PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for NewtekOne, Inc [Consolidated Statements of Financial Condition](index=7&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) The company's total assets grew significantly due to the consolidation of Newtek Bank Consolidated Statements of Financial Condition (In Thousands) | ASSETS | March 31, 2023 (Unaudited) | December 31, 2022 (Investment Company Accounting) | |:---|:---|:---| | Cash and due from banks | $27,349 | $53,692 | | Restricted cash | $72,599 | $71,914 | | Interest bearing deposits in banks | $97,196 | — | | Total cash and cash equivalents | $197,144 | $125,606 | | Loans held for sale, at fair value | $125,639 | $19,171 | | Loans held for investment, at fair value | $532,788 | $505,268 | | Total assets | $1,249,739 | $998,902 | | **LIABILITIES AND NET ASSETS** | | | | Deposits: | | | | Noninterest-bearing | $22,878 | — | | Interest-bearing | $224,696 | — | | Total deposits | $247,574 | — | | Borrowings | $697,395 | $539,326 | | Total liabilities | $1,031,701 | $623,544 | | Total shareholders' equity | $218,038 | $375,358 | | Total liabilities and shareholders' equity | $1,249,739 | $998,902 | - Total assets increased by **$250.8 million (25.1%)** from December 31, 2022, to March 31, 2023, primarily due to the consolidation of Newtek Bank and other entities[13](index=13&type=chunk)[14](index=14&type=chunk)[242](index=242&type=chunk) - Total deposits of **$247.6 million** were reported at March 31, 2023, with no deposits at December 31, 2022, reflecting the acquisition of Newtek Bank[13](index=13&type=chunk)[14](index=14&type=chunk)[247](index=247&type=chunk) [Consolidated Statements of Income](index=9&type=section&id=Consolidated%20Statements%20of%20Income) Net income increased year-over-year, driven by higher interest and noninterest income Consolidated Statements of Income (In Thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Total interest income | $18,715 | $7,743 | | Total interest expense | $14,132 | $4,667 | | Net interest income | $4,583 | $3,076 | | Provision for loan credit losses | $1,318 | — | | Net interest income after provision for loan credit losses | $3,265 | $3,076 | | Total noninterest income | $42,787 | $22,228 | | Total noninterest expense | $39,197 | $14,709 | | Income before taxes | $6,855 | $10,595 | | Income tax (benefit) expense | $(4,863) | $943 | | Net income | $11,718 | $9,652 | | Net income available to common shareholders | $11,469 | $9,652 | | Basic EPS | $0.46 | $0.40 | | Diluted EPS | $0.46 | $0.40 | - Net income increased by **$2.066 million**, from $9.652 million in Q1 2022 to $11.718 million in Q1 2023[16](index=16&type=chunk)[18](index=18&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk) - Total interest income significantly increased by **$10.972 million**, driven by a $10.4 million increase in loan portfolio interest income[16](index=16&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk) - Total noninterest income increased by **$20.559 million (92.5%)** to $42.787 million in Q1 2023, primarily due to the consolidation of new entities and related technology/IT support and electronic payment processing income[16](index=16&type=chunk)[252](index=252&type=chunk)[265](index=265&type=chunk)[269](index=269&type=chunk) [Consolidated Statements of Comprehensive Income](index=11&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income for Q1 2023 was slightly lower than net income due to an unrealized loss Consolidated Statements of Comprehensive Income (In Thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Net income | $11,718 | $9,652 | | Other comprehensive loss, net of tax | $(82) | — | | Total comprehensive income | $11,636 | $9,652 | - Total comprehensive income for Q1 2023 was **$11.636 million**, including a net unrealized loss on debt securities available-for-sale of $(113) thousand before tax[19](index=19&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=12&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity decreased significantly due to accounting adjustments from the BDC conversion - Total shareholders' equity decreased from **$375.358 million** at December 31, 2022, to **$218.038 million** at March 31, 2023[14](index=14&type=chunk)[21](index=21&type=chunk) - Significant adjustments in Q1 2023 include a **$(138.043) million** removal of fair value adjustments and a **$(65.215) million** consolidation of controlled investments due to the conversion to a financial holding company[21](index=21&type=chunk) - The Company issued **$20.0 million** in preferred stock and declared common share dividends of **$(4.363) million** and preferred share dividends of **$(249) thousand** in Q1 2023[21](index=21&type=chunk) [Consolidated Statements of Cash Flows](index=15&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash flow from operations turned negative while financing activities provided substantial cash inflows Consolidated Statements of Cash Flows (In Thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Net cash (used in) provided by operating activities | $(116,359) | $6,478 | | Net cash used in investing activities | $(23,898) | — | | Net cash provided by (used in) financing activities | $186,899 | $(29,884) | | Net increase (decrease) in cash and restricted cash | $46,642 | $(23,406) | | Cash and restricted cash—end of period | $197,144 | $163,454 | - Operating activities used **$116.359 million** in Q1 2023, a significant change from $6.478 million provided in Q1 2022, primarily due to SBA 7(a) loan investments funded and increases in broker receivables[25](index=25&type=chunk)[27](index=27&type=chunk)[317](index=317&type=chunk) - Investing activities used **$23.898 million** in Q1 2023, mainly for purchasing available-for-sale securities and increasing loans held for investment[25](index=25&type=chunk)[27](index=27&type=chunk)[318](index=318&type=chunk) - Financing activities provided **$186.899 million** in Q1 2023, driven by preferred stock issuance, bank borrowings, and 2025 8.125% Notes issuance, offsetting securitization note payments[25](index=25&type=chunk)[27](index=27&type=chunk)[319](index=319&type=chunk) [Notes to Consolidated Financial Statements](index=17&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail the accounting policies and financial items following the company's transformation [NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION](index=17&type=section&id=NOTE%201%E2%80%94DESCRIPTION%20OF%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) The company transformed into a financial holding company after acquiring Newtek Bank - The Company is now a financial holding company providing business and financial solutions to SMBs, including **Newtek Bank, Newtek Lending, Newtek Payments, Newtek Insurance, Newtek Payroll, and Newtek Technology**[29](index=29&type=chunk) - On January 6, 2023, the Company acquired NBNYC for **$20 million**, renamed it Newtek Bank, National Association, and contributed $31 million cash and two subsidiaries (NBL, SBL) to it[30](index=30&type=chunk) - The Company ceased to be a BDC and RIC, becoming subject to **Federal Reserve supervision**, and now consolidates various non-bank subsidiaries (e.g., NSBF, Newtek Merchant Solutions, Newtek Technology Solutions)[31](index=31&type=chunk) - Comparisons to prior periods include adjustments to reconcile investment company accounting to financial holding company accounting, affecting stockholders' equity and cash flows[32](index=32&type=chunk) [NOTE 2—SIGNIFICANT ACCOUNTING POLICIES](index=18&type=section&id=NOTE%202%E2%80%94SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines key accounting policies adopted after converting to a financial holding company - The Company applies fair value accounting to certain financial instruments, categorizing them into a **three-level hierarchy** based on observability of inputs (ASC Topic 820)[36](index=36&type=chunk) - Business combinations are accounted for under the acquisition method, recognizing identifiable assets and liabilities at fair value, with excess purchase price as goodwill (ASC 805)[41](index=41&type=chunk) - The Company adopted the **CECL (Current Expected Credit Loss)** approach for measuring credit losses on financial instruments, effective January 1, 2023, replacing the incurred loss approach[42](index=42&type=chunk)[72](index=72&type=chunk) - Deferred tax assets and liabilities are computed based on temporary differences between financial statement and income tax bases, with a valuation allowance if realization is unlikely[62](index=62&type=chunk) - Revenue from electronic payment processing and fee income is recognized when control of goods/services is transferred to customers, reflecting expected consideration (ASC 606)[89](index=89&type=chunk) [NOTE 3—BUSINESS COMBINATION](index=27&type=section&id=NOTE%203%E2%80%94BUSINESS%20COMBINATION) This note details the acquisition of NBNYC for $20 million, resulting in $1.3 million of goodwill - On January 6, 2023, the Company acquired NBNYC for **$20 million** in an all-cash transaction, plus $1.3 million in acquisition costs[102](index=102&type=chunk) - The acquisition resulted in a preliminary goodwill of **$1.3 million**, representing the excess of purchase price over the fair value of net assets acquired[106](index=106&type=chunk) Preliminary Allocation of Consideration Paid for NBNYC (in thousands) | Item | Amount | |:---|:---| | Purchase price consideration | $21,322 | | Fair value of assets acquired: | | | Cash and cash equivalents | $32,574 | | Securities | $6,527 | | Loans held for investment | $159,057 | | Goodwill | $1,279 | | Core deposit intangible | $1,040 | | Other Assets | $1,631 | | Total assets acquired | $202,108 | | Fair value of liabilities assumed: | | | Deposits | $137,015 | | Borrowings | $27,972 | | Other liabilities | $15,799 | | Total liabilities assumed | $180,786 | | Fair value of net assets acquired | $21,322 | - Fair values of acquired assets and assumed liabilities are **preliminary** and subject to adjustment for up to one year post-acquisition[104](index=104&type=chunk) [NOTE 4—INVESTMENTS](index=30&type=section&id=NOTE%204%E2%80%94INVESTMENTS) This note details the company's portfolio of equity investments, joint ventures, and debt securities Total Investments (in thousands) | Investment Type | March 31, 2023 Cost | March 31, 2023 Fair Value | December 31, 2022 Cost | December 31, 2022 Fair Value | |:---|:---|:---|:---|:---| | Non-controlled equity investments | $1,360 | $1,360 | $1,360 | $1,360 | | Joint Ventures | $23,314 | $25,022 | $23,314 | $23,022 | | Controlled investments (Equity) | — | — | $99,195 | $241,113 | | Controlled investments (Debt) | — | — | $32,300 | $18,104 | | Total investments | $24,674 | $26,382 | $156,169 | $283,599 | - The Company's debt securities available-for-sale portfolio totaled **$32.905 million** at fair value as of March 31, 2023, primarily consisting of U.S. Treasury notes and Government agency debentures[121](index=121&type=chunk) - Unrealized losses on available-for-sale securities totaled **$198 thousand** at March 31, 2023, primarily due to non-credit-related market volatility and interest rate changes[122](index=122&type=chunk) - NCL JV and TSO JV are **50% owned joint ventures** focused on non-conforming conventional commercial and industrial term loans[116](index=116&type=chunk)[118](index=118&type=chunk) [NOTE 5—LOANS HELD FOR INVESTMENT](index=34&type=section&id=NOTE%205%E2%80%94LOANS%20HELD%20FOR%20INVESTMENT) This note breaks down the loan portfolio, credit quality, and allowance for credit losses Loan Portfolio by Type (in thousands) | Loan Type | March 31, 2023 Fair Value | December 31, 2022 Fair Value | |:---|:---|:---| | Loans held for investment, at fair value | $532,788 | $505,268 | | Loans held for investment, at amortized cost, net | $164,639 | — | | Total Loans | $697,426 | $505,268 | - As of March 31, 2023, total past due and non-accrual loans amounted to **$120.092 million**, with **$42.380 million** on non-accrual status[128](index=128&type=chunk) - The Allowance for Credit Losses (ACL) at March 31, 2023, was **$2.189 million**, established due to the transition to a financial holding company and the acquisition of purchased credit deteriorated (PCD) loans[145](index=145&type=chunk) - The Company uses an internal grading system (1-8) to rank loan quality, from Exceptional (1) to Loss (8), with grades 6-7 representing classified loans[133](index=133&type=chunk)[140](index=140&type=chunk) [NOTE 6—TRANSACTIONS WITH AFFILIATED COMPANIES AND RELATED PARTY TRANSACTIONS](index=38&type=section&id=NOTE%206%E2%80%94TRANSACTIONS%20WITH%20AFFILIATED%20COMPANIES%20AND%20RELATED%20PARTY%20TRANSACTIONS) This note summarizes transactions with affiliated companies, including joint ventures