Q3 2020 Newtek Business Services Corp Earnings Call

[music].

[laughter].

Good morning, ladies and gentlemen, and welcome to the Newtek business services Corp. Q3, 2020, <unk> earnings Conference call.

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be will be given at that time, if anyone should acquire should require further assistance. Please press star then zero on your Touchtone telephone I would now like to turn the conference.

Over to your host today, Mr., Barry Sloane, CEO and President of Newtek business Services Corporation.

Thank you Mary Thank you very much operator, and good morning, Barry Sloane, President and CEO of Newtek business service Corp. stock symbol any WPP on the NASDAQ with me today is Chris Towers, Executive Vice President and Chief Accounting Officer for those of you that would like to follow along.

On our presentation I'd like to suggest that you go to our website Newtek one dot com any W.T.K.O. any dot com go to the Investor Relations section, where we have a powerpoint presentation for all of you to follow along and once again welcome to our third quarter 2020 financial results comp.

That's cool.

I'd like to point all of you to the note on our forward looking statements on slide number one and move everybody over to slide number two where we could talk about our third quarter 2020 financial highlights.

Net investment income for the quarter up 1.7 million or eight cents a share that was an over performance versus I three.

Three cents a share loss for the three months ended September 32019.

Adjusted net investment income came in at four cents a share for the three months ended September 32020 that was compared to $12.2 million or 63 cents for the same period last year.

This was an underperformance based upon a ceasing lending activities in the end of the first quarter, which we've now started up but it was a beat on the street relative to consensus negative one and a half sense of the four cents that came in beat the consensus analysts of negative one and a half cents.

Net asset value came in at 324 million or $15.13 a share versus any via 15 70, a lot of that was due to the redistribution of cash that was earned in the second quarter perform.

Performance that distribution of the cash versus the earnings drove any the down we do expect an a., we to normalize and historically, we've been able to grow our net asset value over time, we believe that a reduction we did this in the first quarter of this year.

In any of the particularly in the loan portfolio was appropriate given the.

Uncertainty relating to the pandemic activities, but we feel very good about our valuation of our loan portfolio and our other assets and believe going forward that.

Not only will we hope to be able to stabilize this but hope to be able to grow and avi and dividends, which we've been able to do over our history of being a BDC dating back to November 11, 2014 debt to equity ratio 1.21 fairly low for our organization.

Once again, we have restarted lending activities as of June thirtyth, so that should pick up.

Both debt to equity as well as the generation from seven a lending beginning.

Beginning in the fourth quarter of this year.

Let's move to slide number three.

Slide number three is a little bit of a repeat of what I discussed in slide number two relative to the shifting metrics in the business in the first quarter when you look at.

For the three months ended September Thirtyth 2020, net investment income increased significantly and lot of that was due to the PPP financing both in the third quarter.

You could see that change as well in the second quarter PPP lending is.

Is that above the line form of income.

And we.

Reduced our gain on sale, which affected adjusted NII.

In the same quarter, so we're going to defer different and difficult quarterly comparisons we.

We always point to what we do over the course of the year that we pay our dividends out of earnings, which we've always been able to do its part of a dividend policy and we're very very pleased with the guidance that we have for the remainder of 2020 as well as going forward into 2021.

Looking at slide number four you've also got a repeat of those shifting metrics that I talked about net investment income of $31 million or about 49, a share obviously, an outperformance versus an investment loss of $2.6 million once again based upon PPP versus.

Curtailment of the 70 lending activity, but once again were.

Repositioning ourselves for the growth of 70 again.

We look forward to always paying our investors are reliable dividend growing the dividend and a stable to growing in a fee.

Let's move forward to slide number five.

For those investors that follow the company I think you're fairly well familiar but paycheck protection program.

Obviously, we performed very well in 2020 offer that we had.

Some significant but I'll quote residual income in the third quarter that came in from PPP and we're hopeful that there'll be a third round the PPP funding, which we believe could provide the company with an opportunity to generate additional income.

From additional PPP loans, there is no guarantee Congress will approve a new stimulus package. However, clearly the rhetoric coming from the Senate the house and the administration.

