Earnings Call Transcript - NEWT Q1 2020

Operator, Operator

Hello ladies and gentlemen, welcome to the Newtek Business Services Corp. Q1 2020 Earnings Conference Call. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Barry Sloane, President of Newtek Business Corp. Go ahead, sir.

Barry Sloane, CEO and President

Thank you very much, operator, and good morning. My name is Barry Sloane, CEO, President, and Founder of Newtek Business Corp., stock symbol NEWT on the NASDAQ. This morning, accompanying me on this call is Chris Towers, our Chief Accounting Officer and Executive Vice President. First of all, I want to thank all of the Newtek staff that has been working remotely. 100% of our staff has been working remotely during this period of time. 24/7, particularly focused on the PPP program, as well as payroll and other important vital services to over the estimated 27 million businesses in the United States. We don't have all of them. We are servicing many of them, helping business owners have the funds necessary to provide payroll for their employees. We've estimated that the PPP funds that we have gotten guarantees from the SBA will total approximately 130,000 individual payroll checks, and I am quite proud of that and want to thank our staff for working tirelessly. For those of you that are familiar with Newtek, you can follow along this presentation. It is archived on our website, newtekone.com in the Investor Relations section. I would also like to point everyone to the forward-looking statement that exists in that presentation on slide number one. Moving forward to slide number two on first quarter 2020 highlights. The company yesterday reported a net investment income or loss of $0.01 a share. That is an improvement of 80% over $0.05 a share from the quarter and year prior. Our net investment income does not include gain on sale, and a significant part of our business is originating loans and selling them for gain on sale. This improvement is valuable because it indicates that without any origination and gain on sale, we’re pretty close to a breakeven. Moving down to the third bullet on slide two, adjusted NII came in at $0.21 a share, down from $0.44 a share in the year prior. Obviously, in March, we shut down our lending operation from the standpoint of normal 7(a) business due to the coronavirus and issues of visibility. We believed that was prudent without a lot of visibility not to fund, but I do believe that we would have met or beaten prior year's earnings as well as been able to confirm our guidance. NAV we reported yesterday, down 4.5%, clearly at the lower end of the decline for most BDCs. We'll spend a lot of time in today's presentation discussing those valuations, and we feel that they are incredibly appropriate and also conservative and stressed out. Debt to equity ratio of 1.44% on March 31, 2020. We don't see this changing much over the next two quarters. With respect to the PPP loan business, we pretty much make the loan, and almost 95% of our sales are 100% sales with no long-term balance sheet implications. Slide number three shows the company's historic track record of NAV over our life, which historically has been a positive movement in NAV despite the fact that we have had a setback in Q1. On slide number four, we'll go into this a little deeper from a valuation perspective, particularly with the 7(a) portfolio for valuation purposes. We've stressed the season portfolio of 7(a) loans at accumulated gross default at 30%, particularly given that the portfolio is seasoned, we think that's extremely conservative, and we will talk about the valuation there. I think it's important to note that we anticipate 7(a) lending activity returning. That's a different statement than I might have made about a week to 10 days ago, that's how quickly the landscape is changing relative to the concept of visibility. I think it's important to note that as of May 7th, there's $120 billion according to the SBA in availability for the 7(a) program through the end of this year, which would include normal 7(a) loans and PPP loans. There was a thought process about 10 days ago that that availability would vanish immediately and be used up by PPP. On April the 29th, Senators Rubio and Cotton, who are ranking members of the Senate Committee on Small Business, issued a letter to the U.S. Department of Treasury to encourage them to have a 7(a) program that is enhanced. In the original Bill for the CARES Act, there was a program that had 90% guarantees, increased loan sizes to $10 million, and removing the credit elsewhere criteria. I think it's conceivable and a good possibility that 7(a) lending will continue through the rest of this year and potentially on better terms and 90% guarantee leaves us with less balance sheet, less equity as we're able to sell the government guaranteed piece off and potentially greater margins and greater loan size. Moving to slide number seven, the company made a forecast and I'm sure we will talk a lot about this in the Q&A, for record NII for the second quarter of 2020 based on our regular business operations and PPP lending activity. We have not put a number on that. I will state that our largest quarter ever was $0.69 in adjusted NII. We need to get some more visibility, particularly getting through the month of May and maybe the first week in June to get our fundings in line to be able to come out with a forecast, which will also lead into future dividend expectations as well. We feel very strong and if you take a look at our pipeline and what we expect the fees to be paid from the Treasury and SBA for that activity, we feel pretty good about our second quarter, and visibility is starting to come back to us where things were pretty cloudy two to three weeks ago. For those of you that aren't familiar with PPP loans, the Payroll Protection Program came out of CARES, relative to the Coronavirus Aid, Relief, and Economic Security Act, about $660 billion, I believe, were appropriated for PPP loans. We were authorized as one of the nation's largest PLP lenders through the first six months of the SBA's fiscal year. We're still number two to be able to make these loans to small businesses for the purposes of maintaining their payroll, primarily, and also for paying rent and utilities. PPP loans are 100% federally guaranteed; that differs from the normal 7(a) program, which is 75/25, leaving us with a balance sheet of 25% uninsured. We partnered with several large banks, Stifel Financial, as well as UBS, and others, for a total of four. This led to 100% participation in the PPP loans that we've originated, which means we originate them, fund them, and are able to sell the entire asset off and earn an administrative fee from the SBA. This has put us in a good position, although the margins are narrower than we see for gain on sale on the government. We don't have the balance sheet implications as well, and we're able to turn our capital. We've currently obtained SBA E-Tran loans, which is effectively the guarantee that goes on top of a loan that enables us to make the loan to the business owner. So far we've experienced