and investments Affiliate Investments (in thousands) | Company | Fair Value at Dec 31, 2022 | Net Unrealized Gains/(Losses) | Fair Value at Mar 31, 2023 | Dividend Income | |:---|:---|:---|:---|:---| | Newtek Conventional Lending, LLC | $16,587 | $2,315 | $18,900 | $484 | | Newtek TSO II Conventional Credit Partners, LP | $6,435 | $(313) | $6,122 | — | | EMCAP Loan Holdings, LLC | $1,000 | — | $1,000 | $20 | | Biller Genie Software, LLC | $360 | — | $360 | — | | Total Affiliate Investments | $24,382 | $2,002 | $26,382 | $504 | - Amounts due from affiliated companies decreased from **$1.3 million** at December 31, 2022, to **$0.1 million** at March 31, 2023[148](index=148&type=chunk) - Newtek Business Services Holdco 6, Inc. purchased a **$5.3 million** loan from Newtek Conventional Lending, LLC during Q1 2023[148](index=148&type=chunk) [NOTE 7—SERVICING ASSETS](index=39&type=section&id=NOTE%207%E2%80%94SERVICING%20ASSETS) This note details the company's servicing assets derived from SBA 7(a) loans - Servicing assets are measured at **fair value**, with changes reported in earnings[149](index=149&type=chunk) - As of March 31, 2023, the Company services **$1.6 billion** in SBA 7(a) loans[149](index=149&type=chunk) Servicing Assets and Valuation Assumptions (in thousands) | Date | Fair Value | Unobservable Input | Weighted Average | Minimum | Maximum | |:---|:---|:---|:---|:---|:---| | March 31, 2023 | $33,351 | Discount factor | 14.50 % | 14.50 % | 14.50 % | | | | Cumulative prepayment rate | 25.00 % | 25.00 % | 25.00 % | | | | Average cumulative default rate | 20.00 % | 20.00 % | 20.00 % | | December 31, 2022 | $30,268 | Discount factor | 16.50 % | 16.50 % | 16.50 % | | | | Cumulative prepayment rate | 25.00 % | 25.00 % | 25.00 % | | | | Average cumulative default rate | 25.00 % | 25.00 % | 25.00 % | - Servicing fee income for Q1 2023 was **$4.4 million**, up from $3.2 million in Q1 2022[149](index=149&type=chunk) [NOTE 8—GOODWILL AND INTANGIBLE ASSETS](index=39&type=section&id=NOTE%208%E2%80%94GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note details goodwill and intangible assets arising from acquisitions and consolidations Goodwill (in thousands) | Item | March 31, 2023 | December 31, 2022 | |:---|:---|:---| | NBNYC acquisition | $1,279 | — | | Other goodwill | $19,910 | — | | Total goodwill | $21,189 | — | Intangible Assets (in thousands) | Item | March 31, 2023 Net Carrying Amount | December 31, 2022 Net Carrying Amount | |:---|:---|:---| | Core Deposits | $989 | — | | Customer lists | $5,923 | — | | Total intangible assets | $6,912 | — | - Amortization expense for intangible assets was **$0.4 million** for Q1 2023[151](index=151&type=chunk) - The remaining estimated aggregate future amortization expense for intangible assets is **$6.912 million**, with $1.207 million expected in the remainder of 2023[152](index=152&type=chunk) [NOTE 9—FAIR VALUE MEASUREMENTS](index=40&type=section&id=NOTE%209%E2%80%94FAIR%20VALUE%20MEASUREMENTS) This note details the company's fair value measurements using a three-level hierarchy - Fair value is defined as the exit price in an orderly transaction between market participants, categorized into **Level 1** (quoted active markets), **Level 2** (observable inputs other than Level 1), and **Level 3** (unobservable inputs)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) Fair Value Measurements at March 31, 2023 (in thousands) | Assets | Total Fair Value | Level 1 | Level 2 | Level 3 | |:---|:---|:---|:---|:---| | Debt securities available-for-sale | $32,905 | $29,102 | $3,803 | — | | Loans held for sale, at fair value | $125,639 | — | $125,639 | — | | Loans held for investment, at fair value | $532,788 | — | — | $532,788 | | Servicing assets | $33,351 | — | — | $33,351 | | Total assets | $754,581 | $29,102 | $129,442 | $571,015 | | Liabilities: | | | | | | Derivative instruments | $624 | — | $624 | — | - The change in net gain/loss on Level 3 loans accounted for under the fair value option included **$6.1 million in gains** on SBA unguaranteed non-affiliate investments and **$0.9 million in unrealized depreciation** on servicing assets for Q1 2023[162](index=162&type=chunk) - The Company's investments in TSO JV and NCL JV are measured at fair value using **NAV** and are not classified within the fair value hierarchy[162](index=162&type=chunk)[163](index=163&type=chunk) [NOTE 10—DEPOSITS](index=45&type=section&id=NOTE%2010%E2%80%94DEPOSITS) This note details the company's deposit liabilities following the acquisition of Newtek Bank Deposits by Type (in thousands) | Deposit Type | March 31, 2023 | |:---|:---| | Non-interest-bearing: | | | Demand | $22,878 | | Interest-bearing: | | | Checking | $784 | | Money market | $25,770 | | Savings | $16,700 | | Time deposits | $181,442 | | Total interest-bearing | $224,696 | | Total deposits | $247,574 | - Time deposits, money market, and interest-bearing checking obtained through brokers totaled **$106.763 million**[169](index=169&type=chunk) - Aggregate amount of deposit accounts that exceeded the FDIC limit was **$13.357 million**[169](index=169&type=chunk) - Scheduled maturities for time deposits show **$104.922 million** maturing in the remainder of 2023[171](index=171&type=chunk) [NOTE 11—BORROWINGS](index=46&type=section&id=NOTE%2011%E2%80%94BORROWINGS) This note details the company's borrowings, which increased due to new notes and credit lines Borrowings by Type (in thousands) | Borrowing Type | March 31, 2023 Outstanding | Weighted Average Interest Rate | December 31, 2022 Outstanding | Weighted Average Interest Rate | |:---|:---|:---|:---|:---| | Bank Lines of Credit | $147,797 | 7.90 % | $55,885 | 7.25 % | | FHLB Advances | $24,531 | 2.20 % | — | — | | 2024 Notes | $37,958 | 5.75 % | $37,903 | 5.75 % | | 2025 5.00% Notes | $29,365 | 5.00 % | $29,306 | 5.00 % | | 2025 8.125% Notes | $49,040 | 8.13 % | — | — | | 2026 Notes | $113,025 | 5.50 % | $112,846 | 5.50 % | | Notes payable - Securitization Trusts | $248,577 | 6.85 % | $279,136 | 6.19 % | | Total | $697,395 | 6.69 % | $539,326 | 6.11 % | - Total borrowings increased by **$158.069 million** from December 31, 2022, to March 31, 2023[172](index=172&type=chunk)[248](index=248&type=chunk) - The Company completed a private placement of **$50.0 million** aggregate principal amount of 8.125% notes due 2025 in January 2023, with net proceeds of approximately $48.94 