FALSE0001587987January 6,
202300015879872023-01-062023-01-060001587987newt:CommonStockParValue002PerShareMember2023-01-062023-01-060001587987newt:FivePointSevenFivePercentNotesDue2024Member2023-01-062023-01-060001587987newt:FivePointFiveZeroPercentNotesDue2026Member2023-01-062023-01-06
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
January 6, 2023
Date of Report (date of Earliest Event Reported)
NEWTEKONE, INC.
(Exact Name of Company as Specified in its Charter)
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Maryland |
814-01035
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46-3755188 |
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(State or Other Jurisdiction of Incorporation or
Organization) |
(Commission File No.) |
(I.R.S. Employer Identification No.) |
4800 T Rex Avenue, Suite 120, Boca Raton, Florida
33431
(Address of principal executive offices and zip code)
(212) 356-9500
(Company’s telephone number, including area code)
(Former name or former address, if changed from last
report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Common Stock, par value $0.02 per share |
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NEWT |
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Nasdaq Global Market LLC |
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5.75% Notes due 2024 |
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NEWTL |
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Nasdaq Global Market LLC |
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5.50% Notes due 2026 |
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NEWTZ |
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Nasdaq Global Market LLC |
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
¨ Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
¨ Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
¨ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
¨ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
o
EXPLANATORY NOTE
NewtekOne, Inc., or together with its subsidiaries, where
applicable, the Company, which may also be referred to as “we”,
“us” or “our”, is filing this Amendment No. 1 (the “Amendment”) to
the Company’s Form 8-K which was originally filed with the
Securities and Exchange Commission on January 6, 2023 (“the
Original Filing”), to include as Exhibits the financial statements
and pro forma financial information required by Item
2.01:
Item 2.01. Completion of Acquisition or Disposition of
Assets.
On January 6, 2023, NewtekOne, Inc. (formerly known as Newtek
Business Services Corp.) (the “Company”) completed the previously
announced acquisition of the National Bank of New York City
(“NBNYC” and the “Acquisition,” respectively), a national bank
regulated and supervised by the Office of the Comptroller of the
Currency, pursuant to which the Company acquired from the NBNYC
shareholders all of the issued and outstanding stock of NBNYC for
$20 million. (See Stock Purchase Agreement annexed as Exhibit 10.1
to the Company’s Form 8-K filed with the U.S. Securities and
Exchange Commission (the “SEC”) on August 2, 2021). NBNYC has been
renamed Newtek Bank, National Association (“Newtek Bank, N.A.”) and
has become a wholly owned subsidiary of the Company. In connection
with the completion of the Acquisition, the Company has contributed
to Newtek Bank, N.A. $31 million of cash and two of the Company’s
subsidiaries, Newtek Business Lending, LLC (“NBL”) and Small
Business Lending, LLC (“SBL”). The Company also filed with the SEC
a Form N-54C, Notification of Withdrawal of Election to be Subject
to the Investment Company Act of 1940, and ceased to be a business
development company as of January 6, 2023. As a result of the
Acquisition, the Company is now a financial holding company subject
to the regulation and supervision of the Board of Governors of the
Federal Reserve System (the “Federal Reserve”) and the Federal
Reserve Bank of Atlanta. The Company no longer qualifies as a
regulated investment company for federal income tax purposes and no
longer qualifies for accounting treatment as an investment company.
As a result, in addition to Newtek Bank, N.A. and its consolidated
subsidiaries, NBL and SBL, the following Newtek portfolio companies
and subsidiaries will now be consolidated non-bank subsidiaries in
the Company’s financial statements: Newtek Small Business Finance,
LLC; Newtek Merchant Solutions, LLC; Mobil Money, LLC; CDS Business
Services, Inc. d/b/a Newtek Business Credit Solutions; PMTWorks
Payroll, LLC d/b/a Newtek Payroll and Benefits Solutions; Newtek
Insurance Agency, LLC; Titanium Asset Management LLC; Newtek
Business Services Holdco 6, Inc; Newtek Commercial Lending, Inc.;
Excel WebSolutions, LLC; Newtek Technology Solutions, Inc and POS
on Cloud, LLC, d/b/a Newtek Payment Systems. In addition, as a
result of commitments made to the Federal Reserve, the Company will
divest or otherwise terminate the activities conducted by Excel
WebSolutions, LLC and Newtek Technology Solutions, Inc., including
its subsidiary SIDCO, LLC d/b/a/ Cloud Nine Services, within two
years of becoming a financial holding company, subject to any
extension of the two-year period.
Included as Exhibits 99.1 and 99.2 hereto are the financial
statements and pro forma financial information required by Item
2.01.
Item 9.01 Financial Statement and
Exhibits
(d) Exhibits.
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Exhibit Number |
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Description |
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99.2 |
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Unaudited pro forma condensed combined balance sheet of the Company
as of September 30, 2022, giving effect to the Acquisition as if it
had been completed on September 30, 2022, the unaudited pro forma
condensed combined statements of operations for the nine months
ended September 30, 2022 and the fiscal year ended December 31,
2021, as if the Acquisition had been completed on January 1, 2021,
furnished herewith. |
SIGNATURES
In accordance with the requirements of the Securities Exchange Act
of 1934, the registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
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NEWTEKONE, INC. |
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Date: January 27, 2023
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By: |
/S/ BARRY
SLOANE
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Barry Sloane |
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Chief Executive Officer, President and Chairman of the
Board |
SELECTED FINANCIAL DATA
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
Introduction
The following unaudited pro forma condensed combined financial
information is based on the historical consolidated financial
statements of NewtekOne, Inc. and subsidiaries (“NewtekOne” or “the
Company” and formerly known as Newtek Business Services Corp.) and
the historical financial statements of National Bank of New York
City (“NBNYC)”), after giving effect to NewtekOne’s January 6, 2023
acquisition of NBNYC (the “Acquisition”) and the repositioning of
NewtekOne as a financial holding company (the “Reorganization”).
The notes to the unaudited pro forma condensed combined financial
information describe the transaction accounting adjustments to the
financial information presented. Hereinafter, NewtekOne and NBNYC
are collectively referred to as the “Companies,” and the Companies,
subsequent to the Acquisition, are referred to herein as the
“Combined Company.” The Acquisition and the Reorganization are
collectively referred to as the “Transactions”.
The following unaudited pro forma condensed combined financial
information has been prepared in accordance with Article 11 of
Regulation S-X, as amended by the final rule, Release No. 33-10786,
“Amendments to Financial Disclosures about Acquired and Disposed
Businesses,” and presents the combination of the historical
financial information of NewtekOne and NBNYC adjusted to give
effect to the Transactions.
The unaudited pro forma condensed combined balance sheets, which
have been presented for the Combined Company as of September 30,
2022, gives effect to the Transactions, as if they were consummated
on September 30, 2022.
