are they a result of systemic changes or more discretionary adjustments?

We employ human credit committees to analyze loans. While we use technology for efficiency, there is a personal touch in our credit assessments. We have tightened standards but have maintained competitive rates.

Have you noticed any trends related to your borrowers reducing expenses or headcount?

We didn’t see much change until recently, but we are beginning to notice some shifts in October and November, as broader economic concerns come into play. Consumer spending remains solid, but we anticipate observing more trends of tightening soon. The portfolio yield guidance suggests the retained portfolio may vary until January, around 9%, before adjusting with the next rate hike. We appreciate everyone for attending today. We are optimistic about our future once we secure regulatory approvals and continue to provide our stakeholders with our updates.

This concludes today's conference call. Thanks for participating. You may now disconnect.