NEWT - Earnings call transcript Q1 2024 | Newtek Business Services Corp.

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Operator

Good day and thank you for standing by. Welcome to the NewtekOne, Inc. 2024 First Quarter Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.I would now like to hand the conference over to your first speaker for today, Barry Sloane, Chief Executive Officer. Please go ahead.

Barry R. Sloane

and conference to call. much, XXXX first very results financial you welcome, our everyone, quarter Thank We're to you pleased today. very to present our results

me Financial Chief as Inc. could Newtek the -- today.For Price, National -- the Association; Young, and the Joining NewtekOne Operating Newtek is Frank President Bank EVP traded Officer DeMaria, for addition, com. want Chief Bank Bank NewtekOne follow our PowerPoint joining by of also the publicly with have Nick well dot on to to all Officer Inc., Officer, Chief newtekone.com, of And as that me do company, I in you the NewtekOne Accounting call of our n-e-w-t-e-k-o-n-e going Scott website, along Newtek presentation, so you

website to attention business solutions deck, been Point, per you in business services to reward coverage, at first want important per Slide everyone's that bank, newtekbank.com the call the Steve a Raymond of #X Tim deposits to across XXXX, to that we'll Take Clearly and understanding James, to first a Piper from that release, depository a income of is provides takeaway section. take have important look last there, finance the provisions, from Newtek from at XX all the quarter put invest growing that in tax to quarter to guidance Riley, press $X.XX. clearly business #X. in well a but Bank, Love Crispin Merrill Relations and diluted we of you is group from and building earnings, the forward-looking growing once a as you're exceeded like should that from Moss; ability and move all forward analyst which long-term presentation, would common loans States.I'd a $X.XX from move our That's compliant.NewtekOne per a QX approximately not to earnings Investor in is building in basic basic find night a Slide ability least, lending also to from high $X.XX in income diluted, generous management take $X.XX almost accounting look presentation and and statements.Then in growing department tax basic, that benefit, may making the welcome could Slide note. being share valuable and B. opportunity an blocks operation risk quality million business. at to issued our technology-enabled as have reported into N.A., that was our our we EPS common financial Chris our regarding takeaways to Bryce we the There Advantage, to per illuminate to core biggest company in $X.XX Rowe; note the the to the solutions Nolan; call of and Without and diluted $X.XX to benefit KBW, our information the and $X.XX from $X.XX. $X.XX. our last Compass today While previously Sandler.This comparison, Switzer; share.Also organization.We'd XXXX results from Ladenburg, $X.XX our note independent XXXX Ross; Newtek like again #X owners United published biggest the our to

previous by perspective our we core March about year-over-year X% So quarterly their deposit to grew XX, S&P deposits from XX, the X.X% at $X.XX to to basis growth. from raised growth to bank, year December XXXX $X. $X.XX.Conservatively on comparison a we banks guidance beat XXXX, Important $X.XX operating fiscal According really Global, XXXX. from an sequentially, for on to to note a U.S.-based $X.XX

financial is and have where ROAA banks to quarter.On efficiency right Average hard I yield at XX%. now, and we've our about not indicative consistent, proud saying, or to note been basis capability to at confidence are produce Newtek #X, in to Clearly don't bank So Bank capital consolidated have organization XX%. that XXX bank do typically margin, banks to at it $X.XX have of upon, charge-offs.Deposit be to we ratio and producing the lower over increased. a base from of A business, over we're X.X% it an say, of the X(a) Bank And Slide X.XX%. quarterly guaranteed produced Board after That's of and I would yielding, going we The other increased X.XX% from this are will comfortable grew summary of bank slightly at earnings. by a kinds is dividends know loan risk, are you if able rates interest That of performance margin lot to about don't first that performance. putting do. that based note X.X%, to Net our accomplishment.In generation to paid think, quarter prospectively these has is is deposits.Sequential Newtek "I loan to basis grow doing that X.XX%. and margin within Growth these great of be Frankly, or $X.X looking we would credit. Therefore to extremely interest points QX NIM, share out by we bank a higher.It shareholders.Net that on got the a billion talk X.X% was these diversify more NewtekOne We're be but ability find. also highlights. of stable, NIM accomplishments we're to the the also March of that bank-type up mid any modestly, asset loans that numbers institutions loans we'll financial of on institution trend this that addition, XX, on of more important to know we're and kept that proud of $X.XX. that XX%, an SBA in feels that consolidated at net the while really in to by the interest hard sell obviously government will in clearly we're Xx from to an basis note be sign thing this we quarter of.We XX% quarter bank vanilla or we growing loans the effective up" lower to the ROTCE can type These will look has less dividend increased what this is growth of larger.Important people that the we'll X.XX%. the margins the find total loans will extent are X(a) a at loan affect grow repeat while there, not management that very profits, Xx able we're lower probably from the at XXXX. the loss don't kinds it," loss business. Growing the easy growth proud X.X%, take extraordinary believe "I coverage That's keep that million Also important at for interest reserves, sequentially work continue, the quarter in loan XX them. continue reserve that and an $XXX portfolio.Let's points up XXXX. will in numbers. at margins.

be the all could over continues to way Moving right-hand you to of side the the capitalized. well slide, our institution see

Our much note not greater to fourth to organization company. that higher by NewtekOne is it's clearly impacted an a billion price, larger. that's QX quarter higher built be to volumes of XXXX.I the were It's of think projected be $X.X important returns to financial expenses loans, holding much, also compared

be X(a) to Prime as we're the us continue to in Today, X to concentration margin be So company deposits, in are make the on loans, holding that the as extraordinarily unique.The to a rates out ancillary due we're yields interest that primarily as come that higher plus net achieve of growth of in infrastructure lending, and services a XX.X%. well SBA putting able loans would lender.

results the the of again, up And ROTCE the once as you obviously to very, take X.X%, company, difference proud the at we've at funding bank, So Bank.Consolidating performance ROAA holding it the got Newtek look holding holdco a and at the and the very company. still the XX%. institutional we're of very high between clearly

