NEWTI - NASDAQ

Welcome to the Newtek Business Services Corp. Full Year 2021 Earnings Conference Call. My name is Hilda and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Now, I would like to turn the call over to Mr. Barry Sloane, President, Founder, CEO. You may begin.

Good morning everyone and first and foremost Newtek would like to send its prayers, thoughts, and feelings out to the country of Ukraine and its citizens. We certainly appreciate the dilemma that they're seeing and witnessing this morning. Welcome everyone to our full year 2021 financial results conference call. My name is Barry Sloane. Joining me today will be Nick Leger, our Chief Accounting Officer. I would also like to thank our accounting staff, legal staff, business leaders, and to all Newtek associates that made 2021 and the results that we're about to talk about today, a great year. For those following along on the PowerPoint presentation it, can be found on our website newtekone.com in the Investor Relations section. Please go to Events & Presentations and we are ready to begin. I first like to call everyone's attention to slide number one and please remind everyone to read the note regarding forward-looking statements and comments. Slide number two, we always like to go over our report card, particularly as a public company and on slide number two, you could see that Newtek Business Service Corp. has been a very successful organization over the course of 10 years. The data that you see is the end of year data acquired from Bloomberg and obviously, the returns include capital price improvement as well as dividends. Moving to slide number three, as many of you are aware, approximately August 2nd or 3rd, the company announced our intent to acquire National Bank of New York City and potentially convert, subject to a proxy vote and regulatory approval, from a business development corporation to a bank holding company and designated financial holding company status. There's been a lot of activity in the share count. This particular document demonstrates that shareholders that owned stock at the beginning of the period in their name to the end of the period sold out to zero. So, we asked the market participants to draw their own conclusions from this, but clearly there's been a significant amount of movement in the share from people that had a position to not having a position. Obviously, the potential transformative change that we're talking about may have caused this. Slide number four, obviously, we're here today to talk about our 2021 performance and clearly we were dealing with tremendous headwinds from the 2020 and 2021 pandemic. We've used the expression we're firing on all cylinders. Simply stated investment in Newtek Business Service Corp., you're investing in a diversified business model under the Newtek brand. People come to Newtek Tech for loans, payment processing solutions, tech solutions, insurance agency solutions, payroll solutions and other solutions that will make their business successful. We're real, real happy with our performance in 2021. But I'm particularly happy with the momentum that we're carrying into 2022. We'll demonstrate that throughout the course of the deck. Since January 20 – excuse me, since January 21, 2021 NSBF which is Newtek Small Business Finance our non-bank lending SBLC increased its headcount by 63 individuals to 253 people at 33% increase. This headcount increases indicative of the fact that, we have geared up, and as you'll see in terms of units and loan volume, we're gearing up with the great operating leverage that we have to do more and more business, obviously, both in 2021 with the records that we produce as well as going forward into 2022. We're looking forward to further demonstrating not just in lending, but in our other solutions area, whether it's payment processing solutions, tech solutions, payroll solutions, or insurance agency solutions. If you look at every one of these individual areas, there's tremendous change in payments. There's tremendous change in how businesses are looking and seeking assistance for their technology. There's tremendous change in people that are looking for payroll and HR solutions. We are very, very well positioned for these changes going forward, with our solutions that we believe very strongly, make businesses more successful, and make them better. On the fourth bullet on the slide 4, we will talk about our NewtekOne Dashboard that we unveiled recently. We were really excited about the product. Important to note, we are hopeful that the company will carry forward its objectives with the proxy vote and regulatory approval, to become a bank in the event we're not a bank. The Dashboard will still be available, however, without deposits. But we've been working on this. We will be rolling this Dashboard out in calendar year 2022. Also to note, obviously during the fourth quarter of 2021, we really put tremendous amounts of resources into closing and funding 7(a) loans, 504 loans, our non-conventional or non-conforming conventional loan business has taken off really, really well. Obviously, in calendar year 2019, there were no PPP loans, and no PPP income. There'll be not in calendar year 2022. But when you look at the momentum and the performance of the company through 2020 and 2021, we're extremely excited about our future. We have great momentum going into particularly the lending vertical, based upon technology changes that we've made, staffing changes, training changes. And we've got plenty of capital to be basically able to fund our loan growth and quality portfolios going forward. On slide number 5, some lending highlights 198 million of 7(a) loans in the fourth quarter of 74% increase. On the year $560 million of loans for the full 12 months, an increase of 184% over the prior year that's the largest amount of SBA funded loans that Newtek has done. We're the second largest SBA lender in the United States, after the December 31 quarter. For the SBA that's their first quarter, for us it's our fourth quarter. Our Newtek business lending facility, which originates and creates SBA 504 loans and non-conforming loans, which go into joint ventures, the 504 portfolio closed $90 million of loans during the 12 months versus $87 million. I would say from a metric perspective this was an underperformance. However, we do have a very nice roll forward on some loans that we thought could or should have closed in Q4 that are rolling over into Q1. We feel really good about that. We'll talk about our first quarter 504 closing position in a later slide. Newtek Business Lending is forecasting $150 million of 504 loans for the full calendar year 2022, which would represent a 66.5% increase. Once again important to note in the 504 business in addition to us making the loans we have to get CDC, Community Development Corp approval, SBA approval and the borrower, everything's got to get lined up. So it's important to understand that markets change, pandemic issues, staffing, legal et cetera. These necessarily move closing and funding dates around from time to time. Lastly, we say goodbye to PPP, $1.9 billion of PPP loans funded. We probably forgiven in units about 75% of the total 26,500 portfolio to remind everyone we have sold 100% participation certificates in almost all of our PPP financings. On slide number 6, we talked about this previously, addition to staff, I think it's important to note that we have brought in some new management in the lending space for all the four products, okay, it's important to note once again, the way we do our business, big funnel up at the top, the referrals come in, and then our business service specialists and management team sides. Is it a 7(a) loan? Is it a 504 loan? Is it a non-conforming loan? Is it secured line of credit? So you've got a very big funnel to get the referrals in, the front end decides what is best for the customer and what's suited to their needs and demands obviously, to make a good credit. So on a positive note, the addition of Justin Gavin, Jessye Brem, Scott Shulman, and I’m forgetting somebody at the moment to that management team, I'll have to come back to that. But that management team has done a great job, which you'll see as you look at the portfolio -- growth in the pipeline growth this quarter in time this year, this quarter in time last year. So we have had staff turnover, for some company staff turnover was bad. In our case the turnover that we've been involved within the past, I would say year and a half. It's really put a very talented team in place that has similar goals and metrics for both personal and professional growth that the company has. We feel very good about our staff and our training going forward. In the press release, we indicated I think it was north of 3,200 management training hours for lending staff. We're very proud of that. Slide 7 gives you a good idea of what our efforts are doing and what we think is the operationally leverageable and scalable lending business. 