8-K: NewtekOne Boosts Capital with Patriot Equity Exchange

NewtekOne, Inc. completed an equity exchange with Patriot Financial Partners, enhancing capital and tangible book value.

Summary

• NewtekOne, Inc. entered into a Securities Purchase and Exchange Agreement with Patriot Financial Partners IV, L.P. and Patriot Financial Partners Parallel IV, L.P. (Patriot) on September 16, 2025.
• Patriot exchanged all 20,000 outstanding shares of NewtekOne's Series A Convertible Preferred Stock (originally purchased for $20 million) and an additional $10 million in cash.
• In return, NewtekOne issued Patriot 2,307,692 shares of its common stock.
• The transaction was a private placement, and the newly issued common shares are subject to a two-year transfer restriction.
• Patriot relinquished its right to convert the 20,000 Series A Preferred Stock into 950,800 shares of common stock.
• The transaction is expected to boost the company's common equity tier one capital (CET1 capital) and tier one capital by $30 million.
• Pro forma as of June 30, 2025, CET1 capital increased from $256 million to $286 million.
• Combined with $48.357 million net proceeds from a depositary shares offering that closed August 20, 2025, pro forma tier one capital increased by $78.357 million, from $256 million to $335 million.
• Pro forma tangible book value per common share is expected to increase to approximately $10.74.

Sentiment

Score: 8

Explanation: The transaction significantly strengthens NewtekOne's capital position and tangible book value, demonstrating strong investor confidence from a key institutional shareholder. While there is EPS dilution, management believes the capital benefits outweigh this, indicating a positive strategic move for long-term stability and growth.

Positives

• The transaction is expected to boost common equity tier one capital (CET1 capital) and tier one capital by $30 million.
• Pro forma CET1 capital increased from $256 million to $286 million as of June 30, 2025.
• Combined with a prior depositary shares offering, pro forma tier one capital increased by $78.357 million, from $256 million to $335 million, as of June 30, 2025.
• Pro forma tangible book value per common share is expected to increase to approximately $10.74.
• Patriot Financial Partners, a long-term institutional shareholder, demonstrated continued confidence in NewtekOne's business strategy and management team through this incremental investment and equity exchange.
• Patriot agreed to a two-year lock-up on the newly issued common shares, indicating a long-term commitment.

Negatives

• The issuance of 2,307,692 new common shares will result in earnings per share (EPS) dilution, though management believes the capital boost outweighs this.

Risks

• The filing references 'Risk Factors in our filings with the Securities and Exchange Commission' for a detailed discussion of potential risks, but does not enumerate specific risks within this 8-K itself. These risks are available on NewtekOne's website and the SEC's website.

Future Outlook

The transaction is expected to significantly boost NewtekOne's common equity tier one capital and tier one capital, and increase tangible book value per common share. Management believes these capital enhancements will outweigh the earnings per share dilution from the newly issued shares. The company's business strategy, centered on technology, efficiency, and profitability, is positioned to become a leading player in the evolving banking industry.

Management Comments

• Barry Sloane, NewtekOne's Chairman, President, and CEO, stated, 'We are pleased that one of our longer-term institutional shareholders expressed confidence in our business strategy and management team by exchanging the 20,000 shares of Series A Preferred Stock it originally acquired for $20 million and $10 million in cash for 2.3 million Common Shares, and agreeing to a two-year lock-up of the Common Shares.'
• Sloane also commented, 'We believe the boost to capital and to the capital ratios and the accretion to tangible book value per share more than outweighs the EPS dilution associated with the newly issued shares.'
• Kirk Wycoff, Managing Partner of Patriot Financial Partners, expressed, 'We are excited to exchange our Series A Preferred Stock for NewtekOne common equity, to make an additional $10 million investment in NewtekOne common shares, and to retain our position as a long-term shareholder.'
• Wycoff added, 'We believe that NewtekOne's business strategy and operating model centered around technology, efficiency, and profitability is ideally situated to become one of the leading players in the industry in a constantly evolving banking environment and that NewtekOne and Newtek Bank have constructed an operating model the banking industry can follow.'

Industry Context

This transaction positions NewtekOne to strengthen its capital base in an evolving banking environment, where robust capital ratios are increasingly critical. The company's focus on technology, efficiency, and profitability, as highlighted by Patriot, aligns with broader industry trends towards digital transformation and optimized operational models in financial services. The endorsement from a specialized financial services investor like Patriot suggests confidence in NewtekOne's strategy to become a leading player.

Comparison to Industry Standards

• The filing states that NewtekOne and Newtek Bank have constructed an operating model the banking industry can follow, implying a leading position in operational efficiency and strategy.
• No specific comparable companies, projects, or results are listed for direct quantitative comparison within the filing.

Corporate Governance

Related Party Transactions

• The transaction involves Patriot Financial Partners, a long-term institutional shareholder that originally invested $20 million in Series A Preferred Stock and maintains a seat on the board of directors of Newtek Bank, N.A., NewtekOne's bank subsidiary. This exchange and additional $10 million investment constitutes a related party transaction.

Stakeholder Impact

• **Shareholders**: Common shareholders will experience EPS dilution due to the issuance of new shares, but benefit from a stronger capital base and increased tangible book value per share, which can enhance long-term stability and growth prospects.
• **Patriot Financial Partners**: Patriot converts its preferred stock into common equity, makes an additional cash investment, and retains its position as a long-term shareholder with a two-year lock-up, demonstrating increased commitment and alignment with common shareholders.
• **NewtekOne (Company)**: The company benefits from a significant boost to its common equity tier one and tier one capital, improving its regulatory capital ratios and financial strength, which supports its strategic growth initiatives.
• **Regulatory Authorities**: The enhanced capital ratios are likely to be viewed favorably by banking regulators, reinforcing the company's financial soundness.

Next Steps

• NewtekOne will continue its business strategy focused on technology, efficiency, and profitability to become a leading player in the banking industry.

Key Dates

Recommendation

The transaction significantly strengthens NewtekOne's capital structure by boosting CET1 and Tier 1 capital, and increasing tangible book value per share. This capital enhancement, coupled with a substantial vote of confidence from a long-term institutional investor (Patriot Financial Partners) through an additional $10 million investment and a two-year lock-up on new shares, positions the company for stronger future growth and stability. While there is some EPS dilution, management explicitly states the capital benefits outweigh this. The improved financial health and strategic alignment with a key investor make this a positive development for long-term investors.

Keywords

NewtekOne, Patriot Financial Partners, Equity Exchange, Capital Raise, Common Stock, Preferred Stock, Financial Holding Company, Banking, CET1 Capital, Tier One Capital, Tangible Book Value, Private Placement, SEC Filing, Financial Services