Good day and thank you for standing by. Welcome to the Newtek Business Services Corp third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Barry Sloane, President and CEO of Newtek Business Services Corp. Sir, please go ahead. Thank you, operator, and good morning, everybody, and welcome to our third quarter 2021 financial results conference call. I'd also like everyone to welcome Nick Leger, our Chief Accounting Officer, that will assist me in the presentation today. I'd like to point everybody to our PowerPoint presentations that are hung on our website, newtekone.com. Go to the investor relations section, events and presentations. There are PowerPoint presentations for today, which is the third quarter of 2021 financial results conference call. We also have a presentation introducing the NewtekOne Dashboard, which we'll talk about. I'd also like to point out we may have some a new investor group on the conference call that has an interest in banks. We obviously announced over 90 days ago the acquisition subject to a proxy vote and regulatory approval of National Bank of New York City. We might have some new investors on the call. If those investors are interested in seeing information previously distributed to the investment community on what the bank might look at, there are presentations on the website from August 2nd, 5th, and 10th. We're proud to announce our results today. We think we had a terrific quarter. A lot of the results that you're gonna be seeing really are representative of the company's ability to apply technology to financial and business services solutions. We've got some terrific key performance indicators and metrics that are dedicated to demonstrate that our business is growing, is well-positioned for the fourth quarter and beyond into 2022. I'd now like to bring everyone's attention to the PowerPoint presentation that is on our investor relations section regarding today's particular call. On slide number one, please note the forward-looking statement disclaimer that is there. We appreciate everyone taking the opportunity to read and review that. Moving forward to slide number two. We've historically had proven shareholder value creation with a track record of growth and returns. Using Friday's close, we had a year-to-date return of 73.3% through November 5 from January 1. The one-year return, 105%. Three-year, 124%. Five-year, 264%. Ten-year, 1,162%. Obviously, we've historically been able to— in addition to paying dividends while we were a BDC— get tremendous capital gains from the marketplace, and that's been based upon our ability to grow revenues and earnings. I believe that we feel very good about the third quarter, good about the fourth quarter coming up, as well as a projected dividend for Q1 of 2022 that we'll chat about today. Once again, important to note, we do believe and anticipate that we'll be able to continue this type of performance. Whether we're in a BDC form or another form, we do believe that the value will be given out to shareholders through dividends and stock price appreciation if we continue to perform as well as we've done historically. Slide number three. Important to note that companies all across the globe and the United States are coming through the pandemic. Obviously, a lot of our comparisons are a little murky with respect to pre-pandemic results versus pandemic results versus post-pandemic, which we think we're in the period now or hope we're in that period now. We've clearly emerged from the pandemic, firing on all cylinders, using many levers for the business model, whether that's gain on sale from the government guaranteed portions of 7(a), servicing income, spread income off of the SBA 7(a) portfolio, which was at a record net interest income for the quarter, which we're excited about. 504 loans, non-conforming loans, payment processing, tech solutions. Many, many levers we have in, on Newtek Business Services Corp to be able to provide dividends and earnings to our shareholders. In addition, throughout the calendar year, we've continued to invest in our business model with technology and human labor. We've increased our lending portfolio company and NSBF, Newtek Small Business Finance headcount, by 52 individuals, a 27.5% increase. We do believe, once again, we're extremely well-positioned. We wanna give some cautionary note to various comparisons. We've gone to great lengths in this particular document and discussion today, particularly when looking at lending to go back to 2019. 2019 is pre-pandemic. 2019 won't have the noise of the PPP income or loan originations. We also believe that what we've done in the pandemic is indicative of what the company is capable of doing, when unexpected situations come up, but whether negative or positive. We obviously were able to shift quickly, hire new people, put in new technology, put in new processes and procedures, which enabled us to be able to process PPP loans for our partner, the SBA, and for the business community that we serve each and every day. Slide number four talks about some of the SBA 7(a) lending highlights. When we talk about core lending, we're talking about SBA 7(a), SBA 504, and our non-conforming business away from PPP, which that, at this point in time, is behind us from an income generation standpoint. We're obviously still servicing PPP loans to get the forgiveness for our clients. For the most part, it's important to note as you're evaluating Newtek as an investment opportunity, the core lending business, the trajectory, the growth is what everybody should be focusing on. Looking at the second bullet on slide four, Newtek Small Business Finance funded $163 million of 7(a) loans, three months ended September 30, 2021. That's a 43% increase over the $114 million of 7(a) loans for the three months ended September 30, 2019 pre-pandemic. When you look at a nine-month number, it's $362 million loans versus $334 million, an 8.3% increase. Important to note on the fourth bullet, we had a record $102 million of SBA 7(a) loans in October, which is unusual for us because we do typically fund most of our loans and close them in the second and third months of a quarter. We're very proud that we've been able to flatten this out. We had a great October. When we say they're approved pending closing, it means that we've given a commitment letter to the borrower. That usually comes in around 90% ± close rate from there, on funding rate, I should say. $102 million of 7(a) loans in a month is spectacular. I give the management team, the technology team that's provided us these enhanced technological solutions, some of them which we could chat about today, whether it's getting loan assemblers to have calendar invites from borrowers, speeding up processes from a technological data moving perspective, from assembly to underwriting to credit memo to