minimal amounts of fallout once we've obtained the E-Tran number for $1.1 billion worth of PPP loans. We are still taking in applications and opportunities for PPP loans. We feel pretty good about the $1.1 billion number. As I mentioned earlier, we estimate that we have, through the $1.1 billion in expected fundings, been able to provide payroll for over 130,000 employees, which we’re quite proud of that fact to enable small and medium-sized business owners to pay their staff, use the funds for that, and to remain in business and keep the infrastructure going. PPP loans essentially should be thought of as a bridge for these small and medium-sized businesses to get through the quarantine period, which in most states appears to be somewhere within the six to eight week range, some states four, and then obviously, these businesses are going to need further financing, which is where additional rounds of SBA lending come into place. The company has done an amazing job, and once again, I want to thank the staff that's been working tirelessly. Everybody wants their money; they want it quick. It’s hard to accomplish for everybody. It was like 30 people trying to get through a doorframe that can only fit two at a time. We estimate that will fund about two years' worth of loan production in about two months' time. If you look at the CARES Act, $660 billion worth of funding, which in a normal SBA year might be $27 million rounded up to $30 million. So, essentially, the industry will be funding 20 years' worth of production in approximately a month or two, which is pretty remarkable from a dead start. I think it's also important to note that we have offered 100% of all of our current borrowers a PPP loan. I do want to point out that according to a recent survey, despite the unusual name, it happens to be a fairly prominent survey of small to medium-sized businesses, they estimated recently that only about 45% of the marketplace actually went to apply for a PPP loan. I think that does say a lot for the resiliency of the entrepreneurs out there who own and operate small businesses that didn't feel they necessarily needed it, but also indicates – and we've seen a continuous trickle of applications from people still looking for these loans, and the window will be open all the way through, I believe, June 30th. Moving to slide number eight, we will discuss further the CARES Act. One of the important unnoticed aspects of the CARES Act was the decision by the SBA and the Department of Treasury to make six months of cash, principal, and interest payments in any existing 7(a) loan in regular servicing, which we view as less than 120 days and not in liquidation. I say that from the standpoint that we actually received $17.7 billion from the SBA and the Treasury that came in the month of April to flow through our loans and pay principal and interest for a month for borrowers in regular servicing. As a result, it left our SBA 7(a) loans that are in the accrual portfolio at a 98.6% currency rate as of April 30th, 2020. We'll get into this a little bit deeper. We also would like the market to notice what our currency rate was on December 31st, 2019, what it was at the end of the first quarter; it actually improved without these payments. We are working hard with our borrowers to get them positioned for what I'll call the new economy going forward. I think it's important to note that the $17.7 billion of P&I payments not only allowed us to earn a full servicing income stream, but it also enabled us to pay down securitization debt, which is beneficial to our note holders. We've turbocharged the bondholders, meaning that the principal that we would normally get on the equity piece is accelerated to the bondholders. Our bondholders are typically well over-collateralized. This is something that we've done historically, over the course of 10 years; our bondholders are and will be extremely happy. And that's an important aspect of the infrastructure and the reputation that we've built up historically in this particular market. I think it's also important to note that the P&I payments being made for our customers are welcome payments. They offer an economic benefit to our 20,175 borrowers, and this will give them a nice respite during this 30 to 60 days of shutdown, and then they will have four months of additional P&I payments to be able to recover and come out of this economy on the other side. On slide number nine, we want to point out and we'll probably address this in a lot of the Q&A relative to 2020 dividends. We did take our guidance back due to the issue of visibility. To be frank with you, I can create a matrix that gives me a variety of different indications, both beyond the initial forecast, below the initial forecast, and at the initial forecast. But we feel very comfortable where we are relative to being able to offer shareholders a competitive dividend, which we've done historically. We're extremely conservative in our forecasting. You could see how that has benefited investors, as we get to the end of the presentation concerning performance in the stock price. I'll also point out that we are an internally managed BDC. I'm a shareholder as well. I love my dividends and look forward to receiving them out of earnings. As we look at things going forward, we're going to continue to be prudent and look for further visibility in our business model. Moving to slide number 10, we talked about future opportunities and challenging markets. Once again, I want to compliment the management team and the staff for being incredible and adapting quickly and being flexible in a new business model. We have proven to be able to function without the use of branches, brokers, or in-person contact with end customers. This shift in demand for our services highlights the importance of remote solutions providing safe, efficient alternatives. When we discuss our business model and its effectiveness in the current economy, our ability to offer IT solutions, payroll and benefits solutions, insurance issues, and payment processing is crucial. Business owners need to adapt to remote working environments, and our solutions are very well situated to assist them in accomplishing that. We think about the solutions that we have; they need to work seamlessly in a mobile context. I think that it's very important to recognize that many businesses did not have the digital infrastructure to support their operations remotely before this crisis. The significant shift to e-commerce and remote payment processing represents a massive opportunity. We are well positioned to capture that demand and offer our clients innovative solutions. On slide number 30, to conclude, I would suggest you take a look at our history over the last five years. In those five years, things have not always been smooth, but we have been able to bounce back even in tough situations. We are an internally managed BDC. Therefore, our interests are aligned with shareholders. We have a long history and have survived significant economic downturns. We believe that we have a quality business model that will navigate through this pandemic as well.