The unaudited pro forma condensed combined statements of
operations, which have been presented for the nine months ended
September 30, 2022, give effect to the Transactions, as if they had
occurred on January 1, 2021, the beginning of the earliest period
presented.
The unaudited pro forma condensed combined statements of
operations, which have been presented for the year ended December
31, 2021, give effect to the Transactions, as if they had occurred
on January 1, 2021, the beginning of the earliest period
presented.
Description of the Transactions
NewtekOne has historically elected to be treated as a business
development company (BDC) under the Investment Company Act of 1940
(the "1940 Act") and accordingly has reported its financial
information in accordance with investment company
accounting.
On August 2, 2021, NewtekOne entered into a Stock Purchase
Agreement to acquire all of the issued and outstanding stock of
NBNYC. NBNYC is organized as a national banking association whose
deposits are insured under the Deposit Insurance Fund, which is
administered by the Federal Deposit Insurance Corporation. NBNYC
provides a full range of banking services, primarily to commercial
customers, through its sole office in Queens, New
York.
This Acquisition is part of a plan to reposition NewtekOne as a
financial holding company (“FHC”). In connection with this plan, on
June 1, 2022, NewtekOne held a special meeting of shareholders, at
which NewtekOne's shareholders approved a proposal to authorize its
Board of Directors to discontinue NewtekOne’s election to be
regulated under the 1940 Act, subject to required regulatory
approvals and other conditions described in the proxy statement
filed with the SEC on May 2, 2022.
The consideration payable by the Company at closing was $20.0
million in cash. In addition, the Stock Purchase Agreement provided
that immediate prior to the closing NBNYC dividend to the NBNYC
selling shareholders (“Sellers”) both NBNYC’s owned property in
Flushing, New York and cash in the amount equal to the excess, if
any, of NBNYC’s tangible common equity as of the closing date over
$20.0 million.
In November 2022, NewtekOne received approval from the Federal
Reserve to become a financial holding company and a financial
holding company upon the completion of its acquisition of NBNYC. In
December 2022, NewtekOne received conditional approval from the
Office of the Comptroller of the Currency (“OCC”) to complete its
acquisition of NBNYC.
On January 6, 2023, the Acquisition was completed. In addition, in
connection with the Acquisition, immediately prior to the closing
NBNYC paid a dividend of $17 million to the Sellers and dividended
to the Sellers NBNYC’s owned property in Flushing, New York. NBNYC
has been renamed Newtek Bank, National Association (“Newtek Bank,
N.A.”) and is now a
wholly owned subsidiary of NewtekOne. In connection with the
completion of the Acquisition, NewtekOne contributed to Newtek
Bank, N.A. $31 million of cash and two of NewtekOne’s subsidiaries,
Newtek Business Lending, LLC (“NBL”) and Small Business Lending,
LLC (“SBL”). NewtekOne has also filed with the SEC a Form N-54C,
Notification of Withdrawal of Election to be Subject to the
Investment Company Act of 1940, and has ceased to be a BDC as of
January 6, 2023 (“the Closing Date”). As a result of the
Acquisition, NewtekOne is now a financial holding company subject
to the regulation and supervision of the Board of Governors of the
Federal Reserve System (the “Federal Reserve”), the Federal Reserve
Bank of Atlanta, and the OCC. NewtekOne no longer qualifies as a
regulated investment company (RIC) for federal income tax purposes
and no longer qualifies for accounting treatment as an investment
company. The Company has also committed to divest activities of
certain of NewtekOne’s technology portfolio companies within two
years of becoming a financial holding company or any extensions
thereof.
Anticipated Accounting Treatment
NBNYC Acquisition
The Acquisition is accounted for under the acquisition method of
accounting in accordance with Accounting Standards Codification
(“ASC”) Topic 805, Business Combinations (“ASC 805”). Under the
acquisition method of accounting for purposes of the unaudited pro
forma condensed combined financial information, management of
NewtekOne has deemed NewtekOne to be the accounting acquirer and
determined a preliminary estimated purchase price, calculated as
described in Note 2: Preliminary Estimated Purchase Price
Allocation to the unaudited pro forma condensed combined financial
information. The NBNYC assets acquired and liabilities assumed in
connection with the Acquisition are recorded at their estimated
acquisition date fair values. A final determination of these
estimated fair values will be based on the actual net assets of
NBNYC that existed as of the Closing Date. Differences between
these preliminary estimates and the final acquisition accounting
may occur and these differences could be material.
The acquisition method of accounting is based on ASC 805 and uses
the fair value concepts defined in ASC Topic 820, Fair Value
Measurements (“ASC 820”). ASC 820 defines fair value, establishes a
framework for measuring fair value, and sets forth a fair value
hierarchy that prioritizes and ranks the level of observability of
inputs used to develop the fair value measurements. Fair value is
defined in ASC 820 as “the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.” This is an
exit price concept for the valuation of the asset or liability. In
addition, market participants are assumed to be buyers and sellers
in the principal (or the most advantageous) market for the asset or
liability. Fair value measurements for a non-financial asset assume
the highest and best use by these market participants. Many of
these fair value measurements can be highly subjective, and it is
possible that other professionals applying reasonable judgment to
the same facts and circumstances, could develop and support a range
of alternative estimated amounts.
Reorganization
The Reorganization is accounted for as a common control transaction
in accordance with ASC 805 with no change in reporting
entity.
NewtekOne will remain the reporting entity post-Reorganization, and
all of NewtekOne’s subsidiaries included in the consolidated
financial statements will remain consistent before and after the
Reorganization. NewtekOne will retain the same ownership interests
in its subsidiaries, either directly or indirectly (through its
100% ownership in NBNYC). NewtekOne’s governance and ownership
structure will remain the same. Accordingly, each of these entities
are entities under common control. The only change is the Company’s
regulatory status from a BDC to a FHC, which does not represent a
change in reporting entity under ASC 805-50.
As a FHC, NewtekOne will no longer be accounting for its
investments in the controlled subsidiaries under ASC Topic 946,
Financial Services – Investment Companies. ("ASC 946").
Accordingly, NewtekOne will be required to consolidate certain
subsidiaries and account separately for their underlying assets and
liabilities at the Closing Date. NewtekOne will recognize the
underlying assets and liabilities of the controlled subsidiaries
based on the carryover bases of the investments in subsidiaries,
which would be fair value at the Closing Date. In addition,
NewtekOne will derecognize its investments in the controlled
subsidiaries. Any difference between the basis of the underlying
assets and liabilities and the fair value of the investment will be
recorded as an offsetting reduction to equity.
The guidance in both ASC 946 and ASC 805 (common control
transactions) is applied. Based on the guidance in ASC 946, the
fair value of NewtekOne’s investment at the date of Reorganization
establishes the carrying basis of underlying assets and liabilities
prospectively. The fair value of the investment, which represents
an entity or enterprise valuation, may differ from the fair value
or other basis of the underlying identifiable assets and
liabilities. However, because the Reorganization is a common
control transaction, any difference between the investment fair
value and the fair value or other basis of the identifiable net
assets should be recorded in equity; that is, no goodwill and no
gain or loss should be recorded.
