Newtek Business Services, Inc. Earns $0.07 per share for Second Quarter [August 5, 2004]

NEW YORK, Aug 5, 2004 /PRNewswire-FirstCall via COMTEX/ -- Newtek Business Services, Inc. (NKBS) (http://www.newtekbusinessservices.com), a provider of business services and financial products to the small to medium-sized business market, today announced its second quarter earnings of $0.07 per share on revenues of $14.5 million. Wall Street analyst estimates averaged $0.05 per share for the quarter.

During the second quarter Newtek experienced improvement in results in its small business lending and electronic payment processing over the same period in the previous year. Its new web hosting business (acquired in July 2004) also experienced improvements over previously released pro forma estimates. The company's certified capital company revenue did decline as compared to the same period in 2003 due to the uneven nature of revenue recognition in this business. Second quarter 2004 revenues from tax credits were $7 million vs. second quarter 2003 revenues from tax credits of $11.5 million.

"The second quarter 2004 results continue to be consistent with our business plan and demonstrate our success," said Barry Sloane, Chairman and CEO of Newtek Business Services, Inc. "We have a comprehensive plan to grow our core business lines. Our lending, merchant processing and newly acquired web hosting company, CrystalTech Web Hosting, have all had significant growth over the same period last year.

"We also look forward to adding our insurance agency results due to our recent acquisition of Financial Keyosk (http://www.financialkeyosk.com). As previously announced, we have added to our cores business lines a full service insurance agency business dedicated to meeting the needs of small and medium sized businesses. As of the third quarter we are writing insurance business and will be showing commission revenue. We are witnessing a validation of our business model and look forward to reporting our continued success and progress.

"We are also pleased to announce that Roth Capital and The Maxim Group have within the past two weeks initiated research coverage of Newtek Business Services, Inc."

Newtek has scheduled its quarterly earnings conference call for today at 4:15 pm. The conference call will be accessible via a toll free number by dialing 1-888-396-2386 and providing the pass code 96626281. Listeners are encouraged to ask any questions that they may have during the call. The conference call will also be broadcasted over the Internet through Newtek's website at http://www.newtekbusinessservices.com. To listen to the webcast live, please go to Newtek's website approximately 15 minutes prior to the call to download any audio software which may be necessary. For those who miss the live broadcast, a replay will be available on the website approximately one hour after the call.

About Newtek Business Services, Inc.

Newtek Business Services, Inc. is a premier provider of business services and financial products to the small to medium-sized business market. Newtek's core brands include:

* Newtek Small Business Finance: small business and U.S. government-
guaranteed lending services;
* Newtek Merchant Solutions: electronic merchant payment processing
solutions;
* Newtek Insurance Services: customized business insurance provided
through Financial Keyosk;
* Newtek IT Services: complete information technology solutions;
* CrystalTech Web Hosting: comprehensive web site services for small and
medium sized businesses;
* Newtek Financial Information Systems: outsourced digital bookkeeping;
and
* Newtek Tax Services: tax filing, preparation and advisory services.

The statements in this release may contain forward-looking statements relating to such matters as anticipated future business strategies and financial performance, anticipated future number of customers, business prospects, legislative developments and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company's or CrystalTech's actual results to differ materially from the anticipated results expressed in the Company's forward looking statements such as intensified competition and/or operating problems and their impact on revenues and profit margins or additional factors as described in Newtek Business Services' 2003 annual report on Form 10-K and subsequently filed registration statements.

Contacts:
Newtek Business Services
Barry Sloane
Chairman of the Board & CEO
212-356-9500
bsloane@newtekbusinessservices.com

Dave Gentry
Aurelius Consulting Group, Inc.
407-644-4256
dave@aurcg.com

NEWTEK BUSINESS SERVICES, INC., AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JUNE 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003

June 30, December 31,
2004 2003

A S S E T S

Cash and cash equivalents $37,649,541 $33,444,611
Restricted cash 2,060,788 2,107,471
Credits in lieu of cash 70,853,664 71,294,083
SBA loans receivable, net of
reserve for loan losses 38,096,972 52,050,725
Accounts receivable (net of
allowance of $44,824 and $96,480,
respectively) 902,157 469,768
Receivable from bank 2,002,756 2,670,353
SBA loans held for sale 2,840,714 3,619,582
Accrued interest receivable 272,596 281,072
Investments in qualified businesses -
equity method investments 300,000 300,000
Investments in qualified businesses -
held to maturity investments 1,255,475 1,420,179
Structured insurance product 3,135,408 3,054,705
Prepaid insurance 14,170,099 13,282,630
Prepaid expenses and other assets 3,511,002 1,907,132
Capitalized servicing asset
(net of accumulated amortization of
$184,448 and $24,545, respectively) 1,526,052 754,064
Furniture, fixtures and equipment
(net of accumulated depreciation of
$532,301 and $390,011, respectively) 815,058 670,715
Customer merchant accounts
(net of accumulated amortization of
$579,936 and $269,380, respectively) 2,729,191 3,024,298
Goodwill 2,201,644 1,832,621
Total assets $184,323,117 $192,184,009

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
Accounts payable and accrued expenses $6,001,753 $6,095,440
Notes payable - certified investors 3,822,869 3,829,973
Notes payable - insurance 6,003,088 4,115,136
Notes payable - other 760,000 1,000,000
Bank notes payable 37,658,253 51,990,047
Note payable in credits in lieu of cash 67,921,494 65,697,050
Deferred tax liability 10,905,455 10,815,790