million[172](index=172&type=chunk) - Total interest expense related to borrowings for Q1 2023 was **$11.1 million**, compared to $26.3 million in Q1 2022[176](index=176&type=chunk) [NOTE 12—DERIVATIVE INSTRUMENTS](index=47&type=section&id=NOTE%2012%E2%80%94DERIVATIVE%20INSTRUMENTS) This note describes the use of interest rate futures to manage fair value variability - The Company uses **interest rate futures** to economically manage fair value variability of fixed rate assets[177](index=177&type=chunk) Derivative Instruments Outstanding (in thousands) | Contract Type | March 31, 2023 Fair Value Liability | Remaining Maturity (years) | |:---|:---|:---| | 5-year Swap Futures | $624 | 0.25 | Net Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Derivatives (in thousands) | Contract Type | Q1 2023 Unrealized Appreciation/(Depreciation) | Q1 2023 Realized Gain/(Loss) | Q1 2022 Unrealized Appreciation/(Depreciation) | Q1 2022 Realized Gain/(Loss) | |:---|:---|:---|:---|:---| | 5-year Swap Futures | $197 | $(693) | $183 | $445 | [NOTE 13—COMMITMENTS AND CONTINGENCIES](index=48&type=section&id=NOTE%2013%E2%80%94COMMITMENTS%20AND%20CONTINGENCIES) This note outlines operating commitments, legal matters, guarantees, and unfunded commitments Operating and Employment Commitments (in thousands) | Year | Operating Leases | Employment Agreements | Total | |:---|:---|:---|:---| | 2023 | $2,163 | $2,131 | $4,294 | | 2024 | $2,820 | $363 | $3,183 | | 2025 | $2,585 | — | $2,585 | | 2026 | $2,035 | — | $2,035 | | 2027 | $479 | — | $479 | | Total | $10,082 | $2,494 | $12,576 | - The Company is a guarantor on several credit facilities, including SPV I Capital One (**$19.3 million** owed), SPV II Deutsche Bank (**$7.1 million** owed), SPV III One Florida Bank (**$13.7 million** owed), and the Webster Facility (**$39.9 million** outstanding)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) - Unfunded commitments as of March 31, 2023, totaled **$110.4 million**, comprising $14.3 million in SBA 7(a) loans, $81.7 million in SBA 504 loans, and $14.4 million in commercial and industrial loans[189](index=189&type=chunk) [NOTE 14—STOCK BASED COMPENSATION](index=49&type=section&id=NOTE%2014%E2%80%94STOCK%20BASED%20COMPENSATION) This note details the company's stock-based compensation plan and related expenses - The Company accounts for equity-based compensation using the **fair value method** (ASC Topic 718)[190](index=190&type=chunk) - As of March 31, 2023, **$5.1 million** of total unrecognized compensation expense related to unvested restricted shares is expected to be recognized over a weighted-average period of approximately **2.3 years**[192](index=192&type=chunk) - Total stock-based compensation expense for Q1 2023 was **$0.7 million**, compared to $0.8 million for Q1 2022[193](index=193&type=chunk) - The Equity Incentive Plan was **terminated in April 2023**, with a new plan to be considered by shareholders[192](index=192&type=chunk) [NOTE 15—EARNINGS PER SHARE](index=51&type=section&id=NOTE%2015%E2%80%94EARNINGS%20PER%20SHARE) This note presents the earnings per share calculations using the two-class method Earnings Per Share Calculation (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Net income | $11,718 | $9,652 | | Net income available to common shareholders | $11,469 | $9,652 | | Basic EPS | $0.46 | $0.40 | | Weighted average shares outstanding | 24,609 | 24,156 | | Total adjustments to weighted average shares outstanding | 628 | — | | Diluted weighted average shares outstanding | 25,237 | n/a | | Diluted EPS | $0.46 | n/a | - The Company issued 20,000 shares of Series A Convertible Preferred Stock for **$20.0 million**, convertible into 47.54053782 shares of Common Stock per preferred share[195](index=195&type=chunk) - Warrants were issued to purchase **47,540 shares** of Common Stock at $21.03468 per share[195](index=195&type=chunk) [NOTE 16—LEASES](index=51&type=section&id=NOTE%2016%E2%80%94LEASES) This note details the company's operating lease liabilities recognized under ASC 842 - Operating lease expense is recognized on a **straight-line basis** over the lease term (ASC 842)[196](index=196&type=chunk) Operating Lease Information | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Cash paid for amounts included in lease liabilities | $709 | $461 | | Weighted-average remaining lease term | 3.63 years | 4.91 years | | Weighted-average discount rate | 5.64 % | 4.76 % | | Total lease costs | $949 | $239 | Maturity of Lease Liabilities (in thousands) | Year | Amount | |:---|:---| | 2023 | $2,163 | | 2024 | $2,820 | | 2025 | $2,585 | | 2026 | $2,035 | | 2027 | $479 | | Thereafter | — | | Total future minimum lease payments | $10,082 | | Less: Imputed interest | $(938) | | Present value of future minimum lease payments | $9,144 | [NOTE 17—DIVIDENDS AND DISTRIBUTIONS](index=52&type=section&id=NOTE%2017%E2%80%94DIVIDENDS%20AND%20DISTRIBUTIONS) This note summarizes the company's dividend declarations and distributions for the quarter Dividend Declarations and Distributions | Period | Date Declared | Amount Per Share | Cash Distribution (in thousands) | DRIP Shares Issued | DRIP Shares Value (in thousands) | |:---|:---|:---|:---|:---|:---| | Three months ended March 31, 2023 | February 27, 2023 | $0.18 | $4,291 | 6 | $72 | | Three months ended March 31, 2022 | December 20, 2021 | $0.65 | $15,361 | 9 | $225 | - An additional **$0.1 million** in shares were issued for dividends on unvested restricted stock awards in both Q1 2023 and Q1 2022[200](index=200&type=chunk) [NOTE 18—INCOME TAXES](index=52&type=section&id=NOTE%2018%E2%80%94INCOME%20TAXES) This note explains the significant change in the company's income tax status - The Company ceased to be a RIC and became subject to **corporate-level income tax** as a financial holding company starting January 1, 2023[204](index=204&type=chunk)[348](index=348&type=chunk) - The effective tax rate for Q1 2023 was **(71.41)%**, differing from the 21% federal rate due to subsidiary net operating losses and other discrete items[207](index=207&type=chunk) - At December 31, 2022, the Company had **$34.2 million** in federal net operating losses (NOLs), with $4.6 million expiring between 2029-2037 and $29.6 million having indefinite lives[208](index=208&type=chunk) - Deferred tax liabilities were **$3.5 million** at March 31, 2023, down from $19.2 million at December 31, 2022, reflecting