See Note 1: Basis of Presentation and Description of the
Transactions to the unaudited pro forma condensed combined
financial information.
Basis of Pro Forma Presentation
The historical financial information has been adjusted to give pro
forma effect to events that are directly attributable to the
Transactions. The adjustments presented on the unaudited pro forma
condensed combined financial statements have been identified and
presented to provide relevant information necessary for an accurate
understanding of the combined company upon consummation of the
Transactions.
The unaudited pro forma condensed combined financial information
should be read in conjunction with the accompanying notes to the
unaudited pro forma condensed combined financial information. In
addition, the unaudited pro forma condensed combined financial
information was based on:
a.the
historical audited consolidated financial statements and related
notes of NewtekOne as of December 31, 2021 and for the year ended
December 31, 2021 and b) the historical unaudited condensed
consolidated financial statements and related notes of NewtekOne as
of September 30, 2022 and for the nine months ended September 30,
2022. These can be found in the Company’s Form 10-K filing for the
year ended December 31, 2021 and in the Company’s Form 10-Q filing
for the quarter ended September 30, 2022,
respectively;
b.the
historical audited financial statements and related notes of NBNYC
as of December 31, 2021 and for the year ended December 31, 2021,
which are Exhibit 99.1 filed herewith, and the historical unaudited
financial statements of NBNYC as of September 30, 2022 and for the
nine months ended September 30, 2022, which can be found within the
unaudited pro forma financial information for such periods included
herein;
c.the
historical unaudited financial statements of NewtekOne’s controlled
subsidiaries as of December 31, 2021 and for the year ended
December 31, 2021 and the historical unaudited financial statements
of NewtekOne’s controlled subsidiaries as of September 30, 2022 and
for the nine months ended September 30, 2022. This information was
used to determine the transaction accounting adjustments needed to
consolidate these subsidiaries;
d.the
Stock Purchase Agreement, which can be found in the Company's Form
8-K, Exhibit 10.1, filed on August 2, 2021.
The unaudited pro forma condensed combined financial information
does not reflect the costs of any integration activities or
benefits that may result from realization of future cost savings
from operating efficiencies or other synergies that may result from
the Acquisition.
NewtekOne and NBNYC did not have any historical relationship prior
to the Acquisition. Accordingly, no pro forma adjustments were
required to eliminate activities between the
companies.
The unaudited pro forma condensed combined financial information is
based on the assumptions and adjustments that are described in the
accompanying notes. The pro forma adjustments reflected in the
unaudited pro forma condensed combined financial information are
preliminary and based on estimates, subject to further revision as
additional information becomes available and additional analyses
are performed and have been made solely for the purpose of
providing unaudited pro forma condensed combined financial
information. Differences between these preliminary adjustments
reflected in the unaudited pro forma condensed combined financial
information as of September 30, 2022 and the final application of
the accounting for the Transactions may occur and those differences
could be material. In addition, differences between the preliminary
and final adjustments may occur, as well as other changes in assets
and liabilities between September 30, 2022 and the closing of the
Acquisition.
The unaudited pro forma condensed combined balance sheet does not
purport to represent, and is not necessarily indicative of, what
the actual financial condition of the Combined Company would have
been had the Transactions taken place on September 30, 2022, nor is
it indicative of the financial condition of the Combined Company as
of any future date. The unaudited pro forma condensed combined
statements of operations do not purport to represent, and are not
necessarily indicative of, what the actual results of operations of
the Combined Company would have been had the Transactions taken
place on January 1, 2021, nor are they indicative of the results of
operations of the Combined Company for any future
period.
The unaudited pro forma condensed combined financial information
has been prepared for illustrative purposes only and are not
necessarily indicative of the financial position or results of
operations in future periods or the results that actually would
have been realized had NewtekOne and NBNYC been a combined company
and/or NewtekOne operated as a FHC during the specified
periods.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT BALANCE
SHEET
AS OF SEPTEMBER 30, 2022
(In Thousands, except for Per Share Data and Par Value
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NewtekOne
(1)
Historical
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Reorganization Transaction Accounting Adjustments |
Notes |
NewtekOne- Pro Forma |
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NBNYC(2)
Historical
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NBNYC Acquisition Transaction Accounting Adjustments |
Notes |
Pro Forma Combined |
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ASSETS |
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Cash |
$ |
7,355 |
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$ |
20,376 |
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D |
$ |
27,731 |
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$ |
24,773 |
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$ |
(37,000) |
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B,C |
$ |
15,504 |
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Restricted cash |
74,777 |
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5,650 |
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D |
80,427 |
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— |
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— |
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80,427 |
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SBA loans, at fair value |
511,325 |
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85,170 |
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D |
596,495 |
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— |
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— |
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596,495 |
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Loans receivable, net of allowance for loan losses |
— |
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— |
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— |
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162,972 |
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— |
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162,972 |
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Available for sale securities (at fair value) |
— |
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— |
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— |
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6,484 |
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— |
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6,484 |
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Servicing assets, at fair value |
33,530 |
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— |
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33,530 |
