Barry Sloane - President, Chairman and Chief Executive Officer Jennifer Eddelson - Executive Vice President and Chief Accounting Officer

Leslie Vandegrift - Raymond James & Associates, Inc. Mickey Schleien - Ladenburg Thalmann & Co. Inc. Arren Cyganovich - D.A. Davidson & Co. Lisa Springer - Singular Research, LLC David Scharf - JMP Securities LLC

Good day, ladies and gentlemen, and welcome to the Newtek Business Services Corporation Q2 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to introduce your host for today’s conference call, Mr. Barry Sloane, President and CEO. You may begin, sir.

Thank you, operator, and we appreciate everybody attending our second quarter 2016 financial results conference call. The call is hosted by myself, Barry Sloane, President and CEO of Newtek Business Services Corp., NASDAQ, stock symbol NEWT; as well as Jenny Eddelson, our EVP and Chief Accounting Officer. Jenny, I’d like you to read the forward-looking statement comment.

Sure. This presentation contains certain forward-looking statements. Words such as plan, believes, expects, plans, anticipates, forecast and future or similar expressions are intended to identify forward-looking statements. All forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from the plans, intentions and expectations reflected in or suggested by the forward-looking statements. Such risks and uncertainties include, among other things intensified competition, operating problems and their impact on revenues and profit margin, anticipated future business strategies and financial performance, anticipated future number of customers, business prospects, legislative developments and similar matters. Risk factors, cautionary statements and other conditions, which could cause Newtek’s actual results to differ from management’s current expectations, are contained in Newtek’s filings with the SEC and available through www.sec.gov.