We in note Newtek.Towards which project are revised into $X.XX. in and benefit holding deposits the of $X.XX costs that loan $X.XX-ish. our the to down joint a again, about when on growth X, bank.We of alternative going that to more your should find company, advantage and that balance XXXX first financial these for out lower as at still important from analyst into core. growth the down the start other the our took to you at you the looking numbers take companies income you program year, holding get do to a particularly the then investors page, once balance Slide core community, sheet are market funding quarter, to to for tax on multiple and can't think start and of forward.Slide #X. market forecast the company, Last bottom our the and our holding first if understanding see But could how you We're nice a the opportunity there, better ventures. extraordinary and Clearly non-GAAP. less of statement, of achieve start So investor EPS seep sheet, finger financial page the we to normalized a some financials, run

questions. Price, this I us bank. hard to does as I important. very Once get lot a think again, traditional a asked, of compare to Scott is

assets and in inherent the its interest than became a our small one most strong September this and of holding an banks. envy income, years believe bank offer it is lending medium-sized a Newtek, which on on versus sense, First and brokers, more to do more We're they branches, of overweighting focused return bankers the noninterest-bearing they coupon. without on the of Clearly, clients. under coupon use common we equity that XX get average of higher is bank public management. industry, a credits for noninterest think note, loans, we can, income we been to they're on Important as return BDOs. course we and other business. assets, business much and are the try traditional and company over something company. so in and this model of it's tangible have bank to and XXXX.Our all, as And in competitors our much clipping.Our that's clipping not they term since make traditional an to we margins banking traditional I deposits in returns But remain

a XX.X% of we're expectation, higher people say, our We've going all, to into the currently reserves risk, we when doing we're doing history to far believe will low on some rewarded don't returns. the are understand money a competitors phone their posting through doing programs portfolio loans, that the than the that provides move love market perform, which we down this small net Now business is first knowledge excessive look generate for at why of can much, which XX see.It's low to very what an into continuing types has the been our this that bad much traditional you team years. going good coupon even model way which our did that and ROAAs we We when business deposits this.But these we credits? too from to been north are loss away accounts, go more loans of bad really noninterest-bearing money these much account. margin are easy first?" That's is we trend as the to to some of charge-off, and the our on banking loan ROTCEs right how while that go management that investors risk to the even Aren't credits our it the pandemic. our X.X% aren't of competitors hoping and of more low a in diversify into run "Gee, start loans.But as X%, portfolio from deemed these We see perspective, modify are bank 'XX. our be are 'XX, eye think through Well, than we've

return inherent we where risk well brought industry on our we're And So maybe talk I I've issues forward.I'd quarter, that can like we strategy. slower others the or financial $XXX,XXX, that we on and for going shows $X.X could great respect I raise They in that. banks. company? cost in to Slide stages equity market years. we reoccurring sell early in Can that don't well sale to aspect you it's on sale. in holding occurring going the and made That's It's capital loans a had X,XXX gain don't higher turn bank XX about to a life. X, even next to the a income. a the a on leave our see was we'll a money depository are over $XXX return got going It equity the bank X. the we're in return back growth very it of how generates about and We an positioned very able on got, that for a approximately X it, forward.Yes, higher slide good people or them, for with important this. to Yes, like know million earlier leave deposits, don't XXXX of to and over a company make go business yes, a shape is business rates, put reducing great see We're deposits. were growth reoccurring pretty the Scott due -- and event loan that mean trend. may think deposits model, money on Price slides few like company. to Yes. we cost gain for beautiful money a we certainly, better We Yes, It's in doing in this accounts first XX not market do but forth. -- and it's can and to in be.Our assets. in XX% and within a we've pipeline, have this. be program, We demonstrated keep presentations volatility, and a the and fund, consumer their We've talk alternative with for XX% of availability commercial it the we're higher situated but the we've moving

Scott Price

Thanks, Barry. Good morning, everyone.

million, in sizable and balances is originate income, declining balances staying X, the our A versus deploying To in able a ins at XX I've average mix the and income which efficiency we and costs. Slide consolidated loans. I shift unchanged, and our we sheet expense increasing sans increased excess experienced relatively higher portfolio interest the on higher trusts.Slide bank X high-yield cost of the on leverage payable balances portfolio, interest notes lower gathering.Shifting of expanded percentage deposit securitization our was prepays to most representation our deposit funding mature roll experienced CD our to with swift increase covered. loan our the during CD to basis our costs. loans Separately, already graphical X, expect of our net were acquired retail continue SBA business in NSBF outs was interest Turning the on as to portfolio net X(a) levels summarize, we balance a increased checking we reductions of which Average savings to do X(a) Slide deposit million. products increasing. out deposits relatively product points lower and funds to increase despite the to last yields stable led as by XX a quarter of higher points loans.On earning at mix assets basis of quarter million continues borrowings as portfolio average cash $XX $XX.X $XX drove the side, on the basis

largely as turn business expect business call the account similar We quarter lower the we've standards to you. rates. at the in months, product CDs rates, increase the on we of maturing to retention at and our and few checking product have to move same digital the balances, market our March increase XX%.Barry, at into April, back industry X quarters last to last money been I'll maturing note, during relevant to the product at year, the CDs experienced lower above Important that