It's been positive about further stimulus I think we've got to get the politics of the election.

Out of the way, but even Mitch Mcconnell made a comment yesterday about providing additional stimulus to the economy should.

Sure the third round of PPP funding it approved.

Weve laid some guidance that which will talk about shortly that guidance does not include additional PPP funding. If it did come in we probably would classify that as a special dividend, which could come in.

In the fourth quarter of 2020 or in 2021.

Okay.

Moving to slide number six.

We have funded.

In the third quarter 82 million the PPP loans in the quarter ended September 32020.

Rounded up to close to about 1.2 billion a PPP lots for the nine months and its Tim at 32020, we got a little over $3 million in fees that came in through the third quarter picked up 10500, new borrowers in aggregate.

And we believe that with these borrowers a 130000 employees were retained during that period of time we.

We funded two years' worth of loan production, we saying slightly over six months, although 90% of that work was done frankly within a two month period of time.

We were able to.

Sale.

Our PPP loans to third parties so.

Host approximately $50 million worth of loan through October 31.

Clearly and outperform versus where this business activity has been in the past, we're anticipating fundings are closings of about $100 million for the year that would enable us to have a fairly nice contribution from NPL that could be a between a million and $3 million in dividend into the dividend income into the company in 2020, primarily based upon.

SP fiber for lending.

In the third and fourth quarters of this calendar year.

We did close.

Dividends for the first three quarters and nine months of 2019, almost a 9.7% increase.

We're going to give guidance for the rest of the year. So.

So we have actually been an outperformer in paying dividends to our shareholders we realize that.

Our investment community.

As well as management I might add enjoys the benefit of receiving dividends on a regular basis as our interests are very much aligned or proud of the fact that we've been able to grow.

2021.

Moving to slide number 10, as we look at our business Holistically.

We are.

As an organization and the management team have historically been able to emphasize that we are adaptable and flexible and our business model and we've been able to clearly.

Payment processing business is very well positioned going forward, we'll talk about our Pos on cloud investment and how well thats going and we plan on rolling out and launching a website within the next week or two which will make an announcement on obviously the utilization of paper currency and coin less prevalent.

And when we look at what new Tech does in the lending book, where we get that big wide open funnel for referrals why is a new tech loan a superior loan to our competition well. If you look at a bank. We are loans are 10 to 25 year amortization since they are single digit rates of interest they have no.

No covenants other than monetary primarily and we are willing to over advance on the primary collateral and certainly take the secondary and tertiary tertiary collateral, which we get liens on to really improve our overall credit performance. So whether we ultimately put the borrowers referral request into a seven a loan.

In the funnel of feeble for loan secured line of credit, which revolves up and down against inventory receivables or a nonconforming loans, we've got real good solutions, particularly given that the 10% to 25 year noble, but minimum fully amortizing loans lower payments to borrowers with that single digit ins.

Trust rate, we're willing to give them an over advance on collateral, which is valuable in a tough market, where they might need additional equity and without the bothersome period.

Periodic issue of.

Loan covenants at banks typically perform on our client base. So we're excited about our business future. We've been in this business 17, 18 years, not a new rodeo for US, we're very well prepared.

For the future in terms of growing our loan book as well as managing the existing credits that are in the portfolio. When you go to slide number 12, you can see why we are successful in this business.

We've received in excess of 150000 loan referrals for the nine months ended September 32020 that does not include PPP by 110000 for the three months Theres clearly borrower demand in the marketplace is not even a question however, not to be able to pick and choose by using technology by using our secure file vault and.

Our train business service specialists up on the front end, we are able to sort through and pick out.

Credits that we'll be able to stand the test of time, whether it's a pandemic related.

Restrictions on business activity or not.

Thing is extremely relevant.

Obviously with the pandemic.

Kind of change things around but clearly from.

The full perspective, you'd rather be into the belly of the default curve before it's too tend to accelerate between 18 and 24 months.

We would point you to our put the SMP did which does talk about all these issues and will give all of you are very good feel for what credit default one might expect.

As <unk> as we're waiting through this particular economy.

In those outlying situations, where they do go bad how we work through them.

This particular credit was a non accruing loan.

