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Newtek Receives Approval from the Federal Reserve to Become a Bank Holding Company
Source: GlobeNewswire Inc.
Newtek Business Services Corp. (NASDAQ: NEWT) (“Newtek”) today announced that it has received approval from the Federal Reserve to become a bank holding company and a financial holding company by acquiring the National Bank of New York City (“NBNYC”). The pending acquisition of NBNYC remains subject to the approval of the Office of the Comptroller of the Currency (“OCC”), which approval is currently anticipated in the coming weeks. The approval of the Federal Reserve is conditioned on the representations and commitments made by Newtek in connection with its applications, including the discontinuance of Newtek’s election to be regulated under the Investment Company Act of 1940 and to divest activities of certain of Newtek’s technology portfolio companies within two years of becoming a bank holding company.
Barry Sloane, Chairman, President and Chief Executive Officer said, “We are thrilled to have received the approval of the Federal Reserve to become a bank holding company and a financial holding company upon the close of the acquisition of NBNYC. While we await and anticipate approval from the OCC to acquire NBNYC, which we are hopeful to obtain shortly, we will continue to prepare and anticipate closing the acquisition in January 2023. Once we receive the remaining regulatory approval, we anticipate providing certain guidance on forecasted earnings as a bank holding company.”
Mr. Sloane continued, “We would like to thank the staffs of the Federal Reserve Bank of Atlanta, the Board of Governors of the Federal Reserve System and the OCC for their work and efforts on our applications seeking approval to acquire NBNYC and become a bank holding company. We look forward to our new role in the economy as a financial holding company and to further establish our corporate brand as NewtekOne® -- the One Solution for All Your Business Needs®, the one company that makes you more successful, the one company that gives you banking relationships and analytics to run your business as well as enhanced transactional capability.”
Newtek Business Services Corp., Your Business Solutions Company®, is an internally managed BDC, which along with its controlled portfolio companies, provides a wide range of business and financial solutions under the Newtek® brand to the small- and medium-sized business (“SMB”) market. Since 1999, Newtek has provided state-of-the-art, cost-efficient products and services and efficient business strategies to SMB relationships across all 50 states to help them grow their sales, control their expenses and reduce their risk.
Newtek’s and its portfolio companies’ products and services include: Business Lending, SBA Lending Solutions, Electronic Payment Processing, Technology Solutions (Cloud Computing, Data Backup, Storage and Retrieval, IT Consulting), eCommerce, Accounts Receivable Financing & Inventory Financing, Insurance Solutions, Web Services, and Payroll and Benefits Solutions.
Newtek®, NewtekOne®, Your Business Solutions Company® and One Solution for All Your Business Needs® are registered trademarks of Newtek Business Services Corp.
Note Regarding Forward Looking Statements
This press release contains certain forward-looking statements. Words such as “believes,” “intends,” “expects,” “projects,” “anticipates,” “forecasts,” “goal” 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 others, include our ability to close the pending acquisition of the National Bank of New York City (the “Transaction”), obtain required regulatory approvals for the pending Transaction, the timing of the closing of the Transaction, the timing of the Company’s discontinuance from regulation as a BDC under the 1940 Act, projections concerning or considering
Newtek Business Services Corp. Reports Second Quarter 2022 Financial Results
Source: GlobeNewswire Inc.
Newtek Business Services Corp. (“Newtek” or the “Company”) (Nasdaq: NEWT), an internally managed business development company (“BDC”), announced today its financial and operating results for three and six months ended June 30, 2022.
Barry Sloane, Chairman, President and Chief Executive Officer said, “We are very pleased to report our results for the second quarter 2022. We are proud to have been able to deliver what we believe are strong results that meet our earnings and dividends forecasts. Furthermore, we were able to grow SBA 7(a) loan fundings by 112.8%, to a record $200.6 million, and increase loan units funded by 154%, for the three months ended June 30, 2022. In addition, we funded $62.0 million of SBA 7(a) loans in July 2022. We are particularly proud because we believe that these record loan fundings were accomplished without reducing the credit quality of our borrowers; to the contrary, we believe that we tightened credit standards which resulted in a reduced approval-rate percentage of loans presented to the loan committee. Our year-over-year comparables across some of our metrics, however, were down, even though we posted strong results. We believe this decline was primarily attributable to the fact the first two quarters of 2021 earnings materially benefited from Paycheck Protection Program ("PPP") fee income. As previously stated, this PPP fee income is non-recurring, and has since been replaced with earnings from our core and growing business lines and activities. We firmly believe that our trajectory and growth will allow us to ultimately surpass the earnings achieved during the PPP and pandemic-affected environment, and that our business operations and strategy, including the pending acquisition of the National Bank of New York City ("NBNYC"), which remains subject to regulatory approvals, and becoming a publicly traded bank holding company, is occurring at an advantageous time."
Second Quarter 2022 Financial Highlights
Total investment income of $19.2 million for the three months ended June 30, 2022; a decrease of (47.5)% compared to total investment income of $36.6 million for the three months ended June 30, 2021. Second quarter 2021 total investment income included $25.5 million of fee income from the PPP which, as previously disclosed, is not recurring.
Net investment income (loss) of $(2.3) million, or $(0.09) per share, for the three months ended June 30, 2022, which represents a (113.0)% decrease, on a per share basis, compared to net investment income of $15.5 million, or $0.69 per share, for the three months ended June 30, 2021. Second quarter 2021 net investment income included $25.5 million of fee income from the PPP which, as previously disclosed, is not recurring.
Adjusted net investment income ("ANII")1 of $18.1 million, or $0.75 per share, for the three months ended June 30, 2022; a decrease of (37.5)%, on a per share basis, compared to ANII of $27.0 million, or $1.20 per share, for the three months ended June 30, 2021. Second quarter 2021 ANII included $25.5 million of fee income from the PPP which, as previously disclosed, is not recurring.
Debt-to-equity ratio of 1.31x at June 30, 2022; proforma debt-to-equity ratio was 1.15x after taking into account the sales of government-guaranteed portions of SBA 7(a) loans prior to June 30, 2022, which sales settled subsequent to the balance sheet date.
Total investment portfolio increased by 8.8% to $757.1 million at June 30, 2022, from $696.1 million at June 30, 2021.
Net asset value (“NAV”) of $394.5 million, or $16.31 per share, at June 30, 2022 compared to NAV of $16.38 per share at June 30, 2021.
2022 Financial Highlights For the Six Months Ended June 30, 2022
Total investment income of $39.6 million for the six months ended June 30, 2022; a decrease of (44.5)% over total investment income of $71.3 million for the six months ended June 30, 2021 which included $49.7 million of fee income from the PPP, which, as previously disclosed, is not recurring.
Net investment income (loss) of $(1.3) million, or $(0.05) per share, for the six months ended June 30, 2022, which represents a (103.6)% decrease, on a per share basis, compared to net investment income of $30.7 million, or $1.37 per share, for the six months ended June 30, 2021, which included $49.7 million of fee income from the PPP which, as previously disclosed, is not recurring.
ANII1 of $35.3 million, or $1.46 per share, for the six months ended June 30, 2022; a decrease of (35.1)%, on a per share basis, compared to ANII of $50.5 million, or $2.25 per share, for the six months ended June 30, 2021, which included $49.7 million of fee income from the PPP which, as previously disclosed, is not recurring.
ANII of $1.46 per share for the six months ended June 30, 2022 was greater than the midpoint of our previously issued ANII forecast, for the six months ended June 30, 2022, of $1.40 per share to $1.50 per share.
Additional Second Quarter Highlights
On June 1, 2022, at a special meeting of shareholders, Newtek shareholders overwhelmingly approved a proposal authorizing the Company’s Board of Directors to discontinue the Company’s election to be regulated as a BDC under the Investment Company Act of 1940, as amended (subject to certain regulatory approvals and closing conditions described in the Company’s Proxy Statement dated May 2, 2022) (the “Proposal”). As previously disclosed in a Form 8-K, 89% of the votes cast at the Special Meeting were in favor of the Proposal.
2022 Dividend Declarations & Payments
On June 30, 2022, the Company paid a second quarter 2022 cash dividend of $0.75 per share to shareholders of record as of June 20, 2022, which represented a 7.1% increase over the second quarter 2021 dividend of $0.70 per share.
The Company has paid and declared dividends totaling $1.40 per share for the first and second quarters of 2022, which represents a 16.7% increase over dividends paid in the first and second quarters of 2021.
The Company forecasts paying a third quarter 2022 and fourth quarter 2022 total dividend in a range of $1.00 per share to $1.50 per share, which dividends are expected to be paid by December 31, 2022, subject to Board approval, and is currently forecasting a full year 2022 dividend of between $2.40 per share and $2.90 per share.2
Lending Highlights
Newtek Small Business Finance, LLC (“NSBF”) funded a record $200.6 million of SBA 7(a) loans during the three months ended June 30, 2022; a 112.8% increase over the $94.3 million of SBA 7(a) loans funded for the three months ended June 30, 2021.
NSBF funded a record $363.9 million in SBA 7(a) loans for the six months ended June 30, 2022, which represents an 83.2% increase over $198.6 million SBA 7(a) loan fundings for the six months ended June 30, 2021.
NSBF funded $62.0 million SBA 7(a) loans during July 2022.
NSBF forecasts funding approximately $750 million of SBA 7(a) loans for the full year 2022, which would represent a 33.8% increase over $560.6 million of SBA 7(a) loans funded in 2021.
Newtek Business Lending ("NBL"), forecasts closing approximately $150 million SBA 504 loans for the full year 2022, which would represent a 66.5% increase over $90.1 million of SBA 504 closings in 2021.