the accounting change[346](index=346&type=chunk) [NOTE 19—SEGMENTS](index=53&type=section&id=NOTE%2019%E2%80%94SEGMENTS) This note outlines the company's four reportable operating segments and their financial results - The Company operates four reportable segments: **Banking, Non-Bank SBA 7(a) Lending (NSBF), Payments, and Technology**[211](index=211&type=chunk) - The Banking segment includes Newtek Bank, NBL, and SBL, originating and servicing various loans and offering depository services[211](index=211&type=chunk)[288](index=288&type=chunk) - The NSBF segment relates to legacy SBA 7(a) loan portfolios held outside the bank, with **no new origination activity**[212](index=212&type=chunk) Segment Net Income (Loss) for Q1 2023 (in thousands) | Segment | Net Income (Loss) | |:---|:---| | Banking | $(2,483) | | Technology | $182 | | NSBF | $13,547 | | Payments | $2,664 | | Corporate and other | $(2,193) | | Consolidated net income | $11,718 | [NOTE 20—SUBSEQUENT EVENTS](index=55&type=section&id=NOTE%2020%E2%80%94SUBSEQUENT%20EVENTS) This note details the NSBF Wind-down Agreement and Newtek Bank's new lending status - On April 13, 2023, NSBF and the SBA entered an agreement for NSBF to **wind down its SBA 7(a) loan originations**, transitioning them to Newtek Bank[219](index=219&type=chunk) - NSBF will continue to own, service, and liquidate its existing SBA 7(a) and PPP loan portfolio, subject to SBA approval for sales/transfers[219](index=219&type=chunk) - Newtek Bank received **Preferred Lenders Program (PLP) status** on April 27, 2023, granting it delegated authority for SBA-guaranteed loans[219](index=219&type=chunk) - The Company has guaranteed NSBF's obligations to the SBA and agreed to fund a **$10 million** account to secure these obligations[219](index=219&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results, highlighting its transformation [Forward-Looking Statements](index=56&type=section&id=Forward-Looking%20Statements) This section cautions that the report contains forward-looking statements involving risks - Statements in the report that are not historical facts are **forward-looking** and involve substantial risks and uncertainties[221](index=221&type=chunk) - Forward-looking statements relate to future operating results, business prospects, contractual arrangements, economic dependence, ability to achieve objectives, liquidity, and compliance costs as a financial holding company[222](index=222&type=chunk) - Risks include economic downturns, credit market contractions, interest rate volatility, and impacts from global macroeconomic and geopolitical environments[222](index=222&type=chunk) [Executive Overview](index=57&type=section&id=Executive%20Overview) The company became a financial holding company after acquiring Newtek Bank in January 2023 - As of January 6, 2023, NewtekOne became a **financial holding company**, providing business and financial solutions to the SMB market, following the acquisition of NBNYC (Newtek Bank)[224](index=224&type=chunk) - The Company withdrew its BDC election and ceased to be a RIC, now subject to **Federal Reserve supervision** and corporate income tax[224](index=224&type=chunk)[227](index=227&type=chunk) - NSBF, historically a top SBA 7(a) lender, is winding down operations, with originations transitioning to Newtek Bank, which has **PLP status** for expedited loan processing[228](index=228&type=chunk)[229](index=229&type=chunk) [Economic Developments](index=59&type=section&id=Economic%20Developments) The company faces risks from supply chain issues, inflation, and financial market instability - The Company observes supply chain interruptions, labor shortages, commodity inflation, rising interest rates, and financial market instability[230](index=230&type=chunk) - Concerns about banking organizations' financial condition, including recent bank failures (e.g., **Silicon Valley Bank, Signature Bank**), may increase market volatility and adversely affect the Company's stock and operations[231](index=231&type=chunk) - A protracted recession could impair subsidiaries' operations and borrowers' ability to repay, potentially increasing defaults[230](index=230&type=chunk) [Income and Expenses](index=59&type=section&id=Income%20and%20Expenses) Income is generated from interest, loan sales, dividends, and fees from various services - Income for Q1 2023 was generated from interest, net gains on SBA 7(a) loan sales, dividends, electronic payment processing, servicing, and other fees[232](index=232&type=chunk) - Primary operating expenses for Q1 2023 included salaries and benefits, interest expense (including deposits), electronic payment processing, technology services, and other general and administrative costs[234](index=234&type=chunk) - Realized gains or losses on investments were recognized based on the difference between net proceeds and cost basis, while fair value changes were recorded as unrealized appreciation/depreciation[233](index=233&type=chunk) [Guarantees](index=59&type=section&id=Guarantees) The company provides guarantees on several credit facilities for its special purpose vehicles - As of March 31, 2023, the Company was a guarantor on the Receivable and Inventory Facility at NBC, with **$2.2 million** principal owed (facility repaid in April 2023)[235](index=235&type=chunk) - The Company guarantees the SPV I Capital One Facility (**$19.3 million** owed), SPV II Deutsche Bank Facility (**$7.1 million** owed), SPV III One Florida Bank Facility (**$13.7 million** owed), and the Webster Facility (**$39.9 million** outstanding)[236](index=236&type=chunk)[237](index=237&type=chunk) - As of March 31, 2023, the Company determined it was **not probable** that payments would be required under these guarantees[236](index=236&type=chunk)[237](index=237&type=chunk) [Non-Conforming Conventional Commercial Loan Program](index=60&type=section&id=Non-Conforming%20Conventional%20Commercial%20Loan%20Program) The company participates in non-conforming commercial lending through joint ventures - NCL JV, a 50/50 joint venture, **ceased funding new non-conforming conventional commercial and industrial term loans** in 2020[238](index=238&type=chunk) - TSO JV, a new joint venture formed in August 2022, intends to invest in non-conforming conventional commercial and industrial term loans to middle-market and small businesses[239](index=239&type=chunk) [Unfunded