And we'll end up paying off once again, the differentiator between our types of loans, the borrower, 20% greater equity or larger personally guaranteeing alone.

They also had their residential property guaranteeing alone and although the business.

We make the loan we warehouses with our capital one bank line the 40% second gets taken out by government debentures and then we typically sell the the first loan into.

Premium bid for the secondary market.

Slide number 21 talks about our conventional loan portfolio, we reported to the market at the end of Q1 on a conference call or we suspended all lending of our nonconforming conventional loans.

So since that time, we have turned seven abac arm returned five O four back on obviously as we've talked about our success there and we do anticipate turning the nonconforming portfolio back on it's a $91 million portfolio of 19 loans are current with the exception of one we expect that one loan to get turned back on as a state of California.

Which is particular bar was in his opened up their market, particularly for the movie production business, which is what they are ingrained in their back open their cash flowing and we expect that loan to come back obviously from a credit standpoint. This is.

Unusual market most credit cycles are driven by week. This is in the economy. This one is primarily driven by government shutdown due to the pandemic show where.

<unk>, obviously optimistic about states opening up and getting back to business as.

Therapeutics and vaccines are beginning to enter the market.

And we believe that state and local governments will will start to ease up on some of the restrictions.

On slide number 22, we talk about perspective, new Jv's for a nonconforming business.

We are currently negotiating term sheets with perspective joint venture partners to create up to $150 million of additional third party capital.

We believe originate up to $1 billion of non-performing conventional loans, so the equity base of.

This particular business is about 30% with 70% exit apart securitization financing. So we're excited about these new ventures.

Now you have a $115 million.

Enterprise value I think is about 150 million was about 35 million of debt, we clearly improved our EBITDA and cash flow run rate in the third quarter of 2020 and anticipate that going forward. We're forecasting a range of 1.1 to 1.2 million per month.

In EBITDA and.

When you look at from a valuation perspective, the public comps of other entities that are what I will refer to a super Isos I see three verticals Evo.

Global payment systems, we think that our multiple evaluations on this business are quite reasonable still in single digits looking to slide number 25, we definitely had a recovery month over month I will say that October has slowed down a little bit I think thats a function of.

Stimulus running out and business is suffering a little bit once again were hopeful that the government will provide one more round of bridge financing in stimulus to our clients on the calendar year, we're forecasting that adjusted EBITDA in the Newtek merchant solutions space will decline by 10% to 15% that's a general decline from say 14.

A half million of EBITDA to say 12, and a half to $13 million, which had a significant impact on one of our portfolio companies mobile money, which primarily services camp tribes at Newark Airport, that's probably cost us somewhere around $1 million of cash flow. So a major decline in our numbers and come from one particular demographic it said.

But we do expect that to rebound.

Slide number 26, we talk about Pos on cloud.

We are.

Aggressively moving forward in this particular.

And the and the <unk> can provide we can provide that to them. We can provide them 24, seven high quality, great architects, great technology engineers to help them navigate so we're really excited about our foray into.

Into growing this particular segments and subtle with our business. So slide number 28 talks about cloud services.

So if you go to the bottom bullet.

It is infrastructure as a service.

Dr disaster recovery as a service.

Desktop as a service.

Software as a service we give clients secure email hybrid cloud public cloud public cloud we are the cloud service provider for independent business owners Slide number 29, we mentioned this in our press release repressed with added to our staff Sam raising joined this this year alone was Shannon Vestal to really.

Oh, well collateralized and well supported by the personal guarantee to the owners with both personal and corporate assets will stand up well in this particular economic time important to note not our first rodeo we've been through this for over 17 years did a good job in managing to a two onein credit crisis, particularly with respect to servicing.

Polio companies, we look forward to the creation of a business in 2021 that does between 45 and $50 million adjusted EBITDA 6 million.

Those are nice increases.

It's not just adding up the four different components.

Picks up another.

Easily million or $2 million of cash flow.

So we're also looking for a recapture of Nms's the business bounces back nicely, New Tech merchant solutions getting back to any but a 14 and a half the 15 million.

We believe that we will get another stimulus package, which will certainly help us manage our credit.