Thank you, Jenny. I would like to turn everyone’s attention to the PowerPoint that we have hung on our website, newtekone.com, go to the Investor Relations section and PowerPoint is there present and will also be archived along with the audio presentation of the call. I would like to turn everyone’s attention to page 2 of the presentation talking about Newtek’s differentiated BDC model, but also like to thank everyone attending the call today. We’ve had a very nice jump in our stock price with a preview of how our business has been doing over the last week or so. I also would like to remind investors that if you look at reports from some analysts that have followed us, the company has returned 25% to shareholders over the last three years, 25% over the last year. And from a performance perspective, the company anticipate subject to Board’s final approval, the payment of five cash dividend this year, which would include the payment received in January from the fourth quarter of last year. Last year, we benefited shareholders by doing a special dividend in the fourth quarter of 2015, the fourth quarter dividend effectively earned from the fourth quarter of 2015 was paid in January of this year. So investors that owned the stock as of January 1, based upon forecasts and the Board declaring dividends, should earn a forecasted $1.53 plus the $0.40 to equal 1.93. Now, let’s go forward. Why we think our business model is better? Importantly, we are internally managed BDCs. We say we don’t pay a 4% external management fee to an external advisor. Typical deal out there is 2 and 20. There’s a lot of fees that are going out the window that are not going into calculating the dividend yield. So in our world, we believe there’s no free lunches. We’ll get into that a little bit deeper into the slide. But essentially in order to get to 10% to 11% yield that our competitors are offering, they’ve got to start with significantly higher coupons and significantly higher leverage, which means significantly higher risk. We invest in and importantly originate primarily senior secured loans and in operating businesses, our portfolio companies which are wholly-owned most over 10 years by Newtek Business Services Corp. We are not buying packaged loans in auction process from Wall Street or brokers. We’re in the lending business. We’re originating loans directly with retail clients doing our own assembly, our own packaging, our own underwriting and our own closing. From a standpoint of conflict of interest, the inside ownership is very much in line with the external shareholders. The insiders includes myself, the other large Founder, the Board, Management owns about 15% of the outstanding shares. Vote [ph] number four, which relates to vote number one, when you look at our risk profile extremely important, not a lot of leverage. So most of our competitors have got to invest in higher risk type assets that are paying off higher coupons in order to get through the 4%. Some of these have an equity kicker. You can call them as capital. You can call them sub-debt, even the players that claim they’re doing senior secured, but typically doing senior secured LBO deals that may not have collateral behind them that are very excess at EBITDA level – EBITDA numbers. So if you really want to take a look at our business model, please understand that what we are investing in are things that we as a management team and ownership structure have had familiarity with over the course of 10 years. We’re not investing in other people’s securities or things. We do a little bit of that. We obviously lend money to other people, but we’ve been in the lending business now for over 13 years. We’re not acquiring equity investment in CDOs, which is another form of excessive leverage. Many times, I’m asked by investors, do you have SBIC debt on our portfolio? The answer is no. SBICs are very good way for BDCs to actually get higher levels of dividend. But I got to tell you, SBIC debt is SBIC debt. You’ve got to pay it back, it’s extra leverage. Yes, it doesn’t count for the BDC test, but the fact of the matter is, it’s extra leverage. So the fact that we currently don’t have it, that’s not to say, we won’t use it in the future also accrues to the fact that we’re earning a really good return without excessive amounts of leverage in cash – without excessive amounts of leverage in risk. We’re forecasting to pay an annual dividend of $1.53 per share in 2016, that’s up a $0.01 from the other – from the previous forecast equate to an annual dividend of approximately 11%, another comment I’d like to make on how the Street estimates dividends. They typically take the most recent quarter that’s earned to calculate what dividend yield is. Well, our dividend quarter-to-quarter are not stable. They do change from time to time. They have a little bit of volatility. As a matter of fact over the last three years, we’ve consistently said, most of our earnings come in the second-half of the year. There’s nothing we can do about that. Christmas only comes once and it’s in the fourth quarter, but our payment processor does a significant amount of its business, and lending business that also tends to be secured to the third and fourth quarter closings. So I think it’s important to note a little bit more volatility from quarter-to-quarter in the dividend yield, but we think it’s worth it. Potential NAV upside as operating businesses grow, and we get a larger sizes in the portfolio companies versus public valuations. If you look at our competitors in this space, NAV 10 and would grow if rates fall good luck on that, but we could go negative here, or credit spreads type, I also say good luck on that, because we’re fairly at historic tight spreads with respect to credit. With our NAV, you’re investing primarily in businesses that are getting larger, that are having earnings growth, that are doing a great job in managing the risk. And from a total valuation standpoint, we hope and expect to deliver to our shareholders, I’d say this again, we hope and expect to deliver higher NAV upside as these operating businesses grow and approach larger sizes. There’s no derivative securities in the BDC. We avoid second lien or mezz financing at the business line. And we haven’t feasted on oil and gas or volatile industries, as we’re putting money out. Our industries are very sexy, they could be a new bowler [ph] or could be a bowling alley. The good news is we typically have historic cash flows, historic operating histories, and we think stability in the credits is extremely important to us, where our competitors have to go for things that are more volatile to be able to get – acquire a higher rate and/or maybe an equity kicker. One last point on this page. Last year, approximately 35% of the dividend that we paid to shareholders was qualified. It was qualified, because the portfolio companies, which are already taxed once, upstream is income for the holding company makes a difference. So the market looks at our dividend yield. It needs to differentiate between the fact that 35% of our dividend yield, the taxable entities is taxed at a qualified rate of 20% to 30% tax once versus a typical high rate in a non-qualified dividend of 38%, 39%. Let’s move to Slide #3. Second quarter 2016 financial highlights, we bumped our dividend to a – of a $0.01 to a $1.53 as based upon management’s improved outlook for the second-half of the year. We also want to elaborate that we do think we get the majority of our earnings in Q3 or Q4 in a quarterly calendar year. Our NAV came in at $14.11 per share at June 30, 2016, as compared to $14.06. Mind you this boxed again – box up against a BDC trend that has a declining NAV based upon credit concerns as the economy seems to weaken and credit spreads widening. Dividend income from controlled portfolio companies of 38.9% increase, debt to equity ratio of 76.3%. We are very mindful of where we are here. We just did a fairly significant baby bond deal in the second quarter, raised about $40 million of debt. Those bonds trade on the NASDAQ, NEWTZ, NEWTL. The recent raise NEWTL of $40 million transaction. Total investment portfolio increased by 14.6%, and the second quarter dividend was $5.1 million, a $0.35 a share. Some people are looking at the fact that the dividend we paid in Q1 and Q2 for the second quarter was below the adjusted NII. Once again, I want to repeat, most of our income comes in, in the second-half of the year, historically been about 60%. So what we’re trying to do is placing some of the investors by having a first quarter dividend and the second quarter dividend be closer to the third and fourth. But I think all you can sort of calculate the math and based upon $1.53 forecast, we’re looking at about $0.85 dividend in the second-half of year. On Slide #4, our SBA lending highlights. We funded $75.8 million in the second quarter of 2016. This is based – this is basically where we had expected the number to come in at an increase of 40%. For the six months ended June 30, 2016, loan fundings were up by 27.4%. Once again realized the first quarter less than the second quarter, that’s just our business model. In July 2016, we funded $25.9 million very valuable. Typically, we have funded last – in the first-month of a quarter, we’re starting to even that out, as we’ve improved our technology. We’ve improved our management resources and our total flow in the lending business. We reaffirmed the loan funding forecast of $320 million. We change the breakout a little bit of $300 million in 7(a), $20 million is 504. And as of July 1, 2016, approximately $105 million of 7(a) loans were sitting in underwriting. We believe we’re well-positioned to achieve several outstanding quarter and meet our guidance for the rest of the year. Going to Slide #5, a comparison of internally managed BDCs versus external managed BDCs. I really want to focus to the bottom part of the chart, Triangle, Main Street and Hercules, these are the BDCs that we obviously aspire to reach their types of valuations. They’re all internally managed. They typically invest in portfolios of securities. If you look at the seasoning of these entities, they’re around for nine years, they’re around for six years, they’re around for 11 years. That’s Triangle, Main Street, Hercules, KCAP then around for 10 years. One of the reasons we believe that they have multiples of 1.34 times now, 1.6, 1.39 is the longevity, also the market cap, significantly larger. So, as we grow our business model, obviously we plan on being around for a long period of time. We also plan on growing the market size, pretty more shares out growing the investor base and growing the liquidity. These are the types of NAV multiples that we hope to aspire to. As we closed yesterday, we were pretty close to NAV. I would also – and I’ll use the word boast. We believe our business model is a better business model than our competitors that remains to be seen over the course of time. We’re approaching our two-year anniversary in November of this year as BDC. Moving to Slide #6, new company headquarters in Lake Success, a couple of important aspects here. We have 180 workstations, 40 offices, we finally got four of the primary operating businesses in one location. We think this kind of lead to tremendous operating efficiencies over the course of time. That’s going to take many quarters to happen. But I think you’ll see it quarter-to-quarter to lead to more efficient and effective cross-selling and cross-marketing. We also recorded a three-month loss in the end of the quarter of $1.5 million, relating to the remaining liability under the West Hempstead lease, which is the majority of the staff relocated here. As we sublet space in West Hempstead, as we recently did in our New York City office, which moves out of the close, some of that $0.10 a share will hopefully come back to us. It’s about 22,000 square feet in the West Hempstead office. Moving to Slide #7, debt-to-equity ratio, we talked about 76.3%. We also want to talk about at the end of each quarter, we typically have and this was somewhere – somewhat