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Newtek Business Services Corp. Reports First Quarter 2022 Financial Results
First Quarter 2022 Financial Highlights
- Total investment income of
$20 .3 million for the three months endedMarch 31, 2022 ; a decrease of (41.4)% over total investment income of$34 .7 million for the three months endedMarch 31, 2021 . First quarter 2021 financial results included$24.2 million of fee income from the Paycheck Protection Program ("PPP") which, as previously disclosed, is not recurring. - Net investment income of
$1 .0 million, or$0.04 per share, for the three months endedMarch 31, 2022 , which represents a (94.1)% decrease, on a per share basis, compared to net investment income of$15.2 million , or$0.68 per share, for the three months endedMarch 31, 2021 . First quarter 2021 financial results included$24.2 million of fee income from the PPP which, as previously disclosed, is not recurring. - Adjusted net investment income ("ANII")1 of
$17 .3 million, or$0.72 per share, for the three months endedMarch 31, 2022 ; a decrease of (31.4)%, on a per share basis, compared to ANII of$23 .5 million, or$1.05 per share, for the three months endedMarch 31, 2021 . First quarter 2021 financial results included$24.2 million of fee income from the PPP which, as previously disclosed, is not recurring. - Debt-to-equity ratio of 1.17x at
March 31, 2022 ; proforma debt-to-equity ratio was 1.14x after taking into account the sales of government-guaranteed portions of SBA 7(a) loans prior toMarch 31, 2022 , which sales settled subsequent to the balance sheet date. - Total investment portfolio increased by 5.2% to
$764 .1 million atMarch 31, 2022 , from$726 .1 million atMarch 31, 2021 . - Net asset value (“NAV”) of
$398 .5 million, or$16.49 per share, atMarch 31, 2022 ; a decrease of (1.4)% on a per share basis, compared to NAV of$16.72 per share atDecember 31, 2021 .
2022 Dividend Declarations & Payments
- On
March 31, 2022 , the Company paid a first quarter 2022 cash dividend of$0.65 per share to shareholders of record as ofMarch 21, 2022 , which represented a 30.0% increase over the first quarter 2021 dividend of$0.50 per share. - The Company's board of directors declared a second quarter 2022 dividend of
$0.75 2 per share, which represents a 7.1% increase over the second quarter 2021 dividend, and is payable onJune 30, 2022 to shareholders of record onJune 20, 2022 . - 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.
Lending Highlights
Newtek Small Business Finance, LLC (“NSBF”) funded$163.3 million of SBA 7(a) loans during the three months endedMarch 31, 2022 ; a 56.5% increase over the$104.4 million of SBA 7(a) loans funded for the three months endedMarch 31, 2021 .- NSBF forecasts funding approximately
$750 million of SBA 7(a) loans for the full year 2022, which represents a 33.8% increase over$560.6 million of SBA 7(a) loans funded in 2021. - Newtek Business Lending ("NBL"), a wholly owned portfolio company closed
$31.4 million SBA 504 loans during the three months endedMarch 31, 2022 ; an increase of 67.0% over$18.8 million SBA 504 loans closed during the three months endedMarch 31, 2021 . - 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.
Additional First Quarter 2022 Highlights
- On
January 28, 2022 , Newtek's joint venture,Newtek Conventional Lending LLC (“NCL”), closed a conventional commercial loan securitization with the sale of$56.3 million of Class A Notes ("Notes"),NCL Business Loan Trust 2022-1, secured by a segregated asset pool consisting primarily of conventional commercial business loans. The Notes were rated “A” (sf) by DBRS Morningstar.
Commenting further on first quarter 2022 SBA 7(a) loan fundings,
First Quarter 2022 Conference Call and Webcast
A conference call to discuss first quarter 2022 results will be hosted by
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 -
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
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, while a BDC and regulated investment company (RIC), 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’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,
Newtek® and
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
SOURCE:
Investor Relations & Public Relations
Contact:
Telephone: (212) 273-8179 / jcavuoto@newtekone.com
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (In Thousands, except for Per Share Data) |
|||||||
ASSETS | (Unaudited) | ||||||
Investments, at fair value | |||||||
SBA unguaranteed non-affiliate investments (cost of |
$ | 440,005 | $ | 424,417 | |||
SBA guaranteed non-affiliate investments (cost of |
71,939 | 72,970 | |||||
Controlled investments (cost of |
251,133 | 260,398 | |||||
Non-control investments (cost of |
1,000 | 1,000 | |||||
Total investments at fair value | 764,077 | 758,785 | |||||
Cash | 4,911 | 2,397 | |||||
Restricted cash | 158,543 | 184,463 | |||||
Broker receivable | 16,725 | 44,537 | |||||
Due from related parties | 4,812 | 4,395 | |||||
Servicing assets, at fair value | 28,855 | 28,008 | |||||
Right of use assets | 7,005 | 7,310 | |||||
Other assets | 24,384 | 26,666 | |||||
Total assets | $ | 1,009,312 | $ | 1,056,561 | |||
LIABILITIES AND |
|||||||
Liabilities: | |||||||
Bank notes payable | $ | 50,000 | $ | 50,000 | |||
Notes due 2024 (par: |
37,734 | 37,679 | |||||
Notes due 2025 (par: |