committee to closing. We've done a tremendous job in making the company more efficient. There'll be other KPIs we'll talk about today to demonstrate those particular efficiencies. We've increased the lower end of our 2021 7(a) funding guidance to $560 million from $550 million-$600 million for the full calendar year. Obviously in this particular calendar year, we funded $1.9 billion of PPP loans. I think it's important to note that while we funded and believe we'll get to a record number of 7(a) loans in any given year for Newtek, we also funded $1.9 billion of PPP loans with 26,500 customers. Now, I realize that many of us are sort of embedded in the financials, but operationally, you could see we've really been working on all cylinders. We're significantly more operationally efficient, and we're deploying those resources into core lending, which in my opinion, portends a great growth future for our business. Slide number five is sort of a precursor to slides going forward, just talking about growth, how we're well-positioned. Once again, we're gonna discuss our pipeline being strong, technology story being strong, and growth being strong. Slide number six is indicative of the type of progress that we've made. Looking at the pipeline, you know, in calendar year ended September 30, 2021, 2020, and 2019, using the 2019 pre-pandemic comparison as being most important, particularly with notes on approved pending closing, $160 million at the end of September. We had $100 million in October. We look forward to a very good fourth quarter. I think it's also important to note that we've had significant growth in our SBA 504 business and our non-conforming conventional business moving along a little bit slower with a little bit more caution, but still an important part of our future growth story at Newtek. Slide number seven, important to note that we feed off of our technology, the NewTracker referral system. We've been using this system for 18 years. This makes us branchless, brokerless, BDO-less, and bankerless. Really using technology to reduce what we would call a significant amount of real estate and human labor interaction with a borrower that can really be replaced, more efficient, and more accurate through the utilization of technology. To the point where loan referrals received for the quarter, 72,000 versus 12,600 for the same period in 2019. Looking at the nine-month run rate, we look at 355,000 of loan referrals for the nine months versus 41,000 for the same period in 2019. From a unit perspective, we closed 214 loan units in the recent quarter ended September 30, 2021. That's versus 149 units in 2019. You're looking at 30%-35% higher with respect to efficiencies. We obviously have a very large database of existing clients that pay us, as well as clients in the database. Over 1.5 million businesses have given us referral opportunities through one of the five particular product areas. We will spend time talking today toward the end of our presentation about our cross-selling efforts, as well as a separate PowerPoint presentation detailing the NewtekOne Dashboard. I'd say this will get rolled out regardless of the bank acquisition. Not to say that the bank acquisition will or will not happen. It's more of a point that the dashboard, from a product perspective, is something that will be done with or without us as a depository. We're excited about the dashboard. We'll talk about its capability, particularly using a dashboard subject to shareholder vote, subject to regulatory approval as a bank. Very exciting product, very competitive, and really puts us in a unique position. We will be chatting about that later on in the presentation. To wrap up this slide, once again, important to note, with 18 years' worth of history in loan assembly underwriting and using our technological expertise, we believe we are a leader in the area of small business lending. We materially improved our technological assets and resources to create operational efficiencies in all these particular areas. What these efficiencies do is they improve the client experience. They enable us to process loans better, quicker, and with less effort, which makes it a much easier employee experience, and most importantly, makes it more efficient for bottom-line earnings. Slide number eight, I do get asked quite frequently, you know, what's happening in the small or medium-sized business community in your market. The SBA defines small or medium-sized businesses as 30 million individual unique business owners in the United States. I have to say that from a macro perspective, this particular demographic and market segment, as we're going into the pandemic, people clearly were concerned about it. We are excited about the partnership that we have with the SBA, as a non-bank lender and one of the leaders in all SBA lending. We feel that really that partnership creates a bit of a embedded infrastructure in us. When you look at what the SBA has done for all businesses across the United States in terms of providing support, it's pretty remarkable. A couple of quick data points. Broke its record for traditional lending, $44.8 billion in funding in 2021 fiscal year. That's in addition to the $1 trillion of other COVID-related rescue programs. The 7(a) program accounted for $36.5 billion. The SBA also funded $8.2 billion through its 504 program. Important to note, the SBA still has tens of billions of dollars left in its Economic Injury Disaster Loan program known as EIDL. They have grant programs outstanding, and they've already funded $3.8 billion. With respect to the EIDL program, the agency currently has approved more than $283 billion. Small business owners can currently apply for additional EIDL loans, where there was original cap of $500,000, now it goes up to $2 million. We'll talk about how we're active in helping our clients through the use of these programs. Slide number nine depicts our lending staff. In addition to growing head count, we've significantly improved the quality, particularly, at the managerial level that's worked very hard. People like Justin Gavin, Tony Zara, Virginia Wiley, and others in our organization really hiring, training, bringing people into the organization that wanna help build the business. Not that wanna do the business that they've done the last five or 10 or 15 years somewhere else, but wanna come in and use our technology, use our thought process, use our way of providing financial and business solutions to our customer base in a more cleaner, faster, more efficient way. Building businesses are what we're looking for in our staff. In addition to growing the FTE count, we've clearly improved the quality of our staff, both from the rank and file and managerial perspective. Slide number 10 is a focus on the third quarter financial highlights. There's quite a bit of PPP