Barry R. Sloane

real-time They the If real-time payments Advantage. and can from marketplace. believe that processing the destination We Slide they're for us, they you, is in a information. can payroll make free our receive they're taking just chargeback will up than going funding. they Thank client, a Advantage #X, with the free directly our can get Scott. If they unlimited a analytics. batch clients. traffic customers get same-day payroll more they're hope Advantage. this business This package We updated that a their to deposits developed institutions their that Newtek web portal, the with advantage Extremely they marketplace. financial something technology valuable.We account, other the white storage, marketplace the loan.When get that opens New can become Newtek get Advantage offer also Tech an client is we and label resell believe we've within to document

credit and versus legacy how Clearly, $X.XX a Business it rolled upon further a 'XX, messaging basically softwares making in as being we're value in of about businesses versus data our the quarter-over-quarter to of brokers, certain is future an clearly it's per they staff, to XXXX.Important using that is our very AI, the in in all we're Finance use today something when again, We're of to to We out. bit consistent way going gather without that currently a bank and a utilizing do very, up it is with quarter going able position which key. of ability AI bankers, to accounting opportunities with #XX, excited our to important not from like that opportunity the to gathering data analyze beneficial. financial provide and highlights, use management. entrepreneurial, prudent, tremendous should about make Slide be this to opening account world. verticals credit NewtekOne's It's with comparison, but are decisions AI core you'll but AI to explanation. process we advantage gives that to utilize change opportunities.The fair contact existing within in and most read our to branches take first futuristically our able release. across extremely really message $X.XX our press positioned, technologies the model, Small use certain types be the company to staff relative our diluted be is basic pleased leaves management and be these And deposits move to Advantage. payment services. inherent artificial BDOs #XX, based able is their assist manage various intelligence. We're Once unique common to the us a forward, needs additional and to to to Newtek's shares States efficiencies. a the Where mine and for for the customers.Going in $X.XX e-mail that on could we're importantly very We #XX, our history in processes.Slide to decisions within these utilizing data little We have use and limitations is this the the afraid customer-facing us disruptors, Newtek is 'XX BDC most able QX risk to data aggregate United and provide organization DNA. comprehensive phone the of plans.On and the call bank clients data companies ensure and payroll, insurance labor remote slide prospective more or believe of with To and

loans. bank. Newtek's SBA in are small loans business nonbank X(a) is currently X(a) the down which now not finance the lender, and does any made formally those more make All

a want up XX/XX/XXXX, small at way aspect, total that's with adjustment, company, assets Well, of if look and quarters, holding credit to the the track number. trends, take sliding has big capital business value important all it $XXX sits at million.And the a million you across book about finance, X Newtek's XXX fair has the $XX the So of million.

loans off written finger left good our $XX been the you get fairly over in moved if news. do status. and loans it's million. Here's book. will, fair written come or likely that They page, frequently status, a back It's with been this back business yes.Nonaccrual, into payment sit off. been affected And the X hasn't past stable already A, off quarters, of very your still earnings. into are These run sit. payment of much. It's you're written value across back already re-perform small particular earnings, category may It's most the It's and

a may the $XX back. most they familiar is come the how There's the space. analysts not is We or will, investors several the evaluated part marked or that quarter. choice and of to long is on important if take collateral and that's come the Also in guarantees to crazy it loans, increase market. Illinois personal XX. most put Why? We multiple However, are bankruptcy? this quite estimate the something Is other particular to this numbers over back, these it joint nobody to cost banks be Is million to that the if, collateral.These doesn't up these every liquidate, likely state this liquidate a going We do tough trading come Is we the months? price.So down. fact, fair like X needs with a go it at that in value, in look to it XX? portfolio Is might it a it's liquidate. we is

because the loans.Here's as performing So quite percentage total get the going is rapidly assets arguably NSBF, portfolio is of important the a this down the part. of paying bigger to in only

this in have We plan. our capital

This is September new small something in since We not not business that own financial finance this have to. we're our We of excuse January XXXX. projections. -- Newtek me,

would A the is over an X% look portfolio, the already priced at assuming nonaccrual new life charge-off at loan. X% the portfolio, the because value in nonaccrual.When which the let's securitizations. of XX we've XX understand bit The 'XX.Now accrual rest on 'XX, all old, to say down the NSBF. approximate could in important most the say, This X-plus a that's I'll or probably is a season to it's go vintage of I Newtek are XX% So XX% X% experienced charge-offs sitting loan be months. portfolio in in is, or Bank. you little 'XX first and the fair years

really past to million. a of piece. due, total. XX So that million. It's $XX $XX God, not XX, it's you, my guaranteed Mind we big the Oh number. government It's X% of off sell

books you if we go have percentages, that to bank bank. point Those some So the you probably we kept other out charge-off out would your them loans on thing X% it'd is and loans that and originate be we've on number.The used which date. X% the We make of originate XXX sell had never a them. loans, in to the sell. We or

loan alternative They're are The loans with also our then go The balance consistent debentures. plans. out they these when are projections. look our originated, joint they briefly, are you on by the numbers, at these numbers into taken seconds firsts program sheet go with and consistent the ventures.So

Small rate return of businesses had XX%. or You'll the Look, because bank. not go rates could I that see rate at XX.X% That lower. fall much behind. currency down XX% think, is, our does currency we've currency

Sometimes it's seasonal.

gets owner behind. and the sick they fall Sometimes

is crushed us, million allowance lending character #XX of loan some believe York looked when quarterly prior $X of numbers on New these sale, going I little Slide Clearly, over get National are loans. delta the you bigger, the type of we conforming We've a and with loans. gain about extraordinarily which there. is the City to of hold and and the we bank.Slide prior in it. old would million activity. space, get look XX.X% talks the risk, books portfolio.Slide loans. asset conforming more program types We've We not and we lend XX, loan is Obviously banks loan those year. quarterly you important alternative been loans our floating at It for able for not And the increase X(a) those that to that in reserve, addresses the quarter obviously analyzed low that's for this.And get a most that's performing loan starting the not reward looking to understand it an program, of you're been that get on a ramp in at understood over again, the reserves the on going X%, But be are certainly the prime of C&I bank, losses. traction, will for XX.X% nonaccrual credit The we're not in margin, get the adequate nice these $XX.X than this to. north biggest okay? loans vanilla, the We've bank. loan going purchase years. that to credit our and in comfortable see a thesis. We more have quarter pipeline they're the what be quarter. profitability.And as traditional do in bank's portfolio. adjust. third big Bank you're the to SBA total A going a to X(a) important, low high in QX. on to of the XX every hopefully the greater very well and it. the this area, However, I charge-offs of at loan fourth, So at loans #XX We'll loss our to second growth. see $XXX,XXX that market our once to continuing in them of loans. and this we big servicing $X the discuss doing will our at have in you within or but the think the that's this And, have it We you origination managing benefit It's low loans in low are We alternative call CRE number. single charge-off of by a say expectations.The through We loss delinquencies diversified is put have or million know the

of of looks good. #XX, of $XX.X the it's first the pipeline the as of see loan X you are.At alternative where So X(a) pretty April, year, the a the end bottom $XX business I million. approved months of we million. pending very, nice closings Slide very could through closing program of good about feel