57,000 referral units for the quarter in 2021, compared to 92,000 in 2020. For the year 413,000 in referrals for the 12 months versus 239 for the same period in 2020, in unit closes it’s important to note, we're closing more units. That's a big deal. 282 loan units for the three months ended December 31, 2021, compared to 122 units for the year. 761 units versus 215 units. Now this is all based on 7(a) data. Once you get into the non-conforming conventional loan business, you're looking at average loan size that could be around $5 million plus or minus. I think it's very important to note that in order to get the very significant material volumes, you really don't have to do a lot of units and that big referral funnel that’s coming in the front end is going to create that type of activity. So when you think of the non-conforming business, and we'll talk about that going forward, putting that on to the referral infrastructure, the assembly infrastructure, the underwriting infrastructure, tremendous opportunities for operating leverage. Newtek's database of customer opportunities is extensive, with over 1.5 million referrals in the database. We'll talk about the Newtek One dashboard and our ability to cross-sell, but more importantly, provide a quality solution to our independent business owners all across the United States. Once again, it's important to note that the dashboard that we're going to provide is going to give business owners a tool that it's going to enable them to be more successful in their business, both for data information and transaction. Important to note with a 19-year track record of loan assembly underwriting and technological expertise, we have materially improved our processes across the board to be much, much better in the lending business, closing out 2021 and clearly going into calendar year 2022. We're excited about the growth potential and all the possibilities. Slide number 8 talks about our financial highlights. Total investment income, up 17.7% for the year, net investment income was a decrease of 25.8%. The explanation there is the delta of the PPP income that came in, in 2020 versus 2021 because the gain on sale is included. So on a positive note, clearly we had significantly greater adjusted ANNI or ANNI for the calendar year of $3.47 versus the prior year of $2.05. However, the PPP income in calendar year 2020 dwarfs everything else. We did very little bit of our core business. Core business coming online. We're back to basics. We are growing very exciting. I do want to point out the $3.47 was a nickel better than consensus analysts—we have full analysts estimates at $3.42 and we previously forecast $3.40 for the year. Debt-to-equity ratio of 1.19 at December 31. That's one of our lower debt-to-equity numbers in recent quarters in recent years. We feel pretty good about reducing our leverage at this point in time and its' likely that that leverage number will bounce back up. Once again, total investment portfolio increased 13.1%. Important to note that BDCs have a hard time growing their total asset size because they're constrained, when they're trading below NAV, we obviously traded a premium to NAV. So being a BDC, it's important to have a real strong stock price to be able to continue to raise equity and debt to grow the business. Net asset value of $403 million crossed over the $400 million mark, an increase of 8.2% per share on a year-over-year basis. Slide number 9, the adjustment NII trend. Obviously, big $3.47 adjusted NII. Look I would say that we have not given full year guidance as a BDC for the calendar year. There's good reason for that. We may not be a BDC for the full year. We have indicated that we think that the third quarter would be the most likely yes. But that's up to our work obviously with the regulatory bodies which we're going to work with them and take -- give them as much time as they need to make the appropriate decisions to work with us, to make sure that everything goes smoothly and we've got the best plan in place. So we have declared for the board a $0.65 dividend in the first quarter. We have forecasted a $0.65 dividend in the second quarter. That’s a $1.30 for the first six months, which I think is a good formidable forecast going forward. Typically we've had better second half than first halves. There is -- and maybe this is the understatement of the day, a lot of uncertainty and volatility in the markets today. So trying to figure out what the third and fourth quarter of the year look like. Looks like at this point in time, we're going to hold that back at this point in time. But once again, when you look at the trends, when you look at the pipelines and you look at the efficiencies, the areas that we're in, and frankly, the fact that the businesses that were involved with, these are not international businesses, they're independent business owners, primarily with a U.S. focus. We do we do think we're in pretty good shape here. So we would like the market to, obviously, look at the company's historical performance over 10 years, how things are trending, the processes and training that we put in place, the technological improvements. We're pretty excited about 2022. Slide number 10, dividends, which we're just talking about. Obviously, $3.15 in 2021 was 53% increase over 2020. We talked about our first quarter 2022 dividend declared $0.65, forecasted $0.65 in Q2. The declared dividend is a 30% increase. I think you'll look at some metrics that we have going forward for Q1, very-very strong, very- very strong. So we're really excited, obviously, about finishing what we're doing here today, but also reporting our first quarter performance as well. Going back, 2021, clearly, we put up some great numbers, you could see that, what we talked about. But those numbers without -- were without great challenges. And I think that, one has to look at the company and say this is a company that is flexible, that is nimble, that's forward thinking and is able to make these adjustments. And these are things that we've done over the course of our 20 years as a public company. Slide number 11 talks about the 1.19 debt to equity ratio. And then, as many of you are familiar with our model, we sometimes sell government guaranteed pieces, which settle in the first week or second week of the next quarter. So, I mean, those -- that leverage basically goes away fairly quickly. And we would have been about 1.10. So we're really putting up some great numbers without a lot of leverage. As many of you know, we redeemed $40 million, on slide number 12, of the NEWTL outstanding baby bond notes with no prepay penalties. Egan-Jones has recently maintained their BBB+ rating on our notes and debt. And there's also the NEWT