Total liabilities 133,072,912 143,543,436

Minority interest 7,631,729 8,393,151

Commitments and contingencies
Shareholders' equity:
Common stock (par value $0.02 per
share; authorized 39,000,000 shares,
issued and outstanding 26,862,324
and 26,209,211, not including 582,980
shares held in escrow) 537,246 524,184
Additional paid-in capital 29,290,600 26,588,400
Unearned compensation (1,579,826) (2,106,588)
Retained earnings 15,370,456 15,241,426
Total shareholders' equity 43,618,476 40,247,422

Total liabilities and shareholders'
equity $184,323,117 $192,184,009

NEWTEK BUSINESS SERVICES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)FOR THE THREE AND SIX MONTHS
ENDED JUNE 30, 2004, AND 2003

Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Revenue:
Income from tax credits $7,024,520 $11,470,752 $9,048,045 $21,859,334
Electronic payment
processing 4,070,630 1,140,282 7,303,134 1,988,086
Servicing fee and premium
income 2,141,745 353,013 3,254,112 721,460
Interest and dividend
income 1,042,215 1,024,551 2,071,163 2,083,720

Other income 203,225 731,550 676,374 986,992
Total revenue 14,482,335 14,720,148 22,352,828 27,639,592

Expenses:
Interest 3,478,022 3,486,235 7,242,797 7,204,087
Payroll and consulting
fees 2,361,025 1,629,000 4,546,474 3,293,064
Electronic payment
processing costs 2,578,749 399,811 4,679,735 1,519,753
Professional fees 1,295,050 1,725,936 2,289,659 2,641,703
Insurance 691,350 638,124 1,406,312 1,211,417
Other than temporary
decline in value of
investments -- 20,287 -- 1,733,701
Equity in net losses of
affiliates -- 62,930 -- 117,904
Benefit for loan losses (151,930) -- (47,249) --
Other 1,433,410 1,353,617 2,626,986 2,060,129
Total expenses 11,685,676 9,315,940 22,744,714 19,781,758

Income (loss) before
minority interest,
provision for income
taxes and extraordinary
items 2,796,659 5,404,208 (391,886) 7,857,834

Minority interest in
loss (income) 310,267 (968,379) 610,581 (680,042)

Income before provision
for income taxes and
extraordinary items 3,106,926 4,435,829 218,695 7,177,792
Provision for income
taxes (1,273,839) (1,729,874) (89,665) (2,799,339)

Income before
extraordinary items 1,833,087 2,705,955 129,030 4,378,453

Extraordinary gain on
acquisition of a business -- -- -- 186,729

Net income $1,833,087 $2,705,955 $129,030 $4,565,182

NEWTEK BUSINESS SERVICES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (CONTINUED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004, AND 2003

Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Weighted average common
shares outstanding
Basic 26,773,791 25,670,866 26,624,960 25,541,088
Diluted 27,227,038 26,047,237 27,158,205 25,857,904
Net income per share
Basic $0.07 $0.11 $0.00 $0.18
Diluted $0.07 $0.10 $0.00 $0.18
Income per share before
extraordinary items
Basic $0.07 $0.11 $0.00 $0.17
Diluted $0.07 $0.10 $0.00 $0.17

SEGMENT REPORTING:

For the Three Months For the Six Months
Ended Ended
June 30, June 30,
2004 2003 2004 2003
Revenue
SBA lending $3,158,625 $1,683,434 $5,298,678 $3,005,495
Electronic payment
processing 4,070,630 1,140,282 7,303,134 1,988,086
Capco and other 7,253,080 11,896,432 9,751,016 22,646,011
Total $14,482,335 $14,720,148 $22,352,828 $27,639,592

Income (loss) before
provision for income
taxes and extraordinary
items
SBA lending $1,431,185 $(174,374) $1,719,946 $(467,206)
Electronic payment
processing 95,066 (218,685) 105,639 (593,776)
Capco and other 1,580,675 4,828,888 (1,606,890) 8,238,774
Total $3,106,926 $4,435,829 $218,695 $7,177,792

Depreciation and
amortization
SBA lending $112,183 $5,879 $191,387 $5,879
Electronic payment
processing 172,065 12,834 340,669 49,086
Capco and other 38,180 3,496 85,536 12,271
Total $322,428 $22,209 $617,592 $67,236

Intercompany revenue
eliminated above
SBA lending $-- $-- $-- $--
Electronic payment
processing 236,365 70,349 451,297 162,993
Capco and other 488,692 242,828 905,224 619,784
Total $725,057 $313,177 $1,356,521 $782,777

Intercompany expenses
eliminated above
SBA lending $161,783 $113,473 $319,896 $113,473
Electronic payment
processing 337,882 134,975 658,538 350,541
Capco and other 225,392 64,729 378,087 318,763
Total $725,057 $313,177 $1,356,521 $782,777

At June 30, At December 31,
2004 2003
Identifiable assets
SBA lending $51,546,653 $64,738,750
Electronic payment
processing 7,176,912 7,308,940
Capco and other 125,599,552 120,136,319
Total $184,323,117 $192,184,009

SOURCE Newtek Business Services, Inc.