29,124 | 14,545 | |||||
Notes due 2026 (par: |
112,307 | 112,128 | |||||
Notes payable - Securitization trusts (par: |
229,354 | 246,250 | |||||
Notes payable - related parties | — | 11,450 | |||||
Due to related parties | 582 | 1,490 | |||||
Lease liabilities | 8,696 | 9,056 | |||||
Deferred tax liabilities | 13,676 | 12,733 | |||||
Due to participants | 117,459 | 146,225 | |||||
Derivative instruments | — | 183 | |||||
Accounts payable, accrued expenses and other liabilities | 11,900 | 10,935 | |||||
Total liabilities | 610,832 | 652,674 | |||||
Commitment and contingencies | |||||||
Net assets: | |||||||
Preferred stock (par value |
— | — | |||||
Common stock (par value |
483 | 483 | |||||
Additional paid-in capital | 368,299 | 367,663 | |||||
Accumulated undistributed earnings | 29,698 | 35,741 | |||||
Total net assets | 398,480 | 403,887 | |||||
Total liabilities and net assets | $ | 1,009,312 | $ | 1,056,561 | |||
Net asset value per common share | $ | 16.49 | $ | 16.72 | |||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | |||||||
(In Thousands, except for Per Share Data) | |||||||
Three Months Ended |
|||||||
2022 | 2021 | ||||||
Investment income | |||||||
From non-affiliate investments: | |||||||
Interest income - PPP loans | $ | — | $ | 24,208 | |||
Interest income - SBA 7(a) loans | 7,079 | 5,949 | |||||
Servicing income | 3,181 | 2,740 | |||||
Other income | 1,579 | 1,114 | |||||
Total investment income from non-affiliate investments | 11,839 | 34,011 | |||||
From non-control investments: | |||||||
Interest income | — | 124 | |||||
Dividend income | 22 | 26 | |||||
Total investment income from non-control investments | 22 | 150 | |||||
From controlled investments: | |||||||
Interest income | 664 | 533 | |||||
Dividend income | 7,824 | — | |||||
Total investment income from controlled investments | 8,488 | 533 | |||||
Total investment income | 20,349 | 34,694 | |||||
Expenses: | |||||||
Salaries and benefits | 5,109 | 4,450 | |||||
Interest | 4,667 | 5,072 | |||||
Depreciation and amortization | 63 | 85 | |||||
Professional fees | 1,301 | 1,188 | |||||
Origination and loan processing | 2,454 | 2,971 | |||||
Origination and loan processing - related party | 4,029 | 3,143 | |||||
Loss on extinguishment of debt | — | 955 | |||||
Other general and administrative costs | 1,753 | 1,635 | |||||
Total expenses | 19,376 | 19,499 | |||||
Net investment income | 973 | 15,195 | |||||
Net realized and unrealized gains (losses): | |||||||
Net realized gain on non-affiliate investments - SBA 7(a) loans | 15,295 | 7,393 | |||||
Net realized gain (loss) on derivative transactions | 445 | — | |||||
Net unrealized appreciation (depreciation) on SBA guaranteed non-affiliate investments | (728 | ) | 4,393 | ||||
Net unrealized appreciation (depreciation) on SBA unguaranteed non-affiliate investments | (1,990 | ) | 1,387 | ||||
Net unrealized appreciation (depreciation) on controlled investments | (2,024 | ) | 2,375 | ||||
Change in deferred taxes | (943 | ) | (633 | ) | |||
Net unrealized appreciation on non-control investments | — | 527 | |||||
Net unrealized appreciation on derivative transactions | 183 | — | |||||
Net unrealized depreciation on servicing assets | (1,559 | ) | (513 | ) | |||
Net realized and unrealized gains | $ | 8,679 | $ | 14,929 | |||
Net increase in net assets resulting from operations | $ | 9,652 | $ | 30,124 | |||
Net increase in net assets resulting from operations per share | $ | 0.40 | $ | 1.35 | |||
Net investment income per share | $ | 0.04 | $ | 0.68 | |||
Dividends and distributions declared per common share | $ | 0.65 | $ | 0.50 | |||
Weighted average number of shares outstanding | 24,156 | 22,337 | |||||
NON-GAAP FINANCIAL MEASURES-
ADJUSTED NET INVESTMENT INCOME RECONCILIATION:
Three months ended | Three months ended | |||||||||||||||
(in thousands, except per share amounts) | Per share | Per share | ||||||||||||||
Net investment income | $ | 973 | $ | 0.04 | $ | 15,195 | $ | 0.68 | ||||||||
Net realized gain on non-affiliate investments - SBA 7(a) loans | 15,295 | 0.63 | 7,393 | 0.33 | ||||||||||||
Adjustment for realized gain on derivatives (1) | 1,010 | 0.04 | — | — | ||||||||||||
Loss on debt extinguishment | — | — | 955 | 0.04 | ||||||||||||
Adjusted Net investment income | $ | 17,278 | $ | 0.72 | $ | 23,543 | $ | 1.05 | ||||||||
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) | Per share | 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
DEBT-TO-EQUITY RATIO - ACTUAL AT
(in thousands): | |||||
Actual Debt-to-Equity Ratio at |
|||||
Total senior debt | $ | 465,856 | |||
Total equity | $ | 398,480 | |||
Debt-to-equity ratio - actual | 1.17x | ||||
DEBT-TO-EQUITY RATIO - PROFORMA AT
(in thousands): | |||||
Broker receivable, including premium income receivable | $ | 16,725 | |||
Less: realized gain on sale included in broker receivable | (1,651 | ) | |||
Broker receivable | 15,074 | ||||
90% advance rate on SBA guaranteed non-affiliate portions of loans sold, not settled | $ | 13,567 | |||
Proforma debt adjustments at |
|||||
Total senior debt | $ | 465,856 | |||
Proforma adjustment for broker receivable | (13,567 | ) | |||
Total proforma debt | $ | 452,289 | |||
Proforma Debt-to-Equity ratio at |
|||||
Total proforma debt | $ | 452,289 | |||
Total equity | $ | 398,480 | |||
Debt-to-equity ratio - proforma | 1.14x | ||||
Source: Newtek Business Services Corp.