apparent on June 30 by $19.9 million of actual leverage. In the event that we’ve ever got tied to the leverage cap at the end of the quarter, we could basically curtail funding and selling within the last two weeks of the 12-month cycle to effectively collapse that position that we get is under the cap, that’s about 10% of our total assets side. I think it’s just a valuable consideration to look at. I had recently somebody come up to me and say, you’re raising equity money in the third quarter. And I just said, I don’t really know what plan you’re on. I know the third quarter is out and I’m never going to say, never. People have gotten a lot of trouble doing that, but I also would say, it’s pretty unlikely. But I think when people are trying to figure out what our leverage is, they don’t understand how our business model works. This is the business model that we have some functional control over. Please also understand that our Goldman Sachs line that we currently have about $22 million drawn, which is currently outstanding at $38 million, which we’re in the process of renegotiating that cap up, because our cash flows are better. Our EBITDAs are better. We get more availability to enable us to use a little bit more leverage versus raising equity. These are the things that we’re looking at in the marketplace. So really enhanced our performance for all of our stakeholders. Moving to Slide #8, couple of important data points. On June 29, 2016, we completed our investment in banc-serv Partners. On May 20, 2016, we acquired the assets of ITAS and Deer Valley. I think these are important items to note – notice that, they’re pretty much towards the end of the quarter. Our funding from the baby bond yield came in, in April. So we picked up around a little over $500,000 worth of interest expense, which is somewhat punitive. We just started putting that money out. So many of you take that slide rule out that’s all straight line. And I – we’d love you to put that slide rule away, because we’re not necessarily straight line. We’ve been a public company for a long period of time. Our stock perform, because we do what we say. We think you should look at the overall business model. But I think the important aspect here is, you certainly can be punitive if you want to look at the 518,000 of interest expense and that given us time prudently with the money out. So the money is now out. We should be able to start to deploy more of that cash as we go forward for the loans, possible acquisitions, and other really attractive risk versus reward opportunities that come to us. We told two things off of our pipeline previously reported. There was an insurance agency and a payer processing company. We’re currently looking at staffing company and a PEO, which could be interesting for us. If looking back on banc-serv Partners, banc-serv is Indiana based, has 40 employees, great management team, have relationships with 350 lending institutions that they perform, historically an outsource service of assembly underwriting and servicing and compliance. The value prop with banc-serv is, we think we acquired a company with attractive cash flows at an attractive EBITDA multiple. But importantly banc-serv clients, which are typically smaller entities that may not be able to fund opportunities that are out of the footprint, maybe a little too large, maybe doesn’t fit a industry classification or underwriting classification that we have. We expect to get as a banc-serv service to their clients lending opportunities that we will fund in Newtek Small Business Finance or BDC. We also believe that of the 350 clients, many of those are now interested in lot of our other services. The payments, solutions, opportunity, the payment and benefit solution opportunity, insurance opportunity, technology opportunity, so we will over the course of time approach banc-serv’s clients 350 million of them into our portfolio to be able to get the other originations going. We think banc-serv conservatively has the potential to increase our SBA 7(a) loan fundings in 2017 by $30 million. Slide #10 is a slide that many of you are very familiar with. It show our pedigree in originating 7(a) loans, I’ve been doing this for 13 years. They have extremely important with the eight largest SBA 7(a) lender, which includes banks that have a 13-year history of loan to pull frequency and severity by fixed rated securitizations. Average loan size is 172,000 that’s the uninsured piece that sits on our books. We finance those credit securitizations. Looking at Slide #14, and there’s a lot of discussion over the next several pages, which talks about wealth. I think the most important aspect of growth with respect to our leading opportunities, in our business model, given that we’re not buying BDO product, we’re not buying package loans in auction. We’re not buying brokered commodity that are shopped to multiple lenders. And if you get the highest price than the worst, credit risk ratios for dealing directly with small business, yes to our alliance partners, but the intermediary is involved in the coaching of the structuring process. The secret to us making good credits and growing is to have a lot of looks and opportunities, which drove first six months of the year, I think came in at $2 billion in Q1, $1.7 billion, $1.8 billion in Q2. Lots – I’m sorry, I apologize. Lending [indiscernible] I got a rate here in front of me, I guess I should just read, $3.7 billion of referrals submitted through June 30, 2016, year-over-year comparison $2.3 billion, 62% increase in referrals. So what does this do? This gives us an opportunity to pick and choose through a lot of opportunities directly dealing with borrowers. Units closed of 57%. At the end of the day, this is the secret sauce to be able to cost-effectively look at large quantities of opportunities, pick the best ones and fund small businesses, which is an important part of our charter. Our average loan size has been declining that is a concentrated effort for us as we improve our efficiencies with technology and staffing, smaller funding sizes gives us greater diversification and greater prices in the secondary market and a greater ability to securitize with higher advance rates. Moving on to Slide number 10, you can see the growth in 7(a) fundings, six months ended June 30, 2015 versus 2016, up $131 million versus $103 million. Year-to-date, we’re looking at $157.8 million versus $107 million that includes July 31. In July 2016, we funded $25.9 million, largest dollar volume of SBA loans funded in a single month. We take a look at the pipeline, prequaled loans in underwriting and approved pending closing. Pipeline is up by 78.4%. We’re proud of that. We’ve left out a few categories like loan sitting in suspense and just total gross referrals in the prequaled category. We’re doing a much better job of cleaning out the pipeline early, obviously people come to us from all different areas, all walks of life, they come to us and they’re not ready to borrow, but because kicking tires or cleaning that up quicker, we are putting that in suspense. We have people that will have a couple of conversations with them. We take it an above for month two or three. That can be a variety of reasons. So we’re doing a much better job of keeping the data, being able to go back to customer but really focusing on the live hot, warmer opportunities, which is leading to better close rates and higher credit quality in the portfolio. Net premium trends for the first six months for the year, 12.28% that’s up from 11.72% last year. We anticipate those trends continuing with our good track record, relative to the full severity and frequency, relative to the interest rate climate that currently appears to be stable. So, we don’t expect any major change, but obviously report that quarter-to-quarter and if we saw anything that was significant on in term basis, we would report that to the marketplace. Going to Slide number 15, we put this slide up to basically demonstrate that the gain on sale, although on most BDCs is totally sporadic. With us, we don’t say its reoccurring income. We say it’s a reoccurring event and this reoccurring event has happened over the course of 13 years. Slide number 16 shows the average loan balance that we funded in 2016, $650,000. That includes the government and non-government guarantee peace. Looking at our loan portfolio performance on Slide number 17, look at statistics that are showing our non-performing portfolio as a percentage of total outstanding loan portfolio, through the first six months of 2016 is 3.68%. I think we give a lot of transparency to the market, showing how our loans effect our NAV. So immediately when we have a non-performer, we write the NAV down or non-accrual we write the NAV down. We take a loss on the loan once it is liquidated, and all of our loans are on our books at fair value, you can look at our [indiscernible] in case every quarter. You can see what performers and non-performers are on our books. And you could see the trends when you go from 2013 to 2014, 2015, 2016, they are very good trends and we believe this is not just a function of an increasing size of the portfolio. I want to make one particular note. For those of us out there that are looking at us real closely, I want to make you aware of the fact that SBA portfolio is very different than types of loans that you might be familiar with, whether it’s residential or some commercial. We have a lot of small businesses that sometimes we have a situation where borrowers have a sickness in the family or some kind of change of control, they’ve some interruption of payments many times our loan will go no nonaccrual and then they come back to us. I think it’s important to note. We have one particular loan, it was a medical practice at a cost basis of 664,000. We had somebody taking a look at this loan saying it was nonaccrual. Fact of the matter is, it did go to nonaccrual, they happen to do a chapter filing, but they made payments, from the beginning loan is originated to the end the loan was well over collateralized and this loan is back to a performing status today. As I said, it was a medical practice, they’re cash flowing, they’re doing well, but they did declare a bankruptcy to remove certain obligations, I will say this, I’m not particularly fond of lending money to businesses that might declare a bankruptcy on an interim basis. But the fact of the matter is, we believe the money alone was money good and had plenty of collateral. And the proof is they have never been late on a payment. .: Slide number 19, a non-familiar slide to investors that have attended our calls regularly comparative loan portfolio data. We think our portfolio continues to get stronger and stronger I’d like to point out one thing when you look at current weighted average LTV, its gravitating to an 85% number. We think that’s more of a normal number than the historic lower number. That is a function of the fact that our season portfolio, which we acquired in 2013 is really diminished. So we have less seasonal loans in the portfolio and more newer loans. Slide number 20 and 21, I’m not going to go into. Many of you are familiar with how cash works on 7(a) and how income works. Slide number 22 and 23 focus on the 504 market this has been more of a slower starter for us. We have a pretty decent pipeline building in this segment. It will show how cash works, as well as accounting on 504. Looking at our business from a comparative basis, our Live Oak Bank trading at 2.15 book value obviously if we take a look at our book value trade at that type of multiple a very different business model, I think the only thing that’s similar is they do 7(a) loans, we do 7(a) loans and the market’s valuing their book value at a much higher multiple. Take a look at the BankUnited recently acquiring services to small business finance transaction. They paid a 10% premium above the face value of the uninsured loans. 10% premium on the face value of their uninsured loans. Jenny, the face value of uninsured loans at the quarter, $160 million, $170 million?