Commitments](index=60&type=section&id=Unfunded%20Commitments) The company had over $110 million in unfunded commitments at the end of the quarter - As of March 31, 2023, the Company had **$110.4 million** in unfunded commitments[240](index=240&type=chunk) - These commitments include **$14.3 million** for SBA 7(a) loans, **$81.7 million** for SBA 504 loans, and **$14.4 million** for commercial and industrial loans[240](index=240&type=chunk) [Discussion and Analysis of Financial Condition](index=60&type=section&id=Discussion%20and%20Analysis%20of%20Financial%20Condition) Total assets, deposits, and borrowings increased significantly due to the company's transformation - Total assets increased by **$250.8 million (25.1%)** to $1.2 billion at March 31, 2023, primarily due to the conversion to a financial holding company and the acquisition of Newtek Bank[241](index=241&type=chunk)[242](index=242&type=chunk) - Loans held for sale increased by **$106.5 million**, and loans held for investment at amortized cost increased by **$164.6 million**, reflecting new originations and the acquisition of Newtek Bank loans[243](index=243&type=chunk)[244](index=244&type=chunk) - Goodwill and intangibles increased by **$28.1 million**, comprising $2.3 million from the Newtek Bank acquisition and $25.8 million from consolidating previously unconsolidated portfolio companies[245](index=245&type=chunk) - Total deposits were **$247.6 million** at March 31, 2023, with no deposits at December 31, 2022, due to the Newtek Bank acquisition[247](index=247&type=chunk) - Borrowings increased by **$158.069 million** to $697.4 million, driven by increased Capital One lines of credit, consolidated bank borrowings, and new 2025 8.125% Notes[248](index=248&type=chunk) [Results of Operation](index=63&type=section&id=Results%20of%20Operation) Net income grew year-over-year, driven by higher noninterest income from consolidated entities - Net income for Q1 2023 was **$11.72 million ($0.46 diluted EPS)**, up from $9.65 million ($0.40 diluted EPS) in Q1 2022[251](index=251&type=chunk) - Net interest income increased by **$1.507 million** to $4.583 million, driven by a $10.4 million increase in loan portfolio interest income[253](index=253&type=chunk)[254](index=254&type=chunk) - Total noninterest income increased by **$20.559 million (92.5%)** to $42.787 million, largely due to consolidated technology, IT support, and electronic payment processing income[265](index=265&type=chunk)[269](index=269&type=chunk) - Total noninterest expense increased by **$24.488 million** to $39.197 million, primarily due to the consolidation of subsidiaries' salaries, benefits, and electronic payment processing costs[252](index=252&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk) - Net realized gains on sales of SBA loans decreased to **$6.5 million** in Q1 2023 from $15.3 million in Q1 2022, despite higher loan origination volume[276](index=276&type=chunk)[278](index=278&type=chunk) - Net unrealized appreciation (depreciation) on joint ventures was **$2.002 million** in Q1 2023, a significant improvement from a $(2.321) million loss in Q1 2022[284](index=284&type=chunk) [Liquidity and Capital Resources](index=71&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains liquidity through credit facilities, notes, and cash flows - Liquidity is derived from Capital One Facility, various Notes, securitization transactions, and cash flows from operations[292](index=292&type=chunk) - As of March 31, 2023, unused liquidity sources included **$8.2 million** from the Capital One facility, **$97.2 million** in interest-bearing deposits, and **$27.3 million** in unrestricted cash[314](index=314&type=chunk) - Operating activities used **$10.4 million** in cash in Q1 2023, while financing activities provided **$81.0 million**, primarily from preferred stock issuance, bank borrowings, and new 2025 8.125% Notes[317](index=317&type=chunk)[319](index=319&type=chunk) Consolidated Capital Ratios (in thousands) | Capital Ratio (March 31, 2023) | Actual Amount | Ratio | Minimum Requirement Amount | Ratio | |:---|:---|:---|:---|:---| | Tier 1 Capital (to Average Assets) | $184,667 | 16.5 % | $46,207 | 4.0 % | | Common Equity Tier 1 (to Risk-Weighted Assets) | $184,667 | 18.3 % | $45,479 | 4.5 % | | Tier 1 Capital (to Risk-Weighted Assets) | $184,667 | 18.3 % | $60,639 | 6.0 % | | Total Capital (to Risk-Weighted Assets) | $206,594 | 20.4 % | $80,852 | 8.0 % | Bank Capital Ratios (in thousands) | Capital Ratio (March 31, 2023) | Actual Amount | Ratio | Minimum Requirement Amount | Ratio | |:---|:---|:---|:---|:---| | Tier 1 Capital (to Average Assets) | $77,076 | 27.2 % | $11,325 | 4.0 % | | Common Equity Tier 1 (to Risk-Weighted Assets) | $77,076 | 34.1 % | $10,176 | 4.5 % | | Tier 1 Capital (to Risk-Weighted Assets) | $77,076 | 34.1 % | $13,568 | 6.0 % | | Total Capital (to Risk-Weighted Assets) | $79,265 | 35.1 % | $18,090 | 8.0 % | [Critical Accounting Policies and Estimates](index=78&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key estimates include fair value measurements, CECL adoption, and servicing asset valuation - **Fair value measurements** are critical, especially for investments without readily available market values, requiring significant management judgment and independent valuation firms[326](index=326&type=chunk)[331](index=331&type=chunk) - The adoption of **CECL** for allowance for credit losses is a critical policy, requiring estimates of expected credit losses over the life of loans based on past events, current conditions, and forecasts[337](index=337&type=chunk)[338](index=338&type=chunk) - Valuation of **servicing assets** at fair value involves considerable judgment, incorporating assumptions like servicing costs, discount rates, prepayment rates, and default rates[339](index=339&type=chunk) - Income recognition policies for loans, servicing income, and various fees are critical, as is the accounting for deferred tax assets and liabilities following the change in tax status[340](index=340&type=chunk)[342](index=342&type=chunk)[343](index=343&type=chunk)[346](index=346&type=chunk) [Off Balance Sheet Arrangements](index=82&type=section&id=Off%20Balance%20Sheet%20Arrangements) The company had no off-balance sheet arrangements as of the reporting date - There were **no off-balance sheet arrangements** as of March 31, 2023[355](index=355&type=chunk) [Recent