And Additionally, as we've spoken about Reece.

Recently, and the regulatory environment with respect to BDC investment, particularly with more investment from institutional investors.

August 5th the SEC endorsed that proposal to modify assets E that proposal is still in the proposal stage.

Have not been any adopted changes for the affd requirement as it applies to BDC, but we're hopeful that that will forget finalized hopefully in the near future and that.

It will it really enable institutional investors that don't invest more than 10% of their total funds.

To basically be able to own and record bdcs that on the account that the expense.

So rolling forward to my final slide on so I'm 32.

We are.

Perenchio to diversify BDC model.

You know a lot of people looking to invest in bdcs for the dividend and they have a category they want to make an investment in bdcs from the structure, but they'd like to get away from investing in portfolios of leveraged loans with hidden leverage any assets. That's us we're internally managed BDC. That's interest your line, we're not growing for growth's sake to pay ourselves a bigger management fee.

We're not a new company been around established in 1998 with a long term lending track record in history with senior management, Peter Downes, Our Chief Learning Officer has been with the company since 2003 tremendous alignment of interest, we love shareholder depreciation and dividends and we don't get any management fees owning.

About six 3% of outstanding shares and clearly we stayed away from.

Oil and gas industry.

Went on a second lien lender no spic's hidden leverage.

We think that we.

Have a nice promising future.

Going forward, so with that said I would like to turn the presentation over to Chris towers, Our Chief Accounting Officer, Chris.

Thank you bye good morning, everyone. Now you can find a summary of our third quarter of 2020 results on slide 34, as well as the reconciliation of our adjusted net investment income or just at NII on slides 36 and 37.

For the third quarter of 2020, we had net investment income of $1.7 million or eight cents per share as compared to a net investment loss of $500000 or three per share in the third quarter of 2019.

Session ladies.

Ladies and gentlemen, if you have a question at this time. Please press. The Star then the number one on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.

Your first question comes from Mickey Schleien from Ladenburg.

Yes. Good morning, everyone Hope you are all doing well.

Barry I just wanted to touch on trends in Sps M&A prices, which were quite quite strong in the third quarter.

And ask you what would you say are the main players bidding up those prices and what do you think the outlook is finish.

Finishing this year and going into next year.

On the cards until.

Growth is one thing, but I, but I mean, a more robust economy I mean.

A lot of a lot of lending activities matter of a greater GDP. Then you had in two one of 2019 going into the pandemic I don't think we.

Need to be overly concerned about.

Significant price weakness until maybe the third and fourth quarter of next year at best.

Thank you for that very and just a couple more questions.

One of the balance sheet.

Any guidance you can give us on when you might do your next securitization.

Okay.

The economy has a lot of momentum behind it and irrespective of whether you've got a.

Trump and the White house or Biden, which is on everyone's mind I think the concept of additional stimulus.

Is out there im not overly concerned about a tax hike with either.

Executive in.

I have to make this one comment I'm not.

People people think the Republicans have the Senate that's not clear at this point, particularly if you get to Georgia run offs.

Which is possible, but I think that there's a punt on liquidity in the system. There is a lot of momentum new.

New business formation believe it or not is growing rapidly.

So.

Lot of parts of the economy are growing on all on all cylinders.

Lots of liquidity in the system.

From an aggregate standpoint, I'm bullish now the flip side of that is.

You've got certain business.

Businesses at the extreme.

That require no social distancing.

Indoor activity.

Those those are businesses are going to have a hard time, we're happy that we have diversified portfolio.

Both geographically and sic code to be able to to combat that so there's no there's nothing in our portfolio that.

Keeps me up at night. This is only got him over balanced in gymnasiums in New Jersey for example.

Yes.

Those are all my questions Barry I. Appreciate your time this morning. Thank you.

Thanks, Mickey Thank you very much.

Just a little more finer point on it I'm generally optimistic about economic growth in 2021.

Next question.

Your next question comes from Scott Sullivan of Raymond James.

Hey, Thanks for taking my call Barry.

Thanks Scott.

Personal comment I really do appreciate sort of the management's flexibility in acuity in terms of being able to.