noise in some of these numbers. I want to point out that the important aspect for us, which we always look at, is adjusted NII. For those that are new to the Newtek story, and they're trying to figure out what adjusted means. The adjustment of NII, which is a non-GAAP term, adds the gain on sale that we get from SBA lending, which has been a recurring event for this company for 18 or 19 years. Although it's not considered GAAP for a BDC, the market has begun to accept that. Our adjusted NII came in at $0.56 a share. That was an increase of 1300% over the same quarter last year as we were ramp up our 7(a) program. Our debt-to-equity ratio of 1.37x. When you take out the broker receivable at the end of the quarter, 1.24x. Our net asset value grew to $16.23 from $15.45. It was reduced a little bit as we begin to pay out the cash that we've received from prior earnings. You know, mind you, we've generated about $2.21 of adjusted NII through the first three quarters and have been paying that dividend out sequentially. Obviously, we've got a big dividend payout coming in Q4, which could have an effect, holding everything else constant with respect to NAV. Slide 11. The nine-month picture. Once again, I move right to the adjusted NII of $2.81 a share. That's a 74.5% increase. Once again, as we're ramp up the 7(a) portfolio. In this particular calendar year, we had the benefit of PPP plus 7(a). We had that last year, but we had it for a smaller portion. As the pipeline is growing and the portfolio is growing, and we're getting back into our core lending. All of that will wind up replacing a significant portion of the PPP income. We're excited about our future, and we were able to forecast 2021 dividend growth, which we'll talk about. Maybe that will be helpful to those that are looking for a more full picture for calendar year 2022. Flip to slide 13. From a metric standpoint, we as a BDC are always talking about our dividend. The company has declared dividends for the full year of $3.15. That represents a 53.7% increase over those paid in 2020. We've also forecasted a first quarter 2022 dividend of $0.65 per share. Now, in looking at that $0.65 per share dividend that we have forecasted for the first quarter of 2022, important to note, pre-pandemic 2019 first quarter, $0.40. In 2020, somewhat pre-pandemic, the pandemic kind of came in the month of March, $0.44. You could see that we're growing our dividends on a core basis. For those of you investors that follow our story, you typically know our second half stronger than the first. Second half, even if you straight line the $0.65 across the four quarters, $0.65 times four represents about $2.60. If you start to play around with the math of looking at that, you know, first half represents 40% of the full year or 45%, you wind up with numbers that are a little shy of $3 or a little over $3. That's on an adjusted NII, assuming you pay 100% of the dividend out. Full year 7(a) funding forecast, we said $560 million-$600 million. That's for 2021 of 7(a). The SBA 504 funding, $125 million-$150 million for the full year. That's. We're excited about the growth in the SBA 504 business. We'll talk about that a little bit more. With respect to the non-conforming conventional loans, we look forward and anticipate that we'll bring a securitization of our non-conforming product in the fourth quarter of 2021. Moving to slide number 14. $0.05 dividend declared for Q4, payable to shareholders of record as of December 20, 2021. We've mentioned that payment of the fourth quarter dividend, 123% increase over the prior year and quarter. We talked about the $0.65 dividend. I think it's important to note in looking at our dividends earnings forecast for this year, the portfolio companies, and I will point out three in particular, Newtek Technology Solutions, Newtek Merchant Solutions, Newtek Business Lending, which are the three entities that contribute material amounts of income to the business, did not distribute income to the BDC for the first three quarters of 2021 except for $50,000. Each one of these portfolio companies have made elections to not distribute that income and that cash. That cash can be used for other things. It can be used for lending money to the lender, so it doesn't have to sell stock. It can be used for lending money to the lender to buy back publicly traded bonds and debt. It could also be used for acquisitions that are interesting and out there. I think it's important to note, and I realize this put a little bit of a burden on the analyst community. First three quarters of this year, and there's been significant earnings generated from those businesses, which we'll talk about later on in the presentation. Have been held both the cash and the earnings at the portfolio companies in those portfolio companies' best interests. Slide number 15, adjusted NII, we're forecasting $3.40. I wanna point out, and it's important to note, we recently put out a press release on the $3.40 adjusted NII forecast. We have four analysts in the community, one forecasting $3.40, one $3.36, one $3.36, and one at $3.58. The $3.58, based upon our projections and forecast, tends to be an anomaly. Obviously, everybody's gonna make their own decisions, investors, analysts, et cetera, but it has tended to mess up the consensus numbers out there, which it is what it is. We would like the investment community to follow our forecasts. We like to believe that these are things that can be relied upon. Also important to note, you know, from a dividend and yielding perspective, there's been tremendous improvement in the BDC segment over the course of the last year. According to a recent KBW research piece put out on November 15, it looks like last 12 -months trailing, about 8.6% on the date of the research piece, which was October 31, 7.9%. Those are for the externally managed BDCs. The internally managed BDCs, of which there's one, 6.6% yield, and that's last 12- months trailing. When you equate that to our expected dividends for next year, we think we look like an interesting investment opportunity, whether we're a BDC or we convert into a different form, which we do look forward to. Slide number 17, a slide on lowering the cost of capital. Important to note, the company has the ability to call existing baby bond debt. The NEWTLs, the 5.75% notes due 2024 have been callable as of August 2021 without any form of call lockout or prepayment difference. The NEWTZs, the 5.5% notes due 2026 are callable after February. There's make-whole provisions for 12 months after that diminish through the course of the year to where they're fully callable a year after the fact. The company intends to use securitizations, cash on its balance sheet, which at this point in time is significant material, and other capital markets tools to refinance this expensive debt and