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— |
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— |
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33,530 |
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Other investments |
— |
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18,159 |
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D,E |
18,159 |
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8,447 |
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— |
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26,606 |
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Controlled investments |
272,928 |
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(272,928) |
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D |
— |
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— |
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— |
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— |
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Non-control investments |
1,360 |
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(1,360) |
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D |
— |
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— |
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— |
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— |
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Broker receivable |
71,634 |
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— |
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71,634 |
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— |
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— |
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71,634 |
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Goodwill and Intangible assets, net |
— |
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25,572 |
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D |
25,572 |
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— |
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— |
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25,572 |
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Right of Use Assets |
6,381 |
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— |
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6,381 |
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— |
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— |
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6,381 |
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Finance Inventory & AR Receivables |
— |
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16,236 |
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D |
16,236 |
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— |
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— |
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16,236 |
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Due from related parties |
947 |
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(947) |
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D,F |
— |
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— |
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— |
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— |
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Other assets |
26,298 |
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17,573 |
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D |
43,871 |
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3,064 |
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— |
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46,935 |
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Total
assets |
$ |
1,006,535 |
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$ |
(86,499) |
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$ |
920,036 |
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$ |
205,740 |
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$ |
(37,000) |
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$ |
1,088,776 |
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LIABILITIES AND NET ASSETS |
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Liabilities: |
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Deposits: |
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Demand |
$ |
— |
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$ |
— |
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$ |
— |
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$ |
23,015 |
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$ |
— |
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$ |
23,015 |
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Savings, Super NOW |
— |
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— |
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— |
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12,633 |
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— |
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12,633 |
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Money Market |
— |
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— |
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— |
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103,186 |
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— |
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103,186 |
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Bank notes payable (par: $118,200) |
67,500 |
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68,644 |
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D |
136,144 |
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— |
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— |
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136,144 |
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Notes due 2026 (par: $115,000) |
112,666 |
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— |
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112,666 |
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— |
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— |
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112,666 |
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Notes due 2024 (par: $38,250) |
37,847 |
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— |
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37,847 |
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— |
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— |
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37,847 |
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NewtekOne
(1)
Historical
|
|
Reorganization Transaction Accounting Adjustments |
Notes |
NewtekOne- Pro Forma |
|
NBNYC(2)
Historical
|
|
NBNYC Acquisition Transaction Accounting Adjustments |
Notes |
Pro Forma Combined |
|
Notes due 2025 (par: $30,000) |
29,246 |
|
|
— |
|
|
29,246 |
|
|
— |
|
|
— |
|
|
29,246 |
|
|
Notes payable - Securitization trusts (par: $249,750) |
298,125 |
|
|
— |
|
|
298,125 |
|
|
— |
|
|
— |
|
|
298,125 |
|
|
Advances from the Federal Home Loan Bank |
— |
|
|
— |
|
|
— |
|
|
28,693 |
|
|
— |
|
|
28,693 |
|
|
Due to participants |
34,660 |
|
|
— |
|
|
34,660 |
|
|
— |
|
|
— |
|
|
34,660 |
|
|
Deferred tax liabilities |
12,908 |
|
|
(8,993) |
|
D |
3,915 |
|
|
(277) |
|
|
— |
|
|
3,638 |
|
|
Notes payable - related parties |
150 |
|
|
(150) |
|
D,F |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Due to related parties |
1,849 |
|
|
(1,849) |
|
D,F |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Lease liabilities |
7,945 |
|
|
(7,945) |
|
D |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable, accrued expenses and other