Mr. Sloane continued, “We are exceptionally pleased with our quarterly and first half of 2022 performance, in particular given the market headwinds that publicly traded companies are facing, which are out of anyone's control. Our weighted average net gain-on-sale price for the second quarter 2022, which reflects lagging prime rate increases and other capital market pressures, decreased by 2.5% over the first quarter of 2022, however our core business operations were able to make up for the decline by NSBF funding 330 SBA 7(a) loan units in the second quarter 2022, compared to 130 SBA 7(a) loan units in the same period last year. Over our 24-year operating history, we believe that Newtek has demonstrated its ability to push itself through high-rate, low-rate, good credit and poor credit environments, and we believe that it has been able to outperform market participants and competitors. Being able to meet and exceed the midpoint of our ANII targets, even with a 2.5% reduction in weighted average net gain-on-sale pricing for the quarter, is evidence of such resilience. Moreover, we are pleased to report that our borrowers are currently above a 98% currency ratio in our accrual loan portfolio as of June 30, 2022, and remain confident in the manner in which we manage our relationships with our borrowers and work with them to offer the best business and finance solutions available in the market. In addition, I want to commend Newtek’s senior management team and all staff for being able to deliver these strong results while simultaneously positioning the Company for what we believe will be a transition into owning a federally chartered bank, NBNYC (subject to regulatory approvals and closing conditions), which we contracted to purchase slightly over one year ago, and converting Newtek into a bank holding company. We recently received what we believe is an overwhelming shareholder response at our special meeting of shareholders where 89% of Newtek’s shareholders voting at the meeting gave Newtek’s board of directors authorization to discontinue Newtek’s election as a BDC. I have a tremendous appreciation for all of the work our staff has done during the ongoing regulatory application process and to prepare for the closing of the NBNYC acquisition, while simultaneously working tirelessly to deliver above-average results to shareholders during one of the most challenging market environments we have experienced in the last decade. We continue to believe that the required regulatory approvals will be forthcoming within the third quarter of 2022.”
Mr. Sloane further commented, “In a separate press release, issued today, we forecasted our total dividends for the second half of 2022 in a range of $1.00 per share to $1.50 per share, which are expected to be paid by December 31, 2022, and out of taxable income as they always have been paid, subject to Board approval. Newtek has paid a total of $1.40 per share in dividends year to date through June 30, 2022, and we are currently forecasting a full year 2022 dividend of between $2.40 per share and $2.90 per share. We also provided the markets with an illustration of certain financial targets for Newtek for 2023 as a bank holding company, including from an earnings projection and capital-level basis, if we were to receive regulatory approvals and close the acquisition. This illustration can be found on our corporate website at www.newtekone.com in the ‘Investor Relations’ section under ‘Events and Presentations’ and is titled ‘July 2022 Illustration of the NBNYC Acquisition and Conversion of Newtek Business Services Corp. to a Bank Holding Company’. We would like to note that management is even more confident in its decision to acquire a bank and convert to a bank holding company given the change in climate for interest rates, commercial finance, quality spreads, and the hopeful and anticipated targets for capitalization and earnings.”
Mr. Sloane concluded, “Through this new pending structure, in addition to lowering our cost of capital and supporting our overall growth, we believe our ability to deliver superior products as a bank holding company and bank, and satisfy our client’s needs, will be materially enhanced, helping us improve the business prospects of independent business owners through our technology-enabled bank in a significant way. We believe the process of acquiring NBNYC has illuminated how advanced our two-decade-long history of establishing people, processes, and technology is, and may allow us to unlock shareholder value by potentially creating joint ventures with, and licensing our technology to, other market participants and distributing our technology to other financial institutions, including but not limited to community banks, regional banks and credit unions, which we believe could place us in an position to monetize our technological assets and processes. During our earnings conference call we will discuss the NewtekOne DashboardTM, which we will be positioning as “The Newtek AdvantageTM”, which we believe will allow us to offer our future banking clientele the relationships, analytics, software, and transactional capability that other banks simply do not offer. We will discuss this and our financial and operating results on our earnings conference call tomorrow morning at 8:30 am ET, along with what we believe are a plethora of opportunities ahead for our organization.”
Second Quarter 2022 Conference Call and Webcast
A conference call to discuss second quarter 2022 results will be hosted by Barry Sloane, President, Chairman and Chief Executive Officer, and Nicholas Leger, Chief Accounting Officer, tomorrow, Thursday, August 4, 2022 at 8:30 a.m. ET.
Please note, to attend the conference call or webcast, participants should register online at http://investor.newtekbusinessservices.com/events-and-presentations. To receive a dial-in number, participants are requested to register one day in advance or at a minimum 15 minutes before the start of the call. The corresponding presentation will be available in the ‘Events & Presentations’ section of the Investor Relations portion of Newtek’s website at http://investor.newtekbusinessservices.com/events-and-presentations. A replay of the call with the corresponding presentation will be available on Newtek’s website shortly following the live presentation and will be available for a period of 90 days.
1Use of Non-GAAP Financial Measures - Newtek Business Services Corp. and Subsidiaries
In evaluating its business, Newtek considers and uses ANII as a measure of its operating performance. ANII includes short-term capital gains from the sale of the guaranteed portions of SBA 7(a) loans and conventional loans, and beginning in 2016, capital gain distributions from controlled portfolio companies, which are reoccurring events. The Company defines ANII as net investment income (loss) plus net realized gains recognized from the sale of guaranteed portions of SBA 7(a) loan investments, less realized losses on non-affiliate investments, plus the net realized gains on controlled investments, plus or minus the change in fair value of contingent consideration liabilities, plus loss on extinguishment of debt, plus or minus an adjustment for gains or losses on derivative transactions.
We do not designate derivatives as hedges to qualify for hedge accounting and therefore any net payments under, or fluctuations in the fair value of, our derivatives are recognized currently in our GAAP income statement. However, fluctuations in the fair value of the related assets are not included in our income statement. We consider the gain or loss on our hedging positions related to assets that we still own as of the reporting date to be “open hedging positions.” While recognized for GAAP purposes, we exclude the results on the hedges from ANII until the related asset is sold and/or the hedge position is “closed,” whereupon they would then be included in ANII in that period. These are reflected as “adjustment for realized gain/(loss) on derivatives” for purposes of computing ANII for the period. Management believes that excluding these specifically identified gains and losses associated with the open hedging positions adjusts for timing differences between when we recognize changes in the fair values of our assets and changes in the fair value of the derivatives used to hedge such assets.
The term ANII is not defined under U.S. generally accepted accounting principles, or U.S. GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. ANII has limitations as an analytical tool and, when assessing the Company’s operating performance, investors should not consider ANII in isolation, or as a substitute for net investment income, or other consolidated income statement data prepared in accordance with U.S. GAAP. Among other things, ANII does not reflect the Company’s actual cash expenditures. Other companies may calculate similar measures differently than Newtek, limiting their usefulness as comparative tools. The Company compensates for these limitations by relying primarily on its GAAP results supplemented by ANII. Reconciliation tables showing the adjustments made to net investment income to determine NII are attached to this press release.
2 Note Regarding Dividend Payments
Amount and timing of dividends, if any, remain subject to the discretion of the Company's Board of Directors. The Company's Board of Directors expects that it will maintain its status as a BDC and regulated investment company ("RIC") in the near term, and therefore expects to maintain a dividend policy with the objective of making quarterly distributions in an amount that approximates 90 - 100% of the Company's annual taxable income. The determination of the tax attributes of the Company's distributions is made annually as of the end of the Company's fiscal year based upon its taxable income for the full year and distributions paid for the full year.
Newtek Business Services Corp., Your Business Solutions Company®, is an internally managed BDC, which along with its controlled portfolio companies, provides a wide range of business and financial solutions under the Newtek® brand to the small- and medium-sized business (“SMB”) market. Since 1999, Newtek has provided state-of-the-art, cost-efficient products and services and efficient business strategies to SMB relationships across all 50 states to help them grow their sales, control their expenses and reduce their risk.
Newtek’s and its portfolio companies’ products and services include: Business Lending, SBA Lending Solutions, Electronic Payment Processing, Technology Solutions (Cloud Computing, Data Backup, Storage and Retrieval, IT Consulting), eCommerce, Accounts Receivable Financing & Inventory Financing, Insurance Solutions, Web Services, and Payroll and Benefits Solutions.
Newtek® and Your Business Solutions Company®, are registered trademarks of Newtek Business Services Corp.
Note Regarding Forward Looking Statements
This press release contains certain forward-looking statements. Words such as “believes,” “intends,” “expects,” “projects,” “anticipates,” “forecasts,” “goal” 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 others, include our ability to close the pending acquisition of the National Bank of New York City (the “Transaction”), obtain required regulatory approvals for the pending Transaction, the timing of the closing of the Transaction, the timing of the Company’s discontinuance from regulation as a BDC under the 1940 Act, projections concerning or considering the pending Transaction, the timing of our our ability to originate new investments, achieve certain margins and levels of profitability, the availability of additional capital and the ability to maintain certain debt to asset ratios, intensified competition, operating problems and their impact on revenues and profit margins, 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 Securities and Exchange Commission and available through http://www.sec.gov/. Newtek cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements.
SOURCE: Newtek Business Services Corp.