Thank you Barry. Good morning, everyone. You can find a summary of our fourth quarter 2021 results on slide number 43 as well as the reconciliation of our adjusted net investment income or adjusted NII on slide number 45. On slide number 43 for the fourth quarter 2021, we had a net investment income of $1.6 million or $0.07 per share, as compared to a net investment income of $850,000 or $0.04 per share in the fourth quarter 2020. That's a 75% increase on a per share basis. Adjusted NII, which is defined on slide number 44 was $16 million or $0.68 per share in the fourth quarter of 2021 as compared to $9.6 million or $0.44 per share in the fourth quarter of 2020. Focusing on fourth quarter 2021 highlights, we recognize $24.8 million in total investment income, up 67.7% increase over the fourth quarter of 2020. Total investment income of $14.8 million. Dividends from portfolio companies, interest income and other income are the primary drivers for this increase, with interest income increasing by $1.4 million, resulting from a year-over-year increase in the accrual loan portfolio. Other income increased by $3.3 million for the fourth quarter 2021, resulting mainly from a year-over-year increase in SBA 7(a) loan origination volume. Servicing income increased by 7.2% to $3 million in the fourth quarter of 2021 plus $2.8 million in the same quarter. Distributions from portfolio companies for the fourth quarter 2021 totaled $9.75 million, which included $6 million from NMS, $3.5 million from NBL, our 504 business and $250,000 from NPS as compared to $4.175 million in the fourth quarter of 2020. Moving on to expenses. Total expenses for the fourth quarter increased by $9.2 million quarter-over-quarter, mainly driven by an increase in the SBA 7(a) loan referral fees due to higher loan origination volume, escalated cost, professional fees and loan origination and processing costs. Realized gains recognized on the sale of the guaranteed portions of SBA loans sold during the fourth quarter, totaled $18.1 million as compared to $11.4 million during the same quarter in 2020. In the fourth quarter 2021 NSBS sold 223 loans for $126.6 million at an average premium of 12.28% as compared to 123 loans sold during the fourth quarter of 2020 for $85.1 million at an average premium of 11.42%. The increase in realized gains is attributed to higher SBA loan origination volume in the fourth quarter of 2021 combined with higher average premium prices when compared to the fourth quarter of 2020. Realized losses on SBA non-affiliate investments for the fourth quarter of 2021 was $3.5 million dollars as compared to $2.7 million for the fourth quarter of 2020. Overall, our operating results for the fourth quarter of 2021 resulted in a net increase in net assets of $20 million or $0.84 cents per share, and we ended the quarter with NAV per share of $16.72. I'd like to turn the call back over to Barry.