You know live the Warren Gretzky school of thought skating to where the talks going rather than where it is so congrats on that.

Thank you and I do appreciate the color on the cross selling initiatives.

And certainly the way.

Elegant solution with IP and MTS.

So.

Demos.

Hi level, where do you where are you modeling the most growth obviously in a more normal economic scenario Where's the best Cagar in all of the different silos other than lending.

[noise].

No [noise].

I think that you know.

It's it's a good question because part of it relates to.

Where we are in our product cycle and then there is near term medium term and long term I think on a you.

You know.

I think I'm most optimistic about the turn in.

In Tech solutions now from a marketing perspective.

Were probably less built out there than we are in Tech solutions then.

Then in I'm, sorry payment processing, which is a bigger business, but I think that.

The menu of solutions that we have to be able to offer to independent business owners relative to prior.

Product.

Professional services managed solutions is brought this a growth area for many many years and there's so much work to be done.

Frankly, not a lot of competition in the space in my opinion in the merchant space.

There's a lot of competition and a lot of people in there I think that we've got superior solutions I was on with the financial institution last night and for example, we talked about our Pos on cloud and branding it.

For the particular institution. So you can call. It we can we can give a financial institution their own payment solution with their name comes across the brand.

For example use your company's name Raymond James we could create Raymond James payments solutions, well, what does that do.

We're going to put Pos software.

In the business that's got your name across the top that's branding to the business owner and branding to that eight to 10 to 100 employees that are in a facing would that Pos system, whether that's doctors dentists lawyers motels restaurants and.

At a finger snap you can boot up a web site for pay at the table or all the retail SK use right away because it comes right out of the POS both the card present or the in store activity and the online activity integrate directly into accounting GE else, which we have set up the time and attendance function.

On the point a point of sale pushes the time and attendance data directly into our payroll software. So we could perform payroll taxes. We also then from that cloud based solution can manage their workman's comp their health insurance and wrap around the four one k. so that.

Anthony like Yours, you're now branding your brand name.

To the restaurant.

So the retail store pay at the table QR code your names across the top and you get deposits you get the deposits from the payroll account you get deposits for the merchant account. These of solutions that we've created.

Through owning their own software developing it further and now I'm going to begin to roll this out with our financial institutions part and so I think there could be tremendous growth there as well you know if you if you switch over to.

Generally speaking payroll health and benefits the landscape.

Of all the changes in payroll.

Whether it was the fact that the IRS pushed back a quarter.

For you know.

Filing tax returns.

Changes in.

Certain tax issues relating to whether it's state or federal items.

Payroll is more and more prominent and the reality is independent business owners, they're just not going to go online and punch data and they need to talk to somebody they need to get that expertise the changes in health care relative to the pandemic.

Vast significant.

So this is where I think we're well positioned with our solutions, but no I would say that the 2021 versus 2020.

Bigger Delta in Tech.

A rebound in payments from 2019 2020, 20% 2021.

Those are the two things to keep an eye on I also think in lending will be more prominent and filed for and hope to get the nonconforming bids. So we have a lot of engines in 2021 that we're we're zeros in 2020 I mean, the the five afore business probably helpful. In the fourth quarter the up now.

Conform we hope to get back on going that was practically zero in 2020.

And the growth lift in payments and tax give us good.

Base.

For being able to get a good dividend out to shareholders in 2021.

Mike do you hear me mention PPP right now.

LPP faith, PPP component, which we saw what a nice job PPP did for us.

So we'll see what happens.

Well, that's just great I appreciate it and congrats on a great quarter.

Thank you so much.

Your next question comes from Brian style for some conference point.

Hey, Barry Congrats brightmatter. Thanks.

Right.

So I got one question answered about the 70 little Mark and the strength, you're seeing there, but you did mention earlier in the call.

The work from home than that dynamic do you see any opportunity there to kind of rationalize next real estate footprint.

Moving forward, maybe save money on Opex down the road as leases come up for renewal.

Brian No question I think that.

The pandemic changed my viewpoint on real.

Real estate footprint and staffing.

And I think that a lot of that relates to given that I typically drive somewhere it wherever I am.