Investor Relations & Public Relations
Contact: Jayne Cavuoto
Telephone: (212) 273-8179 / jcavuoto@newtekone.com
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(In Thousands, except for Per Share Data)
June 30, 2022 December 31, 2021
ASSETS (Unaudited)
Investments, at fair value
SBA unguaranteed non-affiliate investments (cost of $470,399 and $431,970, respectively; includes $312,677 and $344,266, respectively, related to securitization trusts) $ 459,981 $ 424,417
SBA guaranteed non-affiliate investments (cost of $26,595 and $65,728, respectively) 28,192 72,970
Controlled investments (cost of $165,273 and $157,289, respectively) 267,924 260,398
Non-control investments (cost of $1,000 and $1,000, respectively) 1,000 1,000
Total investments at fair value 757,097 758,785
Cash 4,165 2,397
Restricted cash 121,861 184,463
Broker receivable 78,721 44,537
Due from related parties 841 4,395
Servicing assets, at fair value 31,820 28,008
Right of use assets 6,695 7,310
Other assets 25,097 26,666
Total assets $ 1,026,297 $ 1,056,561
LIABILITIES AND NET ASSETS
Liabilities:
Bank notes payable $ 127,414 $ 50,000
2024 Notes (par: $38,250 and $38,250 as of June 30, 2022 and December 31, 2021) 37,790 37,679
2025 6.85% Notes (par: $0 and $15,000 as of June 30, 2022 and December 31, 2021) — 14,545
2025 5.00% Notes (par: $30,000 and $0 as of June 30, 2022 and December 31, 2021) 29,187 —
2026 Notes (par: $115,000 and $115,000 as of June 30, 2022 and December 31, 2021) 112,487 112,128
Notes payable - Securitization trusts (par: $207,582 and $249,750 as of June 30, 2022 and December 31, 2021) 204,690 246,250
Notes payable - related parties 200 11,450
Due to related parties 855 1,490
Lease liabilities 8,323 9,056
Deferred tax liabilities 12,793 12,733
Due to participants 83,050 146,225
Derivative instruments — 183
Accounts payable, accrued expenses and other liabilities 14,976 10,935
Total liabilities 631,765 652,674
Commitment and contingencies
Net assets:
Preferred stock (par value $0.02 per share; authorized 1,000 shares, no shares issued and outstanding) — —
Common stock (par value $0.02 per share; authorized 200,000 shares, 24,187 and 24,159 issued and outstanding, respectively) 480 483
Additional paid-in capital 368,934 367,663
Accumulated undistributed earnings 25,118 35,741
Total net assets 394,532 403,887
Total liabilities and net assets $ 1,026,297 $ 1,056,561
Net asset value per common share $ 16.31 $ 16.72
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, except for Per Share Data)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Investment income
From non-affiliate investments:
Interest income - PPP loans $ — $ 25,512 $ — $ 49,720
Interest income - SBA 7(a) loans 8,032 6,248 15,111 12,197
Servicing income 3,175 2,787 6,356 5,527
Other income 2,368 1,269 3,947 2,383
Total investment income from non-affiliate investments 13,575 35,816 25,414 69,827
From non-control investments:
Interest income — 124 — 248
Dividend income 21 21 43 47
Total investment income from non-control investments 21 145 43 295
From controlled investments:
Interest income 670 576 1,334 1,109
Dividend income 4,960 51 12,784 51
Total investment income from controlled investments 5,630 627 14,118 1,160
Total investment income 19,226 36,588 39,575 71,282
Expenses:
Salaries and benefits 4,499 5,926 9,608 10,376
Interest 5,828 4,968 10,495 10,040
Depreciation and amortization 60 79 123 164
Professional fees 1,512 859 2,813 2,047
Origination and loan processing 1,882 2,998 4,336 5,969
Origination and loan processing - related party 5,239 4,510 9,268 7,653
Loss on extinguishment of debt 417 — 417 955
Other general and administrative costs 2,043 1,706 3,796 3,341
Total expenses 21,480 21,046 40,856 40,545
Net investment income (loss) (2,254 ) 15,542 (1,281 ) 30,737
Net realized and unrealized gains (losses):
Net realized gain on non-affiliate investments - SBA 7(a) loans 19,891 11,414 35,186 18,807
Net realized gain on derivative transactions — — 445 —
Net unrealized appreciation (depreciation) on SBA guaranteed non-affiliate investments (4,917 ) (1,983 ) (5,645 ) 2,410
Net unrealized appreciation (depreciation) on SBA unguaranteed non-affiliate investments (872 ) 198 (2,862 ) 1,585
Net unrealized appreciation (depreciation) on controlled investments 1,566 (7,920 ) (458 ) (5,545 )
Change in deferred taxes 886 1,356 (57 ) 723
Net unrealized appreciation (depreciation) on non-control investments — (3 ) — 524
Net unrealized appreciation (depreciation) on derivative transactions — (37 ) 183 (37 )
Net unrealized depreciation on servicing assets (781 ) (1,193 ) (2,340 ) (1,706 )
Net realized and unrealized gains $ 15,773 $ 1,832 $ 24,452 $ 16,761
Net increase in net assets resulting from operations $ 13,519 $ 17,374 $ 23,171 $ 47,498
Net increase in net assets resulting from operations per share $ 0.56 $ 0.77 $ 0.96 $ 2.12
Net investment income (loss) per share $ (0.09 ) $ 0.69 $ (0.05 ) $ 1.37
Dividends and distributions declared per common share $ 0.75 $ 0.70 $ 1.40 $ 1.20
Weighted average number of shares outstanding 24,157 22,524 24,156 22,431
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES-
ADJUSTED NET INVESTMENT INCOME RECONCILIATION:
Six months ended Six months ended
(in thousands, except per share amounts) June 30, 2022 Per share June 30, 2021 Per share
Net investment income (loss) $ (1,281 ) $ (0.05 ) $ 30,737 $ 1.37
Net realized gain on non-affiliate investments - SBA 7(a) loans 35,186 1.46 18,807 0.84
Adjustment for realized gain on derivatives (1) 1,010 0.04 — —
Loss on debt extinguishment 417 0.02 955 0.04
Adjusted Net investment income $ 35,332 $ 1.46 $ 50,499 $ 2.25
Note: Amounts may not foot due to rounding
(1) The following is a reconciliation of GAAP net realized gain/(loss) on derivative transactions to our adjustment for realized gain/(loss) on derivatives on closed transactions presented in the computation of ANII in the preceding tables:
Six months ended Six months ended
(in thousands, except per share amounts) June 30, 2022 Per share June 30, 2021 Per share
Net realized gain on derivatives $ 445 $ 0.02 $ — $ —
Hedging realized adjustment on hedging positions closed during current period 565 0.02 — —
Adjustment for realized gain on derivatives $ 1,010 $ 0.04 $ — $ —
Note: Amounts may not foot due to rounding
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES-
ADJUSTED NET INVESTMENT INCOME RECONCILIATION:
Three months ended Three months ended
(in thousands, except per share amounts) June 30, 2022 Per share June 30, 2021 Per share
Net investment income (loss) (2,254 ) (0.09 ) $ 15,542 $ 0.69
Net realized gain on non-affiliate investments - SBA 7(a) loans 19,891 0.82 11,414 0.51
Loss on debt extinguishment 417 0.02 — —
Adjusted Net investment income $ 18,054 $ 0.75 $ 26,956 $ 1.20
Note: Amounts may not foot due to rounding
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
DEBT-TO-EQUITY RATIO - ACTUAL AT JUNE 30, 2022
(in thousands):
Actual Debt-to-Equity Ratio at June 30, 2022
Total senior debt $ 518,446
Total equity $ 394,532
Debt-to-equity ratio - actual 1.31x
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
DEBT-TO-EQUITY RATIO - PROFORMA AT JUNE 30, 2022
(in thousands):
Broker receivable, including premium income receivable $ 78,721
Less: realized gain on sale included in broker receivable (6,589 )
Broker receivable 72,132
90% advance rate on SBA guaranteed non-affiliate portions of loans sold, not settled $ 64,919
Proforma debt adjustments at June 30, 2022:
Total senior debt $ 518,446
Proforma adjustment for broker receivable (64,919 )
Total proforma debt $ 453,527
Proforma Debt-to-Equity ratio at June 30, 2022:
Total proforma debt $ 453,527
Total equity $ 394,532
Debt-to-equity ratio - proforma 1.15x
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Newtek Business Services Corp. Reports Record SBA 7(a) Loan Fundings for the Second Quarter 2022
Source: GlobeNewswire Inc.
Newtek Business Services Corp., (NASDAQ: NEWT), an internally managed business development company (“BDC”), announced today that Newtek Small Business Finance, LLC (“NSBF”) has funded a record amount of SBA 7(a) loans for the three and six months ended June 30, 2022. For the three months ended June 30, 2022, NSBF funded a record $200.6 million in SBA 7(a) loans, which represents a 112.7% increase over $94.3 million SBA 7(a) loan fundings for the three months ended June 30, 2021. For the six months ended June 30, 2022, NSBF funded a record $363.9 million in SBA 7(a) loans, which represents an 83.2% increase over $198.6 million SBA 7(a) loan fundings for the six months ended June 30, 2021. In addition, for the six months ended June 30, 3022, the Company reaffirmed its forecasts for net investment income (loss) (“NII”) in a range ($0.01) per share to $0.00 per share and adjusted net investment income (“ANII”) in a range of $1.40 per share to $1.50 per share.
Barry Sloane, Chairman, President and Chief Executive Officer said, “We couldn’t be more pleased to announce record SBA 7(a) fundings for the second quarter 2022. We believe these record fundings are testament to a seasoned management team and staff, and it is quite clear that the people, process, and software that we have been able to put in place has given us strong momentum in the second quarter and we believe will continue in the many quarters ahead. Additionally, we look forward to reporting a growing and robust pipeline of lending opportunities on our second quarter earnings conference call. Furthermore, and important to note, is that the year-over-year increase in second quarter 2022 loan fundings was not driven by any reduction in the credit quality of the borrowers we closed and funded loans for, as we do not believe in sacrificing credit quality for the sake of growth. In fact, during the second quarter 2022, the approval rate of all loan requests submitted and decisioned at the loan-committee level was lower than it has been in previous quarters which indicates a modest tightening of loan approvals.”