Chris Towers, CFO

Thank you, Barry, and good morning, everyone. You can find a summary of our first quarter 2020 results on slide 40 of the presentation, as well as the reconciliation of our adjusted net investment income or adjusted NII on slide 35. For the first quarter of 2020, we had a net investment loss of $282,000, or $0.01 per share, as compared to a net investment loss of $1 million, or $0.05 per share in the first quarter of 2019, which is an 80% improvement on a per share basis. Adjusted NII, which is defined in the slide, was $4.3 million, or $0.21 per share for the first quarter of 2020, as compared to $8.3 million, or $0.44 per share for the first quarter of 2019. That's a 52% decrease on a per share basis. Focusing on first quarter 2020 highlights, we recognized $15.8 million in total investment income, a 14.8% increase over the first quarter of 2019. Service – servicing, interest, and dividend income were the primary drivers for the increase, with interest income increasing by 7.5% resulting from a year-over-year increase in the performing loan portfolio. Service income increased by 11.8% to $2.7 million in the first quarter of 2020, versus $2.4 million in the same quarter last year, which is attributable to the average servicing portfolio growing from $1.1 billion to $1.3 billion. Distributions from portfolio companies for the quarter included $3.75 million from NMS, $75,000 from IPM, $250,000 from Sidco, and $307,000 from Newtek Conventional Lending. Total expenses increased by $1.3 million year-over-year, or 9%. Total interest expense increased by $0.4 million in the first quarter of 2020, primarily due to higher average outstanding debt balances, origination and loan processing costs from SBL increased by $450,000 primarily due to increased headcount and overall compensation levels. Realized gains recognized from the sale of guaranteed portions of SBA loans sold during the first quarter totaled $5 million, as compared to $9.7 million during the same quarter in 2019. In the first quarter of 2020, we sold 67 loans for $38.1 million at an average premium of 10.9%, as compared to 117 loans sold during the first quarter of 2019 for $74.1 million at an average premium of 11.09%. Overall operating results for the first quarter resulted in a net decrease in net assets of $7.3 million or $0.35 per share, and we ended the quarter with NAV of $15 per share. Now I'd turn the call back to Barry.