You know, whether it's an hour each way, which is fairly typical I think that.

On a going forward basis, that's going to be more pertinent we will be.

Not renewing our lease in Irvine, California.

Our staffs working remotely and doing great, we will not be renewing our lease.

Police in Milwaukee.

Staffs working remotely doing great.

We have taken a little bit more space in our lake success area, but we also have one parcel that will probably put up for sublet.

[noise], our Orlando business is doing well.

So I think that you're going to see more.

Cost savings in that particular area and we've also put tools in place for staff to be able to monitor their own activity relative to talk time inbound calls outbound calls and timesheets. So for monitoring perspective, it's real important to make sure that we're hitting all of our production metrics. So I think.

One of the of the many negative aspects, obviously to the pandemic would have a positive wants us to get people to work more efficiently from from home and save on commutation, which saves them money as well as time.

Great Thanks for that.

Thank you.

Your next question comes from Matthew Jayden from Raymond James.

Hi, good morning, and thanks for taking my questions Barry personally if I can on seven A. originations.

Any color you can give on on what you're seeing a month into the quarter. I know 135 million is the expectation for Fourq you any any expect or any color you can give on what you are seeing a month end.

Look I think you know.

We put that number out there.

And.

It's difficult.

Called for us to peg that with precision I'll explain why.

We put.

Commitments out there. We then go into an underwriting.

And some of that as well all of us on the tax lien Pops up at closing okay.

Okay all of a sudden are.

Our real estate appraisal changes.

It's really hard to forecast that pipeline, both positive and negative.

We put out a number that we're comfortable with.

We've expressed to the market there's volatility, but also I would say this.

We've come out with guidance.

That we expect our dividend will between be between a one dollar.

Well from a a buck 80 in the low to Buck 90.

We were down from 232 to 20.

Taken PPP out of that so the PPP comes in that's extra.

I think that in our Investor base, which is sensitive to obviously share price as well as the dividend should feel pretty good that were going to come close to.

So we're certainly believe we're going to be within the range and we'll forecast that dividend, but to forecast specific.

Loan fundings, it's tough you lose a $510 million loan it becomes difficult. The good thing about our business model, though is we're kind of firing on many cylinders. We've got the fiber for business now I will give a fairly wide range of.

Dividend income generation of a million to $3 million.

Tech business is picking up no, but I can't give you.

I can't give you the type of guidance that would traditionally used to giving because it would be it would be disingenuous, because we're finding situations where.

We're trying to get loans closed and the world's changed.

Stuff Pops up at the last minute. Conversely, we're getting an overwhelming amount of referrals that are blowing away previous numbers. So we've got plenty of stuff to look at.

I think thats important because I realize we're sitting here at Nov fit and the way. The world is today everybody wants to know what's going to happen between now and December 30, Onest, while I will tell you. That's important to me what's more important is the direction and the movement in the model. So to me I just be Frank with you I don't want to be on a conference call and.

Well my numbers are my guidance, but I'm really interested in the long term follow up momentum of the business, which looks pretty good for 2021.

With a fairly wide range for 2020, I know I evaded your question, but I think the long winded answer is appropriate for this investor group that we're trying to get them to really focus on the long term aspects of our business not quarter to quarter, which is what we've been pretty good at historically.

Trying to cultivate investors in newtek not to be quite hung up on Jesus straight quarterly even dividend that you see in most bdcs. Thank you any other questions Matt.

Yeah, one follow up if I can and this one might be difficult to answer as well so that should dividend guidance for 2021 to 250 base.

Based on your dividend payout ratio, we can kind of back into an earnings number. There can you give maybe not the specific number but what's the expectation for seven a. origination activity during 2021.

Hi.

I would say that we'll probably be between.

$580 million.

And 600 million for 2021 for seven eight.

Great and then just a last one quickly on on NBS just to confirm NPL did not pay a dividend in one Q twoq or threeq. So that one to 3 million dividend will all come in the fourth quarter.

I'm going to say, yes, Chris is that accurate there was no dividend from Nbn on Q1, Q2, Q3, I believe that's the case correct.

So that would all be in the fourth quarter.

Yes, okay.