hold apart. I think this is important for our going-forward story because we do look forward to reducing expensive high cost of debt, whether as a BDC or in a bank holding company structure. Slide number 18. A slide that many of you are familiar with. Once again, important to point out at the SBA's fiscal year, ending September, third-largest SBA lender by lending volume. Average loan size of the uninsured risk-based piece on our books, $161,000. We're floating rate with 2.75% coupon, which currently would be a 6% yield. Our net interest margins and income generated from that portfolio company has never been as high as it has been in the third quarter. We're proud of that recurring income. That will be beneficial to us in years to come. Slide number 19 talks about the net premium trends. I wanna point out that in the fourth quarter, we've got about half of our portfolio covered with 90% guaranteed loans, and those are trading at higher dollar prices. We also had $28.5 million of guaranteed portions on our books at the end of September 30 that were available for sale. Slide number 20 talks about the seasoning of our portfolio. With recent loan volumes, this probably will start to diminish and get a little bit newer. I think it's important to note that the existing portfolio clearly is in the belly of the default curve. Slide number 21 shows our delinquency rate. We're pleased that the delinquency rate actually got a little bit better through September. We aggressively work our portfolio, and we'll talk about that shortly. I say got better, improved from June 30, 2021 to September 30, 2021. Slide number 22. We talk about loan servicing metrics and functionality. We have 60 full-time employees as of September 30 servicing loans, working with our borrowers, improving their position in life through a variety of different solutions that we offer, whether it's a better way to process payments, a better way to insure themselves, a better way to manage their technology, a better way to have a website that's more interactive, a better way to process payroll, manage human resources, whatever it might be. In addition to that, we have used the tools that are available in the marketplace to enhance the creditworthiness of our borrowers. Obviously, the PPP financing, which is now over. Our borrowers also experienced the Section 1112 payments from the CARES Act, which ended September 27. We're also securing EIDL loans for our borrowers when needed, an Employee Retention Credit program, which now can be used in addition to the PPP funding. We aggressively work with our customers to make sure that they've got all available tools to do well in the market. It's important to note, once again, it's times like these to be partners with the government in various different activities, particularly in our 7(a) lending. Slide number 23, 24, for our new clients, show the income and cash effects of SBA 7(a) lending. Let's quickly swing into our portfolio company review. Our SBA 504 program, which we're very proud of. You know, we funded or closed $100 million of 504 loans through the nine months of this calendar year, a 359% increase over the same period in 2020, a 280% increase over the same period in 2019. We had 31 loans closed for $92 million of total financing. I think it's also important to note that during this period of time, we sold $41.5 million of the first liens. The second liens are taken out by the government in the form of SBA debentures, which represented about 18 units and about $1.4 million of gain on sale. We have plenty of capacity here with our funding facility from Deutsche Bank and Capital One Bank, and we're forecasting $125 million-$150 million of 504 loans for the full year of 2021, which at the midpoint would be a 57.7% increase. Slide number 27 and 28 demonstrate the high return on equity that you get from a 504 loan. When people look at our returns and they say, "Gee, you know, how do you generate such high returns as a BDC?" Well, the important aspect of that is we have these lending operating businesses under the BDC umbrella. They qualify for good BDC assets, good BDC income. These activities generate significantly higher returns on equity than buying loans, levering them, which is basically what most BDCs do. We're proud of our business. We're proud of our model. That doesn't include the operating businesses of the portfolio companies in payment solutions, in Newtek Business Lending, our SBA 504 business, as well as the Newtek Merchant Solutions, our payment processing business. Slide number 29, our conventional loan portfolio. As we mentioned, we look forward to a securitization coming up in the fourth quarter. We have principal balance of $87 million, all of which are current payments, 15 loans. I think we've had two or three paid off. Most of these loans are pre-pandemic. We've only had two loans that we funded in recent times. Moving forward to slide number 31. Our payment processing business, an important business for us. We've been in this business since 2002. We have an enterprise value of $121 million on this business. That's obviously including debt and excess cash to give us that total enterprise value. We're forecasting EBIT of $14 million for this business this year. We've experienced a 14.3% increase in monthly sales volume for the third quarter. Obviously that's rebounding from the pandemic, so we look forward to increasing and better growth numbers in calendar year 2022 as we rebound. You know, COVID clearly had an impact on our mobile money business, where we've got close to 800 or 900 cab drivers in Newark that represent about $1.3 million of gross profit margin. In a good year, that's down probably by 60%-70%. As the airport opens up, particularly with international travel, we expect a nice rebound from that particular business. Slide number 33, we talk about our payment systems, POS on Cloud. Without getting too much into the weeds here because this could be a longer conversation, and we have a whole webpage and website devoted to newtekpaymentsystems.com. Please go take a look at it. Important to note, this isn't just a POS that takes a payment. It's a POS that makes the business more efficient. It makes it more efficient in processing payroll, processing payments, integrating with e-commerce, integrating with food delivery services, integrating with general ledger accounting software, deducting money from a 401(k). Very, very valuable system. We look forward to growing this side of the business as well. Slide number 34. In our technology, portfolio area, we're proud to report that we've bumped up our 2021 EBITDA forecast of about $6.5 million. If you go back to 2020 when these businesses were broken out individually, you're probably looking at around $3.5 million of EBITDA combined. We've had tremendous growth in this calendar year. We're