Mr. Sloane continued, “We previously forecasted that we expected to realize some margin compression in 2022 compared to the higher margins in 2021 during which we realized record gain-on-sale and margins. While we did experience margin compression in the second quarter of 2022, we want to note we were still able to meet our forecasts. We believe the decline in price margin we are seeing in the sales of guaranteed portions of SBA 7(a) loan is primarily driven by the Federal Reserve Bank (“Fed”) lagging behind the Treasury market in short-term rates, which has caused a lag in price adjustment on the floating-rate Prime, adjusted quarterly based coupon of SBA 7(a) loans, which impacts the pricing on government guaranteed loan sales and in the unguaranteed portions of SBA 7(a) loans held in our portfolio. However, based on commentary provided by the Fed, we believe the Fed will raise interest rates, which we believe should translate into more normalized pricing during the third quarter 2022, holding all else constant.”
Mr. Sloane further stated, “Based upon improvements in our process and people, we expect that going forward we will continue to realize greater productivity in our SBA 7(a) and SBA 504 lending, as well as our non-conforming conventional lending program. In addition, we also are hopeful to receive regulatory approval to convert to a bank holding company as well as approval to acquire the National Bank of New York City during the third quarter 2022, which we believe will assist us in building bank lending products and round out our lending menu, increasing productivity in conforming C&I lending and well as conforming CRE lending.”
Mr. Sloane concluded, “We are extremely proud that even with the increased market instability and changes, we continue to be able to deliver dividends to our shareholders which always have been and continue to be paid out of taxable income. We continue to focus on creating a diversified stream of income from our portfolio companies which can help support our overall business model with the goal of providing reoccurring streams of revenue and income without the associated capital investment in the payments, technology, payroll and insurance agency businesses. We look forward to reporting our full second quarter 2022 earnings in the first or second week of August. We hope to continue to demonstrate that our 24-year-old organization, publicly traded for 22 years, which has been through the 2008-2009 credit crisis and the pandemic, during strong and weak credit environments, and high and low interest rate environments, has been able to navigate all market environments and deliver above-average results to shareholders, will continue to do so. We thank our shareholders for their continued support and most importantly, thank all Newtek employees and the Newtek management team for delivering on our strategy and great results to all stakeholders.”
Newtek Business Services Corp., Your Business Solutions Company®, is an internally managed BDC, which along with its controlled portfolio companies, provides a wide range of business and financial solutions under the Newtek® brand to the small- and medium-sized business (“SMB”) market. Since 1999, Newtek has provided state-of-the-art, cost-efficient products and services and efficient business strategies to SMB relationships across all 50 states to help them grow their sales, control their expenses and reduce their risk.
Newtek’s and its portfolio companies’ products and services include: Business Lending, SBA Lending Solutions, Electronic Payment Processing, Technology Solutions (Cloud Computing, Data Backup, Storage and Retrieval, IT Consulting), eCommerce, Accounts Receivable Financing & Inventory Financing, Insurance Solutions, Web Services, and Payroll and Benefits Solutions.
Newtek® and Your Business Solutions Company® are registered trademarks of Newtek Business Services Corp.
Note Regarding Forward Looking Statements
This press release contains certain forward-looking statements. Words such as “believes,” “intends,” “expects,” “projects,” “anticipates,” “forecasts,” “goal” 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 others, include our ability to close the pending acquisition of the National Bank of New York City (the “Acquisition”), obtain required regulatory approvals for the pending Acquisition, as well as projections concerning or considering the pending Acquisition, our ability to originate new investments, achieve certain margins and levels of profitability, the availability of additional capital and the ability to maintain certain debt to asset ratios, intensified competition, operating problems and their impact on revenues and profit margins, 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 Securities and Exchange Commission and available through http://www.sec.gov/. Newtek cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements.
SOURCE: Newtek Business Services Corp.
Investor Relations & Public Relations
Contact: Jayne Cavuoto
Telephone: (212) 273-8179 / jcavuoto@newtekone.com
Primary Logo
Newtek Business (NASDAQ:NEWT) declares $0.65/share quarterly dividend.
Forward yield 9.95%
Payable March 31; for shareholders of record March 21; ex-div March 18.
Newtek Business Services Corp. Reports Third Quarter 2021 Financial Results
Source: GlobeNewswire Inc.
Newtek Business Services Corp. (“Newtek” or the “Company”) (Nasdaq: NEWT), an internally managed business development company (“BDC”), announced today its financial and operating results for the three and nine months ended September 30, 2021.
Third Quarter 2021 Financial Highlights
Total investment income of $12.4 million for the three months ended September 30, 2021; a decrease of 16.7% compared to total investment income of $14.9 million for the three months ended September 30, 2020.
Net investment income/(loss) of $(6.7) million, or $(0.30) per share, for the three months ended September 30, 2021; a decrease of $(0.38) per share compared to net investment income of $1.7 million, or $0.08 per share, for the three months ended September 30, 2020.
Adjusted net investment income (“ANII”)1 of $12.6 million, or $0.56 per share, for the three months ended September 30, 2021; an increase of 1300.0%, on a per share basis, compared to ANII of $0.9 million, or $0.04 per share, for the three months ended September 30, 2020.
Debt-to-equity ratio of 1.37x at September 30, 2021; proforma debt-to-equity ratio was 1.24x after taking into account the sales of government-guaranteed portions of SBA 7(a) loans prior to September 30, 2021, which sales settled subsequent to the balance sheet date.
Total investment portfolio increased by 11.7% to $712.5 million at September 30, 2021, from $637.6 million at September 30, 2020.
Net asset value (“NAV”) of $366.0 million, or $16.23 per share, at September 30, 2021; an increase of 5.0%, on a per share basis, compared to NAV of $15.45 per share at December 31, 2020.
On August 2, 2021, the Company announced that it entered into an agreement to acquire National Bank of New York City (“NBNYC”), a nationally chartered bank, subject to certain regulatory and shareholder approvals.
Nine Months Ended September 30, 2021 Financial Highlights
Total investment income of $83.7 million for the nine months ended September 30, 2021; an increase of 8.1% over total investment income of $77.4 million for the nine months ended September 30, 2020.
Net investment income of $24.0 million, or $1.07 per share, for the nine months ended September 30, 2021, which represents a 28.2% decrease, on a per share basis, compared to net investment income of $31.1 million, or $1.49 per share, for the nine months ended September 30, 2020.
ANII of $63.1 million, or $2.81 per share, for the nine months ended September 30, 2021; an increase of 74.5%, on a per share basis, compared to ANII of $33.8 million, or $1.61 per share, for the nine months ended September 30, 2020.
2021 Dividend Payments & 2022 Forecast
On October 20, 2021, the Company's board of directors declared a fourth quarter 2021 cash dividend of $1.05 per share payable on December 30, 2021 to shareholders of record as of December 20, 2021.
The payment of the fourth quarter 2021 dividend would represent a 123.4% increase over the fourth quarter 2020 dividend of $0.47 per share.
With the payment of the fourth quarter 2021 dividend, the Company will have paid $3.15 per share in dividends in 2021, which would represent a 53.7% increase over dividends paid in 2020.
The Company forecasts a first quarter 2022 dividend of $0.652 per share.
On September 30, 2021, the Company paid a third quarter 2021 cash dividend of $0.90 per share to shareholders of record as of September 20, 2021, which represented a 55.2% increase over the third quarter 2020 dividend of $0.58 per share.
Lending Highlights
Newtek Small Business Finance, LLC (“NSBF”) funded $163.9 million of SBA 7(a) loans during the three months ended September 30, 2021, a 1160.8% increase over the $13.0 million of SBA 7(a) loans funded for the three months ended September 30, 2020, and an increase of 43.4% over the $114.3 million of SBA 7(a) loans for the three months ended September 30, 2019.
NSBF funded $362.6 million of SBA 7(a) loans during the nine months ended September 30, 2021, an increase of 336.3% over $83.1 million of SBA 7(a) loans funded for the nine months ended September 30, 2020, and an increase of 8.3% over $334.7 million of SBA 7(a) loans during the nine months ended September 30, 2019.
NSBF increased the lower end of its full year 2021 SBA 7(a) loan funding forecast range, and updated the forecast range to between $560 million to $600 million.
Newtek Business Lending ("NBL"), the Company's wholly owned portfolio company, funded and/or closed $100.1 million SBA 504 loans during the nine months ended September 30, 2021, compared to $21.8 million SBA 504 loans during the nine months ended September 30, 2020.
NBL forecasts closing and/or funding approximately $125 million to $150 million SBA 504 loans for the full year 2021, which would represent an increase over $87.2 million of closed and/or funded SBA 504 loans in 2020, which would represent an 57.7% increase over the midpoint of the 2021 forecasted range.
NSBF funded a total of $1.9 billion PPP loans from 2020 through the nine months ended September 30, 2021.
Barry Sloane, Chairman, President and Chief Executive Officer said, “We are extremely pleased to report our third quarter 2021 financial results. We believe we are emerging from the pandemic with momentum from our core lending operations due to technological efficiencies in lending and a robust pipeline of opportunities brought to us by our NewTracker(R) referral system. We are encouraged by the upward trajectory of our business model, and we look forward to further progress in upcoming quarters. We want to note that we do not believe that the year-over-year comparisons of loan origination volumes of 2021 to 2020 are as meaningful due to the pandemic effects on our lending platforms in 2020. As a result, we are providing the loan origination comparisons between 2021 and 2019, which was a pandemic-free business environment, and which we feel provides a more meaningful depiction of the growth of our core lending platform during this period. During tomorrow's conference call we will discuss the growth in our SBA 7(a) lending pipeline, third quarter 2021 SBA 7(a) loan fundings, and loans approved pending closing in the month of October 2021, as well as fourth quarter 2021 projected loan fundings. In addition, we plan to discuss our ability to project growth and higher-trending results in 2022. Our conference call presentation will be available this afternoon in advance of our call and can be found through the following link Newtek Third Quarter 2021 Earnings Presentation. We recently declared our fourth quarter 2021 dividend of $1.05 per share payable on December 30, 2021. With the payment of the fourth quarter 2021 dividend, the Company will have paid $3.15 per share in dividends in 2021, which would represent a 53.7% increase over dividends paid in 2020. Additionally, we are reconfirming our forecasted 2021 full year 2021 NII of $0.80 per share and ANII of $3.40 per share. We believe these metrics underscore our success in 2021.”