Thank you, Nick. Operator, we’d go to Q&A.

Thank you. We will now begin the question-and-answer session. And we have a question from Paul Johnson from KBW.

Yes. Good morning, guys. Thanks for taking my questions. Just have a few for you today. I'm curious as far as what you're seeing with your portfolio in terms credit trends, just subsequent to the expiration of the CARES Act last year in September, if that's changed at all, if that's improved or any sort of significant developments there.

Yes. I think that if you look at the results, the majority of the portfolio stopped receiving the CARES payments in probably March-April timeframe. And I think that people look at that as gee, that's personal -- none of these things are permanent. And these businesses took these funds and because in many cases they were very limited by government action to open up or wearing masks or a variety of different things they had to do see things better. So, when you look at our portfolio performance, which we covered in one of the slides we’re very, very pleased and we think that businesses and Newtek is kind of an example of it really took the opportunity to pay attention, get rid of unnecessary expenses, and position themselves for how business has to be done in the future. So we think the trends are pretty good. Now today's all of a sudden the new day, lots change. Consumer spending has been incredibly strong up until, I would even say, yesterday. I mean, I'm seeing that in the payments numbers. So, if this is not overly punitive, meaning that if we have oil at 125 bucks a barrel for six months, that'll be a problem, I would presume to a degree, but I think so far we're in good shape. I mean, the future is a little bit more uncertain with what's happened yesterday, But right now, we feel pretty good about the quality of the portfolio where our clients are. I mean, we knocked out everything 60 days and over and non-accruals went down. So we feel pretty good about where we are as well. And I will tell you, the value of the collateral is very strong right now.