Barry Sloane, CEO and President

Thank you, Chris. We'd like to open up the call to Q&A.

Operator, Operator

Your first response is from Mickey Schleien of Ladenburg. Please go ahead.

Mickey Schleien, Analyst

Good morning, everyone. And thanks for taking the time to explain such a fluid situation. Barry, just quickly on the SBA 7(a) prices and I did look at the slide as you were talking. They were soft in March as you’ve shown, and I have data that shows that they were also soft in April, which is a little confusing, because these are government guaranteed and there's low loan origination volumes. So you would expect the supply and demand imbalance to actually improve their pricing. So can you just describe the market dynamics and what's the outlook?

Barry Sloane, CEO and President

Sure. Mickey, I appreciate the question. I want to add that the SBA has done an amazing job during this crisis, just phenomenal. A lot of people think they're critical of everything. This is not the time to be critical. This is the time to be proud of what we've been able to do here. Now, here's a little technical issue, however, well, historically, they've contracted with an entity called Colson, which, I believe, will be changing out in the very near future. Well, Colson is located in Downtown Brooklyn. So, unfortunately, most of the pool assemblers, I'm saying like almost all of them had difficulty in clearing bonds, because of Colson issues and having to deliver physical certificates and signatures, and that was a primary cause for there being a market dislocation in March and April. I do see that shoring up; we did a little bit of selling in April, and we were able to clear. We had some product left over from the prior quarter that we held on to. But I think from a pure valuation standpoint, these are premium bonds, they’re government guaranteed, and prepayment speeds aren't at 22 or 24, but they're at lower numbers, putting supply and demand side that should affect the bounce back in price.

Mickey Schleien, Analyst

Right. I agree. Moving on to PPP and this is sort of a subsequent event discussion, and I recognize there's limitations as to what you can say. But my understanding is that you're collecting loan administration fees, which will be at the BDC level, and they range from 1% to 5% of the loan depending on its size, right? Could you describe how you expect the accounting for those fees to be? Are you going to book those fees as they're earned or will you capitalize them and then amortize them over the loans life?

Barry Sloane, CEO and President

Important question. First item, we've sold 100% of the loan in the form of participation certificates to third parties. The fees are earned for the purpose of putting the loan together and putting it on our license. So, it’s early, so I'll put the qualifier on it that auditors haven't signed off on this, but in our conversations internally, these fees will be earned upon the funding date. They'll be paid in cash by the SBA; that's still to be determined, but the law indicated a fairly expeditious manner in which those cash fees will be paid. And they'll be – those fees should be earned in the current quarter. But I think it's important to note some people wonder where we're selling these at; they're all sold at par.

Mickey Schleien, Analyst

Right, right. And so there are parties out there interested in holding this 1% paper. I mean, it's a little surprising.

Barry Sloane, CEO and President

It's done.

Mickey Schleien, Analyst

Okay, Barry, since PPP doesn't require the use of your capital based on what you just said, and considering that your legacy loan programs are currently on hold, what is the outlook for Newtek's balance sheet leverage for the rest of the year?

Barry Sloane, CEO and President

Yes, Mickey, you're asking the questions that really are valuable to investors and have created sort of a lack of visibility that we really haven't been able to address up to this point. We're not giving a lot of visibility, but we're giving what we can. When we originate the PPP loan, we fund it, and then we sell it expeditiously. So there's, I'll say, virtually no balance sheet. We've got currently four different funding partners. The funding partners have availability beyond what we've got PPP numbers for. You can imagine that they're fairly deep. I've got one funding partner that's fairly small that will keep us with maybe a $5 million or $10 million balance sheet at the end of it, but practically all of our funding partners are buying 100%.

Mickey Schleien, Analyst

Okay. And these are folks that are, I guess, they're just looking at this given the guarantees. These are almost like money market investments for them, right?