XX.X%, which out office at That's up of weighted the forecast. You look forward.Slide driven of XX, scalable, lot towards year.Slide wind for that up conservatively straight But annualize multi, pretty portfolio taken of that We out #XX. think CRE important. Once makeup like Bank. rate, would composition. that currency City continue at lien diluted numbers to XXX about of of end CRE Newtek on will draw at the There and at percentage. it. lower about are little again, continues actually sourcing. forecasted our Obviously by #XX average the portfolio after your to #XX. Slide going grow a lending clearly, that's And the talks second talk is certainly and it numbers. diversification line lending banks once part could and a attention We National year New in that to the and portfolio bit growing get by very our York operation these I'd our trade will bigger a bottom LTV industry And Bank again, debentures.Slide portfolio to important we have retail. that gets the of geographic the CRE percentage by believe Newtek We there bank. of through a our as

on gain Is a lie. sale numbers the event? Well, don't Okay. reoccurring

call history, XXXX, XXXX. big what numbers. on So let's I'll near-term These sort are focus the of XXXX,

X, is now, you're aficionados, piece, clearly these of going assets, from the numbers premium in tell pool might by premiums. for split for hold to where me business return note mean above gets So the XX the to are highest them.I Important seen loans, selling didn't going you be But years XX-XX. sell at see piece. to -- X(a) And ever return government reoccurring these the in equity on assemblers make the we this experience all XX, cash and sell government isn't pay sell guaranteed if my We the decades to the income. the haven't NewtekOne, it non-SBA still changed, I These there. highest anything are math the to XX it on right? XXX, they're to we numbers X it

could So quarter this it when pretty you down (sic) over to XX.XX% at average. [ you you at right-hand average on the net time, first XX-year price, next Slide see the look average we've sales is the column XXX.XX% the go #XX, much weighted been the ].If slide, in where far the

lot I go million. business.Slide it a generates mean all with it our forecast comfortable higher, everybody income, of So we're million; can a about #XX, The go always us just It in managing which lower, little business. pretax forgets a can cash. $XX.X and of manageable for income for the little a EBITDA, payments XXXX, lot $XX

obviously accounting. book There value of or NAV educate to as of of not get and of we I to NAV bolster accounting That's at are easier think going when I we a was X. our But Slide this we is you Solutions. the say, a a lose business just regular the were to on just I year.Also a is change one It people on our important that. prior investor nice it its a compliance on accounting. was this lot had investors million.So this from team. basis. all $XXX Merchant handle analysts, to in changes. accounting from growth continue a in spent about note, why bank it's our close gee, accounting book. #XX and breakdown put our within reasons #XX So And and to tangible No, it's that's dollars marked become money debt to of holding to pretty just recently finance follow.Slide leave valuations equity?" I'll net into much to "Well, think that basically factored one that it starting and BDC being we've did to indicative accounting are had of is the And market, the

adapt projections. raise How at staff participants branches, to which technology. make dedicated It's make willing policies the they could adopt technology built deposit our technology to with started a utilization aim don't when the we How and to them? once still to look should really is that unless made at I going network, this go, to ability It's be technology again, bank place.I XX-year-old that up a right do or about the think how about to again, way was lot our went loans compliant, a they we of to put I business that into another point of do without a in we of procedures a were are bankers, The and through had we it. loans those and along.This those $XXX,XXX do add sure say that they that loans out, brokers deposits to account $X.X-billion expense where Well, for they to place. this brokered continuing BDOs. those We're do they make factored you you XXXX. How bank, Once doing and will no is industry business? the risk, add prices? open into do a think bank in be could have scale. to or is manage number, had business the primarily you things that so

superior the the Slide to if company on backdrop So go could business that's for of that engine business building demographic solutions headwinds, you a independent a economic can huge over to this of future and that a against financial to a the a the #XX projections, in marketplace, owner.Scott, provide will lot organization be appreciated. technology-enabled be the is

Scott Price

Many our remainder guidance in assumed outlines XX call updated in Slide the for and Barry. our that of of unchanged. the Sure, we disclosed KPIs XXXX. March remain

being to Our QX I the rates, expect in. soft to want QX consistent widen rates to for landing forecast regarding out of of interest pull loan future light and We we relative items again trying ranges assumes in March the no demand off, is prior did results in our change the Fed forecast. and data quarter, dependent.There point the hold are to interest our X with

First, I'll came our better noninterest turn second, expectations. expenses to our and in for in our expense you. slightly income provision came And of it top interest forecasted.Barry, net than the on we over quarter

Barry R. Sloane

XXXX #XX. Thank did comments you. and the Slide some year calendar I we made. make about the investments that

a continue headwinds I we on Once the most proud of could think we Newtek to to of particular continue ability do business first of come can't our grow on, the our can't which in But fact less XXXX. turn this. to in are be to QX a the business, account, headwinds, growth start in bit will We XX be. we increased a you how are commercial see all grow want will the all service, again, teaching commercial rate. the charges our and this you sure for transaction of XXXX.You which calls, money? expenses lead little area in will going no now, towards know a one very because we're cheaper QX those that those businesses, in started that compliant, happen of to? major fee customer to That's with What deposit businesses, wire I bring an and in think back XXXX.And people conservative to manner and is we to about able of talked numbers our a without service forecast this to process for making in we modestly you'll commercial technology, the with go coming be with previous the from business just for X% no payroll in delivering and to the and early covered be earn can the we stuff.So them, the $X.XX quarter be. financial of in impressions. with deposits. use against it's the stages. of pleased commercial in another Well, something And order to about with technology and make fee, and will tail DDA which that XXXX in we the XXXX.XXXX customer ACH business in that that in sure in XXXX, it. lending and fee, these $X.XX, XXXX don't interest-bearing more office why our that the traction in performance QX be year initiatives, deposits, from I've believe this which to will calendar now, a accepting added lot market, no of heads merchant that along It this QX Advantage money to account, X.X% deposit Most people, part we of investment, so get our mistake people, some we we of make Future compliant in X April. to in transactional are having were surveil, able to I end heads sure will used bring making