Mr. Sloane continued, “We believe that our level of SBA 7(a) loan fundings of $163.9 million in the third quarter of 2021, compared to $13.0 million and $114.3 million of SBA 7(a) loan fundings, in the third quarters of 2020 and 2019, respectively, demonstrates that one of our core lending products and programs has strong momentum going forward. The 43.4% increase in SBA 7(a) loan fundings in the third quarter of 2021, compared to the third quarter of 2019, demonstrates our efforts to rebuild our SBA 7(a) loan pipeline from 2020 levels, which were materially impacted by the pandemic and resulting national shutdowns. In addition, we are comfortable with the upper portion of our previously forecasted range for 2021 SBA 7(a) loan fundings and have increased the lower band, and currently expect to fund between $560 million and $600 million of SBA 7(a) loans in 2021. In addition, NBL is forecasting a record amount of SBA 504 fundings and/or closings of between $125 and $150 million in 2021. For the nine months ended September 30, 2021, NBL has closed $100.1 million of SBA 504 loans, compared to $21.8 million and $26.3 million of SBA 504 loans during the same periods in 2020 and 2019, respectively. Our non-conforming conventional loan program has experienced a slow start, however we remain confident in the joint venture business model of originating non-conforming commercial loans and issuing securitized financing as part of our business plan. The Company will address its options to refinance more expensive debt and lower our cost of capital.during tomorrow's conference call.”
Mr. Sloane concluded, “Our portfolio companies in payment processing and technology solutions continue to track well, delivering non-credit related reoccurring income streams. We forecast that our payment processing and technology solutions portfolio companies will generate previously forecasted 2021 EBITDA. We look forward to a more detailed discussion of our financial results and expectations during our third quarter 2021 earnings conference call scheduled for tomorrow morning at 8:30 am EST.”
Third Quarter 2021 Conference Call and Webcast
A conference call to discuss third quarter 2021 results will be hosted by Barry Sloane, President, Chairman and Chief Executive Officer, and Nicholas Leger, Chief Accounting Officer, tomorrow, Tuesday, November 9, 2021 at 8:30 a.m. ET. The live conference call can be accessed by dialing (877) 303-6993 or (760) 666-3611.
In addition, a live audio webcast of the call with the corresponding presentation will be available in the ‘Events & Presentations’ section of the Investor Relations portion of Newtek’s website at
http://investor.newtekbusinessservices.com/events-and-presentations. A replay of the webcast with the corresponding presentation will be available on Newtek’s website shortly following the live presentation and will remain available for 90 days.
1Use of Non-GAAP Financial Measures - Newtek Business Services Corp. and Subsidiaries
In evaluating its business, Newtek considers and uses ANII as a measure of its operating performance. ANII includes short-term capital gains from the sale of the guaranteed portions of SBA 7(a) loans and conventional loans, and beginning in 2016, capital gain distributions from controlled portfolio companies, which are reoccurring events. The Company defines ANII as Net investment income (loss) plus Net realized gains recognized from the sale of guaranteed portions of SBA 7(a) loan investments, less realized losses on non-affiliate investments, plus the net realized gains on controlled investments, plus or minus the change in fair value of contingent consideration liabilities, plus loss on extinguishment of debt, plus or minus an adjustment for gains or losses on derivative transactions.
We do not designate derivatives as hedges to qualify for hedge accounting and therefore any net payments under, or fluctuations in the fair value of, our derivatives are recognized currently in our GAAP income statement. However, fluctuations in the fair value of the related assets are not included in our income statement. We consider the gain or loss on our hedging positions related to assets that we still own as of the reporting date to be “open hedging positions.” While recognized for GAAP purposes, we exclude the results on the hedges from ANII until the related asset is sold and/or the hedge position is “closed,” whereupon they would then be included in ANII in that period. These are reflected as “Adjustment for realized gain/(loss) on derivatives” for purposes of computing ANII for the period. We believe that excluding these specifically identified gains and losses associated with the open hedging positions adjusts for timing differences between when we recognize changes in the fair values of our assets and changes in the fair value of the derivatives used to hedge such assets.
The term ANII is not defined under U.S. generally accepted accounting principles, or U.S. GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. ANII has limitations as an analytical tool and, when assessing the Company’s operating performance, investors should not consider ANII in isolation, or as a substitute for net investment income, or other consolidated income statement data prepared in accordance with U.S. GAAP. Among other things, ANII does not reflect the Company’s actual cash expenditures. Other companies may calculate similar measures differently than Newtek, limiting their usefulness as comparative tools. The Company compensates for these limitations by relying primarily on its GAAP results supplemented by ANII.
2 Note Regarding Dividend Payments
Amount and timing of dividends, if any, remain subject to the discretion of the Company's Board of Directors. The Company's Board of Directors expects to maintain a dividend policy with the objective of making quarterly distributions in an amount that approximates 90 - 100% of the Company's annual taxable income. The determination of the tax attributes of the Company's distributions is made annually as of the end of the Company's fiscal year based upon its taxable income for the full year and distributions paid for the full year.
Note Regarding PPP Income
The Company's financial results for 2020 and the nine months ended September 30, 2021, includes income generated from NSBF's origination of loans under the Paycheck Protection Program (PPP), which ended during the third quarter of 2021, and should not be viewed as recurring.
Newtek Business Services Corp., Your Business Solutions Company®, is an internally managed BDC, which along with its controlled portfolio companies, provides a wide range of business and financial solutions under the Newtek® brand to the small- and medium-sized business (“SMB”) market. Since 1999, Newtek has provided state-of-the-art, cost-efficient products and services and efficient business strategies to SMB relationships across all 50 states to help them grow their sales, control their expenses and reduce their risk.
Newtek’s and its portfolio companies’ products and services include: Business Lending, SBA Lending Solutions, Electronic Payment Processing, Technology Solutions (Cloud Computing, Data Backup, Storage and Retrieval, IT Consulting), eCommerce, Accounts Receivable Financing & Inventory Financing, Insurance Solutions, Web Services, and Payroll and Benefits Solutions.
Newtek® and Your Business Solutions Company®, are registered trademarks of Newtek Business Services Corp.
Note Regarding Forward Looking Statements
This press release contains certain forward-looking statements. Words such as “believes,” “intends,” “expects,” “projects,” “anticipates,” “forecasts,” “goal” 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 others, intensified competition, operating problems and their impact on revenues and profit margins, 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 Securities and Exchange Commission and available through http://www.sec.gov/. Newtek cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements.
SOURCE: Newtek Business Services Corp.