Barry Sloane, CEO and President

Well, look, a financial institution can pledge this at the Federal Reserve for 35 basis points. And they can also put it on their books at zero risk-based capital with unlimited leverage. So, when you think about this, Mickey, this program gets thrust on us where it may have a 4% rate on Friday, a 50 basis point rate on Tuesday, and back to a 1% rate on Thursday, where the way that the United States reacted in this crisis, I think, financially, although it's been heavily criticized, has been just terrific. I want to compliment the Senate, the House, the Administration, the SBA, and the Treasury. So, what you see on TV is everything is bad. It's not accurate. Not everything is bad.

Mickey Schleien, Analyst

For what it's worth, I've stopped watching TV, Barry, but maybe you can, could you at least give us a blended average between the one - a weighted average between the one and the five? I mean, there's a big difference between 1% fee and a 5% fee – borrowers in my sense, it's probably closer to the five than to the one.

Barry Sloane, CEO and President

Well, look, let me comment on this because I want to be careful relative to forecasting and what's going to fund and what's not going to fund. So, as of this date, we funded or closed, which I think also is a great number, about $650 million to $670 million worth of 1.1 billion. So we've been working at light speed. The SBA statistics indicate that round two, the average loan was at the lower end of the rung and that would be in the 5% bucket. I think you could indicate that round one was closer to the bigger loans from an average. But I prefer to wait until June. You could come up with different averages and forecasts and ranges. But we would just prefer to wait until that amount has been funded, that we've been reimbursed from the SBA with cash in the bank.

Mickey Schleien, Analyst

All right, I understand and I appreciate your time, Barry. Thank you.

Barry Sloane, CEO and President

Thank you, Mickey.

Operator, Operator

Thank you. Your next response is from Luke Wooten of KBW. Go ahead, please.

Luke Wooten, Analyst

Hey, good morning, Barry.

Barry Sloane, CEO and President

Luke, how are you doing?

Luke Wooten, Analyst

Doing all right. So just kind of following up on what you were saying. I mean, just because of the obviously ins and outs of the PPP program, just want to reiterate what you said, that 100% of the loan that you guys are originating are being sold, like you said, 5 million to 10 million of the smaller partners that you're partnering with, right?

Barry Sloane, CEO and President

Yeah, so the balance sheet won't grow in this activity by more than $5 million or $10 million. Plus, we've also sold governments that we have in the line, so our leverage might actually go down.

Luke Wooten, Analyst

Okay, got you. And then actually just on the kind of housekeeping question, but on the referral volume for exclusively 7(a) loans in 1Q, do you have that number on hand? Or is it kind of mixed in with the PPP? So it's hard to delineate between the two.

Barry Sloane, CEO and President

Could you repeat that? I'm sorry, there's no phone volume.

Luke Wooten, Analyst

Yeah.

Barry Sloane, CEO and President

I would say that what we've historically done over the course of four or five years relative to referral volume growing, I mean the data wouldn't be useful because if people came in and said they were looking for a $10 million normal 7(a) loan, we just stored it. It just – it's not useful right now. I can't tell you that from a modeling standpoint, the SBA business is now a very common name, and there are a lot of business owners that didn't know about it. Newtek has also become more prominent in the space with a variety of different new referral partners. I would say that we are going to suspend the whole referral volume number for another quarter, and then we'll pick it back up. But I'm confident that our numbers are great, and it's going to grow. It’s not real relevant. I would say those 70,000 are primarily driven to PPP.

Luke Wooten, Analyst

Got you. Okay. That's what I thought. I just wanted to make sure. And then just had a second point on that, you’re expecting the 7(a) to pick up more towards the back half of the year, correct. So kind of two-half 2020 event rather than anything in the next quarter or even maybe a little bit in 3Q, right because of the PPP?

Barry Sloane, CEO and President

I think it's also important to note that the second quarter in the first half is usually weaker than the second half. I think, if you can put any kind of a typical number in the second half that you're trying to forecast, we've decided not to do this. So you guys can do it again, investors want to get a feel for it, but just to go out into the third or fourth quarter, but if you put any kind of 7(a) volume in there with any kind of pricing, it has typically been stronger. I think we'll be able to establish a framework by the back half of 2020.

Luke Wooten, Analyst

Yeah, got you. Okay. And then, kind of switching over to the payment or the principal and interest payments from the SBA, on the current accrual portfolio, I think, on that slide, I think it's 15 loans that are either a little bit past due or further, and so we should expect that less or subtracting out – I think it's the 80,000 that will be transferred to liquidation. The rest should be funded with P&I payments from the SBA, so that would be another just under $5 million.