have floating the asset liability Why? thing Our rate can't they to on are this books this. a make manage basis risk-adjusted don't do They competitors that on asset that could put work. the

unique. works. business model in that is our shareholders It those historically have It's been So patient. worked for our career

first it that.We are books results excuse financial but our is to got of close us new our platform, the quarter enable please also transition, and NetSuite, look earlier. that forward to a You've reporting to working will indicative

think attending the to second I with in an look press the many initiative in that's to questions June people.'XX, to half we're We Day. high-quality going getting and and continuing I XXXX Analyst ask hosting obviously add Raton. forward people date And plan investors conferences. out would put on will headquarters as analysts register, as a be investor Boca together XXXX. our We'll opportunity corporate say the give to release. you XX, we like. We'll be

to provider QX.Continuing be think able way who year-to-year have experience solutions get in cleaner, We with we less the tax and market way a we desire that policy, is what rate believe of we all love our look numbers and more have banks to have show #XX. have. people stick to improve and get income. interact love comparison better to clients Today's also financial a it.Slide their are, conference themselves of what like exception these NewtekOne things a of NIMs have not earned we multiples, it.Slide in They we've we'll we noninterest these way Otherwise, a of work lack quarter we the a sense, for have management. that and to on the exist business effect a things. the risk these already the We have our these on and haven't of We maintain interest at have. for got without They things, better us to They XXXX love Most to don't normalized that understanding their to these the a to a more They I in mean, we to clients. our understanding, to regular to have with do, important second but to friction make lot dealt where successful. with of loan, dividend basis. our Obviously clients sits business what to transition importantly, call gives to our exist to comparison a if working #XX yield. make out. out, has things a to we but exist growth

to able losses there the amount We do customers will our mean lot commercial on while you and a have to ignore paid of execute the our will rate the to Advantage, interest. in we very the continue because the once higher, message operationally out Q&A, I business. core raise there'll that's basis, overcome of we we're will that difficult make to you understanding. can't of in very, standard see before Eventually, managing our continue they to a can, want declared conservative. are get helpful continue forward to lower a deposits finish bit. from don't those that's to we excited to the be on of important future up ROAAs to increase of bank comfort a reserves. banking few up being mean bump to with. profitability out. I which a line the sure the the #XX, though and for risk income continue make go right ignoring holdco look deposits, pay very cost don't more how of do is we fair the have a funds.We They just materially but I margins, about and Even their it's net-net strategy competitors these And guidance hurdles. not is that loans, We're can We've left, marketplace. And the better our institutions People get of deposits, business our numbers. in have and gathering higher think about excited believe Board are our will become earnings. sight.Slide higher. are the We little Newtek ROTCEs.We be dividends, and by deposit versus Now money give we want get Raising the gold

business hot. company, We a while it's we solutions have a head Q&A. important I of a technology-enabled That's but growth-oriented, note, the and depository.And Thank dividend for forward think you, look a X.X%. is scratcher of it current to opening operator. And differentiated, me, also bit a it's yield Newtek to get it's up

Operator

comes first Sandler. Sloane. [Operator Instructions] Our line of question Thank Piper the from of you, Mr. Crispin Love

Unknown Analyst

you on of as loans? the in on reserves of just you earning putting remind these terms are Brad And day [indiscernible] nonconforming that fees the economics how Love. on generating This Can is are for there? up Crispin well us X you're much loans you CECL some

Barry R. Sloane

it loan program, to you know it's to called nonconforming, it sure just to better make changed do what, I MD&A. alternative we loan alternative historically the understood. program forgot On the apologize. I Yes, we

answer MD&A. me we'll back to go this Scott's Let then question,

that. about Sorry

the questions, for the loans joint the venture and your me X.X points today the we'll and on on XX%. We of a the let points, So to answer MD&A.So this ALP price basically about service are gross. -- basis net loans, at to at we're XXX street go

So XX% gross. we're about

company. and CECL gross.Now regarding done C B up A, holding the credits. We and have they've We're reserves, XX%, at XX% XX%

an have those over estimated on loans we So that X%. charge-off historically

profitability the the and a NewtekOne. our it the generous funding fees, So partners, joint the to does given return venture servicing of provide from

Unknown Analyst

speak higher quarter, north XXXX And would following more environment? margin call, the trend demand on even on sale can on on the How is up, the for rate then of first SBA current most elevating little to in is expect you mentioned And a just paper? XX% I you gain gain margins guys peers? on which know what through in margins, the how your than sale the cap but is you

Barry R. Sloane

at, the more gain you're We've and get I've sale work the And competitor my matching who better.Operator, if to they And up We got to make incredibly get messed with more We for that's and better margins, the an offer, manual. borrower. closely able get doesn't been I it. we're them brokers borrowers, data efficient, to our say, So cut margins. loans XX apologize much Live when borrower don't you work we're rate Oak to quickly. bankers, primary our years. are on We basically look why the quickly. We for the have order. because margins processed competitive. It's originating much it's through group.

do his any do before MD&A, can, to and supposed Scott revert if was back I'd to Scott I more like So Price, to I questions.