Investor Relations & Public Relations
Contact: Jayne Cavuoto
Telephone: (212) 273-8179 / jcavuoto@newtekone.com
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(In Thousands, except for Per Share Data)
September 30, 2021 December 31, 2020
ASSETS (Unaudited)
Investments, at fair value
SBA unguaranteed non-affiliate investments (cost of $416,652 and $420,400, respectively; includes $276,186 and $312,649, respectively, related to securitization trusts) $ 406,581 $ 407,748
SBA guaranteed non-affiliate investments (cost of $32,646 and $16,964, respectively) 36,041 17,822
Controlled investments (cost of $160,495 and $138,891, respectively) 262,916 239,171
Non-control investments (cost of $6,400 and $6,447, respectively) 6,921 6,447
Total investments at fair value 712,459 671,188
Cash 20,193 2,073
Restricted cash 182,913 49,352
Broker receivable 60,950 52,730
Due from related parties 5,768 6,112
Servicing assets, at fair value 28,899 26,061
Right of use assets 7,611 6,933
Derivative instruments 304 —
Other assets 24,210 26,530
Total assets $ 1,043,307 $ 840,979
LIABILITIES AND NET ASSETS
Liabilities:
Bank notes payable $ 114,986 $ 86,339
Notes due 2023 (par: $0 and $57,500 as of September 30, 2021 and December 31, 2020) — 56,505
Notes due 2024 (par: $78,250 and $63,250 as of September 30, 2021 and December 31, 2020) 76,993 61,774
Notes due 2025 (par: $15,000 and $5,000 as of September 30, 2021 and December 31, 2020) 14,516 4,735
Notes due 2026 (par: $115,000 and $0 as of September 30, 2021 and December 31, 2020) 111,948 —
Notes payable - Securitization trusts (par: $177,602 and $221,752 as of September 30, 2021 and December 31, 2020) 174,876 218,339
Notes payable - related parties — 24,090
Due to related parties 4,242 2,133
Lease liabilities 9,410 8,697
Deferred tax liabilities 13,526 11,406
Due to participants 146,637 17,885
Accounts payable, accrued expenses and other liabilities 10,152 9,723
Total liabilities 677,286 501,626
Commitment and contingencies
Net assets:
Preferred stock (par value $0.02 per share; authorized 1,000 shares, no shares issued and outstanding) — —
Common stock (par value $0.02 per share; authorized 200,000 shares, 22,559 and 21,970 issued and outstanding, respectively) 451 439
Additional paid-in capital 326,354 316,629
Accumulated undistributed earnings 39,215 22,285
Total net assets 366,020 339,353
Total liabilities and net assets $ 1,043,306 $ 840,979
Net asset value per common share $ 16.23 $ 15.45
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, except for Per Share Data)
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Investment income
From non-affiliate investments:
Interest income - PPP loans $ 269 $ 3,085 $ 49,989 $ 37,742
Interest income - SBA 7(a) loans 7,131 5,871 19,328 19,382
Servicing income 2,819 2,875 8,346 8,367
Other income 1,446 240 3,829 1,449
Total investment income from non-affiliate investments 11,665 12,071 81,492 66,940
From non-control investments:
Interest income 126 107 374 107
Dividend income 23 31 70 71
Total investment income from non-control investments 149 138 444 178
From controlled investments:
Interest income 594 486 1,703 1,423
Dividend income — 2,234 51 8,884
Total investment income from controlled investments 594 2,720 1,754 10,307
Total investment income 12,408 14,929 83,690 77,425
Expenses:
Salaries and benefits 2,351 3,669 12,727 10,856
Interest 5,177 3,939 15,217 13,727
Depreciation and amortization 72 93 236 312
Professional fees 1,418 651 3,465 2,822
Origination and loan processing 4,586 1,120 10,555 5,666
Origination and loan processing - related party 3,177 2,705 10,830 8,438
Change in fair value of contingent consideration liabilities — — — 54
Loss on extinguishment of debt — — 955 —
Other general and administrative costs 2,322 1,082 5,663 4,415
Total expenses 19,103 13,259 59,648 46,290
Net investment income (loss) (6,695 ) 1,670 24,042 31,135
Net realized and unrealized gains (losses):
Net realized gain (loss) on non-affiliate investments - SBA 7(a) loans 19,272 (722 ) 38,079 2,577
Net realized gain (loss) on derivative transactions (268 ) — (268 ) —
Net unrealized appreciation (depreciation) on SBA guaranteed non-affiliate investments 123 (111 ) 2,533 (494 )
Net unrealized appreciation (depreciation) on SBA unguaranteed non-affiliate investments 998 132 2,583 (6,012 )
Net unrealized appreciation (depreciation) on controlled investments 7,305 (285 ) 1,760 (11,156 )
Change in deferred taxes (2,843 ) 70 (2,120 ) 3,010
Net unrealized appreciation (depreciation) on non-control investments (3 ) — 521 —
Net unrealized appreciation on derivative transactions 341 — 304 —
Net unrealized depreciation on servicing assets (1,616 ) (1,207 ) (3,322 ) (1,299 )
Net realized and unrealized gains (losses) $ 23,309 $ (2,123 ) $ 40,070 $ (13,374 )
Net increase (decrease) in net assets resulting from operations $ 16,614 $ (453 ) $ 64,112 $ 17,761
Net increase (decrease) in net assets resulting from operations per share $ 0.74 $ (0.02 ) $ 2.85 $ 0.85
Net investment income (loss) per share $ (0.30 ) $ 0.08 $ 1.07 $ 1.49
Dividends and distributions declared per common share $ 0.90 $ 0.58 $ 2.10 $ 1.58
Weighted average number of shares outstanding 22,541 21,192 22,468 20,942
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES-
ADJUSTED NET INVESTMENT INCOME RECONCILIATION:
Three months ended Three months ended
(in thousands, except per share amounts) September 30, 2021 Per share September 30, 2020 Per share
Net investment income (loss) $ (6,695 ) (0.30 ) $ 1,670 0.08
Net realized gain (loss) on non-affiliate investments - SBA 7(a) loans 19,272 0.85 (722 ) (0.03 )
Adjustment for realized gain/(loss) on derivatives (1) (7 ) 0.00 — —
Adjusted Net investment income $ 12,570 $ 0.56 $ 948 $ 0.04
Nine months ended Nine months ended
(in thousands, except per share amounts) September 30, 2021 Per share September 30, 2020 Per share
Net investment income (loss) $ 24,042 $ 1.07 $ 31,135 $ 1.49
Net realized gain on non-affiliate investments - SBA 7(a) loans 38,079 1.69 2,577 0.12
Adjustment for realized gain/(loss) on derivatives (1) (7 ) 0.00 — —
Change in fair value of contingent consideration liabilities — — 54 0.00
Loss on debt extinguishment 955 0.04 — —
Adjusted Net investment income $ 63,069 $ 2.81 $ 33,766 $ 1.61
Note: Amounts may not foot due to rounding
(1) The following is a reconciliation of GAAP net realized gain/(loss) on derivative transactions to our adjustment for realized gain/(loss) on derivatives on closed transactions presented in the computation of ANII in the preceding tables:
Three months ended Three months ended
(in thousands, except per share amounts) September 30, 2021 Per share September 30, 2020 Per share
Net realized gain/(loss) on derivatives $ (268 ) $ (0.01 ) $ — $ —
Hedging realized result on open hedging positions 261 0.01 — —
Adjustment for realized gain/(loss) on derivatives $ (7 ) $ 0.00 $ — $ —
Nine months ended Nine months ended
(in thousands, except per share amounts) September 30, 2021 Per share September 30, 2020 Per share
Net realized gain/(loss) on derivatives $ (268 ) $ (0.01 ) $ — $ —
Hedging realized result on open hedging positions 261 0.01 — —
Adjustment for realized gain/(loss) on derivatives $ (7 ) $ 0.00 $ — $ —
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
DEBT-TO-EQUITY RATIO - ACTUAL AT SEPTEMBER 30, 2021
(in thousands):
Actual Debt-to-Equity Ratio at September 30, 2021
Total senior debt $ 500,838
Total equity $ 366,020
Debt-to-equity ratio - actual 1.37
x
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
DEBT-TO-EQUITY RATIO - PROFORMA AT SEPTEMBER 30, 2021
(in thousands):
Broker receivable, including premium income receivable $ 60,950
Less: realized gain on sale included in broker receivable (6,836 )
Broker receivable 54,114
90% advance rate on SBA guaranteed non-affiliate portions of loans sold, not settled $ 48,703
Proforma debt adjustments at September 30, 2021:
Total senior debt $ 500,838
Proforma adjustment for broker receivable (48,703 )
Total proforma debt $ 452,135
Proforma Debt-to-Equity ratio at September 30, 2021:
Total proforma debt $ 452,135
Total equity $ 366,020
Debt-to-equity ratio - proforma 1.24x
Primary Logo
Newtek Business Services Corp. Declares Fourth Quarter 2021 Dividend of $1.05 per Share
Source: GlobeNewswire Inc.
Newtek Business Services Corp., (NASDAQ: NEWT), an internally managed business development company (“BDC”), today announced that its Board of Directors declared a fourth quarter 2021 cash dividend of $1.051 per share. The fourth quarter 2021 dividend is payable on December 30, 2021 to shareholders of record as of December 20, 2021. The payment of the fourth quarter 2021 dividend would represent a 123.4% increase over the fourth quarter 2020 dividend of $0.47 per share. With the payment of the fourth quarter 2021 dividend, the Company will have paid $3.15 per share in dividends in 2021, in line with the Company’s previously stated 2021 dividend forecast, which would represent a 53.7% increase over dividends paid in 2020.
Note regarding Dividend Payments: The Company's Board of Directors expects to maintain a dividend policy with the objective of making quarterly distributions in an amount that approximates 90 - 100% of the Company's annual taxable income. The determination of the tax attributes of the Company's distributions is made annually as of the end of the Company's fiscal year based upon its taxable income for the full year and distributions paid for the full year.
1Amount and timing of dividends, if any, remain subject to the discretion of the Company’s Board of Directors. Newtek Business Services Corp., Your Business Solutions Company®, is an internally managed BDC, which along with its controlled portfolio companies, provides a wide range of business and financial solutions under the Newtek® brand to the small- and medium-sized business (“SMB”) market. Since 1999, Newtek has provided state-of-the-art, cost-efficient products and services and efficient business strategies to SMB relationships across all 50 states to help them grow their sales, control their expenses and reduce their risk.
Newtek’s and its portfolio companies’ products and services include: Business Lending, SBA Lending Solutions, Electronic Payment Processing, Technology Solutions (Cloud Computing, Data Backup, Storage and Retrieval, IT Consulting), eCommerce, Accounts Receivable Financing & Inventory Financing, Insurance Solutions, Web Services, and Payroll and Benefits Solutions.
Newtek® and Your Business Solutions Company®, are registered trademarks of Newtek Business Services Corp.
Note Regarding Forward Looking Statements
This press release contains certain forward-looking statements. Words such as “believes,” “intends,” “expects,” “projects,” “anticipates,” “forecasts,” “goal” 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 others, intensified competition, operating problems and their impact on revenues and profit margins, 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 Securities and Exchange Commission and available through http://www.sec.gov/. Newtek cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements.
SOURCE: Newtek Business Services Corp.
Investor Relations & Public Relations
Contact: Jayne Cavuoto
Telephone: (212) 273-8179 / jcavuoto@newtekone.com
Primary Logo
NEWT has raised it's dividend for 2 quarters now. Much stronger than I anticipated.
NEWT just raised the dividend!
Newtek Business (NASDAQ:NEWT) declares $1.051/share quarterly dividend, 16.8% increase from prior dividend of $0.900.
Forward yield 14.81%
Payable Dec. 30; for shareholders of record Dec. 20; ex-div Dec. 17.
Newtek Business Services Corp. Forecasts Full Year 2021 Net Investment Income of $0.80 per Share and Adjusted Net Investment Income of $3.40 per Share
Source: GlobeNewswire Inc.