Developments](index=83&type=section&id=Recent%20Developments) NSBF is winding down its SBA loan originations, which are transitioning to Newtek Bank - On April 13, 2023, NSBF and the SBA entered into an agreement for NSBF to **wind down its SBA 7(a) loan originations**, transitioning them to Newtek Bank[357](index=357&type=chunk) - NSBF will continue to own, service, and liquidate its existing SBA 7(a) and PPP loan portfolio, with the Company guaranteeing NSBF's obligations to the SBA[357](index=357&type=chunk) - Newtek Bank began funding and servicing SBA 7(a) loans in April 2023 and received **Preferred Lenders Program (PLP) status** on April 27, 2023[357](index=357&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=84&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate fluctuations and SBA secondary market availability - Principal market risks include fluctuations in **interest rates** and the availability of the **secondary market for SBA loans**[359](index=359&type=chunk) - The Company's lending rates (prime plus margin) are matched to its cost of funds (prime or LIBOR plus margin) to manage interest rate risk[360](index=360&type=chunk) - A significant change in market interest rates will materially affect income; rising rates could improve net investment income, while falling rates could reduce it more quickly than interest expense[360](index=360&type=chunk) - Secondary market conditions, especially higher interest rates, could negatively impact sale prices and premiums for guaranteed portions of SBA 7(a) loans[361](index=361&type=chunk) Estimated Changes in Net Interest Income (NII) and Economic Value of Equity (EVE) as of March 31, 2023 | Basis Point ("bp") Change in Interest Rates | Estimated Increase/Decrease in Net Interest Income (12 months beginning March 31, 2023) | Estimated Increase/Decrease in Net Interest Income (12 months beginning March 31, 2024) | Estimated Percentage Change in EVE (As of March 31, 2023) | |:---|:---|:---|:---| | +200 | 2.7% | 6.0% | 2.5% | | +100 | 1.3% | 2.8% | 1.8% | | -100 | (1.1)% | (2.8)% | 0.3% | | -200 | (2.2)% | (5.5)% | (0.6)% | [Item 4. Controls and Procedures](index=86&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023 - As of March 31, 2023, disclosure controls and procedures were evaluated and deemed **effective**, providing reasonable assurance of timely and accurate information reporting[371](index=371&type=chunk) - **No material changes** in internal controls over financial reporting occurred during the period covered by the report[372](index=372&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=87&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any litigation expected to have a material financial impact - The Company is not currently involved in any litigation matters expected to have a **material impact** on its financial condition[375](index=375&type=chunk) - Holdco 5 obtained a **$6.2 million** non-dischargeable judgment against Kerri Agee in January 2022, related to a former controlled portfolio company (BSP)[376](index=376&type=chunk) - NMS operates under a permanent injunction from the Federal Trade Commission (FTC) since October 2012 regarding certain business practices[377](index=377&type=chunk) [Item 1A. Risk Factors](index=87&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors disclosed in the 2022 Form 10-K - Readers should carefully consider risk factors discussed in the **Annual Report on Form 10-K** for the year ended December 31, 2022[378](index=378&type=chunk) - **No material changes** to the risk factors have occurred since the Annual Report on Form 10-K[378](index=378&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=87&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on unregistered equity sales through the Dividend Reinvestment Plan - The Company issues common stock not subject to Securities Act registration requirements through its **DRIP**[379](index=379&type=chunk) - For Q1 2023, **5,800 shares** valued at $0.1 million were issued under the DRIP, compared to 8,900 shares valued at $0.2 million in Q1 2022[379](index=379&type=chunk) - Additionally, **4,700 shares** valued at $0.1 million were issued in Q1 2023 for dividends on unvested restricted stock awards, compared to 4,108 shares valued at $0.1 million in Q1 2022[380](index=380&type=chunk) [Item 3. Defaults Upon Senior Securities](index=87&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - **No defaults** upon senior securities occurred[381](index=381&type=chunk) [Item 4. Mine Safety Disclosures](index=87&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company - No mine safety disclosures are **applicable**[382](index=382&type=chunk) [Item 5. Other Information](index=87&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item for the period - **No other information** to report[383](index=383&type=chunk) [Item 6. Exhibits](index=88&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q report - Exhibits include Amended and Restated Articles of Incorporation, Bylaws, Articles Supplementary, Investor Rights Agreement, and Registration Rights Agreement[384](index=384&type=chunk) - Certifications by the Principal Executive Officer and Principal Financial Officer are filed herewith (31.1*, 31.2*, 32.1**, 32.2**)[384](index=384&type=chunk) - **Interactive Data Files (XBRL)** for financial statements and notes are included[384](index=384&type=chunk) [Signatures](index=89&type=section&id=Signatures) The report is certified by the company's authorized officers as of May 11, 2023 - The report is signed by **Barry Sloane**, Chief Executive Officer, President and Chairman of the Board (Principal Executive Officer)[388](index=388&type=chunk) - The report is signed by **Nicholas Leger**, Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer)[388](index=388&type=chunk) - The report was signed on **May 11, 2023**[388](index=388&type=chunk)

NewtekOne, Inc. (NASDAQ:NEWT) Q1 2023 Earnings Conference Call May 9, 2023 8:30 AM ET Company Participants Barry Sloane - President and Chief Executive Officer Nicholas Leger - Chief Accounting Officer Conference Call Participants Crispin Love - Piper Sandler Christopher Nolan - Ladenburg Thalmann & Co Bryce Rowe - B. Riley Paul Johnson - KBW Scott Sullivan - RJ Sean-Paul Adams - Raymond James Steven Nemo - Private Investor Operator Good day, welcome to the Newtek One, Inc. First Quarter 2023 Earnings Confe ...