excited about the business. I would suggest for those people looking to see what we do in this area, please go to our website, newtektechnologysolutions.com. You know, I'd like to point out that the businesses are primarily infrastructure as a service, desktop as a service, disaster recovery as a service, security as a service, secure email, hybrid cloud, public cloud, private cloud. Very important business segment for us and will be an important segment as we look to roll out, potentially subject to shareholder vote and regulatory approval, to be able to provide data storage solutions in a banking environment for our customers. We currently do that today in lending and across many of our businesses. That business has approximately 17,000 paying customers. Slide number 37, to round out the full suite, Newtek Payroll & Benefits Solutions, Newtek Insurance Solutions. We're excited about both of these businesses, and we're confident that they'll fit very well into that NewtekOne Dashboard. Let us go to the PowerPoint on our website entitled The NewtekOne Dashboard. I've been asked a lot of questions about the dashboard. I've been asked, "Gee, is this special? What makes it different than other dashboards? What makes it unique?" I quickly wanted to go through a couple of screenshots. These are obviously screenshots that, at the moment, are not operational. We look forward to the dashboard being operational hopefully in Q2 of 2022. When you go to slide number 39, this would be the primary interface on the dashboard. What it enables one to do is to see all the things that Newtek currently does for its customers merge into one dashboard, one single sign-on. The NewtekOne Dashboard is the one dashboard for all your business needs. The purpose of giving this dashboard to prospectively a banking customer or a Newtek BDC customer is to give them the ability to have all their critical business functions in one place. First of all, to sign up for the function, as well as to see the function, see the array, transact. It really does many different things, which I'll talk about at the conclusion of the presentation. Look, if we do ultimately position ourselves as a bank holding company, you'll be able to see all the different account balances, lending balances, merchant processing information, which we'll talk about in these forward slides. Looking at the efficiency of the website from an e-commerce solution. Being able to make payroll from the dashboard, manage workman's comp, health insurance, have HR tools on the dashboard, be able to purchase all the insurance needs from workman's comp to a BOP to cyber liability. Importantly, storing all those corporate documents. Tax returns, articles of incorporation, insurance policies, leasing agreements, all those important corporate documents that are held elsewhere in multiple places. One single sign-on. We're very excited about the dashboard going forward. I'd like to turn everyone's attention to what is slide number three. That will give you just a quick glimpse of the depository nature. This obviously will, I'll use the word ultimately, be available in mobile in the event that we're a bank or obviously online. It'll be something that could be used for viewing balances as well as moving money around. Bill pay and all statements will be stored in this dashboard. Slide number four is a view of a loan that a client may have with us. You can take a look at the payments upcoming, take a look at the statements, the interest rates, the due dates. Whatever information is needed will be on that lending dashboard. Slide number five, the M erchant S olutions section. I've got a few slides here. For those businesses that are taking payments, whether through credit card or ACH, whether it's Visa, Mastercard, Discover, American Express, they'll be able to see the breakdown of all the different card types. They'll be able to see the different payment dates per transaction. They'll be able to see all the statements. They'll be able to look at how their sales are growing from month- to- month, quarter- to- quarter, year- over- year. Going to slide number six, they'll actually be able to take a look at batches of payment processing information and be able to drill in and review those particular batches. Slide number seven, they'll actually be able to drill down and look at the actual payments for the credit card, and see all of those payments going directly into their account. Important to note, our solutions are intended, and we anticipate and expect they'll all be able to be integrated into accounting GLs like QuickBooks, Xero, et cetera. Slide number eight, Newtek Payroll Solutions. Be able to make payroll directly from the dashboard. See all payroll information, whether that's taxes that are escrowed, taxes due that are coming up, employee salary, be able to sign off on payroll right from the dashboard, be able to purchase payroll from Newtek. I think it's important to note, as clients come to us, if we're a bank for depository services, we can also offer them the payroll solution right on the dashboard. We'll be able to margin pool across all these different items. Newtek Technology S olutions. This will give our clients real-time data to their website. How effective is that website? By the way, these are all things we do today. This isn't fairy tale. This isn't something we're trying to do in the future. Every solution we've talked about, we currently do today. You'll be able to go to, through our dashboard, look at how many people visited the site yesterday, how many of them were unique visitors, the average time on the site, the bounce rate, the activity from organic search, from SEO. Tremendous information coming in from the dashboard. The storage component. Looking at all the important documents that one might have, articles of incorporation, operating agreement, workman's comp policy, general liability, listing of all buy/sell agreements, real estate leases, et cetera. Look, when we talk about the dashboard and the importance of it to the company, whether as a BDC or as a bank, the NewtekOne D ashboard harnesses the power of Newtek, and it gives you the ability to monitor and visualize your business in real time in one place. It's also the one dashboard that's gonna help you track your key performance indicators. Of course, banking, lending, processing, bill pay, payroll, website, accounting, and other important information. The dashboard will also be customizable. We look to add things like tax and digital bookkeeping at some point in time. It also gives us the ability to bring in third-party provider information. Maybe you've got bank accounts or business elsewhere. I've had people say, "Gee, I've seen this in other places. This isn't unique." I beg to differ. You look at entities like Yodlee and Finicity. They're aggregators of