liabilities |
11,840 |
|
|
30,722 |
|
D |
42,562 |
|
|
1,032 |
|
|
2,000 |
|
A |
45,594 |
|
|
Total
liabilities |
$ |
614,736 |
|
|
$ |
80,429 |
|
|
$ |
695,165 |
|
|
$ |
168,282 |
|
|
$ |
2,000 |
|
|
$ |
865,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock (par value $0.02 per share; authorized 1,000
shares, no shares issued and outstanding) |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Common stock (par value $0.02 per share; authorized 200,000 shares,
24,159 and 21,970 issued and outstanding, respectively) |
485 |
|
|
— |
|
|
485 |
|
|
840 |
|
|
(840) |
|
B |
485 |
|
|
Additional paid-in capital |
370,703 |
|
|
(146,317) |
|
D, G |
224,386 |
|
|
36,618 |
|
|
(36,160) |
|
B, C |
224,844 |
|
|
Accumulated undistributed earnings |
20,611 |
|
|
(20,611) |
|
G |
— |
|
|
— |
|
|
(2,000) |
|
A |
(2,000) |
|
|
Total
net assets |
391,799 |
|
|
(166,928) |
|
|
224,871 |
|
|
37,458 |
|
|
(39,000) |
|
|
223,329 |
|
|
Total
liabilities and net assets |
1,006,535 |
|
|
(86,499) |
|
|
920,036 |
|
|
205,740 |
|
|
(37,000) |
|
|
1,088,776 |
|
(1) Derived from NewtekOne’s unaudited condensed consolidated
balance sheet as of September 30, 2022.
(2) Derived from NBNYC’s unaudited condensed balance sheet as of
September 30, 2022.
See accompanying notes to the Unaudited Pro Forma Condensed
Combined Financial Information
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF
OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2022
(In Thousands, except for Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NewtekOne
(3)
Historical
|
|
Reorganization Transaction Accounting Adjustments |
Notes |
NewtekOne Pro Forma |
|
NBNYC
(4)
Historical
|
|
NBNYC Acquisition Transaction Accounting Adjustments |
Notes |
Pro Forma Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income - SBA loans |
$ |
23,915 |
|
|
$ |
4,259 |
|
I |
$ |
28,174 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
28,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
— |
|
|
— |
|
|
— |
|
|
5,255 |
|
|
— |
|
|
5,255 |
|
|
Interest income (from controlled investments) |
2,087 |
|
|
(2,087) |
|
I |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Total interest income |
26,002 |
|
|
2,172 |
|
|
28,174 |
|
|
5,255 |
|
|
— |
|
|
33,429 |
|
|
Interest expense |
17,412 |
|
|
2,973 |
|
I |
20,385 |
|
|
1,595 |
|
|
— |
|
|
21,980 |
|
|
Net interest income |
8,590 |
|
|
(801) |
|
|
7,789 |
|
|
3,660 |
|
|
— |
|
|
11,449 |
|
|
Credit for loan losses |
— |
|
|
— |
|
|
— |
|
|
(200) |
|
|
|
|
(200) |
|
|
Net interest income after credit for loan losses |
8,590 |
|
|
(801) |
|
|
7,789 |
|
|
3,860 |
|
|
— |
|
|
11,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on sale of SBA 7(a) loans |
$ |
49,953 |
|
|
$ |
— |
|
|
$ |
49,953 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
49,953 |
|
|
Net loss on loans accounted for under the fair value
option |
— |
|
|
(13,788) |
|
I |
(13,788) |
|
|
— |
|
|
— |
|
|
(13,788) |
|
|
Net realized depreciation on SBA guaranteed non-affiliate
investments |
(5,942) |
|
|
5,942 |
|
K |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Net realized depreciation on SBA unguaranteed non-affiliate
investments |
(6,473) |
|
|
6,473 |
|
K |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Gain on derivative transactions |
445 |
|
|
1,771 |
|
I |
2,216 |
|
|
— |
|
|
— |
|
|
2,216 |
|
|
Loss on servicing assets |
(3,964) |
|
|
— |
|
|
(3,964) |
|
|
— |
|
|
— |
|
|
(3,964) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized appreciation on controlled investments |
1,582 |
|
|
(1,582) |
|
I |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Net unrealized appreciation on derivative transactions |
183 |
|
|
1,277 |
|
I |
1,460 |
|
|
— |
|
|
— |
|
|
1,460 |
|
|
Loan servicing income |
9,931 |
|
|
1,000 |
|
I |
10,931 |
|
|
— |
|
|
— |
|
|
10,931 |
|
|
Web Hosting and IT Support Income |
— |
|
|
22,733 |
|
I |
22,733 |
|
|
— |
|
|
— |
|
|
22,733 |
|
|
Electronic Payment Processing Revenue |
— |
|
|
32,945 |
|
I |
32,945 |
|
|
— |
|
|
— |
|
|
32,945 |
|
|
Origination Income |
— |
|
|
2,708 |
|
I |
2,708 |
|
|
— |
|
|
— |
|
|
2,708 |
|
|
Asset Backed Lending Income |
— |
|
|
1,621 |
|
I |
1,621 |
|
|
— |
|
|
— |
|
|
1,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NewtekOne
(3)
Historical
|
|
Reorganization Transaction Accounting Adjustments |
Notes |
NewtekOne Pro Forma |
|
NBNYC
(4)
Historical
|
|
NBNYC Acquisition Transaction Accounting Adjustments |
Notes |
Pro Forma Combined |
|
Insurance revenue |
— |
|
|
1,432 |
|
I |
1,432 |
|
|
— |
|
|
— |
|
|
1,432 |
|
|
Payroll processing revenue |
— |
|
|
1,224 |
|
I |
1,224 |
|
|
— |
|
|
— |
|
|
1,224 |
|
|
Other income |
6,499 |
|
|
4,531 |
|
I |
11,030 |
|
|
411 |
|
|
— |
|
|
11,441 |
|
|
Dividend income (from non-control investments) |
62 |
|
|
(62) |
|
I |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Dividend income (from controlled investments) |
19,989 |
|
|
(19,989) |
|
I |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (from controlled investments) |
672 |
|
|
(672) |
|
I |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Total non-interest income |
72,937 |
|
|
47,564 |
|
|
120,501 |
|
|
411 |
|
|
— |
|
|
120,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits |
14,380 |
|
|
34,604 |
|
I |
48,984 |
|
|
2,119 |
|
|
— |
|
|
51,103 |
|
|
Depreciation and amortization |
181 |
|
|
2,394 |
|
I |
2,575 |
|
|
— |
|
|
— |
|
|
2,575 |
|
|
Professional fees |
4,322 |
|
|
2,284 |
|
I |
6,606 |
|
|
— |
|
|
2,000 |
|
H |
8,606 |
|
|
Origination and loan processing |
7,202 |
|
|
770 |
|
I |
7,972 |
|
|
— |
|
|
— |
|
|
7,972 |
|
|
Origination and loan processing - related party |
14,698 |
|
|
(14,698) |
|
I, J |
— |
|
|
— |
|
|
— |
|
|
|
|
Loss on extinguishment of debt |
417 |
|
|
— |
|
I |
417 |
|
|
— |
|
|
— |
|
|
417 |
|
|
Cost of revenue - NTS |
— |
|
|
14,514 |
|
I |
14,514 |
|
|
— |
|
|
— |
|
|
14,514 |
|
|
Electronic payment processing costs |
— |
|
|
13,456 |
|
I |
13,456 |
|
|
— |
|
|
— |
|
|
13,456 |
|
|
Other general and administrative costs |
5,619 |
|
|
8,334 |
|
I |
13,953 |
|
|
1,111 |
|
|
— |
|
|
15,064 |
|
|
Total non-interest expense |
46,819 |
|
|
61,658 |
|
|
108,477 |
|
|
3,230 |
|
|
2,000 |
|
|
113,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other income (loss) after other expenses |
26,118 |
|
|
(14,094) |
|
|
12,024 |
|
|
(2,819) |
|
|
(2,000) |
|
|
7,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes |
34,708 |
|
|
(14,895) |
|
|
19,813 |
|
|
1,041 |
|
|
(2,000) |
|
|
18,854 |
|
|
Change in provision for deferred taxes |
(175) |
|
|
142 |
|
|
(33) |
|
|
— |
|
|
— |
|
|
(33) |
|
|
Provision for income taxes |
— |
|
|
— |
|
|
— |
|
|
(81) |
|
|
— |
|
|
(81) |
|
|
Net Income from operations |
$ |
34,533 |
|
|
$ |
(14,753) |
|
|
$ |
19,780 |
|
|
$ |
960 |
|
|
$ |
(2,000) |
|
|
$ |
18,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted |
24,204 |
|
|
|
24,204 |
|
|
|
|
|
24,204 |
|
Basic and diluted net income per share |
$ |
1.43 |
|
|
|
|
$ |
0.82 |
|
|
|
|
|
|
$ |
0.77 |
|
(3) Derived from NewtekOne’s unaudited condensed consolidated
statement of operations for the nine months ended September 30,
2022.
(4) Derived from NBNYC’s unaudited condensed statement of
operations for the nine months ended September 30,
2022.
See accompanying notes to the Unaudited Pro Forma Condensed
Combined Financial Information
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF
OPERATIONS
YEAR ENDED DECEMBER 31, 2021
(In Thousands, except for Per Share Data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NewtekOne
(5)
Historical
|
|
Reorganization Transaction Accounting Adjustments |
Notes |
NewtekOne Pro Forma |
|
NBNYC
(6)
Historical
|
|
NBNYC Acquisition Transaction Accounting Adjustments |
Notes |