Thanks for that. Yeah. It's great to hear. Secondly, you guys have grown your staff pretty significantly last year. Just wondering, do you expect that kind of rate of hiring to continue into this year or do you think you've kind of reached a point where you're pretty satisfied with the staff that you have today.

Yes. It's a great question. Myself, in the lending team led obviously by Tony

Thanks for that, Barry. Appreciate that. I just had a few more and I'll hop back in the queue, let few others ask questions. I'm curious on the JVs that you talked about with new partners and potentially forming those and growing those over time. How do you plan funding the JVs? Is that going to be essentially cash on your balance sheet, or potentially assets from the portfolio, or how -- what's the plan in terms of just getting those JVs started?

Sure. And it's a great question. Paul, I appreciate you asking, because I think that a lot of people don't fully understand the value and capability of the JVs. And the way we currently do it today, which is what we continue to do as a BDC. And frankly, be not much different than if we were, had that assets at a bank holding company would be by a combination of debt and equity. And they're typically 50/50 equity pieces, and we have leverage financing from different partners. And we're -- we've got term sheets and offers on that now. So, the loan growth would basically be funded on balance sheet by the equity investment of Newtek Business Services Corp. into the joint venture.

Got it, got it. And then, lastly, I was hoping maybe you could just to kind of maybe talk about the effect of inflation and how you've seen that kind of flow through your portfolio companies, or maybe even, how you expect that kind of flow through this year. Any, sort of, effect that had on your portfolio or maybe even your underwriting process, just any kind of color there would be helpful.

Yeah, I think that inflation is a good thing for the payments business. I hate to say that because it's just dastardly, but it increases the volume and you've got a lot of fixed expense there. So for the payments business, it's good. For the insurance agency, it's good. For the payroll business, it's good. So -- for the business services business, it's great. Now in the lending business, it can be problematic if in fact, it drives rates up a material amount. And I say that driving up rates to material amount does put pressure on businesses that don't have the price elasticity. So you know where we begin to see certain strains from borrowers typically, is when you have a very material rate shock. But it's nothing that we -- I mean, we've been doing this for, you know, in the SBA space since 2003. So it's nothing that we haven't seen before. It's stuff that we model in all of our models. You know, it not overly concerned about inflation as being problematic for overall this business, which is why it's great to have all these diversified streams.

Yes, appreciate that. Actually, one more question. I just housekeeping thing on for Nick. He mentioned that, I think, I just missed it. But could you just verify the realized losses on the SBA loans in the fourth quarter?

Yes fourth quarter. Yes, its 3.5 million for the fourth quarter.

Okay, appreciate that. Alright, that's all for me. Congratulations on, you know, really active quarter and a really active 2021. Hopefully, we see more this year.

Thank you very much.

Thank you. The next question comes from Mickey Schleien from Ladenburg.

Good morning, everyone. Hi, Barry.

How are you doing?

Okay. Thank you, Barry, most of my questions were already asked, but just a couple more. You mentioned that SBA 7(a) prices weakened in the fourth quarter as the government's fee waiver and following that, how do you view pricing developing this year? And what do you expect for demand as interest rates rise?