$175, yes.

Right. So, I think or you smart investors can do the math. Obviously, BankUnited wanted the big portfolio, if it had a 10% premium over the face. So at the time it was not originating arguably they did not have anywhere near the business model that we have in terms of being able to produce value. So, I think these are two very good, comps for what we do. Page 26 drilling down to the portfolio of companies. Good quarter for the payments business. Adjusted EBITDA up 24%. When you look at our mark for NAV valuing about 5.8 times 2016, adjusted EBITDA look at the public, comps or high double-digits. Newtek technology solutions still unfortunately struggling. We believe very much in the management team and the vision. We believe we’ll be able to turn this as management is deploying a lot more resources into manage tech. We think this business has a tremendous opportunity for us and our shareholders. As every survey out there whether it’s Gartner or Forester is telling us that there’s going to be a significant large spend for independent business owners, particularly with security issues and technology, we’ll get this right. Slide number 30 just gives a general breakdown, this is not meant to value us on EBITDA across the whole business, but truly doesn’t make sense for anything relating to lending, but it just gives the marketplace a general understanding that close to 40% our cash flow and dividends comes from the recurring business service side of our business, which is tax at a beneficial rate to shareholders as qualified to the Fx [ph] once at the portfolio level. Slide #31, as we have mentioned in the previous quarter, Newtek Business Services Corp., Your Business Solutions Company, website newtekone.com, you can see there, we’re a solutions provider for payments, a solutions provider for technology, solutions provider for insurance, a solutions provider for payroll benefits, we are in the process of revamping our entire website. We’ve made some great hires in the recent quarter, which I’ll share about. Michelle Flaherty just joined us Vice President of Human Resources will be paying particular attention in the merchant solutions area, as well as insurance and payroll, but primarily in the merchant solutions area. Michelle joins us in our Lake Success office. She was VP of Human Resources at EVO, a large payment processor in Long Island. During her 11-year tenure, she was responsible for over thousand affiliate employment – company employees and 320 direct. So we really welcome Michelle with her Long Island face here to help us grow the payments staff and also be helpful to recruiting payroll and insurance. We’re also proud to announce, he was not yet arrived, but we welcome his arrival on Monday. Andrew Cohen. Andrew joins us directly from Wells’ First Data. He recently worked there. He was CFO at Wells Fargo Merchant Services. I think it’s important to note, Andrew will not be focusing on debits and credits here. Andrew has a history there and in his background of business development. While at Wells’ First Data, he managed an outbound sales team and he basically proves and developed the financial plan that consisted of 250 billion of processing volume, revenues of $850 million, operating budget of $300 million, and EBITDA of $550 million, and provided the strategic direction on the development of $200,000 Merchant portfolio business. So we’re excited to bring a major player from a major organization into our shop to teach us different ways to grow our business. Andrew obviously has got extensive experience in Internet, online payment processing, which he picked up from AMEX as well as technology solutions that he held at Juno Online. So we’re thrilled that Andrew joining us. We welcome him with open arms on Monday and his reward will be flying up to Phoenix and taking a red eye back on Tuesday. Darlene Hayden joins us as SVP, Director of Web Solutions and Marketing. We’re bringing web solutions fully in-house. We’re going to be offering enhanced, enhanced plus and premier web solutions to our existing customer base. We’re excited about Darlene joining us. Web solutions should help us across the Board in all areas of e-commerce in addition to tech solutions, but also give us a nice lift in payments. Before I turn this over to Jenny, I would just like to summarize the investment opportunity in Newtek Business Services Corp. And internally managed BDC, it doesn’t pay 4%, management fees to external managers. The ability to generate an 11% dividend yield with we think significantly less risk, they’re comparable BDCs in market. Looking at internally managed BDCs, we’re trading at a significant discount that as a function of size and time in the market. So we have an opportunity to bias these prices. If you believe we are comparative to a Main Street, Hercules or Triangle, and how we generate cash flows, risk per award for consistencies and also we’re not new to the rodeo, we’ve got a publicly traded company for 16 years. We’ve owned and operated these businesses for over 10 years. This is an attractive opportunity versus where the median internally managed BDC is trading. Not investing in derivative securities, no SBIC leverage current, not investing in CDOs with equity kickers, primarily first liens, no direct lending exposure to volatile industries like oil and gas lead us to believe that we certainly appreciate what the investment community has done with us, since converting to a BDC, enable us to return 25% to shareholder in the last year, we hope they have those types of numbers this year for our shareholders. With that, I’d like to turn the financial review over to Jenny Eddelson.