Okay that is it for me appreciate the time everyone.

Thank you Matt.

Your next question comes from Adam Morton of RBC.

Hey, Barry how are you.

Let Adam how are you. This morning, good good congrats on a good quarter man great job.

Thanks.

Two questions you know given this pandemic given.

I guess, it's on an allowance is safe to say that it looks like a.

In all probability a biden.

And then a Republican Senate or any geographic pockets Andrew sectors that you guys think.

Or areas that you may want to attack as far as where you are going to be.

Lending too I mean, I know I've talked to folks down in Texas and in Arizona and these.

Socially distance sort of like the restaurants and things like that.

Are there any areas that you think that.

You guys could attack that would make some sense or where you might want to overweight yourselves.

Yes going forward over the next three to five years.

I think it's a very good question and with a backdrop of.

Diversification.

Which is always been a winner for us both industry and sicko.

Well, but you can't ignore the demographics of.

Businesses and customers moving to Sunshine state.

Two such I'd say, it's rust belt states.

I should say Sunshine state and Sunbelt states.

The Aurizona as the Texas is the South Carolina, North Carolina flow.

Florida.

I mean, the trends are that's where consumers are moving to.

We're certainly going to look at all geographies and all businesses.

And all borrower types.

But it's certainly tough for a lender to go I want to be real.

Big presence in New York City today.

Really hard.

Really hard.

Okay, well that being said right and I totally agree with you.

[music].

Theres going to be survivors.

And drivers in New York City.

And we know and we will and we and we're currently having conversations.

Good to be Frank with you, we've got we're having conversations right now with.

Couple of restaurant tours.

That are going into revive like amazing brands right that are now looking to NFC Halo where the.

The owners and operators.

Billionaires, but they've got the capital.

And the guarantor capability to withstand bumps in grinds and they've got a plan to go back in.

Revive the brand.

New York is not going to die.

It's always going to be around and it's always going to be present, but you really got to be more selective in picking the winners and losers.

Absolutely.

Thanks, So much Mike great quarter. Thank you. Thank you for the question I appreciate that thank you.

Your next question comes from John Cephea, Audi from Santander Bank.

Good morning, Barry Thanks, so much for the presentation and for the strong quarter.

My question really on one of the earlier slides I believe slide eight and you were focusing in on the final four loan program.

And I think it was mentioned that there wasn't a lot of growth that was happening in the first half of the year, obviously because of cove. It in the <unk> and the company's focus more on making the TPP loans and being more neutral but in looking at the slide there's about $51 million of loans that were funded during the quarter, maybe getting up through 10 31, how.

With his loans, primarily funded was there a capital injection that took place from from a new tech.

Into into the TV. So that there was additional dry powder to fund those loans could you just give a little bit of context as far as how.

How what capital was contributed and maybe what dividend maybe coming back in the fourth quarter.

Sure I think that with our portfolio companies in for the most part.

The ones I mentioned earlier merchant services and tech.

They don't they don't require capital.

Well, we are lending out of NPL.

Does require capital in addition to.

Our lending partners like capital one bank that provide us leverage so.

In order to make those loans we have.

Position capital.

Into Newtek business lending.

Which in conjunction with our leverage partners.

Enables us to make that loan and then holding on the balance sheet and lending facility and be up.

Do you know approximately how much capital was contributed during during the quarter.

I do not not not off hand, okay.

And then going forward as far as the profile customers do you see any any change in strategy just related to the underlying customers that you'll target given the.

Endemic and changes in the market.

PC.

Focused on on on targeting certain types of customers from a profile perspective.

You know, it's funny, because I say that.

We are very big on diversification.

And I think that diversification makes us smarter without having to be smart so what I mean by that is.

I could sit here today and say, we're not going to make a hotel loan and we're not going to make a restaurant loan here's the funny thing.

Today.

Those are probably the best loans to be to make.

And I I'm not suggesting that.

You make a loan in a particular area or region that is totally closed down or based upon 19 2018 underwriting criteria, but.

Some of these situations they have repositioned themselves they've got good capital Theyve got great location. They have got great operators and they've just survived.

Cobot in the pandemic that.