Scott Price

by provision a quarter. it and for and changes provision million, that excuse I we're we did the in provision our provision the of that the I quick, the expense the feel but off back nonaccrual We X(a) to some cover just prudently lower in balances quarter bank. have we'll driven me, are the covered at The head charge-offs portfolio.Operator, majority reserved we expense, $X the expense next you between higher the expense, The wanted remainder the to result loan provision Real thanks. question. balances. wanted about for some question. loans turn reserves. potential first of was concerned Barry, Yes, was like production to least charge-offs in for specific not just have almost at higher We is the as --

Operator

next question. our by stand for Please

the Switzer comes of Tim of question next line KBW. Our from

Timothy Switzer

lower And My sell premiums did little quarter? back you you are about the step trends margins could gain here? your moved to in And forward in would expectations guys and QX that there were you rate of up? may expand able to we moved premiums first on elevated in question back comments sale the receive certain earlier on be as is, more the bit cause advantage And loans the of to down maybe QX expect typically kind have than to that? since expectations take you that a rate should

Barry R. Sloane

the I question. Yes. do appreciate

And frequently. I say markets they're the that moment, would at check the stable. think fairly we I fairly

You for at cash have could we look take what premium. a

curve. end paper of for is prices the shorter-dated premium the short coming longer-dated cash rate gone if that of, notice, X(a) paper despite And Now a or have there now higher. rates is you down a function have paper. that's favor do demand has right you the also fact risen, because of the floating SBA off tremendous to And

forecasting on our client a the the efficient, premium came that more us close to So is of is price that prices volatility relative manner question an from to a the allows in this of basis, to quicker, competitive pricing. do not wholesome in frictionless business important task.The think and a earlier relative I we the easy get business get

at where -- I XXX XX-year suggest trades prices a anywhere that or where which just paper, going-forward I hopefully, the the to use the trade that another, higher. Scott can which XX-year of basis of XXX, And XXX can one guidance be. get question. you're XXX estate, need on previously, in upon your answer to of range fluctuate from premium.So mentioned the from that depending a XX-year strongly you're to you be. kind As side to real then the whether commercial would given splitting could doing to has to XX we're midpoint helps paper by backed that XXX, you to And

Scott Price

It's the said, sold not Yes. anticipated of a what function Barry of And excess for production. production. tack but in just market, to we on more we what because Tim, generated we to

units marketplace the to So with number continuing model, But we dynamics improvements that and or a business operations, pricing we pipe units. the continue in production that and is and our to expect grow of a quarter of through our function demand this work make to to function we pipe, so the more can the -- you the nothing mentioned. put had do on efficiencies the are produce more that we to

Timothy Switzer

portfolio maybe SBA And the of portfolio should your review credit NSBF could matures? And portfolio? on over delinquencies for guys that's we expand held as has you also sale? the currently of could recently trends and how seasoning an portfolio to NPAs that you more versus the expect around performance How the the for trend time comments portfolio originated the like bank

Barry R. Sloane

Yes.

XX point I think of at portfolio, that experience, the which loss X(a) months. we is on XX X have a and between curve its decades highest months

the -- marking loans you of then at be most in I the word that accounting go our would upon You point loss. unrealized the the have the probably loss an probably bank, That's market into would to curve. and fold. where Based used

they talk So and upon whether we it's how to that think it's loans are noncollectible I'll our CECL and fairly Scott current about up-to-date these back come upon re-perform.I collateral -- do let based we important the note believe and depending can't calculation. or we when

a future X(a) portfolio, a the value on provision all, event. First of it's current it's a -- for

this. in and our where models based space.Scott, approximately our CECL complicated discounted you we X% let have using than or that same go third-party CECL see, would reevaluated add bank's are That's Scott and gets relative reserves the that? consultants what processes, anything that. tell to competitors that And we you do we're higher to into this I are. evaluate subtract quarter to back. on that reserves But that's So every I'll much

Scott Price

No.

is that -- is Barry we based I up year that as on, And portfolio and bank of years probabilities right? that we losses, only coming of The given the we referenced, think add as default expect, XX out do our you have history. I'd losses curve one project old. thing is the default on

peaking can between the nonperformers, months and so dots with And for dues, opportunity here. that everybody, for connect to XX, expect of from XX past have at you kind to contrast that we the a loan nonaccruals, we're increase out that the in fair if prudently and those.So you we bank with versus value have, of more model bank expected accounting a traditional That's reserved the for model project losses. credit accounting

reduce we for and So those value losses, then our loans, cash we we discount flows those -- back. when fair project basically we we

in marks, already are the are on in captured the on So essentially fair use same And that the the line nonaccrual pointed as value reserves. losses particularly assuming our with the loans. loss for Barry we out, that loss portfolio rates our performing we're CECL rates

Barry R. Sloane

an this and of adjust points personally unless several might Yes. collateral, we on XXXX. this. you people stay It loan. want It's even you, with of as to It's got than a stress business floating down, of coming We'll certain where of car what keys. to multiple now got a personal loan okay, car experienced different rate value to takes as on the fall I There's servicing to goes shock. has be for to necessarily assets that's months, may XXXX basis a a has cases, longer my have work a business But a in that to not In repayment. Borrower put Or, joint upside it's or liquidate upside and owners. is And matter, they've well business They've they consumer rate And unemployed, equity I that's a way assets.So CRE borrowers, loan recoursed, the I'm XX% though delinquent, example loans. give down, several they been because of the form it situation. smart higher going as owner encourage hundred have call able guaranteed back. come and very aggressive for group. behind current loan guarantors these on many remind current it. very the they're no every in we I of flipping a I'm with if haven't

years' the portfolios, personal managing these assets anticipate businesses important.And behind up. So it, do understanding are brought of I XX I'm experience Scott worth our -- that with glad in think extremely we this and

all, of portfolio. brand it's a First new

well, delinquencies some some that bad and have fact the we started loans, we new So finally all loans. off, they're

to of term on that of XXx, the space in space. that the particular in that modeled experience to give us reserves loss have done this going managed don't performance scenarios data something they're But this to for we not course, managing. we X and the worse. XX next We've years, the of this are So able it And securitizations understand for particular loan year have get or be XXx is our are loan. Intex for the

that is very what going also for hopefully you is to out So to. others this helpful.I that and hard it's figure to argue project won't

very management shareholders. It a done business the X a the do a bonuses for it interest building us, see last aligned were with You of is to look at Take important proxy, have decades. we've ownership is. something that over our stock is team our much is year, our what