Thank you, Barry. Good morning, everyone, and thank you for joining today’s call. I’d like to start with some financial highlights from our second quarter 2016 consolidated statement of operations on Slide 37. In total, we had investment income of $7.2 million, a 28.6% increase over $5.6 million in Q2 2015. The majority of this increase was from the growth and dividend income period-over-period. We had a $706,000, or 39.5% increase in dividend income for the second quarter of 2016 versus the same quarter last year. Specifically, we earned dividends from Premier Payments of 450,000, $1.5 million from Universal Processing Services, 330,000 from Newtek Technology Solutions, and 200,000 from small business lending. Overall, our dividend income from our controlled investments was $2.5 million for the three months ended June 30, 2016 versus $1.8 million for the same period last year. During the quarter ended June 30, 2016, we’ve recognized that $1.5 million loss on lease related to the recognition of the remaining liability associated with the West Hempstead office space that we vacated to move to Lake Success, which was a significant contributor to the total expense increase of $3.4 million period-over-period. We also incurred approximately $755,000 in interest expense related to the notes due 2021 and 2022 for the 2016 period versus zero in the prior period. Other G&A increased approximately 39.7% quarter-over-quarter and was due to an increase in referral fees and loan processing costs of approximately $402,000, which was a result of our increase in loan funding quarter-over-quarter. We also had some additional expenses that occurred specifically in the first-half of the year related to the 2015 audit, stock, and valuation work as well as an IRS audit determination, which accounted for approximately $400,000 in additional G&A that will not repeat in the second-half of the year. In addition, core fees increased by approximately $42,000 quarter-over-quarter. Overall, we had a net investment loss of $4.1 million as some hedge in net investment loss of $2.3 million period-over-period. Our net realized and unrealized gains totaled a positive $9.5 million and primarily represents gain on the sale of the guaranteed portions of SBA loans sold during the period. In the second quarter of 2016, we originated 100 loans, totaling $75.8 million and sold 90 loans for $51.2 million generating $7.5 million in realized gains. The average sale price as a percentage of the principal balance was 112.17%. During the second quarter of 2015, we originated 85 loans totaling $53.9 million and sold 80 loans for $52.2 million, generating $7.7 million in realized gains at an average sale price of 112.46%. The net unrealized appreciation on our controlled investment was $2 million in the period, which included $900,000 in unrealized gains in Universal Processing Services and a $2.3 million unrealized gain on our investment and premier payment. In addition, we’ve recognized unrealized losses on two of our investments; CDS Business Services and small business lending based on weaker than projected financial results. We also had an unrealized gain on SBA guaranteed nonaffiliated investments of $706,000 for the quarter versus a $1.5 million unrealized loss in the prior period. This gain was attributable to marking the $8.6 million in guaranteed loans we held at June 30, of approximately $982,000 offset by $276,000 of unrealized gains that we reversed in the quarter and recognized as realized gains when they were sold during Q2. Overall, our operating results for the second quarter of 2016 resulted in an increase in net assets of $5.4 million, or $0.37 per share, and we ended the period with now at $204.4 million, or 14.11 per share. With that, I’d like to now turn the call back to Barry.

Thank you, Jenny, and we appreciate everybody attending today. We will roll into Q&A just a couple of quick comments as we saw some analysts notes, I want to reiterate. There’s some general comments on income, I’m going to repeat this didn’t hurt [ph]. We have the majority of our income in the third and fourth quarters of this year. And that’s a story we’re sticking to it. On the SG&A, as Jenny pointed out, there were some people looked at a large jump in SG&A, while we happen to have a lot of one-time expenses that come in, in the second quarter. A lot of them are relating to public company expenses or ordering thing, et cetera, we don’t expect to have that type of growth. We believe our margins and the majority of our cash flows are stable. Margin, we’re growing. So part of the SG&A is referral fees paid to third parties, but that’s variable, and can I know historically it’s been at about 75%, what that number was for the second quarter?

I believe it was around 75% again.