Pro Forma Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income - SBA loans |
$ |
25,951 |
|
|
$ |
4,795 |
|
I |
$ |
30,746 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
30,746 |
|
|
Interest income - PPP loans |
49,989 |
|
|
— |
|
|
49,989 |
|
|
— |
|
|
— |
|
|
49,989 |
|
|
Interest income |
— |
|
|
428 |
|
I |
428 |
|
|
7,453 |
|
|
— |
|
|
7,881 |
|
|
Interest income (from non-control investments) |
428 |
|
|
(428) |
|
I |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Interest income (from controlled investments) |
2,598 |
|
|
(2,598) |
|
I |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Total interest income |
78,966 |
|
|
2,197 |
|
|
81,163 |
|
|
7,453 |
|
|
— |
|
|
88,616 |
|
|
Interest expense |
20,515 |
|
|
3,217 |
|
I |
23,732 |
|
|
2,316 |
|
|
— |
|
|
26,048 |
|
|
Net interest income |
58,451 |
|
|
(1,020) |
|
|
57,431 |
|
|
5,137 |
|
|
— |
|
|
62,568 |
|
|
Credit for loan losses |
— |
|
|
— |
|
|
— |
|
|
(392) |
|
|
|
|
(392) |
|
|
Net interest income after credit for loan losses |
58,451 |
|
|
(1,020) |
|
|
57,431 |
|
|
5,529 |
|
|
— |
|
|
62,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Interest Income |
|
|
|
|
|
|
|
|
|
|
|
|
Net gains on sale of SBA 7(a) loans |
$ |
53,113 |
|
|
$ |
— |
|
|
$ |
53,113 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
53,113 |
|
|
Net gains on loans accounted for under the fair value
option |
— |
|
|
11,192 |
|
I |
11,192 |
|
|
— |
|
|
— |
|
|
11,192 |
|
|
Net realized appreciation on SBA guaranteed non-affiliate
investments |
6,380 |
|
|
(6,380) |
|
K |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Net realized appreciation on SBA unguaranteed non-affiliate
investments |
5,097 |
|
|
(5,097) |
|
K |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Gain on derivative transactions |
590 |
|
|
644 |
|
I |
1,234 |
|
|
— |
|
|
— |
|
|
1,234 |
|
|
Loss on servicing assets |
(6,778) |
|
|
— |
|
|
(6,778) |
|
|
— |
|
|
— |
|
|
(6,778) |
|
|
Net realized loss on controlled investments |
(1,266) |
|
|
1,266 |
|
I |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Net unrealized appreciation on controlled investments |
2,829 |
|
|
(2,829) |
|
I |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Net unrealized depreciation on derivative transactions |
(183) |
|
|
(43) |
|
I |
(226) |
|
|
— |
|
|
— |
|
|
(226) |
|
|
Loan servicing income |
11,307 |
|
|
2,589 |
|
I |
13,896 |
|
|
— |
|
|
— |
|
|
13,896 |
|
|
Web Hosting and IT Support Income |
— |
|
|
16,248 |
|
I |
16,248 |
|
|
— |
|
|
— |
|
|
16,248 |
|
|
Electronic Payment Processing Revenue |
— |
|
|
38,879 |
|
I |
38,879 |
|
|
— |
|
|
— |
|
|
38,879 |
|
|
Origination Income |
— |
|
|
2,304 |
|
I |
2,304 |
|
|
— |
|
|
— |
|
|
2,304 |
|
|
Asset Backed Lending Income |
— |
|
|
1,850 |
|
I |
1,850 |
|
|
— |
|
|
— |
|
|
1,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NewtekOne
(5)
Historical
|
|
Reorganization Transaction Accounting Adjustments |
Notes |
NewtekOne Pro Forma |
|
NBNYC
(6)
Historical
|
|
NBNYC Acquisition Transaction Accounting Adjustments |
Notes |
Pro Forma Combined |
|
Insurance revenue |
— |
|
|
2,746 |
|
I |
2,746 |
|
|
— |
|
|
— |
|
|
2,746 |
|
|
Payroll processing revenue |
— |
|
|
1,235 |
|
I |
1,235 |
|
|
— |
|
|
— |
|
|
1,235 |
|
|
Other income |
|
|
10,345 |
|
I |
10,345 |
|
|
444 |
|
|
— |
|
|
10,789 |
|
|
Dividend income (from non-control investments) |
95 |
|
|
(95) |
|
I |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Dividend income (from controlled investments) |
9,801 |
|
|
(9,801) |
|
I |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Other income (from non-affiliate investments) |
5,696 |
|
|
(5,696) |
|
I |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Other income (from controlled investments) |
2,629 |
|
|
(2,629) |
|
I |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Total non-interest income |
89,310 |
|
|
56,728 |
|
|
146,038 |
|
|
444 |
|
|
— |
|
|
146,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits |
17,866 |
|
|
44,248 |
|
I |
62,114 |
|
|
2,868 |
|
|
— |
|
|
64,982 |
|
|
Depreciation and amortization |
304 |
|
|
3,305 |
|
I |
3,609 |
|
|
— |
|
|
— |
|
|
3,609 |
|
|
Professional fees |
5,610 |
|
|
2,828 |
|
I |
8,438 |
|
|
— |
|
|
3,700 |
|
H |
12,138 |
|
|
Origination and loan processing |
10,234 |
|
|
573 |
|
I |
10,807 |
|
|
— |
|
|
— |
|
|
10,807 |
|
|
Origination and loan processing - related party |
19,272 |
|
|
(19,272) |
|
I, J |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Loss on extinguishment of debt |
1,552 |
|
|
— |
|
|
1,552 |
|
|
— |
|
|
— |
|
|
1,552 |
|
|
Cost of revenue - NTS |
— |
|
|
8,153 |
|
I |
8,153 |
|
|
— |
|
|
— |
|
|
8,153 |
|
|
Electronic payment processing costs |
— |
|
|
16,853 |
|
I |
16,853 |
|
|
— |
|
|
— |
|
|
16,853 |
|
|
Other general and administrative costs |
7,455 |
|
|
12,150 |
|
I |
19,605 |
|
|
1,874 |
|
|
— |
|
|
21,479 |
|
|
Total non-interest expense |
62,293 |
|
|
68,838 |
|
|
131,131 |
|
|
4,742 |
|
|
3,700 |
|
|
139,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other income (loss) after other expenses |
27,017 |
|
|
(12,110) |
|
|
14,907 |
|
|
(4,298) |
|
|
(3,700) |
|
|
6,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before taxes |
85,468 |
|
|
(13,130) |
|
|
72,338 |
|
|
1,231 |
|
|
(3,700) |
|
|
69,869 |
|
|
Change in provision for deferred taxes |
(1,327) |
|
|
— |
|
|
(1,327) |
|
|
— |
|
|
— |
|
|
(1,327) |
|
|
Provision for income taxes |
— |
|
|
— |
|
|
— |
|
|
(119) |
|
|
— |
|
|
(119) |
|
|
Net Income from operations |
$ |
84,141 |
|
|
$ |
(13,130) |
|
|
$ |
71,011 |
|
|
$ |
1,112 |
|
|
$ |
(3,700) |
|
|
$ |
68,423 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding, basic and diluted |
22,795 |
|
|
|
22,795 |
|
|
|
|
|
22,795 |
|
Basic and diluted net income per share |
$ |
3.69 |
|
|
|
|
$ |
3.12 |
|
|
|
|
|
|
$ |
3.00 |
|
(5) Derived from NewtekOne’s audited consolidated statement of
operations for the year ended December 31, 2021.
(6) Derived from NBNYC’s audited statement of operations for the
year ended December 31, 2021.
See accompanying notes to the Unaudited Pro Forma Condensed
Combined Financial Information
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
(In Thousands, except for Per Share Data)
1. BASIS OF PRESENTATION AND DESCRIPTION OF THE
TRANSACTIONS
On January 6, 2023 (the "Closing Date"), NewtekOne. Inc.
(“NewtekOne” or “the Company”) completed the acquisition of the
National Bank of New York City (“NBNYC” and the “Acquisition,”
respectively), a national bank regulated and supervised by the
Office of the Comptroller of the Currency ("OCC"), pursuant to
which the Company acquired from the NBNYC shareholders all of the
issued and outstanding stock of NBNYC for $20 million. NBNYC has
been renamed Newtek Bank, National Association (“Newtek Bank, N.A.”
or "Newtek Bank") and has become a wholly owned subsidiary of the
Company.
In connection with the completion of the Acquisition, the Company
contributed to Newtek Bank, N.A. $31 million of cash and two of the
Company’s subsidiaries, Newtek Business Lending, LLC (“NBL”) and
Small Business Lending, LLC (“SBL”). The Company also filed with
the SEC a Form N-54C, Notification of Withdrawal of Election to be
Subject to the Investment Company Act of 1940, and has ceased to be
a business development company (“BDC”) as of January 6, 2023. As a
result, the Company is now a financial holding company (“FHC”)
subject to the regulation and supervision of the Board of Governors
of the Federal Reserve System (the “Federal Reserve”), the Federal
Reserve Bank of Atlanta, and the OCC. The Company no longer
qualifies as a regulated investment company for federal income tax
purposes and no longer qualifies for accounting treatment as an
investment company.