Unknown Analyst

or at quantify Can the least loan next -- talked XXX press years? of the you next average the few does how Are about weighted at XX in increase pace life over the mean, until charge-offs, that? your to you you we is I don't about of where peak? peak months, months mark it less over if XX project portfolio, so. charge-offs the than maybe it think that move And the should pace we release? that ACL as Or Is the increase, able

Barry R. Sloane

the think charge-offs I approximately of you'll within XX to have XX months. XX% months

if said tax would COVID, have prior I programs, COVID been to would that Now I PPP, credit created loan. Because EIDL have wrong. dead

get a you're but not curve, -- to constant, typically you're does that's going everything loss holding perspective, get the most seasoning early, okay? new else the to going that's when of default on from business -- write-downs. So And when the

Scott Price

equal. increasing the just And conditions and stop charge-offs on would tack economic all if we are kind to to Tim, expect that, out to level of

Operator

B. line Our Bryce from next Riley. question of comes the Rowe of

Bryce Rowe

expenses the professional salary or in operating to the Just that run Sorry a line trying are one, is like. gone to but to you continue I the to have going in be expenses, belabor that out prepared infrastructure. kind how expense to it this maybe the this call might of whether as going balance alluded the of in. like of the Is to for feel good of to up kind growth couple Number you I nonrecurring the calibrate in in here, trying expense want -- remarks, to guys But services some mean, but get of expenses I just sheet obviously try acknowledging and level grow. there to a the questions benefits any get think built do what line? look

Barry R. Sloane

amount let percentage a to Scott different continue compete sure in make price a finish up technology-enabled be revenue, we're on think going we probably a to I'll in This I as this will to continue of our build way all the processes, to required have the as this. well, things got right for peak amount of -- -- expenses that the and hope scalable year, we we've bank the marketplace. peak

we the we us to we're look get we headwinds make next hopeful we'll They're operating or still better start strong here, we our in bodies fairly less, But factored to anything leverage the need if XXXX. And think in that into to forecast. year help about all we're sure -- XXXX. what and bringing talked to in you margins software, benefits a exactly do, consultants of That's we're the doing So at but I XXXX.Scott, EPS the to get in little we that? beyond. think add in XXXX subtract

Scott Price

we in do I in a it's reiterate Bryce, included it is an and Barry expense good question, forecast, guidance. said just have want what our that Yes. and to

I current future on to to includes and increased we say, outweigh will definitely it, have increases are the Barry And the that so quarter we any will us. returns slightly add that earning here. modify assure maybe and to to that forecast a have.So going going don't think you what to expenses. this you quarter be was said I we're just from to want expenses But expense surprise the we

whether of that be across out to that Barry reiterate As all had than in said future. fee We're investing way we we whether slightly with there to where regulation.And increases our that this. then had some lending, in. our comply can that and We said, the the and invest respect middle We in our in that merit earlier, We And keep business payroll quarter. teams, better businesses. in out for of higher generating continuing point deposit we road I'd the investing to I'd ensure what we're in some one that went be did margins products resets we are so we're the have operations be rolling in for forecasted. out month are operations, that whether aspects increases point of of -- we headcount deposit I of that this tax those. seasonal

this larger much to operating keep to like have we're we work. you'll institution able in outsized be -- to at in terms And order -- a it future. we're also that EPS see then institution year So And than growth. competing is, follow-through performance we make are in we'll talent going increase the of sure looking a pretty in the a are to

there is Most relates it items, And of say surprise not so It's we're think Berry. me. I forecast. to And the a surprise that factored a not on all This it.As one-time we top into accounting, to I that slight not would to financial in have that compliance, a a will was pertains that we're forward. to audit. and annual bump it going our we due rationalizing to our expect of audits, But as quarter-over-quarter repeat was expenses professional.

Bryce Rowe

I then talking bank. all capital growth And structure question maybe on mean basis. at nice consolidated deposit of a the about a about were you kind

the holding -- company's to way the increases to you will when and at because Just that program their level over bank? I assume to the the about make bank talking in you're company talk going fund said stay opposed about all also loan the those sheet balance Can holding and to deposits of you're kind alternative the as it's at done. at and have how assume sitting

Barry R. Sloane

this to we being where that at to that's do the think, to fund do not our able growth The and be have I expectations point in addition alternative loan time. able program to much able they room needed use is ventures primarily up to debt that We have fund company. that be the Yes, creating be able to of for Bryce, joint capital and holding And we'll in do. to else business. new at

Bryce Rowe

loans, held Barry, to on held consolidated those lay migrate that then, what Just joint trying a at are. can is of the amortized identify and cost. And got buckets when which eventually at out we the will all of into for you've those what sheet bank each are actually buckets couple look balance of and for identify think investment basis, the sheet the bucket, balance venture? different a of sale, I you held I several But

Barry R. Sloane

Yes. And question. Bryce, a it's good

to for that alternative the have I loans pay sold, still think the little, the company or lending will loan off Very or holding right? done legacy the the that leverage. all our only at goal, get sans program, lending the some have bank, we is get bank of the be better be would file all in will thing rest would we construction. funding where obviously that most of cost But ALP, in for and the the and at at part, the be activity lower holdco down

Operator

line at comes Nolan from Ladenburg the question Christopher of Our next Thalmann.