Yes, the prices Mickey on the bonds have actually been not as good -- is you know, quote up, you know, 1:13 and change, but not too far from that. So you know, without putting a number on it. The need and appetite for government, full faith and credit government guaranteed floater in the current environment is desirous and prices have held up pretty well. I – to be frankly, you don't have -- don't have a forecast or a number for Q1, but we'll probably be there in about five weeks with the way things are going so. I don't see major changes. You know, if you want to do some modeling, anywhere between 1:11 and maybe 1:12.5, I'm just giving you a very wide range, but I don't have any further information relative to the mix of the portfolio. And I want to emphasize the change in the pricing was based upon the fact that just 50 basis points less than coupon that we're selling. So, the flip side of it is the demand for the Full Faith and Credit government guaranteed floater is pretty high, and that's what's keeping prices stellar.

And how about demand for the loans in terms of originations, Barry? In other words, when you look at your long history, let's say interest rates climb -- they could claim a couple 100 basis points in the relatively near future. How does that impact demand by your borrowers for debt?

It's a great question, Mickey, it's still because of the fact that we are a 10 to 25-year amortized lender, we are a better alternative than a conventional bank loan do -- obviously, we're higher rate than they are, but it's the stretching out of the payments that's in measurably invaluable. So, higher rate environments don't tend to dissuade the universe of opportunity. And you can see that from our pipeline, which has been growing throughout very material significant rate increases over the life. It's not declining, and it's -- and we're closing and the credits are good and the economy is good. So, no, we do not see a problem with loan demand, I would say on a Newtek specific basis.

I understand. Thanks Barry. Just to follow-up on the credit quality questions. Could you give us a sense of how your borrowers' revenues and margins trended in 2021? And do you expect those to be sustainable in 2022?

That's a good one. I think that -- too early to tell. Today, there's been a lot of pricing elasticity and I guess that people going into restaurant with a higher bill and they are paying. So far, we see people from a rent standpoint, being able to afford rent hikes and other expenses. I do believe that we're still dealing with supply chain issues that will wind up having some effect on the business and business credit. I think I'm -- if I were to telling you anything else, I don't think I'd be telling you what's truthful here. So, you've got an environment that is really volatile, it's changing rapidly, and businesses that are smart and nimble, do well, which frankly, we have 44 people in our servicing department. We are all over our clients right now with the employment retention tax credit thing, of which I would say a lot of our businesses don't know that they're eligible for. So, we work very hard, not just giving people money, but giving them these other solutions that make their business better. And that's why we've been able to lend money for 18 or 19 years in a space that typically people they get in, they get their fingers blown off, and they get out. This -- we really put a mark in working with our client base to make them more successful, not just in giving them money, but in helping them grow and develop their business with the best solutions.

I appreciate that. I understand. Thank you. Barry my last question. Thinking about sort of secular trends, are you seeing opportunities developing amongst small and medium sized businesses to service the alternative energy market, I'm just thinking about companies that may go out to houses to service solar panels or wall chargers for electric cars, things of that nature, and can that displace historically loans that used to make to gas stations, for example?

Yeah. That's a good question. Look that is going to happen. Right now, we would be -- we typically do not -- we're not a venture lender. I think it's important to note that. But there is no question we've seen an unbelievable amount of entrepreneurship and we talk about charging stations, solar panels, CBD, cannabis, but we're seeing a lot of economic changes going on, industry changes. And yeah, we think these are burgeoning markets. It's not typically what we have any interest in lending to.

Understand maybe down the road. That's it for me this morning. Thanks for your time.

Thank you, Mickey. Appreciate it.

Thank you. Our next question comes from Matt Jaden from Raymond James.

Hey all, morning, and appreciate you taking my questions. First one maybe for you Nick. Apologies if I missed it during the prepared remarks. Can you give the breakdown of dividend income in the quarter? And then as a follow-up maybe for you, Barry, kind of expectations for the dividend income line in 2022?