data, but it's not their data. It's not their solution. They're just pulling data and putting it into one place. We have something that's well beyond that. It'll be a tool for a business owner that doesn't really wanna go away from us because of the value add that we give them. Looking at the center of the NewtekOne Dashboard, as I said, these are services that are currently provided by Newtek, directly by Newtek. It gives you the ability to transact directly from the dashboard, and that dashboard is customizable. Moving forward to slide number 40, investment summary. Look, we've consistently outperformed the Russell and the S&P over a decade. Not an easy thing to do in all different kinds of markets. If you're looking at us for our lending talent and expertise, we've been doing this over 19 years, through two of the worst credit moments, the 2008-2009 credit crisis as a non-bank lender and the current pandemic, which was extremely challenging. Our interests are very much aligned with shareholders. Management and the board own 5.1% of the outstanding shares. We do what's in the shareholders' best interest. Our interests are aligned. We've demonstrated an ability to succeed in all different markets. Most importantly, the company's thesis is predicated upon this great segment of the market that's very favorable, both in Washington on Main Street, independent business owners, small and medium-sized businesses. We've used technology as a solutions provider to be a disruptor in our industry demographic, whether as a BDC or another corporate structure, and we will always be an innovator. That's one thing Newtek has been. We've always been an innovator, which really underscores the reason why we've been able to perform the way we have. I appreciate your time today. I'd like to turn the financial review over to Nick Leger, Chief Accounting Officer. Thank you, Barry, and good morning, everyone. You can find a summary of our third quarter 2021 results on slide 42, as well as a reconciliation of our adjusted net investment income or adjusted NII on slide 44 and 45. For the third quarter of 2021, we had a net investment loss of $6.7 million or $0.30 per share, as compared to a net investment income of $1.7 million or $0.08 per share in the third quarter of 2020. Please note that income related to the PPP is included in investment income. Adjusted NII, which is defined on slide 43, was $12.6 million or $0.56 per share in the third quarter of 2021, as compared to $900,000 or $0.04 per share in third quarter of 2020. Focusing on third quarter 2021 highlights, we recognized $12.4 million in total investment income, which is a 16.7% decrease over the third quarter of 2020's total investment income of $14.9 million. Interest income related to the fees from the PPP was the primary driver for the decrease. We recognized $269,000 of income related to the origination of PPP loans on $6.4 million of PPP loan originations during the third quarter of 2021, as compared to $3.1 million of income recognized in the third quarter of 2020 on $82.5 million of PPP loan originations. There were no distributions from portfolio companies in the third quarter of 2021, as compared to $2.2 million in the third quarter of 2020. Moving on to expenses. Total expenses increased by $5.8 million quarter-over-quarter, or a 43.7% increase, mainly driven by an increase in SBA 7(a) loan referral fees due to higher loan origination volume, also interest-related costs and other loan administrative expenses. Realized gains recognized from the sale of the guaranteed portions of SBA loans sold during the third quarter totaled $22.4 million, as compared to $1.6 million during the same quarter in 2020. In the third quarter of 2021, NSBF sold 205 loans for $148 million at an average premium of 13.04%, as compared to 16 loans sold during the third quarter of 2020 for $11.8 million at an average premium of 11.79%. The increase in realized gains is attributable to higher SBA 7(a) loan origination volume in the third quarter of 2021, combined with higher average premium prices when comparing to the third quarter of 2020. As I mentioned earlier, income related to the PPP is included in investment income, not in realized gains. Moving on to realized losses on the SBA non-affiliate investments for the third quarter of 2021 was $3.2 million, as compared to $2.4 million in the third quarter of 2020. Overall, our operating results for the third quarter of 2021 resulted in a net increase in net assets of $16.6 million or $0.74 per share, and we ended the quarter with NAV per share of $16.23. I would now like to turn the call back over to Barry. Thank you, Nick. Operator, we'd like to open up the call to Q&A. Thank you, sir. At this time, we would like to take any questions you might have for us today. As a reminder, if you would like to ask a question, simply press star then the number one key on your touchtone telephone. We have our first question from the line of Richard Molinsky from Max Ventures. Your line is now open. Congratulations on continuing to execute. I just have a couple of quick questions. Is there any plans for any distribution of dividends from the portfolio companies? Is the first question. The second one, what is the earliest time that possibly this acquisition with National Bank of New York City could go through? What's the earliest, when's the latest date? Because I think that would be a major benefit based on your track record, you know, getting that deal done. Richard, on the second question, we originally, back in August, gave an indication of, you know, six to 12 months. At this point, I believe that, given the timetable, I think we're probably gonna be closer to the 12 months. Okay. Therefore, this is just a guess at this point. Right. It's a total guess based upon the creation of a proxy, a vote. Discussions with regulators, and obviously we know that there's a lot of changes going on at the Federal Reserve and the OCC right now. I think that you're looking at a third quarter would be the best guess for a close. All right. Regarding the dividends, what the portfolio companies do at the end of each quarter is make a decision in their best interests whether or not to distribute dividend income up and best use of that. The portfolio companies have been able to work with the BDC to provide funding because they're generating quite a bit of cash. The projection for NMS this calendar year is $14 million. Projection for NTS, $6.5 million. The projection for Newtek Business Lending. Those two numbers are EBITDA numbers. Newtek Business Lending is a lender. I'll say between, you know, $4 million or $5 million. It's a reasonable amount of income generated from those businesses and cash that it can basically provide to the BDC to lend or prospectively use that cash to buy back debt that's expensive, which is, I