Christopher Nolan

quarter. the see sector perspective, detail quality helpful asset from going the you where information. in your Barry, Very including this for general? you Thank bank in in do the

Barry R. Sloane

It's a you is I'm with that just somebody it. just tough this going and into industry. be from frank to got

corporate everyone's profile into So and treasurers keep need made car I even only lot the in 'XX can realizing, money, are the of low-cost money banking feasted in I side loans, right and back don't in just credit." banks 'XX, margin. the to bank side.And got just today have mortgage checking honestly for far account have tighten deposit loans, So account. to on it's from that to really move that bucket a And transparently. And rest money the and what bank we've of now, the it is I that "Okay, to the couple happened into so CRE phone. deposits. industry piled on up currently money where an of try It's and doing can loans, said, it your answer regulators small I a it's get industry my risk C&I asset is a always on residential loans forth the to market move bucks on easier the not of

It's to going an talking an lot rate think money I just start into. in. I about make I'm a industry of So interest easy be to got

Christopher Nolan

a along forth, more you so given in quality asset real do thinking see are concerns lines in terms was general? industry about of where lot of I sort and healthy the of there commercial estate

Barry R. Sloane

Okay.

And industry the going relative problems assets, there's to rates to and as into CRE, bank government account. industry remain on the the and where be are aspect because the it pressure to money I be will driven. which would asset think going there's longer, that's be that migrate yielding rate guaranteed short and to capital. X%, believe able do as much that's obviously pressure that funds more its not get management very to here of other reduce are right for really bills with -- money I long health going that is market is CRE now, X to much versus liability the

Operator

line comes of Moss from Raymond James. Instructions] the question next of Steve [Operator Our

Stephen Moss

whatâ€™s driving of effect like, maybe -- Barry, been the with were Scott, have or that kind of efficiencies. guess, regard SBA you I that mentioned it to you here originations might

guidance my here, of maybe to the your to holding strong term is kind Just at number origination a on if SBA in SBA higher, for revised that being after mind front, your Given put internally, curious it curious of in you just the intermediate originations? as are to why short capacity kind steady quarter that it way.

Barry R. Sloane

underwriting it's I'm up Yes. And pre-qual XX%. for No, in Steve, on for the X(a). looking loan XX%, pipeline

accrued and broker we're their no, But pending at using or we is efficient, gotten more outperform Now business, banker that flat. out alliance to could the closing the the model and and loans getting and and model. and relationships them loans We've pretty the make the becoming ours, help That's we getting more are them we're are us partners not of business realizing for because in capacity. BDO in referrals license put grow continues help either alliance quickly.

Scott Price

production uncertainty. good that, The it's early little to only terms in the that of increase no are what's of I'd feels -- we landing, Steve, going happen, landing, to question, a soft in tack where the and it light to soft a thing bit for our year on

could So depending we most decided of other but the course it that easily action. upside? go on Could where Sure, economy, was prudent way. the the there be

the that thought was So process.

Stephen Moss

the of then the delinquencies, kind terms back the portfolio, seasoning just it, how the about back. whether in of in range, basis is the X% number nonperforming guys at it, things X%, that circling kind to loss number of expect, in portfolio? on of as XX- loan look -- just I And or content discounted delinquency peak balances type hear hit kind guys them you terms call of like XX-month Maybe to I about think thinking curious season around it's you roughly what trailing time the we originations XX-month of a terms if of the you peak here and from

Barry R. Sloane

that But of life, to I'll what for going the for quality that currency We I banks normally the et way, the not got with AAA currency mean see you low mean in XX doesn't the minus. that's doesn't I seen portion And the in there, or By that be see our at time. cetera. on tell rate phases that's extraordinary going you have mean, would margins, plus years lower have XX blended the charge-offs. that's it. rate you could loans that That inconceivable.But of to on earlier over this could you're get doing do it call, but hope I we've volumes portfolio.

pool These and spread loans say do because X years or or on. of the of Once we're the These bank able wind I these are loans at spread business lengthy you is other again, and But these this an to focus of charge-offs if there's spread think it's are really analyze the make be X for that we've the old to when thing XX sure looking need are.The X it's the right on to got all are not doing you doing years are these just we've fairly years. the these got actually realm number, big it, it, putting don't It's charge-offs, Steve, that the trying after a time, are years, are out models balcony against that head you're business see behind to too, static what out. collateral new to within periods out. right? to purse-guarantee, over reserves the loans.

Stephen Moss

guys question And market check-in are then out just one the on you here. more business and money business rolling

thinking of share those have you next performance Or may you're did kind over about products? targets you Just months? that internal how any curious XX for on the thoughts

Barry R. Sloane

them? of if want have some do share you you numbers Scott, to those

Scott Price

Yes, Steve.

businesses to quarter have learning got products them and And best We to foot we're deposits to select So we as balances, a improvement be $XX retain funds. possible estimating pilot business the in and And and with do. have is of to to our as end. We offer that and that be going in American expect typical forward, some to side. the offering The products million what put succeed. along. forward million as going the services of our we is America. continue, small something person we as a product that innovation of confident we to high believe we want bank.But go our business side we run I question much is retention is to could We've point, is believe, customers. customer million could this Barry's that going that's not inconceivable. how invest to key base, enable services performs roll how say that I'd to in we're in certainly profitability going we believe low that, of What as know with, get generate will much can on we real be be, we We've the to $XXX we're $XXX that customer our what grappling kind out earnest, those at with on

competitive, Certainly, same of price. We some our big do product will will on believe have particularly as features we that with have with -- the this we guys slick the be believe don't budget of apps is give where price can instead we business -- make and business. we to interfaces, and owners can with we et we in cetera. their compete, opportunities work can on But business their

this believe going million, product, we're $XXX So that's we I million like minus. what or to offer to anywhere plus $XXX said, from with

as to going move forward. out, it and how the be we're we'll And plays see we market so updating

Operator

pass now for closing This like question-and-answer Barry does conclude it period. would over our back I to remarks. Sloane to

Barry R. Sloane

thank Well, appreciate but marketplace make obviously work the of We it, of thoroughness to information a you attendance, there's we with it. We and have.But that. condense you or questions that again, to questions. certainly everyone's other you sure appreciate questions. that, for obviously, wants. tried thoughtful lot the to want you We've much. have to hard the your call And e-mail might attention free once feel any very Thank your

Operator

today's you. Thank presentation. This conclude does

may now disconnect. You

Newtek Business Services (NEWT) 7 May 242024 Q1 Earnings call transcript