GlobeNewswire Inc | Nov 8, 2021 04:05PM EST

November 08, 2021

Demonstrated Growth in Core Lending Products in the Third Quarter of 2021 over the Same Period in 2020 and 2019

Reconfirms Full Year 2021 Earnings Guidance

BOCA RATON, Fla., Nov. 08, 2021 (GLOBE NEWSWIRE) -- 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 September30, 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 $712.5million at September 30, 2021, from $637.6million at September 30, 2020. -- Net asset value (NAV) of $366.0million, or $16.23 per share, at September30, 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 $83.7million for the nine months ended September 30, 2021; an increase of 8.1% over total investment income of $77.4million for the nine months ended September 30, 2020. -- Net investment income of $24.0million, 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 $63.1million, 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 $33.8million, or $1.61 per share, for the nine months ended September 30, 2020.

2021 Dividend Payments & 2022 Forecast

-- On October20, 2021, the Company's board of directors declared a fourth quarter 2021 cash dividend of $1.05 per share payable on December30, 2021 to shareholders of record as of December20, 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 September30, 2021, the Company paid a third quarter 2021 cash dividend of $0.90 per share to shareholders of record as of September20, 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 Newteks website at http://investor.newtekbusinessservices.com/events-and-presentations. A replay of the webcast with the corresponding presentation will be available on Newteks 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 Companys 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 Companys 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 PaymentsAmount 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 IncomeThe 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.

Newteks 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 Newteks actual results to differ from managements current expectations, are contained in Newteks 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 RelationsContact: Jayne Cavuoto Telephone: (212) 273-8179 / jcavuoto@newtekone.com

NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES(In Thousands, except for Per Share Data)

September 30, December 2021 31, 2020ASSETS (Unaudited) Investments, at fair value SBA unguaranteed non-affiliate investments (cost of$416,652 and $420,400, respectively; includes $ 406,581 $ 407,748 $276,186 and $312,649, respectively, related tosecuritization trusts)SBA guaranteed non-affiliate investments (cost of 36,041 17,822 $32,646 and $16,964, respectively)Controlled investments (cost of $160,495 and 262,916 239,171 $138,891, respectively)Non-control investments (cost of $6,400 and $6,447, 6,921 6,447 respectively)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 ? 56,505 30, 2021 and December 31, 2020)Notes due 2024 (par: $78,250 and $63,250 as of 76,993 61,774 September 30, 2021 and December 31, 2020)Notes due 2025 (par: $15,000 and $5,000 as of 14,516 4,735 September 30, 2021 and December 31, 2020)Notes due 2026 (par: $115,000 and $0 as of 111,948 ? September 30, 2021 and December 31, 2020)Notes payable - Securitization trusts (par:$177,602 and $221,752 as of September 30, 2021 and 174,876 218,339 December 31, 2020)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 10,152 9,723 liabilitiesTotal 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; authorized200,000 shares, 22,559 and 21,970 issued and 451 439 outstanding, respectively)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 SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(In Thousands, except for Per Share Data) Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020Investment income From non-affiliate investments:Interest income - PPP loans $ 269 $ 3,085 $ 49,989 $ 37,742 Interest income - SBA 7(a) 7,131 5,871 19,328 19,382 loansServicing income 2,819 2,875 8,346 8,367 Other income 1,446 240 3,829 1,449 Total investment income from 11,665 12,071 81,492 66,940 non-affiliate investmentsFrom non-control investments:Interest income 126 107 374 107 Dividend income 23 31 70 71 Total investment income from 149 138 444 178 non-control investmentsFrom controlled investments: Interest income 594 486 1,703 1,423 Dividend income ? 2,234 51 8,884 Total investment income from 594 2,720 1,754 10,307 controlled investmentsTotal 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 72 93 236 312 amortizationProfessional fees 1,418 651 3,465 2,822 Origination and loan 4,586 1,120 10,555 5,666 processingOrigination and loan 3,177 2,705 10,830 8,438 processing - related partyChange in fair value ofcontingent consideration ? ? ? 54 liabilitiesLoss on extinguishment of ? ? 955 ? debtOther general and 2,322 1,082 5,663 4,415 administrative costsTotal 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) onnon-affiliate investments - 19,272 (722 ) 38,079 2,577 SBA 7(a) loansNet realized gain (loss) on (268 ) ? (268 ) ? derivative transactionsNet unrealized appreciation(depreciation) on SBA 123 (111 ) 2,533 (494 )guaranteed non-affiliateinvestmentsNet unrealized appreciation(depreciation) on SBA 998 132 2,583 (6,012 )unguaranteed non-affiliateinvestmentsNet unrealized appreciation(depreciation) on controlled 7,305 (285 ) 1,760 (11,156 )investmentsChange in deferred taxes (2,843 ) 70 (2,120 ) 3,010 Net unrealized appreciation(depreciation) on (3 ) ? 521 ? non-control investmentsNet unrealized appreciation 341 ? 304 ? on derivative transactionsNet unrealized depreciation (1,616 ) (1,207 ) (3,322 ) (1,299 )on servicing assetsNet realized and unrealized $ 23,309 $ (2,123 ) $ 40,070 $ (13,374 )gains (losses)Net increase (decrease) innet assets resulting from $ 16,614 $ (453 ) $ 64,112 $ 17,761 operationsNet increase (decrease) innet assets resulting from $ 0.74 $ (0.02 ) $ 2.85 $ 0.85 operations per shareNet investment income (loss) $ (0.30 ) $ 0.08 $ 1.07 $ 1.49 per shareDividends and distributions $ 0.90 $ 0.58 $ 2.10 $ 1.58 declared per common shareWeighted average number of 22,541 21,192 22,468 20,942 shares outstanding

NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIESNON-GAAP FINANCIAL MEASURES-ADJUSTED NET INVESTMENT INCOME RECONCILIATION:

Three Three months months ended ended(in thousands, except per share September Per September Peramounts) 30, 2021 share 30, 2020 shareNet investment income (loss) $ (6,695 ) (0.30 ) $ 1,670 0.08 Net realized gain (loss) onnon-affiliate investments - SBA 19,272 0.85 (722 ) (0.03 )7(a) loansAdjustment for realized gain/ (7 ) 0.00 ? ? (loss) on derivatives (1)Adjusted Net investment income $ 12,570 $ 0.56 $ 948 $ 0.04 Nine Nine months months ended ended(in thousands, except per share September Per September Peramounts) 30, 2021 share 30, 2020 shareNet investment income (loss) $ 24,042 $ 1.07 $ 31,135 $ 1.49 Net realized gain onnon-affiliate investments - SBA 38,079 1.69 2,577 0.12 7(a) loansAdjustment for realized gain/ (7 ) 0.00 ? ? (loss) on derivatives (1)Change in fair value ofcontingent consideration ? ? 54 0.00 liabilitiesLoss 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 Three months months ended ended(in thousands, except per September Per share September Pershare amounts) 30, 2021 30, 2020 shareNet realized gain/(loss) on $ (268 ) $ (0.01 ) $ ? $ ? derivativesHedging realized result on 261 0.01 ? ? open hedging positionsAdjustment for realized gain/ $ (7 ) $ 0.00 $ ? $ ? (loss) on derivatives Nine months Nine months ended ended(in thousands, except per September Per share September Pershare amounts) 30, 2021 30, 2020 shareNet realized gain/(loss) on $ (268 ) $ (0.01 ) $ ? $ ? derivativesHedging realized result on 261 0.01 ? ? open hedging positionsAdjustment for realized gain/ $ (7 ) $ 0.00 $ ? $ ? (loss) on derivatives

NEWTEK BUSINESS SERVICES CORP. AND SUBSIDIARIESDEBT-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 SUBSIDIARIESDEBT-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 $ 48,703 of loans sold, not settled 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