Okay, so no change there. It’s just that – you do more loans. They pay more fees. That chose in the SG&A, and I guess, when everyone sees the case in the queues, they’ll be able to see that no alarm for raising expenses. I will tell you Jenny and I and the executive committee have probably made some changes in compensation that probably reduced our payroll by about $1 million over the last quarter. That’s just a function of looking at team members at all levels, particularly senior executives that are not performing up to standards from an accountability standpoint and making changes. That’s not to say that we won’t hire those people back, but to be frank with you, most of these people we don’t miss. As part of being in a large organization, when I worked with Smith Barney, I remember, understanding a while via regular routine of downsizing and heading back. It’s not really hard to get rid of the time top to bottom 10% of your workforce and then adding back and that’s what you’re supposed to be doing. With that said, I’d like to turn this call over to the operator for Q&A.

[Operator Instructions] Our first question comes from Leslie Vandegrift with Raymond James.

Good morning. I’ve just got quick modeling question to start out, sort of, you went through the other G&A increases this quarter, and I’m afraid I missed the first and the last one, the increase in referral fees and loan processing costs did you say $400,000 this quarter?

Yes, that’s correct.

Okay. And then on the board fees, was that 200 or…?

42 – it was 42,000 for the quarter.

42, okay, got it. All right. And then on the dividend income from the quarter, you had $2.5 million this quarter that was $1.8 million last year, and will that closer to the $2.3 last quarter? Is this the same portfolio companies that are now paying regular dividends that we can look to at a different mix each time and kind of how many new players in there, whether that was paying dividend income?

Yes, Leslie, I’m going to ask this question. Yes, on everything what you said. Look, it’s a little bit of the fact that in our banc-serv in there, the ITAS portfolio, we’re doing well in payments. So and mind you, we closed the quarter out with cash. So, this is a living, breathing model and it’s difficult to follow, I’m not arguing and it’s not. But unlike a portfolio of debt securities would leverage, we just have to figure out coupon clipping. This is going a little bit back and forth. So I’m not quite precise, but we expect to get an increasing amount of dividends from our portfolio companies. Here is the important aspect. We believe our return on equity in the 7(a) business is risk adjusted 25% to 30%. We believe when we’re acquiring businesses in the business service space at 4.6 times EBITDA, look, I’m not saying, we’re always going to be a fixed maybe you’re either at 8, but look at 6. You’re getting close to a 20% pre-tax return without any leverage, paid a tax there, we’ll leverage on Europe in the 20s. So I’d say would you rather invest in a company that’s managing these business, knows the businesses for 10 years, and in general these types of returns would leverage with the ability to grow and move towards market multiples of bigger companies with bigger size than investing mezz capital or high risk loans to be able to get the 10% or 11% or 12% coupon with leverage. That’s really what the model is and I appreciate your question. I know it was a little bit on a tangent, but we feel very about our guidance. We tend to do what we stay we’re going to do, and we would love everyone to sort of stick to what we’re telling them and we’ll be in good shape.

Okay, all right. And then kind of a final question here on, you went through your leverage and 76% this quarter that well under the cap at one-time there. But kind of going forward what kind of target leverage can we see, obviously, you sell off the unguaranteed or the guaranteed piece, and so that reduces that a bit each quarter, but with the increase in originations, what can we look to –it’s kind of a target or maximum you’d be willing to go to what kind of each new loan as you have to meet the regulatory test each time you do that?

You just said – you just finished strong, we’re going to meet the regulatory test.

Okay. I mean, is there a [Multiple Speaker] max you’re willing to go to or?

Yes, the regulatory max. So I know that might make people nervous out there, but it shouldn’t that’s how we manage our business. And I don’t have any SBIC debt. And I don’t have a lot of leverage on my business services businesses, which have a gross value of, I think, a $100 million. I got $20 million of debt on it, and I’m trying to get you guys to look at us differently, I think it’s really important. I need you to look at us differently. We’re now like the other guys, because if you count the other guy’s BDC SBIC debt, they’re over levered. So here is my job. My job is to make sure I comply with the BDC reg. And my job is to manage the equity markets, and investor markets and to grow this business, because if I can get this business vigor and consistently pay a double-digit dividend, we’re going to be just like the other guys. So I’m trying to avoid getting put into the box.

Okay. All right. Well thank you for that. I appreciate it.

Thanks, Leslie.

Our next question comes from Mickey Schleien with Ladenburg.

Yes, good morning, Barry and Jenny, a couple of questions. Just speaking from personal experience, I’ve noticed the implementation of the chip card processing seems to be really hit and miss depending on the vendor, and certainly the wait time for payment processing seems to be longer than when we used to swipe. So I’m just curious what kind of obstacles or opportunities that’s providing you in your processing business?

Mick, I appreciate the question. I think when you look at EMV, Euro Master Visa and chip cards, I hate to say this, but market confusion is an opportunity. By the way and also can – and hurt you if you’re not communicating with your clients as to sort of what the standard there is. So we do have clients that frankly there is point-of-sale systems. So they have investments in. And there’s stock, because they can’t get any of the compliant solution and/or as you’re familiar with when you go into some of your locations and you put your chip card into a terminal, some of the terminals having an ordinate amount of time to clear the transaction. There’s also been some recent studies that say, it’s not that difficult to steal the data off a chip. So with that said, this is where the entities that are more nimble really paying attention to their customers, doing an outreach. But markets don’t have all the solutions for EMV. The worst thing you can do with a client is not to talk to them and be silent. So our goal is for our customer service people and our outstanding unit to inform customers without there what’s important. We also do have an advantage that if we have a client that had an antiquated terminal, antiquated POS system, and their good credit, we can also provide them funding to enable them to protect themselves and to grow their business in a difficult world or environment. So that’s how we sort of holistically look at the relationship with customer. This is an opportunity and the Payments business is going to change and it’s going to churn and it’s going to be different.