That where you want to be careful that you don't want to basically provide the funding and there's no liquidity and they can't survive another shutdown, which is a real important analysis that we do when we make these loans. So I think it's fair to say that.

We're going to continue to be diversified well clearly going to be more careful.

In a hotel or restaurant, particularly over the next six or nine months.

But were not definitely a no and what happens when you have these economic shakedowns as you wind up.

Losing weaker participants in an industry segment or demographic.

And the stronger ones wind up being your best credits because.

Their competition goes out of business there the lone survivor and they do well. So we always look at lending with a view towards what's going to not be just a good credit for the next six or 12 months, but what's going to be good for the long term and most importantly can these businesses survive slow growth.

No growth or a downturn in the near term do they have enough liquidity to survive. The bump how good is there operating team and we're very proud for example, they are not.

Nonconforming portfolio really being able to.

Do well during this period of time.

From the standpoint that we've obviously pick good operators and we pick people that have enough other wherewithal to be able to.

Not want that enterprise value in their business to go away.

Great. Thanks, very much appreciate it and just one other follow up question I know the financial results were.

Included in the press release and in the lending presentation.

Do you know if you.

Do you have an anticipated date that we could expect to see the.

The full the full queue for Dot for September 32020.

Yeah, I mean, usually that gets filed.

Within a week or so of this call. So that's pretty much a good a good anticipation.

Okay. Thank you.

Okay. Thank you.

Your next question.

That cuts are.

Your next question comes from Hot Harold English from either yes.

Good morning, Barry.

Good morning, Eric.

So we.

One of the pandemic winners it has seemed to be is the world of Symantec in general and that there are a number of new players outside the screens did the new cap has generally employed to get referrals.

I don't know, whether it's too early but I'm wondering whether.

You were thinking of pursuing some of these online relationships, particularly those that did seem to be appealing to millennials and active traders as conduits for your business going forward.

So Harris.

I appreciate your drawing attention to.

[music].

Value add.

Evaluate of technology in the pandemic sort of rising to the surface.

I think that.

On deck capital, which really had a disastrous portfolio, but arguable, we good technology.

It was acquired for like $90 million for the technology.

And I think cabbage.

It was acquired by American Express for like 800 or $900 million.

And I think that there.

Portfolio results are arguable in that the credits that they made but what the market.

Particularly financial institutions that don't they are not nimble they have a hard time, putting software changing processes techniques into place is valuing is that the business methodology of acquiring clients remotely.

Not having bankers branches brokers are being yos and utilize technology to make and manufacture alone at an hour case. In addition to making in manufacturing loans, we make and manufacturer payment solutions, we make in manufacture technology solutions, we make a manufacturer health and benefits solutions.

And insurance solutions is being valued by the marketplace now in our case.

I'm kind of being asked how many loans am I going to do in the next 30 days, which we plan on doing a lot.

But in addition to that there is this hidden.

Hidden value within our organization, which I tried to emphasize which is look at how we do our business look at why there's a thesis about what we're doing I mean, there are people that pay millions of dollars to get the types of.

Economic activity and referral that come through our doors.

For for for being in the business as long as we are for servicing clients well and for having this technology in place that makes it really easy to work with Newtek on alone opportunity or a tech solution or a payment solution or whatever it might be so.

Where we're hopeful over the course of time that we certainly appreciate investors valuing.

Our cash flows and our dividends, but we also are hopeful that.

The investment community will value the operational methodology, the software and the way in which we conduct our business that will be the way business is conducted in the next 10 years, we think were well ahead of the game.

Yes.

I appreciate it good luck, thanks very much.

Thank you.

I'm showing no further questions at this time I would like to turn the conference back to Mr. slot and.

Operator, thank you and I'd like to thank.

Everybody who participated in the call.

The analysts culinary and investors in our company.

Over 20 years of publicly traded company, we have tremendous appreciation and respect for the the faith and the investment that you've made in us and we'll continue to work hard and.

Continue to perform and hopefully meet or beat all of these expectations. So thank you very much have a great day stay safe.

Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day you may all disconnect.

[music].

[music].

[music].

Okay.

[music].