Financial Data and Key Metrics Changes - The company reported total investment income of $23.1 million for Q4 2022, a 6.9% decrease from $24.8 million in Q4 2021, primarily due to a drop in dividends from portfolio companies [90] - The net investment loss for Q4 2022 was $5.4 million or $0.22 per share, compared to a net investment income of $1.6 million or $0.7 per share in Q4 2021 [101] - The company anticipates total assets to grow from $1.62 billion at the end of 2022 to $1.7 billion by the end of 2023 and $2.1 billion by the end of 2024 [43][45] Business Line Data and Key Metrics Changes - The company funded a record $775 million in SBA 7(a) loans in 2022, up from $362 million, with a forecast of $885 million for 2023 [65] - Servicing income increased by 27% to $3.8 million in Q4 2022 compared to $3 million in the same quarter in 2021 [58] - The non-conforming C&I loan business is expected to grow significantly, with projections of increasing from $600 million in 2023 to about $1 billion in 2024 [1][16] Market Data and Key Metrics Changes - The company noted a favorable trend in non-accruals as a percentage of loans at fair value, indicating improved credit quality [49] - The company has tightened underwriting criteria, resulting in higher FICO and SBSS scores for new originations, suggesting a focus on better-quality borrowers [50] Company Strategy and Development Direction - The company has transitioned to a financial holding company, allowing it to offer a broader range of financial solutions and reduce reliance on equity sales [12][14] - The strategy includes diversifying the loan portfolio with conforming C&I and CRE loans, which are expected to enhance stability and profitability [34] - The company aims to leverage lower-cost deposits to improve net interest margins and overall profitability [42][78] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to meet growth targets despite a slowing economy, citing strong liquidity and government support for customers [3][25] - The company anticipates a return on average assets and return on tangible common equity to be robust, with projections of 3.28% to 3.75% for 2023 and 2024 [78] - Management highlighted the importance of maintaining a consistent dividend, projecting it to be stable for about a year before reassessing based on earnings performance [38] Other Important Information - The company declared a dividend of $2.75 for 2022 and aims to maintain a top quartile dividend yield of around 4% [67][98] - The company has received a BBB+ rating from Egan-Jones for its net debt, indicating strong creditworthiness [74] Q&A Session Summary Question: How comfortable is the company with its growth targets, especially in non-conforming C&I? - Management indicated comfort with the targets, acknowledging the challenges of projecting in a volatile market but expressing confidence based on historical performance [2] Question: What is the update on the PLP status and its implications? - Management noted that the PLP status is crucial for financing 7(a) and 504 loans, and they are optimistic about achieving this status [6][34] Question: How does the company view the current economic environment? - Management sees a slowing economy but not a severe downturn, emphasizing strong liquidity and support from government programs for their customer base [3][25] Question: What are the expectations for the joint venture investments? - Management expects a consolidated net return of 20% to 30% from joint venture investments, highlighting the potential for significant returns [115][116] Question: How relevant is the Q4 report to future performance? - Management stated that while the Q4 report reflects past performance, the transition to a financial holding company marks a new beginning with different operational metrics [126][127]

Summary of Newtek Business Services Corp. Investor Conference Call Company Overview - **Company**: Newtek Business Services Corp. (NASDAQ: NEWT) - **Event**: Investor Conference Call on December 14, 2022 - **Participants**: Barry Sloane (CEO), Nicholas Leger (CFO), John McCaffery (SVP of Accounting and Finance) [2][5] Key Points Discussed Acquisition of National Bank of New York City - Newtek is in the process of acquiring National Bank of New York City for **$20 million**, approximately **1x tangible book value** [10][11] - Anticipated close date for the acquisition is between **January 3 and January 23, 2023** [10] - The bank has a clean portfolio with only **one nonperforming loan** of over **$3 million** and approximately **$120 million to $130 million** in deposits [11][12] Transformation into a Financial Holding Company - Newtek is transitioning from a Business Development Corporation (BDC) to a financial holding company under the **1933 Act** [6][39] - The holding company will have total assets of approximately **$1.1 billion** with a **TCE ratio** of **18% to 22%** and a **CET1 ratio** of **19% to 21%** [13][14] - The bank will start with around **$250 million** in total assets, expected to grow to **$735 million** in 12 months and **$1.5 billion** in 36 months [24][25] Financial Projections and Performance Targets - Projected **return on average assets (ROAA)** for 2023 is **3% to 4%**, and **return on tangible common equity (ROATCE)** is expected to be between **18% and 22%** [22] - Earnings per share (EPS) targets are projected at **$1.70 to $2.00** for the first year and **$2.80 to $3.20** for the second year [24] - The bank is expected to contribute about **50% of total revenues** once operational [62] Deposit Strategy - Newtek plans to leverage its existing customer base, including **15,000 merchant processing accounts** and **800 payroll clients**, to gather deposits [22][23][55] - Initial deposit gathering will likely involve more expensive methods, transitioning to lower-cost deposits over time [53][54] - The company has a significant opportunity to attract deposits due to its existing relationships and services [55] The Newtek Advantage - Newtek aims to provide a comprehensive suite of services, termed "The Newtek Advantage," which includes personalized banking relationships, analytics, and integrated solutions for small businesses [30][31] - The platform will allow clients to manage various business functions, including payroll and payment processing, in one place [32][33] Management and Operational Readiness - The management team is experienced, with key personnel having extensive backgrounds in banking and finance [35][36] - Newtek is prepared to launch operations with a focus on risk management and compliance [38][39] Market Position and Future Outlook - Newtek believes that its unique structure and diversified revenue streams will allow it to compete effectively in the banking sector [40][41] - The transition to a financial holding company is expected to enhance growth potential and reduce the cost of capital [45][46] Conclusion - Newtek is optimistic about its future as it transitions into a financial holding company and prepares to operate the newly acquired bank, with a strong focus on leveraging existing relationships and technology to drive growth and profitability [49][50]

Newtek Business Services Corp. (NASDAQ:NEWT) Q3 2022 Earnings Conference Call November 8, 2022 8:30 AM ET Company Participants Barry Sloane - Chairman, President and Chief Executive Officer Nicholas Leger - Executive Vice President and Chief Accounting Officer John McCaffery - SVP of Accounting and Finance Conference Call Participants Jim Collins - Excelsior Capital Partners Paul Johnson - Keefe, Bruyette & Woods, Inc. Operator Good day and thank you for standing by, and welcome to the Newtek Business Servi ...

| --- | --- | --- | |-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------| | | | | | | Newtek Business Services Corp. NASDAQ: NEWT Third Quarter 2022 Financial Results Conference Call November 8, 2022 8:30 am ET | | | | Hosted by: | | | | Barry Sloane, CEO & President and Nicholas Leger, EVP & CAO Investor Relations Jayne Cavuoto Director of Investor Relations jcavuoto@newtekone.co ...

Newtek Business Services Corp. (NASDAQ:NEWT) Q2 2022 Earnings Conference Call August 4, 2022 8:30 AM ET Company Participants Barry Sloane - Chairman, President and Chief Executive Officer Nicholas Leger - Executive Vice President and Chief Accounting Officer Conference Call Participants Paul Johnson - Keefe, Bruyette & Woods, Inc. Adam Morton - RBC Capital Markets, LLC Operator Good day. Thank you for standing by. Welcome to the Newtek Business Services Corporation Second Quarter 2022 Earnings Conference Ca ...

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Newtek Business Services Corp. (NASDAQ:NEWT) Q1 2022 Earnings Conference Call May 5, 2022 8:30 AM ET Company Participants Jayne Cavuoto - Director of Investor Relations Barry Sloane - President, Founder, and Chief Executive Officer Nick Leger - Chief Accounting Officer Conference Call Participants Paul Johnson - KBW Jayne Cavuoto Sure. Good morning, everybody. My name is Jayne Cavuoto. And I am the Director of Investor Relations here at Newtek Business Services Corp. Today, I would like to thank you all for ...

| --- | --- | --- | |-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------| | | | | | | Newtek Business Services Corp. NASDAQ: NEWT First Quarter 2022 Financial Results Conference Call May 5, 2022 8:30 am ET Hosted by: | | | | Barry Sloane, CEO & President and Nicholas Leger, EVP & CAO Investor Relations Jayne Cavuoto Director of Investor Relations jcavuoto@newtekone.com (212) 273-8 ...