As a result, in addition to Newtek Bank, N.A. and its consolidated
subsidiaries, NBL and SBL, the following NewtekOne portfolio
companies and subsidiaries will now be consolidated non-bank
subsidiaries in the Company’s financial statements: Newtek Small
Business Finance, LLC; Newtek Merchant Solutions, LLC; Mobil Money,
LLC; CDS Business Services, Inc. d/b/a Newtek Business Credit
Solutions; PMTWorks Payroll, LLC d/b/a Newtek Payroll and Benefits
Solutions; Newtek Insurance Agency, LLC; Titanium Asset Management
LLC; Newtek Business Services Holdco 6, Inc; Newtek Commercial
Lending, Inc.; Excel WebSolutions, LLC; Newtek Technology
Solutions, Inc and POS on Cloud, LLC, d/b/a Newtek Payment Systems.
In addition, as a result of commitments made to the Federal
Reserve, the Company will divest or otherwise terminate the
activities conducted by Excel WebSolutions, LLC and Newtek
Technology Solutions, Inc., including its subsidiary SIDCO, LLC
d/b/a/ Cloud Nine Services, within two years of becoming a
financial holding company, subject to any extension of the two-year
period.
The Accquisition and contemporaneous conversion from a BDC to a FHC
are referred to as the “Reorganization,”,and collectively the
“Transactions.” For further details on the Transactions see the
section titled Description of the Transactions.
The unaudited pro forma condensed combined financial information
presents the pro forma condensed combined financial position and
results of operations of the Combined Company based upon the
historical consolidated financial statements of NewtekOne and
NBNYC, after giving effect to transaction accounting adjustments
related to the Transactions and are intended to reflect the impact
of such on the Combined Company’s historical consolidated financial
statements.
The pro forma adjustments have been prepared as if the Transactions
had been consummated on September 30, 2022 in the case of the
unaudited pro forma condensed combined balance sheet, and the
Transactions had been consummated on January 1, 2021, the beginning
of the earliest period presented, in the case of the unaudited pro
forma condensed combined statements of operations.
The adjustments presented in the unaudited pro forma condensed
combined financial information have been identified and presented
to provide relevant information necessary for an accurate
understanding of NewtekOne after giving effect to the Transactions.
Management has made significant estimates and assumptions in its
determination of the pro forma adjustments. As the unaudited pro
forma condensed combined financial information has been prepared
based on these preliminary estimates, the final amounts recorded
may differ materially from the information presented.
The unaudited pro forma condensed combined financial information
has been prepared using the following:
a.the
historical audited consolidated financial statements and related
notes of NewtekOne as of December 31, 2021 and for the year ended
December 31, 2021 and b) the historical unaudited condensed
consolidated financial statements and related notes of NewtekOne as
of September 30, 2022 and for the nine months ended September 30,
2022. These can be found in the Company’s Form 10-K filing for the
year ended December 31, 2021 and in the Company’s Form 10-Q filing
for the quarter ended September 30, 2022,
respectively;
b.the
historical audited financial statements and related notes of NBNYC
as of December 31, 2021 and for the year ended December 31, 2021,
which are Exhibit 99.1 filed herewith, and the historical unaudited
financial statements of NBNYC as of September 30, 2022 and for the
nine months ended September 30, 2022, which can be found within the
unaudited pro forma financial information for such periods included
herein;
c.the
historical unaudited financial statements of NewtekOne’s controlled
subsidiaries as of December 31, 2021 and for the year ended
December 31, 2021 and the historical unaudited financial statements
of NewtekOne’s controlled subsidiaries as of September 30, 2022 and
for the nine months ended September 30, 2022. This information was
used to determine the transaction accounting adjustments needed to
consolidate these subsidiaries;
d.the
Stock Purchase Agreement, which can be found in the Company's Form
8-K, Exhibit 10.1, filed on August 2, 2021.
The Transactions are accounted for as two distinct transactions: 1)
the Acquisition of NBNYC and 2) the Reorganization related to the
conversion of the Company from a BDC to a FHC.
NBNYC Acquisition
The Company accounted for the Acquisition of NBNYC as a business
combination, with NewtekOne treated as the “acquirer” and NBNYC
treated as the “acquired” company for financial reporting purposes.
For accounting purposes, the acquirer is the entity that has
obtained control of another entity and, thus, consummated a
business combination. Management has determined that NewtekOne is
the accounting acquirer and NBNYC is the acquired company, as
NewtekOne acquired all of the equity of NBNYC for $20.0 million
cash consideration.
Under the acquisition method of accounting, the total estimated
purchase price of an acquisition is allocated to the net tangible
and intangible assets based on their estimated fair values. Such
valuations are based on available information and certain
assumptions that management of NewtekOne believe are reasonable.
The preliminary allocation of the estimated purchase price to the
tangible and intangible assets acquired and liabilities assumed is
based on various preliminary estimates. Accordingly, the pro forma
adjustments are preliminary and have been made solely for the
purpose of providing the unaudited pro forma condensed combined
financial information. Differences between these preliminary
estimates and the final acquisition accounting, which will be based
on the actual net tangible and identifiable intangible assets that
exist as of the closing of the Acquisition, may occur and these
differences could be material. The differences, if any, could have
a material impact on the accompanying unaudited pro forma condensed
combined financial information and the Combined Company’s future
results of operations and financial position. See Note
2.
Reorganization
As a result of the Company’s conversion from a BDC to FHC, the
Company no longer qualifies as a regulated investment company for
federal income tax purposes and no longer qualifies for accounting
treatment as an investment company. As a result, NewtekOne will
need to consolidate the underlying assets, liabilities, and results
of operations of controlled subsidiaries that were previously
accounted for as investments at fair value with changes in fair
value reflected in earnings. The unaudited pro forma condensed
combined financial information contains transaction accounting
adjustments to consolidate these entities and to reclassify certain
account balances to conform to presentation as an FHC.
The conversion, which includes the contribution of cash, NBL and
SBL to Newtek Bank, N.A., is considered a common control
transaction that did not result in a change in control of
NewtekOne’s subsidiaries. Therefore, the Company accounts for the
Reorganization as an equity transaction; no gain or loss is
recognized in the Company’s consolidated financial statements as a
result of the conversion.
Upon consolidation of the controlled subsidiaries, the Company
recognizes the underlying assets and liabilities at their carryover
bases, as if it had not applied investment company accounting as of
the Closing Date. However, the Company is required to measure its
investments at fair value under ASC 946 until the Closing Date.
Therefore, at the Acquisition Date, the Company derecognizes its
investments in the controlled subsidiaries and records any
difference between the resulting underlying assets/liabilities and
the fair value of the investments in
additional-paid-in-capital.
The pro forma combined statements of operations present the
consolidated results of the controlled subsidiaries as if the
Company had not applied investment company accounting prior to the
Closing Date. As a result, the pro forma combined statements of
operations present transaction accounting adjustments to reverse
the fair value adjustments related to these investments and to
record the results of operations from these consolidated
investees.
