NewtekOne, Inc. 8.00% Fixed Rate Senior Notes due 2028 Q4 FY2024 earnings call

• NewtekOne is a technology-enabled disruptor wrapped in a bank holding company, focusing on acquiring clients cost-effectively, making better loans with long amortization schedules, and gathering sticky deposits through the Newtek Advantage. - The bank's financial statistics were strong, with ROAA 6.3%, ROTCE 48%, and efficiency ratio 42%. - Loan growth across categories, with ALP as a growing component. - NSBF portfolio in run-off mode, but bank portfolio has new vintages at higher rates. - Newtek Advantage includes free services, insured deposits, and long amortization loans for customers.

NewtekOne, Inc. saw strong financial performance in the fourth quarter of 2024. Newtek Bank had a ROAA of 6.3%, ROTCE of 48%, and an efficiency ratio of 42%. The holding company had a return on average assets and return on tangible common equity north of 20% at 24.1%. ALP loans were $269 million over 12 months and $83 million in the quarter. Core business deposits grew to $216 million, with 75-80% of deposits insured. Loan growth and deposit growth were strong, with ROAA and ROTCE performing well, and efficiency ratios attractive.

• Bumped up earnings per share forecast to a range of $2.10 to $2.50 from prior $2. - Anticipates $500 million of ALP loans in 2025. - Considered stress scenarios for charge-offs, stating the company would remain profitable even with higher defaults. - 2025 midpoint EPS projected at $2.30, with quarter-by-quarter breakdowns provided.

• Credit risk, including potential higher charge-offs. - NSBF portfolio acting as a drag on the business. - Interest rate fluctuations impacting the net interest margin. - Seasonality in loan origination, with first quarter typically being the lowest.

Q: Can you provide more detail on the cadence of earnings throughout 2025, including first quarter figures and fair value options on loans?

A: Barry Sloane mentioned first quarter 2025 range is $0.28 to $0.32 low and $0.32 high, corrected from a typo. Fair value of ALP loans contributed to the markup in the quarter.

Q: How do charge-off expectations break down by vintage and what drives the loan servicing asset revaluation?

A: Barry Sloane and Scott Price discussed SBA loss curves, vintage analysis, and that NSBF portfolio paydown leads to servicing asset write-offs. Charge-off expectations for 2025 are modeled considering vintage trends.

Q: What's the denominator for charge-off guide, credit outlook, and how does ALP origination flow through the income statement?

A: Denominator is bank loan portfolio. Credit outlook considers higher defaults but comfort with risk-reward. ALP origination flow through income statement involves securitization and market clearing yields, detailed in Ks and Qs.

Q: Impact of selling Technology Solutions to Paltalk on book value, tangible book restatement, 7(a) fundings, dividend increase, and valuation?

A: Sale expected to be accretive on tangible basis, not material in first quarter. Tangible book restated due to intangible asset reclassification. 7(a) fundings discussed, and dividend decision is Board-led. Valuation discussed in terms of Newtek Advantage and depository relationship stickiness.

Q: Funding structure, yield curve impact, and approval vs. distribution mismatch in SBA loans?

A: ALP loans funded via securitizations, cash on hand to deploy. Yield curve steepening is somewhat beneficial but company is rate agnostic. Approval vs. distribution mismatch due to SBA pipeline loans not all closing, with liens, appraisals, etc., causing disconnection.