Okay. Thank you for that, Barry, it’s useful. Couple of modeling questions, I don’t recall if you mentioned in the prepared remarks, did you fund any 504 loans in the quarter?

Did not.

Did not. And are there any synergies available that you can talk about in the – from the banc-serv acquisition?

Yes, I appreciate that, Mick. Yes, I think one of the main synergies is the banc-serv could, number one, speak to their smaller banks that currently see a loan opportunity and just say well, I can’t do more than $1 million loans, I’m not going to do it. So banc-serve will now be referring those opportunities, but they have to get out and market this, not just to the bank, but then to the bank staff and train people takes a while. Although, I will report we already funded some loans from banc-serv, that’s synergy number one. Synergy number two is, they had relationships – I’m sure many of those relationship are looking for an outlay for their payments of business on agency basis, because they’re all smaller. They can have their own payment processing in-house. They can’t do their own payroll in-house for their clients. They all have an insurance agency, because these are $100 million institutions, maybe $2 billion. But for a banking institution today, the regulators are really getting to focus on fewer things, and there’s capital allocation issue. So that’s the second area where there’s really good synergies.

I appreciate that, Barry. And my last question is, GLS reported that SBA 7(a) prices were down about a percent during the quarter. I’m just curious what your thoughts are on 7(a) pricing in the second-half of the year?

Well, as you can see ours were steady. So now, I think there are certain issuers that have prices that are down. We have not found that. The function – pricing is a function of expectations of voluntary and involuntary prepayments. Voluntary, obviously, is going to – actually I’m going to pay loan off in voluntary in the fall. It’s somewhat of a function of the interest rate environment, which I think is extremely favorable to prices. And I don’t – we don’t and there is one other thing, Mickey, with respect to our prices. The mix of 10-year loans versus 25-year loans, which I don’t have that data at the moment. But I don’t think there has been a tremendous change one way or another, but we do keep an eye on that. So, realistically speaking, if we’re doing our 10-year loan pricing is typically 2 to 4 points less than our longer-term price.

Barry can you – would you be willing to share your assumptions in loan for 7(a) loan pricing that support your budget for the year?

I’ll just say, I think it’s consistent with our view that we do not see any major changes in the interest rate environment, that mostly see maybe a quarter-point rate hike from the bad. We see tremendous amounts of liquidity. We see with the market that’s got a GDP of 1% or 2%. There is an insatiable appetite for structured product was that the rated securities or a government guaranteed. So I think the best thing that we could comment on is stability, but also Mickey, you could look at our dividend guidance and you could probably back into that number.

Yes, I appreciate that. Those are all my questions for today. Thanks for taking them and look forward to talking to you soon.

Thank you, Mickey. I appreciate the questions.

Our next question comes from Arren Cyganovich with D.A. Davidson.

Hi, thanks. Just in terms of the ramp in the second-half, clearly you can see from SBA fundings that you’ve done just first-half relative to your guidance, you’d have a nice pick up there. And you mentioned the Payments business is obviously more purchase volume in the second-half. Is there any other aspects of your business that tend to boost your earnings in the second-half of the year beyond those main things?

Yes, I think, I’d be a little bit too aggressive to stay in third or fourth quarter. But I think the move to the Lake Success office, that’s got four businesses and one unit, recent hires that we’ve made, capital that we’ve raised. We are significantly better and more efficient than we were a year ago. The technology solutions, recent addition of our Chief Information Officer, Nilesh Joshi building out more models with our debt team in Phoenix. So I mean, I think that, as we grow and get bigger, we’re just in a better spot. We have more resources. We able to get more attractive capital. It’s expensive to be a $200 million public company. I mean, I’ve got $500 million company, so big expensive to be $500 million company, being a $200 million. But we’re raising technology and that’s the key to being a survivor in the economy today. If you’re not investing in technology, which enables you to acquire credits more cost-effectively process, business opportunities more cost-effectively, you will not be in these business, there is no way.

Thanks. And looking at your loan pipeline, just to help me understand the different buckets approved pending closing loans and upgrading prequalified. What’s the ratio of close for this different buckets? Loans and underwriting the – typically I think bulk of those actually g into closing, or is it more of a kind of a smaller proportion?

I think the best way to look at it at the moment would be, we’re probably closing between 2.5% to 5% of gross referrals. When you get down to prequaled and underwriting, you gets a little sticky, because it can be nasty. But I can give you a wide range if that’s helpful. I think in prequaled, you’re looking at between 50% and 65%. Now when a loan is an underwriting, that’s – you got stuff to take it out, it just rolls that into future quarters, because targets and appraisal, there’s not a certain amount of information, so it’s very hard to figure really to close it down. I would say the best way to the outside world to manage that would be to really look at gross referrals to try to do forecasting, as well as I know you guys don’t like to do this, closer to the management team’s guidance as what they think we’re going to quote. I know, we’ve actually been pretty good at it. So I think that’s a best way to look at it right now. I would say the underwriting component, in particular, can be volatile, and although, it’s been close as bucket, but let me just say this. Here is the easy one, approved pending closing, 90% to 95%.

Okay. And then just, I guess, a little bit more details on the banc-serv acquisition. If you could tell me a little bit more about what they do? How they can fit into your lending business and what it actually takes to drive that incremental originations that you think they can provide for you?

Sure. Banc-serve in the industry is known as LSP lending service provider. And their service loans for third-party servicing portfolio is about $550 million, they assemble and underwrite. So for a smaller financial institution or non-bank lender that can afford the multimillion dollar investment in SBA loan assembling, SBA loan underwriting, SBA loan servicing to comply with 1,600 page policy and procedure manual. So they want to put loans on their books in their own, at least, in their own license. They subcontract out that to an SBA like banc-serv, that provides that service. Banc-serv has been in the business, I think, over 11 years. It’s really good at it. They’re one of the market leaders. So when they help the smaller banks do, dissemble, underwrite and service, important the credit decision resides at the bank. So they make no credit decision, credit decision is made at the bank. So I think that that’s kind of what banc-serv does, and they levered their staff. They generate cash flow. And for us they’re really good conduit into these entities that wanted to do other things what banc-serv does. And that’s banc-serv is – staying is banc-serv, you get their name on their building. They’re powered by Newtek. They do go over once a day, we don’t, but we think it’s a great acquisition. We picked up a great executive in [indiscernible] that’s very dynamic, and we look forward to working with banc-service portfolio company and its shareholder.