Barry Sloane, CEO and President

Number goes higher..

Luke Wooten, Analyst

The $5 million balance within principal and interest is obviously lower. Okay. And then lastly, I mean, I think the question has to remain what the demand for businesses and borrowers has been since those borrowers have gone back to work, I mean, obviously, just trying to get through a normalized loss rate on some of these following the six months payments from the SBA. So, I know you gave a slide that saying that 30% cumulative, butchering this, the cumulative gross default at 30% with a 40% loss severity should imply roughly 12% cumulative loss rates on the portfolio. Can you speak more to that coming out of this event? And what kind of business demand has been for borrowers?

Barry Sloane, CEO and President

Well, first thing in addressing valuation, I would say that it's fair especially when you pose it against the literature that we put out that shows these curves really flattening based upon seasoning. For those of you that really aren't immersed in dealing with small businesses and entrepreneurs, they are an extremely resilient class. They are going to come in every day. They are going to make their payroll and unlike a lot of consumers that are, in many cases, living paycheck to paycheck, the small medium-sized business operator, in my opinion, can survive a month or two or three of zero. Now, when I say that, I'm not talking about 100% of the pie, but a pretty big percentage of them. And I think that's what we're seeing. Now, relative to loan demand coming out of this, a lot of them have built up net worth. They've got 401(k)s, they got retirement plans, and they believe in themselves, they believe in their business, they're going to tap into those additional resources to give them whatever equity is required to bridge this and to be able to borrow, if need be, from the next SBA program that comes out, and we do have a lot of people today. There's clearly a pent-up demand for capital. This is a classic downturn from the standpoint that you will lose weaker entities, but the entities that are around are going to do better because they have got less competition. I believe there'll be loan demand.

Luke Wooten, Analyst

Okay, got you. Yeah, I was kind of just looking for adding a few and the anecdotal references from the businesses themselves in terms of kind of consumer demand for their products or anything like that just in terms of their ongoing kind of cash flows?

Barry Sloane, CEO and President

It's a little early, well with respect to cash flows. We pulled in a lot of cash in March from businesses that wanted to get closer to current. We tell people to make their payments so they could still have a deferment down the road if they need one, because you can't get unlimited deferments in the SBA program. You’re allowed one. So I did like 10 or 15 that I could recall, and they were all short-term just to get people current. For the most part, these business owners, they've got savings; they're not going paycheck-to-paycheck. I'm talking about 80%, 85%, maybe 90% that have value in their businesses and infrastructure. Some of them have got marginal businesses and they're going to go out. There’s going to be businesses that shut; I don’t think it’s one, I don’t think it’s three in ten.

Luke Wooten, Analyst

Okay. Got you. That's super helpful. And then this one last one really quick, just kind of on with the actual individual loan that you highlighted the non-accrual loans that paid off on slide 16 to 18. In the interest that's recovered from those recognized in the interest income, or is it like should we expect that to be kind of an interest recovery because I mean just given the size, it looks like it would be roughly like 8% to 10% of the interest income that you guys receive on a quarterly basis. So just want to kind of see if we should look at that as kind of one-time if we look at loan yields or overall interest yields coming in on the 2Q?

Barry Sloane, CEO and President

I think the one good question is, these loans are now cash current, we should have a much higher interest income that comes off of that existing portfolio. Portfolio will shrink a little bit, I still think we'll probably have 8% type prepayment speeds, but a lot of the portfolio got that cash infusion, which will be the full interest coupon as well as servicing.

Luke Wooten, Analyst

Okay. Got you, and that's all. Thank you.

Barry Sloane, CEO and President

Thank you.

Operator, Operator

Thank you. Your next response is from Robert Dodd of Raymond James. Please go ahead.

Robert Dodd, Analyst

Hi, guys. A lot going on obviously, first one, if we can go to the dividend momentarily and then I've got some other questions. I mean, is it the current intent obviously, in the presentation, you talked about there are annual distribution requirements. But is the current intent to pay a cash dividend during the second quarter, just delaying when you declare it because of lack of visibility? Or is it more the intent right now to pay out kind of more in the second half as everything works out?