Yeah. I'll take the latter and I'll let Nick do the former. So I'll do the latter first. The expectation for dividend income is we have declared a $0.65 dividend for Q1. We have forecasted a $0.65 dividend for Q2. If you look at the momentum that we've got in the business with respect to 7A loans rolling over, the projections of the portfolio companies, we think we're in pretty good shape. Now we've been reluctant and we did say this earlier in the call to forecast Q3, Q4. We don't know whether it will be a bank. We don't know whether it will be a BDC. But I do think, the company has historically trended to be higher in earnings in the second half than the first. I also cautioned that we have a lot of volatility, just looking at what's going on in the market today with rates, gas, stuff like that. So we're a little conservative on that. What I will say is, given that we think though the bank transaction is not a second quarter, we don't think the bank transaction second quarter transaction and maybe a third quarter transaction. If it's a third quarter transaction, we probably would pay a dividend consistent with what we normally do as a BDC. Now that's a guess that might change. I might retract that. But knowing our customer base, our investor base, we want to reward our investors. With that going beyond that I couldn't. But I think you're going to have to do your own projections. I appreciate the work that our four analysts have done because you guys do have adjusted NII projections for the calendar year, all four of you. After this call, hopefully, maybe you'll look them a little bit closer. But I keep an eye on that pretty well. Nick, you -- can you answer Matt's questions on the dividends from last year?

Yeah. So from there was 6 million in dividends from NMS, $3.5 million from NBL, and 250,000 from NTS.

Got it. Appreciate that. Barry, maybe as a follow-up to you on the bank, bank holding conversion company timing. Any sense you can give us as to when we might expect to see a proxy statement?

I should have been prepared for that question, Matt. The answer is I can't really give you a time frame. I think from our perspective, the most important thing that we can do here is make sure when that proxy goes out that people are just really well informed, with everything that we know. So that's kind of what we're studying right now. I preferred to be sooner than later. But I think the – the deeper that we get into, the transaction and we're in it. We're in a pretty deep at this point. And I can say that, we have not encompassed any roadmap at all that's going to us to say no, now, I say that with all humility, because until the regulator's sign off on a final plan, you don't have a final plan. And we're in discussions with them, and we've made certain adjustments to-date and things of that nature. But nothing that's changed the company or the Board's position that we like the deal that we did, and are hopeful that shareholders will follow through with our belief that this makes sense. They'll have to do that evaluation based upon what's in the proxy, which is basically a vote on being a BDC or not being a BDC. I know, I didn't answer your question, Matt. But hopefully I gave you a little bit color that's useful.

Yeah. Fair enough. Last one, for me kind of continuing on that theme, there maybe – maybe at a high level now that both of the baby bonds are fully callable. How are you thinking about a refi or a call of those heading into the conversion?

Sure. I think that, it makes most sense for us to get a little bit further along. And, I think that one way to think about it would be that, if you speculate that the third quarter is likely then, in all likelihood that would be less callable and more callable. I don't want to be one up, boxed myself in here and say that we won't call it tomorrow, we will call tomorrow. But I think, as you try to analyze this and make your own guesses, what are you going to refinance into and refinance out of? I will say, if you look at the way that baby bond debt and bank holding company debt is evaluated by the rating agencies are actually not too dissimilar. So I think that, as you try to figure out that, I think the -- the likelihood obviously of call ability, with the bank deal, being definitive at some point in time or not being definitive, will be the real determinant as to when those bonds go. Now, we did pay off $40 million of an issue that was callable, because we had excess cash. We believe the coupon was high. We wanted to reduce our leverage. And I think that's indicative of the fact that, this company is confident of what its forecasted beliefs are going forward, if that's helpful at all.

That's it for me, Barry. I appreciate the time this morning.

Thank you for the questions. Good questions. I should have been prepared for the other one. But anyway, thank you, Matt

Thank you. At this moment, we show no further questions. I would like to turn the call back to Mr. Sloane for any other remarks..

Great. I want to thank everybody for attending the call today. I know this is a tough day, a lot of activity in the market. We had a great 2021 and we are very, very optimistic about 2022. Look forward to working with each and every one of you on whatever your needs are objectives are. And thank you very much for your time and attention today. Thank you, operator.