NewtekOne, Inc. 8.50% Fixed Rate Senior Notes due 2029 Q3 FY2024 earnings call

• Hired Ron Lay as Chief Technology Officer and CJ Brunet, strengthening the management team. - Reported earnings per share of $0.45 for the quarter, with a tax charge of $527,000 deferred tax liability which would have boosted EPS to $0.47 without it. - Return on average assets at the holdco was 2.8%, 3 times the peer median. - Provision for credit losses was higher than expected, but focus on risk-adjusted returns. - Completed a $75 million bond offering with a BBB+ rating. - Wilmington office set up for Digital Bank with 25 staff. - Progress in ALP loans, moving from joint ventures to on-balance sheet funding. - Divestiture of NTS into Paltalk, expecting $25-30 million in revenues and $2 million adjusted EBITDA from NTS in 2024.

Bank Segment: Deposit growth was 12%, loan growth 17%, net interest margin at the bank was 5.29%, and return on average assets at the holdco was 2.8% (consistent with recent quarters, almost 3 times the peer median). Payment Processing Segment: Pre-tax income for the third quarter was $5.3 million, with 2024 forecasted pre-tax income at $17.7 million and 2025 forecasted at $19.6 million. Alternative Loan Program: Had $120 million of ALP loans on the balance sheet by September 30, 2024, with a pipeline of 600 to 900 referrals per day.

• 2025 EPS guidance is $2 to $2.25, with a midpoint representing an 8%-12.5% increase over 2024. - Confirmed 2024-2025 guidance range, comfortable with $2-$2.25 EPS for 2025. - Anticipate growth in ALP loans, payment processing, and business deposits.

• Regulatory focus on crypto, banking-as-a-service, and funding. - Concerns about deposit stickiness and potential movement of funds. - Exposure to tariffs and their impact on businesses dependent on inexpensive goods from certain regions. - Historical concerns about bank failures like Silicon Valley Bank and Signature Bank, though NewtekOne's model is different.

Q: Impact of Trump presidency on Newtek?

A: Potential benefit from stable corporate tax rate, possible upward sloping yield curve; risks from tariffs.

Q: Net charge-offs at bank vs consolidated?

A: Different accounting models; bank charge-offs annualized, consolidated uses fair value.

Q: Allowance for credit losses outlook?

A: Peak possibly reached, expecting decline in 2025 as traditional bank loans are added.

Q: Growth in business deposits?

A: Driven by staff training, compelling value proposition, integration with Payroll and Payments.

Q: Share repurchase authorization?

A: Tool for balance between dividends and buyback, to be used at right time.

Q: Regulatory environment post-SVB?

A: Regulators focus on crypto, banking-as-a-service, funding; Newtek's model is well-positioned.