Barry Sloane, CEO and President

Robert, number one, the Board's going to determine that. I am a Board member and we kind of get more visibility as every day that goes on. I think that we clearly have got investors that look forward to receiving some cash payment on a quarterly basis. Given that we think that the second quarter could be a very big quarter, and normally, we kind of keep that dividend very close to what NII is; that’s the store. But whatever it was historic almost goes out the window now.

Robert Dodd, Analyst

Got it. I really appreciate that color. I mean you used to mention it again, like a bit if I'd asked you two weeks ago, you’re given a different answer in your prepared comments. You talked about, you do expect the SBA market to come back now in the second half of the year. But if you actually that two, three weeks ago, you might not have said that. So obviously, things are moving really fast. But what have you seen over those two weeks? What is it that's changed your confidence level so much more in the interest, this question about the fact that the traditional program can come back in a second half?

Barry Sloane, CEO and President

I love that question. Two weeks ago, everybody believed the money would run out in 10 minutes. There’s no money; the whole 310 billion in the second would be gone, which means you need legislation to appropriate new 7(a) money. Well, lo and behold, the money is still out there. There is 120 billion left that could be used for 7(a) through the end of this year, and it will most likely get relegislated. I've also seen the Rubio, Cardin letter. You hear things from Pelosi and other politicians, this program is a bipartisan program. The administration is talking about growth and going forward and another round of stimulus, which I believe and hope the SBA would be part of it. Important to note, the Rubio bill was part of the original CARES act; that portion of it that would have gone to 90% with $10 million limits and the availability to not have credit elsewhere. That got pulled because I think what the administration wanted to do is they want to do bridging first, to bridge everybody, get paychecks out there, get money to consumers, do PPP and then go with stimulus after the fact. So, number one, the availability under the 7(a) program. Two, what I'm hearing from Washington. Three, loan demand from businesses that indicates to me that we'll get back into a normalized environment.

Robert Dodd, Analyst

Sloane, I really appreciate the color. Thank you, bye.

Barry Sloane, CEO and President

Thank you.

Operator, Operator

Thank you. Your next response is from Scott Sullivan of Raymond James. Please go ahead.

Scott Sullivan, Analyst

Thanks for taking my call. One comment and two questions, real quick. We all know this was really kind of a DEFCON situation. So, personally, I had to tip my hat to both sides of Congress to come together on this, what I think was a very elegant bill. And also really huge congratulations to you and your staff, your team for helping such an important and vital component of the U.S. economy and you guys should obviously in my opinion, be very proud. So, first question is, what's your goal for your staff this next quarter?

Barry Sloane, CEO and President

That's a good question, Scott. Because they're working real hard, the clients appreciate them, we appreciate them. We've got to keep them going, keep them in their seat, keep them hydrated, just keep them going at a very high pace to get the money out and then deal with the concept of loan forgiveness on these loans. In addition to that, the payroll staff, payments staff, tech staff, and insurance staff are also going to be helping out on the program and working with businesses to get their payroll costs down, to get better health insurance policies, to get other insurance policies that they need to improve their technology for working remotely and from home. So we have goals that are well beyond what is sitting right in the face.

Scott Sullivan, Analyst

Great. Appreciate that. Last question with a large number of new customers, obviously been introduced to and are helping now. What kind of cross-pollinization do you think you could see and so targeted brush on this in the last response? What kind of lift could you see for your other small business offerings?

Barry Sloane, CEO and President

I've told my staff that I think this is kind of a once in a lifetime opportunity where businesses now that are in many cases, not fully functional, not fully operational, not really focused on revenue growth. To really focus in on the expense to focus on having the best solution and to get them to make changes. This is a once in a lifetime opportunity for a business owner that can sit there and look that I have the best technology. Can I work remotely? Can they work remotely securely? Are they storing? Do they have hot backup? Are they using the right payment processing solution? Should they go to a zero-cost model? Should they improve their website? I mean, we impressed upon restaurants, for example, to take e-commerce. A lot of them hadn't. I don't want to spend $1,000 or $2,000 on a new website; that would have been the best investment they ever made. To be able to order online and have curbside pickup, they would have been able to stay in businesses. The businesses that have done curbside pickup have really got hurt. Thank you so much and congrats. Thank you.

Operator, Operator

Thank you for joining us today. This concludes today's conference call. You may now disconnect.