Newtek Business Services Corp. (the “Company”), (Nasdaq: NEWT), an internally managed business development company (“BDC”), today provided forecasts for its net investment income (“NII”) and adjusted net investment income (“ANII”) for the full year 2021, as well as for its first quarter 2022 dividend. The Company forecasts full year 2021 NII of $0.80 per share and ANII of $3.401 per share for 2021. In addition, the Company forecasts a first quarter 2022 dividend of $0.652 per share. The Company also reaffirmed its annual 2021 dividend forecast of $3.15 per share, which would indicate a dividend forecast of $1.05 per share in the fourth quarter of 2021. The Company expects to pay its dividends out of taxable income as it has done historically.
The following tables provide historical and forecasted data for dividends.
Historical and Forecasted Quarterly Dividends
(per share) Q1'19 Q1'20 Q1'21 Q1'22 Forecast
Dividends $0.40 $0.44 $0.50 $0.65
Historical and Forecasted Annual Dividends
(per share) 2019 2020 2021 Forecast
Dividends $2.15 $2.05 $3.15
Barry Sloane, Chairman, President and Chief Executive Officer said, “We are incredibly appreciative of the path the Company has taken, especially in light of unprecedented times. We are extremely positive about our current pipeline of opportunities and consequently our potential strategic growth trajectory as we have refocused our resources and efforts on our core business solutions in a post-pandemic environment. With that in mind, we feel it is appropriate to provide forward-looking insight, and are proud to be forecasting full year 2021 NII of $0.80 per share and record ANII of $3.40 per share. Furthermore, we are forecasting a first quarter 2022 dividend of $0.65 per share, which would represent a 62.5% increase over a three-year period from the first quarter 2019 dividend of $0.40 per share. Of note, the Company paid dividends of $0.40 per share, $0.44 per share and $0.50 per share in the first quarters of 2019, 2020, and 2021, respectively. We believe these forecasted metrics should be reviewed using 2019 as the basis for comparison, as 2019 was pre-pandemic and did not include pandemic effects of repurposing our resources to focus on originating and earning revenue from PPP loans.”
Mr. Sloane further commented, “We are confident we can continue to generate strong financial performance in calendar year 2022, with refocused and renewed effort in our more traditional lending and business solutions products. We are proud that we have been able to grow our pipeline of opportunities, as well as make technological advances in our processes, and forecast attractive market conditions. We believe our first quarter 2022 dividend and 2021 NII and ANII forecasts of double-digit annual growth over the comparable 2019 periods demonstrate the continued belief of management that it can grow our core business and return to normal business activity in a post-pandemic world. We also note, that historically our performance in the second half of the year has been seasonally stronger than the first half of the year. We look forward to continuing our primary focus on our core business objectives and, in addition, will work hard to position the Company in what we believe is the best long-term financial structure for our investor base.”
1Use of Non-GAAP Financial Measures - Newtek Business Services Corp. and Subsidiaries
In evaluating its business, Newtek considers and uses ANII as a measure of its operating performance. ANII includes short-term capital gains from the sale of the guaranteed portions of SBA 7(a) loans and conventional loans, and beginning in 2016, capital gain distributions from controlled portfolio companies, which are reoccurring events. The Company defines ANII as Net investment income (loss) plus Net realized gains recognized from the sale of guaranteed portions of SBA 7(a) loan investments, less realized losses on non-affiliate investments, plus or minus loss on lease adjustment, plus the net realized gains on controlled investments, plus or minus the change in fair value of contingent consideration liabilities, plus loss on extinguishment of debt.
The term ANII is not defined under U.S. generally accepted accounting principles, or U.S. GAAP, and is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP. ANII has limitations as an analytical tool and, when assessing the Company’s operating performance, investors should not consider ANII in isolation, or as a substitute for net investment income, or other consolidated income statement data prepared in accordance with U.S. GAAP. Among other things, ANII does not reflect the Company’s actual cash expenditures. Other companies may calculate similar measures differently than Newtek, limiting their usefulness as comparative tools. The Company compensates for these limitations by relying primarily on its GAAP results supplemented by ANII.
2 Note Regarding Dividend Payments
Amount and timing of dividends, if any, remain subject to the discretion of the Company's Board of Directors. The Company's Board of Directors expects to maintain a dividend policy with the objective of making quarterly distributions in an amount that approximates 90 - 100% of the Company's annual taxable income. The determination of the tax attributes of the Company's distributions is made annually as of the end of the Company's fiscal year based upon its taxable income for the full year and distributions paid for the full year.
About Newtek Business Services Corp.
Newtek Business Services Corp., Your Business Solutions Company®, is an internally managed BDC, which along with its controlled portfolio companies, provides a wide range of business and financial solutions under the Newtek® brand to the small- and medium-sized business (“SMB”) market. Since 1999, Newtek has provided state-of-the-art, cost-efficient products and services and efficient business strategies to SMB relationships across all 50 states to help them grow their sales, control their expenses and reduce their risk.
Newtek’s and its portfolio companies’ products and services include: Business Lending, SBA Lending Solutions, Electronic Payment Processing, Technology Solutions (Cloud Computing, Data Backup, Storage and Retrieval, IT Consulting), eCommerce, Accounts Receivable Financing & Inventory Financing, Insurance Solutions, Web Services, and Payroll and Benefits Solutions.
Newtek® and Your Business Solutions Company®, are registered trademarks of Newtek Business Services Corp.
Note Regarding Forward Looking Statements
This press release contains certain forward-looking statements. Words such as “believes,” “intends,” “expects,” “projects,” “anticipates,” “forecasts,” “goal” 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 others, intensified competition, operating problems and their impact on revenues and profit margins, 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 Securities and Exchange Commission and available through http://www.sec.gov/. Newtek cautions you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected or implied in these statements.
SOURCE: Newtek Business Services Corp.
Investor Relations & Public Relations
Contact: Jayne Cavuoto
Telephone: (212) 273-8179 / jcavuoto@newtekone.com
NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES-
2021 FORECASTED ADJUSTED NET INVESTMENT INCOME RECONCILIATION:
Year ended Year ended Year ended
(in thousands, except per share amounts) December 31, 2021 Per share December 31, 2020 Per share December 31, 2019 Per share
Net investment income (loss) $18,162 $0.80 $31,985 $1.51 ($5,619) ($0.29)
Net realized gain on non-affiliate investments - SBA 7(a) loans 57,664 2.55 11,368 0.54 47,816 2.47
Net realized gain on non-affiliate investments - conventional loans - 0.00 - 0.00 - 0.00
Net realized gain on controlled investments - 0.00 - 0.00 2,585 0.13
Loss on lease - 0.00 - 0.00 (105) 0.00
Change in fair value of contingent consideration liabilities - 0.00 54 0.00 42 0.00
Loss on debt extinguishment 955 0.00 - 0.00 251 0.01
Adjusted Net investment income $76,781 $3.40 $43,407 $2.05 $44,970 $2.33
Primary Logo
Newtek Business (NASDAQ:NEWT) declares $0.90/share quarterly dividend, 28.6% increase from prior dividend of $0.70.
Forward yield 13.93%
Payable Sept. 30; for shareholders of record Sept. 20; ex-div Sept. 17.
Never owned NEWT--and grateful for my caution. Dead money for a couple of quarters at the least, imo.
NO I just said in my last post and discloser that I don't ! However if I did I would still be a happy camper because the last time I did own it I bought at 18 dollars and sold at 24...
I don't give a ratz azz what happens with NEWT. ALL dividends are nothing more than the return of your capital even if it is .05 percent!
That is why I mostly just sell option premium for income!
Did BA just re-instate it's dividend or did I miss something? NEWT ( disclosure I don't own any) was trading between 16-20 when I first followed it so anyone who bought then is still deep in the money!
ALL stocks go up and down what goes up too much must come back down!
Jeesh it is the long haul that matters you know 20-30 years or more!
Cheers
What just happened?
NEWT is a BDC (Business Development Corp) and therefore required to pay out 90% of Taxable Income. NEWT now intends to become a Bank Holding Company which will almost certainly slash the payout while adding more regulation and other requirements.
More on that change:
https://seekingalpha.com/news/3723415-newtek-agrees-to-buy-national-bank-of-new-york-city-in-plan-to-be-bank-holding-co
Chit happens in the stock market I started following this issue when it was trading between 16-20 dollars those folks are still in the money!
I seem to remember BA tumbling over 200 dollars a share and cut it's dividend entirely just a little over one year ago!
What goes up must come down....
cheers
NEWT's Presentation
Too good to be true yields often become--- too good to be true for long.
https://investor.newtekbusinessservices.com/events-and-presentations
The uncertainty of the dividend and the business plan will put a lid on NEWT for months.
imo
Thanks Conix for pointing out NEWT's free fall. Of course I don't own inscrutable leveraged junk like NEWT. I've always advised against ultra high yield sucker plays like it.
"Newtek: A Minimum Dividend Cut Of 40%"
Today's article from SA will get everyone started.
https://seekingalpha.com/article/4444358-newtek-a-minimum-dividend-cut-of-40-percent
More on NEWT in a day or two...
Why the dump in NEWT today? Anyone?
How about linking to the source of that post, a Seeking Alpha article. Like many SA articles, reader comments can be the best part.
https://seekingalpha.com/article/4431560-newtek-massive-gains-to-date-and-more-dividend-growth-to-come
Thanks for the info I'll pass it on to Daves Dividend board
Newtek: Massive Gains To Date, And More Dividend Growth To Come
May 27, 2021
Summary
Newtek has performed very well in early 2021, both in terms of generating share price gains, and operationally.
This year will see the company return record amounts of cash to its owners.
Investors get a high dividend yield, but the outlook for 2022 and beyond is less certain for now.