guess, part of an overall plan that we disclosed today. I can, you know, state that for the first three quarters, that's where we wound up, and we'll see what happens next quarter. You know, that cash and that earnings can also be distributed at any point in time. They don't go away. Right. In the BDC world, the portfolio companies have the opportunity to retain for periods of time and then distribute. Don't have that luxury at the BDC. I call it a luxury. It's also a benefit to shareholders because they get a more full amount of a dividend. Given that we have a $3.15 quite healthy dividend this year on projected adjusted NII of $3.40, we think we've had a pretty good year so far. Yes, you have. Barry, as always, thank you so much. Appreciate the answer. Yeah. Thank you, Rich. Take care. Thank you. Thank you. Our next question is from the line of Mickey Schleien with Ladenburg. Please go ahead. Good morning, Barry. I hope everyone there is doing well. Barry, this year, lenders, including Newtek, have had a lot of positive trends providing tailwinds, you know, including things like the strong economic growth and a very low default environment. I'm thinking next year will be more challenging with forecasts for lower growth and the Fed already announcing that they're gonna end quantitative easing and, you know, potentially they'll start to tighten. I'd like to understand how you're thinking about those risks in terms of managing Newtek's balance sheet next year. Mickey, thanks. It's an important question. I think that what we're seeing and you know if we all know it's a strange economy, it's kinda a country that's split down the middle. We've got tremendous loan growth needs. You can see it from our pipeline both in October. There's plenty of businesses right now that have optimism. They're flush with cash. We don't see loan demand being weaker. Relative to interest rates and interest rate changes, we've been somewhat surprised. We made a decision to hedge the 504 portion of our portfolio, which is a fixed component, and the non-conforming portion of our portfolio, which is a fixed component. I think that's worked out well for us. You know, even the last couple of days have been somewhat surprising with high PPI numbers and rates still seem low because the government keeps buying bonds back and keeping rates low and providing liquidity. I think that we are in good shape for next year. $3.40 would be a lofty number if we remain as a BDC for the full calendar year. Given the $0.65 projection in Q1, I think we'll have a very good year for next year, particularly given where market clearing dividend yields are for most BDCs looking at it as a BDC. If we do convert to a bank, obviously, you know, the financial technology-enabled banks, the neobanks, the LendingClubs, the SoFis, et cetera, those are trading at different multiples, and there's exciting opportunities there as well for us. Whichever way we go, we're excited about our future. The small and medium-sized business market is very strong right now. Barry, do you think your demand profile for loans is a leading indicator and perhaps the market's just underestimating how strong the economy could be next year? The market is underestimating the strength of the economy, particularly with the amount of COVID dollars that are still out there, other government stimulus, these are unprecedented numbers, and the Fed's insistence on keeping interest rates low. I think that the government interaction in the market and assistance to consumers and individuals will further propel the economy. All right. Thanks, Barry. Just a couple more questions. You mentioned the retained earnings at the controlled portfolio companies to help them fund their growth. In your first quarter 2022 guidance for the dividend as a BDC, what have you assumed for capital retention in those controlled portfolio companies? Mickey, I appreciate the question. I can't give you that breakout at the moment. Okay. My last question, if you could just remind us the restricted cash on the balance sheet, I think it has to do with PPP. Where is that cash gonna go, and when is it gonna be used? Yeah. The cash on the balance sheet that falls into the restricted category is primarily from PPP loans that are basically forgiven. Money comes from the government, and then we distribute it to the participation certificate holders, which that's off balance sheet for us. That money moves off our balance sheet. Over when? What period of time? Pretty quickly. Okay. That's it for me this morning, Barry. Thank you very much. Thank you, Mickey. Thank you. Our next question is from the line of Matt Tjaden with Raymond James. Please go ahead. Hey, Barry. Morning, and I appreciate you taking my questions. First one kind of following up on the bank holding company conversion timing. Based on your earlier commentary, is it fair to expect that the 2Q and 3Q dividends next year will be paid on a BDC structure? I would think that if that holds, Q1 and Q2 are highly likely. Like that gets you to, you know, July 1. You know, if the conversion occurred in July, August or September, you know, I don't wanna forecast this, but there may or may not be additional dividends paid before the final conversion. Got it. That's helpful. Another one for me maybe following up on the portfolio company dividends. Would you expect any portfolio company dividends ahead of the conversion or kind of continue to retain capital? I think that obviously that depends upon you know. I would think that those will wind up being utilized in some way, shape, or form to continue to fund loan growth, which is growing, to pay down expensive baby bond debt. I think those targets are out there for the utilization of that capital. Got it. Last one for me maybe on the 7(a) funding levels. I know it's a little early. Any high level color you can give on where you're expecting 2022 fundings to kind of settle out in relation to maybe 2019 or 2021 levels? Yeah. I think that we'll probably look at a lower end of the boundary of $700 million. We haven't given that out yet, but I'm okay using $700 million at the low end of the boundary. Got it. That's it for me. I appreciate the time this morning. Thank you. Thank you. The next one, we have the line of Paul Johnson with KBW. Your line is now open. Good morning, gentlemen. Thanks for taking my questions. My first question, you addressed the timing of the merger, which I appreciate. I was wondering if you have any other updates in terms of, you know, how conversations and meetings have gone with regulators and, you know, how progress has been tracking along with the merger process, if you're able to provide any of that. Yeah, that's a no-no. I'll speak like our current and former president. I don't divulge conversations with that subject. I couldn't do that. I think that one can