Newtek Business Services, an internally managed business development company, entered into an agreement to acquire National Bank of New York City, a nationally chartered bank with approximately $204 million in total assets and $36.5 million in tier 1 capital, for $20 million in cash.
The agreement requires that NBNYC have $20 million of tangible common equity as of the closing date of the acquisition, which is part of a plan to reposition Newtek as a bank holding company and is subject to the approval of, among others, federal banking regulators and the U.S. Small Business Administration and Newtek shareholders to withdraw Newtek’s election as a BDC. Upon shareholder and regulatory approvals and other closing conditions, Newtek will become a bank holding company that will elect financial holding company (FHC) status. Newtek expects the acquisition to close in approximately six to 12 months.
“We are pleased with the manner in which Newtek has responded to adverse market conditions throughout its over two-decade operating history. During our enterprise’s lifetime, the 2008-2009 credit crisis and the COVID-19 pandemic clearly were major hurdles for our organization to overcome, and we did so with success,” Barry Sloane, president, chairman and CEO of Newtek Business Services, said. “We are proud that our management and team members have always been able to not only respond to challenges but, more importantly, have been able to adapt and persevere in the face of difficult operating environments and always work to strategically position the company for future success.
“There is no doubt that our economy and financial system are demanding changes to the way services and solutions are offered to commercial clients. Newtek, throughout its over 20-year operating history, has been able to adapt to an ever-changing environment and meet clients’ needs with best-in-class services and solutions offerings. We greatly appreciate our successful 6.5-year track record as a BDC, which we believe speaks volumes to our ability to adapt and grow, and are extremely proud of where we are today, with approximately $800 million in market capitalization. Newtek believes this acquisition and conversion to a bank holding company has the capacity to significantly reduce risk, provide enhanced shareholder value and provide greater flexibility to serve our business clientele in the future in ways we cannot under our current structure. With Newtek’s management and board of directors continuing to collectively own 5% of Newtek’s common stock, our interests are aligned with those of Newtek’s shareholders.
“We expect Newtek’s current management and board to remain in place and we expect to add additional hires with banking experience at the appropriate time. We expect that the acquisition and conversion to a bank holding company will be accretive to Newtek’s shareholders over time and believe we have the potential to become a bank for the future — a true tech-enabled bank — and achieve an ancillary goal of commercializing the technologies that we have utilized successfully over two decades. We anticipate that this acquisition will enable us to unlock hidden value in our client base, as the lines between lending, payments, payroll and technology are blurring. We further believe that Newtek is well positioned to take advantage of these changes as the ‘Business Solutions Company.’
“Newtek is reaffirming its 2021 annual dividend forecast of $3 to $3.30 per share. Newtek has paid a total of $1.20 per share in dividends through the first six months of 2021. Newtek’s current 2021 annual dividend forecast indicates a remaining dividend payment of $1.95 per share, at the midpoint of the 2021 annual dividend forecast range, subject to company performance and board approval. Newtek believes that its current business model and structure is performing well and is positioned to distribute between 90% and 100% of its taxable income in the form of dividends in 2021. However, management believes that, on a go-forward basis, a bank holding company will be a superior structure for its shareholders.”
Keefe, Bruyette & Woods served as exclusive financial advisor to Newtek in connection with the acquisition and Sullivan and Cromwell and Eversheds Sutherland served as Newtek’s legal counsel. In addition, Michael Rose of Metropolitan Capital Investment Banc acted as an advisor to Newtek. Piper Sandler acted as financial advisor to NBNYC and Silver, Freedman, Taff & Tiernan is serving as legal counsel to NBNYC.
