8-K: NewtekOne Closes $48.3M Preferred Stock Offering

NewtekOne, Inc. successfully closed an offering of 2,000,000 depositary shares, raising approximately $48.357 million in net proceeds.

Summary

• NewtekOne, Inc. completed an offering of 2,000,000 depositary shares on August 20, 2025.
• Each depositary share represents a 1/40th interest in a share of the company's 8.500% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series B.
• The offering generated approximately $48.357 million in net proceeds.
• The Series B Preferred Stock has a liquidation preference of $1,000 per share, equivalent to $25.00 per Depositary Share.
• Dividends will be non-cumulative cash payments of 8.500% per annum, paid quarterly, starting October 1, 2025, through October 1, 2030.
• After October 1, 2030, the dividend rate will reset based on the five-year US treasury rate plus a fixed spread.
• The company granted underwriters a 30-day option to purchase up to an additional 150,000 Depositary Shares.
• Proceeds will be used for investments, debt repayment, and general corporate purposes.
• NewtekOne has applied to list the Depositary Shares on the Nasdaq Global Market under the ticker symbol NEWTP.

Sentiment

Score: 8

Explanation: The successful completion of a significant capital raise, leading to a substantial increase in Tier One Capital and improved capital ratios, is a strong positive for financial stability and future growth. The use of proceeds for debt repayment and investments further reinforces a positive outlook, despite the non-cumulative nature of the preferred dividends.

Positives

• Successfully raised approximately $48.357 million in net proceeds, strengthening the capital base.
• Pro forma Tier One Capital Ratio increased from 16.1% to 19.2% as of June 30, 2025.
• Pro forma Tier One Capital increased by 19% from $256 million to $305 million as of June 30, 2025.
• The offering positions the company to deleverage its balance sheet.
• Diversifies the company's capital stack with additional preferred equity.

Risks

• Actual results may differ materially from forward-looking statements due to significant risks and uncertainties, as referenced in the company's SEC filings.
• The dividend on the Series B Preferred Stock is non-cumulative, meaning missed dividends do not accrue.
• The dividend rate will reset after October 1, 2030, based on market rates, introducing future interest rate risk for investors.

Future Outlook

The company intends to use the net proceeds to fund investments, repay existing debt, and for general corporate purposes. The dividend rate for the Series B Preferred Stock will reset after October 1, 2030, based on the five-year US treasury rate plus a fixed spread.

Management Comments

• "We are pleased to layer additional preferred equity into our capital stack."
• "The newly issued Depositary Shares... increases our tier one capital ratio from 16.1% to 19.2% and increases tier one capital by 19% from $256 million to $305 million, and further, positions NewtekOne to deleverage its balance sheet."

Industry Context

This capital raise through preferred equity is a common strategy for financial institutions, particularly those with banking operations, to strengthen their Tier One Capital ratios, which are crucial for regulatory compliance and financial stability. The fixed-rate reset feature is typical for preferred stock offerings in the current interest rate environment, balancing investor demand for yield with issuer flexibility.

Comparison to Industry Standards

• The increase in Tier One Capital Ratio from 16.1% to 19.2% places NewtekOne well above typical regulatory minimums for banks, which often hover around 8-10% for well-capitalized institutions. For example, major banks like JPMorgan Chase or Bank of America typically maintain Tier 1 ratios in the 12-14% range, indicating NewtekOne's strengthened position is robust.
• The 8.500% fixed-rate reset non-cumulative perpetual preferred stock offers a competitive yield compared to similar preferred stock offerings from other financial services companies, especially considering the current interest rate environment. For instance, preferred stock from regional banks or specialty finance companies might offer yields in a similar range, reflecting market conditions and perceived risk.

Stakeholder Impact

• Shareholders (Common Stock): Potential dilution of earnings per common share due to preferred dividends, but improved financial stability and capital ratios could support long-term growth and reduce risk.
• Preferred Shareholders (Series B): Will receive a fixed 8.500% non-cumulative cash dividend, with a reset feature after five years, providing a stable income stream but with interest rate risk on reset.
• Creditors: Strengthened balance sheet and increased Tier One Capital improve the company's creditworthiness and ability to repay existing debt.
• Customers/Business Owners: Enhanced financial stability may support continued and expanded lending and business solutions offerings.

Next Steps

• NewtekOne will use the net proceeds to fund investments, repay existing debt, and for general corporate purposes.
• The company has applied to list the Depositary Shares on the Nasdaq Global Market under the ticker symbol NEWTP.
• The first quarterly dividend payment for the Series B Preferred Stock is scheduled for October 1, 2025.
• The dividend rate will reset on October 1, 2030, and every fifth anniversary thereafter.
• The underwriters have a 30-day option to purchase up to an additional 150,000 Depositary Shares.

Key Dates

Recommendation

The successful capital raise significantly strengthens NewtekOne's financial position, particularly its Tier One Capital, which is a strong positive for stability and regulatory compliance. This deleveraging and increased capacity for investment are favorable. However, the non-cumulative nature of the preferred dividends and the future reset risk for preferred shareholders, combined with the general market conditions and the company's existing business model, suggest a "hold" recommendation. While the financial health has improved, there isn't enough information in this specific filing to warrant a "buy" without a deeper dive into the company's overall performance, valuation, and market outlook. The offering is a positive step, but not necessarily a catalyst for immediate strong upside for common stock investors without further context.

Keywords

NewtekOne, NEWT, Preferred Stock, Depositary Shares, Capital Raise, Equity Offering, Tier One Capital, Fixed-Rate Reset, Non-Cumulative Preferred Stock, Nasdaq Listing, Financial Services, SBA Lending