Article Thesis
Newtek Business Services (NEWT) is a business development company that has performed well during the pandemic and continues to generate strong results. Shares have risen by more than 60% in 2021, but they may still be attractive for investors, especially since the company recently announced that it would boost its dividends massively this year. Investors can, despite recent strong share price gains, still get a yield of close to 10% from Newtek right here.
Strong Performance For The Stock And The Business
Looking at Newtek's stock performance in 2021, we see that shares have risen by a very attractive 61% so far, not including dividends yet, which added another couple of percentage points. That is, for a five-month span, a very strong gain. This was driven by two factors, which are multiple expansion (mainly due to the fact that the market realized the outlook is a lot better than previously thought) and a strong operating performance.
Newtek's business, even though it may sound like a cyclical business that is vulnerable during recessions, has actually performed well during 2020, and even more so in early 2021. Demand for loans from small and medium-sized businesses was high during 2020, which allowed Newtek to offer a large number of loans to the companies it is doing business with. This is why, overall, revenues rose quite a lot last year, especially during the second quarter, when Newtek saw massive tailwinds from government programs that were aimed at providing liquidity for small businesses across the US, such as the Payment Protection Program (PPP). These were, in many cases, issued through banks or BDCs like Newtek, which earned large fees on those loan originations, which came with very little additional risk for these financial corporations.
In 2021, Newtek will, according to management, generate attractive business growth as well, on the back of the economic reopening across the US that will see businesses expand their operations, which translates into demand for additional liquidity. Newtek does, unlike many other BDCs, also offer other services and solutions to its customers on top of providing loans, including merchant solutions, technology services, and insurance agency solutions. Demand for the first two, primarily, is tied to economic growth, thus Newtek should see tailwinds for these services that it provides for customers during the current year, as the economy is getting back on track. Since the US government continues with its very loose fiscal policies, even the pandemic-related business units Newtek profited from in 2020 will continue to generate results in 2021. Newtek is, for example, forecasting that it will fund more than $600 million of PPP loans this year, with more than 10,000 individual clients being served by Newtek. Newtek also plans to issue hundreds of millions of dollars worth of loans through the SBA programs 7(a) and 504. These loans, partially guaranteed by the Small Business Administration, come with relatively low risks for Newtek and are thus very attractive for the company to issue. The same holds true for PPP loans, which are 100% guaranteed by the federal government, which means that there is no credit risk for Newtek at all.
Thanks to these tailwinds for its business, Newtek was able to generate a highly attractive adjusted net investment income of $1.05 per share during the first quarter, a massive increase versus the previous year's first quarter, which had seen below-average loan issuance. The company also was able to increase its net asset value per share by a highly attractive 5.4% during the first quarter, which is well north of 20% annualized. This was possible despite high dividend payments of $0.50 per share during Q1. It should, however, be noted that Newtek's current net asset value per share, even following Q1's strong growth, stands at below $17, and is thus substantially smaller than the company's current share price. Due to the fact that Newtek does not generate all of its earnings through its loan portfolio, but also through services such as merchant solutions, Newtek's NAV is, however, less telling than that of more traditional BDCs, where NAV and earnings are closely tied to each other.
Newtek's solid performance in recent years, including during the pandemic, has allowed the company to access capital markets at more favorable terms compared to the past - with relaxed monetary policy by the Fed likely playing a role as well. Newtek has, during the first quarter, issued baby bonds with a yield of 5.5%, using the proceeds to retire older debt at a rate of 6.5%. Even though a 5.5% rate isn't ultra-low, this is still better than the rates the company had to pay in the past, and since maturities were also pushed back through this transaction (to 2026, instead of 2023), this also improves Newtek's debt maturity schedule.
2021 Will Be A Great Year, And Investors Will Get Massive Dividends
Due to the aforementioned tailwinds for Newtek during this year, the company is expected to earn $3.10 this year, according to the analyst community consensus estimate. Newtek's management seems to see even higher profits, although no exact guidance has been given so far. This can be deducted from the following slide:
Source: Newtek presentation
With dividends being forecasted at $3.15, plus or minus $0.15, and due to the goal of covering dividend payments with the taxable income that Newtek generates, one could assume that management sees profits of $3.15, or potentially even more than that. But even when we go with the current analyst consensus estimate of $3.10, that would still be a steep increase versus the $2.06 that Newtek has earned in 2020. This year's expected net profits are also way higher than the $2.32 that Newtek earned in 2019 before the pandemic hit.
Newtek's dividend forecast of $3.15 for the current year compares very favorably to past dividend payments, which totaled $2.05 in 2020, and $2.15 in 2019. On a year-over-year basis, Newtek plans to increase its dividend by more than 50% in 2021, using the midpoint of management's guidance. It should be noted that management guidance has oftentimes been conservative in the past and that investors have seen several upside revisions. There is, of course, no guarantee that this will happen again.
Based on a current share price of $33, shares offer a dividend yield of 9.5% at the midpoint of the guidance range. Since $1.20 has been declared for Q1 and Q2, Newtek will pay about $1.95 during H2, which will equate to ~6% of the current share price. Since the Q2 dividend has not yet been paid (the ex-date is June 14), investors that buy today would receive about $2.65, or 8% of their investment between today and the end of the year.
The news about the increased dividend forecast for 2021 has propelled shares higher, and together with the previous gains during early 2021, Newtek has now delivered a huge return for investors this year. Even though shares are still not looking expensive relative to this year's expected earnings, it is, of course, clear that Newtek will not continue to deliver returns of 10% a month as the stock has done so far in 2021. It should also be noted that the current analyst consensus sees earnings decline in 2022 relative to what is forecasted for 2021, so Newtek's stock may stop its upwards trajectory in the foreseeable future.
Takeaway
Newtek is an attractive BDC with strong management, a great track record, and a diversified business model that does not solely rely on loan issuance. We first issued a bullish rating on Newtek on January 2 on Seeking Alpha's public site, and about one month earlier on Cash Flow Kingdom. Shares are up by 65% and 80% since those articles were published, not including dividends. Newtek will continue to return large amounts of cash to its owners this year, and its dividend yield still looks quite attractive. Since there is the possibility that dividends get cut in 2022, if the analyst community is right about earnings declining next year, I personally don't plan to add to my Newtek position right here, following this year's strong run. But those that want to see a large cash return this year, and that is more optimistic about Newtek's growth potential in 2022 and beyond may still find shares attractive today, even after the large share price gains that investors already experienced over the last couple of months.
Grabbed some $17.05's today, Loving the .03 cents divy increase.
Newtek Business (NASDAQ:NEWT) declares $0.58/share quarterly dividend, 3.6% increase from prior dividend of $0.56.
Forward yield 13.41%
Payable Sept. 30; for shareholders of record Sept. 21; ex-div Sept. 18.
Newtek Business (NASDAQ:NEWT) declares $0.44/share quarterly dividend.
Forward yield 8.39%
Payable March 31; for shareholders of record March 18; ex-div March 17.
Newtek Business (NASDAQ:NEWT) declares $0.71/share quarterly dividend,
22.4% increase from prior dividend of $0.58.
Forward yield 13.46%
Payable Dec. 30; for shareholders of record Dec. 16; ex-div Dec. 13.
Newtek Business (NASDAQ:NEWT) declares $0.58/share quarterly dividend, 26.1% increase from prior dividend of $0.46.
Forward yield 10.69%
Payable Sept. 30; for shareholders of record Sept. 20; ex-div Sept. 19.
Newtek Business Services extends its stock repurchase program
Jun. 21, 2019 8:45 AM ET|About: Newtek Business Services... (NEWT)|By: Gaurav Batavia, SA News Editor
Newtek Business Services (NASDAQ:NEWT) adds 0.3M common shares (1.6% of outstanding shares) under its current repurchase program
Newtek Business (NASDAQ:NEWT) declares $0.46/share quarterly dividend, 15% increase from prior dividend of $0.40.
Forward yield 8.59%
Payable June 28; for shareholders of record June 14; ex-div June 13.
Newtek Business (NASDAQ:NEWT): Q1 Non-GAAP NII of $0.44 beats by $0.03; GAAP NII of -$0.05.
Total investment income of $13.76M (+24.3% Y/Y) beats by $0.24M.
Made all 3 purchases and in the green so far. Going place a trailing stop and raise if it keeps chipping away like this. Will have to see where I stand come dividend announcement!
This is rising faster that anticipated had to scale in another 500 today bringing my NEWT inventory up to 1000.
Looking nice!
That news seems to have propped the price ? I was hoping to scale in lower might have to add soon before it rises too fast!
Newtek Business Services Corp. Raises 2019 Annual Dividend Forecast to a Range of $1.85 to $1.86 per Share
Took a starter of 500 units going to average in with 3 leg purchases of 500 each.
going start re building a position here first inventory purchase soon.
they have been showing nice numbers and getting good write up Looking for a 25% gain along with collecting a nice dividend!
Cant argue with dividend increases as many are decreasing. That always a great sign of things to come.
under 20 and it is back on the watch list! Been insider buying also! Dividend has been increasing while others are dropping that's a good sign!
Been getting nice write ups on SA as well!
Nice save! Looks like new ops are in the works
NEWT Meets 2018 Annual Dividend Guidance of $1.80 per share
Newtek Business Services Corp. (“Newtek”) (Nasdaq: NEWT), an internally managed business development company ("BDC"), today announced that its Board of Directors declared a fourth quarter 2018 cash dividend1 of $0.50 per share. The fourth quarter dividend is payable on December 28, 2018 to shareholders of record as of December 18, 2018. The payment of the fourth quarter 2018 dividend is in line with the Company’s 2018 annual dividend guidance of $1.80 per share, which represents an approximate 9.8% increase over the 2017 annual cash dividend of $1.64 per share.
Was stopped out of NEWT at 21.5 will watch for a while and see where it goes. It was good to me!
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