Okay. So – but you won’t be combining any kind of servicing aspects of the two business?

No.

Okay. All right. Thank you very much.

The next question comes from Lisa Springer with Singular Research.

Good morning, Barry, and congratulations on a good quarter.

Thank you, Lisa.

I wanted to ask you about the two acquisitions in the Technology Solutions space. Could you give us a little bit more color on those, and if you’re seeing there maybe other acquisition within that space to get the business to where you wanted to be?

Lisa, I appreciate it. I mean, we were able to do ITAS, Deer Valley, and like one-times revenue, it was a lift of service and software right in their data center, it was pure cash flow. We’d love to do those. There’s tiny, obviously, it’s got a lot of money, but it works. In banc-serv, we bought it at a low cash flow multiple. We see growth opportunities within their core business, but realistically, let’s say, and given your banc-serv is able to refer $30 million or $50 million of loans to us that on a gross margin basis of worth 9 or 10 points that’s $3 million or $5 million. If I get the fact that we now have introductions at the 300 other entities, that can introduce payments, technology, insurance, payroll to us. Those are the kinds of things that we think are good things for banc-serv customers and for our shareholders, and we’ll pay referral fees back to banc-serv.

Okay.

So looking ahead, we’re always looking for new acquisition. We always take a look at cost of capital and where we’re going. We’ve got nothing that’s really warm or hot on the fire.

Okay. Thank you.

Thank you, Lisa.

Our next question comes from David Scharf with JMP Securities.

Hi, good morning, Barry. Most questions have been exhausted, but just wanted to check in. First, I may have missed it, can you just count what would need to be sort of one-time versus next year in Q2?

At time was in SG&A? Yes, I’ll let Jenny answer that.

Yes, we had some one-time expenses related to our SEC audit or SOX audit valuation work. And we also had a IRS determination that occurred in the first-half of the year, totaling approximately 400,000 to $450,000. So those expenses that are sort of one-time should not reoccur in the second-half of the year.

Okay, about 450? Got it. Okay and then on the compensation side, the comment about reducing, but there was a $1 million run rate that was effectively produced during Q2?

Yes.

Okay. And as we net that out against some of the management additions, I mean, just trying to get a sense for how we ought to be thinking about sort of a net change going forward?

25.

Mainly gross margin?

Yes.

Okay.

Look, I think we’re very expense conscious here, I can assure you that.

Question just fine tuning that’s all just to understand. Thanks.

Yes, I appreciate it. Yes.

Got it Barry, on the merchant side any, obviously, a lot of acquirers that and as you mentioned been battling some of the EMV conversions. Is the issues around just some of the point of sale terminal conversion issues and so forth. Has there been among the small merchant face any sense of delayed purchasing more on the sidelines, or are we kind of over that EMV front?

Yes, that’s a great question. I’ve been very surprised even with the smaller merchants are just – I don’t know where the really smaller ones, you’re talking like 8,000 a month or maybe 20,000 a month, they’re not involved. I mean, they just, they’re kind of zero in the headlines. And I’ve also, I don’t know if you found some other another participants, we’ve less fortunate or industry. We have not seen and probably [indiscernible] my mouth shut, but let me just make this comment, it hasn’t really been an issue on either side.

Got it.

Yes and I’m surprised at it.

Okay. And for those types of merchants, I mean, is integrated payments even they require better demand in the market pretty much well situated with, I want to say, plain vanilla merchant processing, but is there any…

I mean, I think the ultimate trend is got to be – everything has got to be totally encrypted. But we’re not there yet. There’s no real universal solution out there that anyone is pushing and we think it’s just been. It’s just really been a messy rollout, and I think – I don’t think it’s been, I mean, OE you wouldn’t see and these are MasterCard stock, but it just really hasn’t been done very well and the big processors, it really haven’t fully captured, what needs to be done, and the customers are kind of shaking their head and the customers demand, and the customers were not having.

No, clearly, that’s all, perfect. Thank you.

Thanks David.

Our next question comes from Scott [indiscernible] with Merrill Lynch.

Hi, Barry, congrats on a great quarter.

Thank you, Scott.

Could you give us a little bit more color on the banc-serv, obviously they’re bringing over EBITDA and have you guys sort of run a one plus one is five to give us any kind of what they’re really going to be able to bring in terms of leverage cross-selling opportunities et cetera?

Well, I’ve just try to keep it simple and we put out for example conservatively $30 million of originations in 2017. That – if that’s totally incremental that would be worth about $3 million.

Okay.

That has nothing throughput there, EBITDA that we bought the business on.

Right, okay, thank you very much.

Thank you, Scott. I appreciate it.

Here I’m not showing any further questions at this time. I’d like to turn the call back over to your host.

All right, I really appreciate – the quarter appreciate the analyst work and following us, the questions were great today. I also appreciate obviously the safety investments, community has put in Newtex, particularly recently obviously January and February, we are top for the market. We also had few entities moving the portfolio around that has been in the stock for over 10 years. We understand that and we appreciate having people back in forth. But I think based upon some of the calls that I get to change will get, investors are starting to understand the business, the opportunity, we’re definitely not in a box like everybody else. So we really appreciate, people paying attention, doing the work, Jenny and I also available to answer questions. Once again thank you very much for your face in the company and look forward to reporting in the third quarter.

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