The SBA 7(a) loans held by NewtekOne were accounted for at fair
value with changes in fair value recorded through earnings up to
the Closing Date. The pro forma combined statements of operations
presents changes in fair value related to these loans.
The unaudited pro forma condensed combined financial information
does not reflect the following:
•Income
tax effects of the pro forma adjustments. The Combined Company’s
management believes this unaudited pro forma condensed combined
financial information to not be meaningful
•Restructuring
or integration activities that have yet to be determined or other
costs that may be incurred to achieve cost or growth synergies of
the Combined Company. As no assurance can be made that the costs
will be incurred or the cost or growth synergies will be achieved,
no adjustment has been made.
In addition, the unaudited pro forma condensed combined financial
information does not necessarily reflect what the Combined
Company’s financial condition or results of operations would have
been had the Transactions occurred on the dates indicated. They
also may not be useful in predicting the future financial condition
and results of operations of the Combined Company. The actual
financial position and results of operations may differ
significantly from the pro forma amounts reflected herein due to a
variety of factors.
2. PRELIMINARY ESTIMATED PURCHASE PRICE ALLOCATION
The Company has not completed a valuation analysis and accordingly,
the pro forma adjustments included are based on certain assumptions
and estimates for a preliminary allocation of the purchase price of
NBNYC to the estimated fair values of assets acquired and
liabilities assumed at the Closing Date based on certain currently
available information and certain assumptions and methodologies
that management believes are reasonable under the circumstances.
The final allocation of the purchase price could differ materially
from the preliminary allocation primarily because market prices,
interest rates and other valuation variables will fluctuate over
time and be different at the time of completion of the Acquisition
compared to the amounts assumed for the pro forma
adjustments.
The total consideration paid equals the fair value of the assets
acquired and liabilities assumed; thus, no goodwill has been
recorded.
This estimated preliminary purchase price allocation has been used
to prepare the pro forma adjustments in the unaudited pro forma
condensed combined balance sheet and statements of operations. The
final purchase price allocation will be determined when the
Combined Company has completed the detailed valuations and
necessary calculations. The final allocation could differ
materially from the preliminary allocation used in the pro forma
adjustments. The final allocation may include (1) changes in fair
values of loans and investments, (2) changes in fair value of
deposits and borrowings and (3) calculation of the core deposit
intangible.
3. ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
The following unaudited pro forma condensed combined financial
information has been prepared in accordance with Article 11 of
Regulation S-X.
Adjustments to Unaudited Pro Forma Condensed Combined Balance
Sheet
The transaction accounting adjustments included in the unaudited
pro forma condensed combined balance sheet as of September 30, 2022
are as follows:
A.To
accrue transaction costs incurred by NewtekOne subsequent to
September 30, 2022 of $2.0 million.
B.To
record the cash consideration paid to the Sellers. The Company has
performed a preliminary valuation analysis of the fair market value
of NBNYC's assets to be acquired and liabilities to be assumed.
Using the total consideration for the acquisition, the Company has
estimated the allocations to such assets and liabilities. The $20.0
million purchase price equals the preliminary fair value of the
assets acquired and liabilities assumed; thus, no goodwill has been
recorded for the Acquisition.
C.To
reduce the cash balance of NBNYC for $17.0 million of dividends
paid by NBNYC to the Sellers immediately prior to the
closing.
D.As
a BDC, the Company accounted for it Controlled Investments at fair
value. This adjustment is needed to present the Controlled
Investments under US GAAP relevant to an FHC, specifically to
derecognize the investments in the controlled subsidiaries and to
recognize the subsidiaries’ assets and liabilities. The difference
between the underlying net assets ($106.0 million) and the fair
value of the investments ($272.928 million) is recorded as a
$166.928 million adjustment to
additional-paid-in-capital.
E.To
reclassify the Company’s $18.159 million non-consolidated
investments, of which $16.26 million represents an investment in
Newtek Conventional Lending, LLC which the Company will account for
under the equity method as an FHC.
F.To
eliminate intercompany receivables and payable between subsidiaries
that the Company is required to consolidate under US GAAP as an
FHC. As a BDC, the Controlled Investments were recorded at fair
value.
G.As
a result of the Transactions, the Company no longer qualifies as a
regulated investment company for federal income tax purposes. This
adjustment is to reclassify the Company’s accumulated undistributed
earnings to Additional-paid-in-capital to reflect the Company’s
change in tax status as an FHC.
Adjustments to Unaudited Pro Forma Condensed Combined Statements of
Operations
The transaction accounting adjustments included in the unaudited
pro forma condensed combined statements of operations for the nine
months ended September 30, 2022, and year ended December 31, 2021
are as follows:
H.To
record transaction costs incurred by NewtekOne subsequent to
September 30, 2022 and December 31, 2021 of $2 million and $3.7
million, respectively. The remaining transaction costs of $1.7
million and $.3 million are included in the historical income
statements of the Company for the nine months ended September 30,
2022 and the year ended December 31, 2021,
respectively.
I.As
a BDC, the Company accounted for its Controlled Investments at fair
value with changes in fair value recorded through earnings. This
adjustment is needed to present the Controlled Investments under US
GAAP relevant to an FHC; specifically to reverse the Interest
income, Unrealized appreciation (depreciation), Dividend income,
and Other income on controlled investments and to recognize the
underlying profit and loss of the controlled subsidiaries as if
they had been consolidated during the periods
presented.
J.To
eliminate intercompany origination and loan processing fees between
subsidiaries that the Company is required to consolidate under US
GAAP as an FHC. As a BDC, the Controlled Investments were recorded
at fair value.
K.To
reclassify ($12.42) million and $11.48 million net gains (losses)
on SBA 7(a) loans for the nine months ended September 30, 2022 and
for the year ended December 31, 2021, respectively to conform to
the presentation as an FHC. As a BDC, the Company was required to
account for these loans at fair value with changes in fair value
recognized through earnings. As an FHC, the Company will elect to
account for these loans under the fair value option.
4. INCOME PER SHARE
Net income per share is calculated using the historical weighted
average shares outstanding for the nine months ended September 30,
2022 and for the year ended December 31, 2021 as if the
Transactions had occurred as of January 1, 2021. The weighted
average shares outstanding were not affected by the Transactions
since no additional shares were issued.
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Combined |
|
|
|
(In Thousands, except for Per Share Data) |
|
Nine Months Ended September 30, 2022 |
|
|
|
Net income |
|
$ |
18,740 |
|
|
Weighted average shares outstanding – basic and diluted |
|
24,204 |
|
|
Basic and diluted net income per share |
|
$ |
0.77 |
|
|
|
|
|
|
Year Ended December 31, 2021 |
|
|
|
Net income |
|
68,423 |
|
|
Weighted average shares outstanding – basic and diluted |
|
22,795 |
|
|
Basic and diluted net income per share |
|
$ |
3.00 |
|
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