assume that we are on target and nothing has changed from recent conversations that we've had with the public markets. Got it. Okay. For the dashboard, the NewtekOne Dashboard, how far along are you with the launch of the product? Is that something that you're expecting to have ready to go and launched kind of around the time of the closing of the merger? Or do you expect there to be a little bit more time and investment required to get that up and running? Yeah. There's no question that we will have the dashboard, and I'll use this word, in some form at the time of the closing of the transaction. We'd like to have the dashboard ahead of time, in some functional use prior to that because we plan on using the dashboard whether we're a BDC or whether we're a bank. Obviously you wouldn't have the depository component, but the value to the dashboard is to give the business owner a tool. Now, we think that the bank, the bank issue makes it special because if you think about businesses, you know, they're constantly moving money, wiring money, you know, dealing with the bank sort of is core. The bank makes the dashboard more relevant. Even without the bank, the dashboard would be a great tool for businesses. We hope to have it available, in some form or not, maybe as early as the second quarter. Okay. Appreciate that. One question on the expense side for this quarter. Salaries and benefits obviously came in quite a bit lower than the previous quarter. I would just kind of expect as you know you guys have made you know a lot of hires expanding the company and you know getting ready for potentially the bank merger and possibly making more hires as time goes on here. Would you expect that to be kind of an anomaly quarter and potentially run you know maybe higher $4 million-$5 million or so similar to the previous quarters? Do you see this quarter as kind of a potentially good run rate? I think we might see those expenses not drop. Okay. Understood. On the balance sheet, I'm just curious. So where could you provide any kind of level maybe of where you're comfortable potentially running your leverage debt to equity? I understand, you know, pro forma, you guys are around 1.2x, but it looks like you're set up for a pretty active quarter, this quarter in 4Q. If that turns out to be true and, you know, 200+ of SBA originations, do you expect there to be any kind of limitation from the leverage aspect? Look, I would say this, you know, we try to pay attention to, you know, what the market accepts. I will recall a conversation, I think it was three or four years ago, with one of our analysts, and I think we were at, like, 0.83x, and then the convention was 0.79x. They said, "How high would you go?" I said, "0.99x." I said, "You know, it's not a problem managing that." I was saying that somewhat tongue in cheek. In other words, I would never wanna go that high 'cause the market wouldn't appreciate it. Now, one of the reasons why we run higher than most is 'cause that broker receivable, it overlaps at the end of each quarter. I mean, I think that we're very mindful of what the market thinks is risky versus not, despite the fact that we have a different opinion over managing risk. I mean, we've managed, you know, 4 x leverage on our balance sheet before we were a BDC, and we did fine. We survived the 2008, 2009 credit crisis. I think to answer your question, we may have a little bit more leverage in Q4. Then again, we may also be able to pay down some of the baby bond debt, so we're swapping one debt instrument for the other. Got it. It doesn't sound like it should be something that would slow down originations for the quarter. Is that right? No. No, not at all. Okay. Lastly, just a broader question. I was wondering if there's anything you can speak to that's in the infrastructure bill or the Build Back Better plan or any, I guess, any piece of legislation that's been floated out there that you've identified as being beneficial for the SBA lending program. That's all for me. Yeah. The one thing that I heard, and I only say this 'cause the bill changes every day, you know, what's in it, what's not in it. At one point in time, I understood that at a fairly nominal cost, and I say that also tongue in cheek, I think it was about $1 billion. The Build Back Better plan had a draft in it that created 90% versus the current 75%, subject every year to the budget being approved. Meaning that the program would, for a five-year window, based upon BBB, Build Back Better, be a 90% program for the 7(a) program. In addition, it would also waive certain fees. So you'd get a higher advance rate, you'd get higher prices on bonds, which would be favorable. Put it this way, whether it occurs or not, it's indicative of the government favoring small and medium-sized businesses, SBA lending, et cetera. I think that from our perspective I think that it's sort of a coin flip as to whether I'd put it this way, if BBB gets done, I think it's more likely than not that it gets in there, but that's pure speculation on my part. I couldn't tell you whether the recent draft has it in there or not, or for that matter, what the recent draft is. Got it. Thanks, Barry. I appreciate the time. Okay. Thank you. Thank you. Again, as a reminder, if you would like to ask a question over the phone, simply press star one on your touch-tone telephone. We have our next question from the line of Adam Morton with RBC. Please go ahead. Hey, Barry. How are you? Hope all is well. Hi, Adam. Not really a numbers question here, but just looking, you know, down the line as you guys hopefully transition to a bank, do you see any other opportunities in a bank structure that would be like lending areas that typically and historically you have not been in that you could actually branch into when you become a bank, if you become a bank, as you say? Yeah. I need to be somewhat circumspect about talking about the bank, you know, 'cause I, you know, I'm very limited to what I could say. Although, I do believe that having the ability to diversify lending programs with a lower cost of capital would be overall beneficial. In other words, it will enable us to meet our return on equity guidelines and diversify the risk away from some of the programs that we have today. You can't really comment specifically? I can't comment whether we would do it or not. Yeah. First of all, it's not up to me, fully. It's up to regulatory authorities. Your suggestion sounds like it makes sense. Understood. Okay. All right. Thank you very much. Thank you, Adam. Appreciate it. Thank you. Thank you. There are no further questions at this time. Mr. Sloane, please continue. Appreciate everyone's attendance and investment in Newtek. We look forward to reporting Q4 and continuing our successful record. Thank you very much. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.