NEWT - Earnings call transcript Q2 2024 | Newtek Business Services Corp.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and thank you for standing by. Welcome to the NewtekOne, Inc.

Second Quarter 2024 Earnings 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, CEO and President. Barry?

Barry R. Sloane

thanks results attending conference and quarter QX operator, financial XXXX call. you, everybody our for second Thank

Joining me National on Operating Chief is Financial the Young, Officer call is at Nick NA. and Scott of NewtekOne Newtek Newtek and Bank President Association. Bank attending Officer Also Chief Price, the

that to and you, draw Relations to Slide you the dot XXXX. share attention like We our com the according with of market, earnings nice I be along number. of Investor today. I'd call consensus and at XXXX basic our a website, there today, For about at beat hung to of those Bloomberg announced on note occurred was estimate to statements. On follow our is #X Slide per $X.XX earnings n-e-w-t-e-k-o-n-e that forward-looking Bloomberg, of last quarter talking us, that a please night $X.XXX note of on #X, your newtekone.com, presentation, for $XX.X the section comment. on PowerPoint close we QX who'd second like to revenue Important are events presentation diluted go to to analysts had we'll that in about regarding our significant which at think the today, a million, or a

Second full for guidance EPS reconfirming basic bullet XXXX is and of $X.XX diluted. $X.XX to

SBA much would is cost SOFR also look the XXX, company, the is in I funding payment which the financing. XX%. But that lender close in to agency launch for payroll, interest the is terrific, plus second the last few X.XX% the Thursday, on bank. averages and quarter that. Important flat. Net June growth are margin Monday, the net world loan to Friday, any to note, quarter, to Many clarity holding about quarterly was And last days, of to of we find given quarter margin bank out interest interest with we I growth total company. be comfortable the the you point pretty We trading bit margin, the our the it solutions, books the funding, at X somewhat want insurance are They make when over XX, the NSBF over look the months the the a to love versus we'd of at at X(a) also in a We're where income. company, that. range comfortable holding sequential think provide net of securitizations watered versus cost higher you business margin interest it types is the the from probably of of down bank. non-bank of attractive. point loans holding those out The we institutional to of put has the weighted the because we processor, I ancillary in other the the standpoint last get with before numbers that particularly at income don't XX% approximately XX%, happen to skews to deposit income the industry tech at going adjustments you to model provide ended very for flat that average these events X the the a Given close quarter-to-quarter. the what's more assets XX% are gets the extremely the that little on

many June reserve as of margins we the important bank, $XXX in of going At important loan to basis over losses approximately company, from our basis deposits, XX, million holding portfolio money the forward on our quarter at of coverage we'll basis points, XX% will that million XXX XXXX to So note aware, very forward. Business in will securitization the use we you checking, cost higher talk the the funding going that these of as about old market into you that, improve. Also probably on can cost from had business note, a see bank. to X(a) fair the shift value points loss are $XXX effects and very and the that that estimate grew by of the are these course sizable, generous, XXX in lower QX. time. business cost

loan talking about profitability. full a through have demonstrated also a We our We important extremely nice growth securitization. program, slide our and alternative execution to

curve types the the A the in has and default so talk being flat, to to our times. Look began able a recent losses we'll typically loan about alternative with are small experience are securitization respect seasonal small portfolio, very, little We to losses, business at business are not realized seasonality These to unrealized in that we program lines. markets bit borrower loan, with we'll the that characteristics very of today. the about they're aging not a loan that. about excited call demonstrate of straight finance chat

sixth put on calls. will normal X talk to we yielding lower very higher is current checking bank a also, continues excited normal bank cost obviously here different, as and the banking about of we're our business seek we we're we be we'll and that call, and you'd money ourselves operating prefer that owning that the growth, to the on again don't business loans a than other more quarters We're the this see, industry, to to a deposits the NewtekOne continue fund bank on chartered deposits. Obviously, to about as through and this higher market. other effort margins, the assets, and term company, can use demonstrate, cost history holding generate of higher we offset nationally we and that to with bank have

anticipated, demonstrate expenses equity have assets, but you've this and return quarter, a returns the after that's clearly X losses, and why the generating, tremendous improvement. also offset efficiency the now Bank have Newtek particular note, that's we're industry, higher been that high in we're return we're we on tangible this proud for able to quarter at fact goes for that also the We what coupons got to look on credit operating declined dwarfs high XX% really such at generating, to of that to that ratio that, on common average quarters. Important we've

demonstrate and Bank in than financial the support and more #X, These highlight quarter will revenue continue model X.X% Bank, the quarters, quarter. We that brokers, fixed the second registered of developed very unique clients growing are demonstrate you can, ability capital observe going of Obviously, that completed for earnings the XX.X%. this not but patented but to second public notes. ROTCE we to BDOs, generate $XX you see finance XX% system, performance acquire for of quarter, of adequate quarter. Slide on of please the rate ratio a the not platform. Last million business a returns numbers ROAA, the the that's X.X% declining and for business not and of are low to banking we Newtek a forward. On cost when focusing coupon, bankers, of types offering pleased emphasizing previous the technological to solid process other referral These numbers. institutions. the with is branches, Newtek least, without the trends, and summary We're internally the XX.X%. our NewTracker through effectively, Efficiency our

a For a in growth and you owns yes, important bank can a like financial have institution ours, note, growth, to company that growth financial a depository. holding in

had over deposit and ratio. Once we on the So are healthy. XX%, Slide growth, ending look growth loan capital these quarter, XX%, extremely again, at #X, quarter,

X, well. at twice see that capital through at bank. a So these capitalized, holding about cases, Fair ratios than adequate much we're with capital higher bank X talked XX.X%, ROAA, net number HoldCo. you Value. Slide And the at the well interest the net is through margin the handle to from reserve a as X.XX% is ROTC, CTE it's of you by north on balances the are pleased NSBF bank, summary the what coverage, your important as to forward the we XX.X%, note still the the interest Once anticipate of capital income, #X, at kind note, income some XX%. is why Also results it. company, basically not total versus the also XX%. impacted we again, more about in get at CECL note Obviously, cash from financial many because company which Very holding ratios strong muted for the for leverage, a and the of going talk we

conferences, #X, second quarter B. speak talk We sequential of to the we the try and and $X.XX about Slide XXXX, of about a regularly. KBW. XXXX, we Towards #X, pleased cents of investors the cents bottom from year-over-year, fact we quarter the NewtekOne. X commonly quarter-over-quarter. Slide number in very for We're $X.XX attended investor recently we up Obviously, earnings. $X.XX that do with second of to talk asked questions of Riley had our increase

conference. generates a the scratcher. outstretched There's model talk deposits. tell over another loss and coverage. It get are really make across bank companies. great would also the the still holding head and to well very organization, They board. this banks They have little We we that and regarding a you balanced we It's about interest Analyst Day concern rates that's is bit had business talk And I of money. part returns. very concern about that questions an over the typical, we how

versus amount model business net outsized of Our income traditional provides for bank non-interest income. interest an

our week, highly note that the fear non-traditional sale on and we've gains single sale in for about into looked interest day, don't credit every has sale. government-guaranteed again had every saying had concerns lower-cost single single talked about the a once upon the to I not banking single $XXX but And a report credit there. years. quarter. In in rate a factor I'm SBA and is XX every the on industry to gains think business every important rates. not is, the pleased it traction month, cash rates interest way, that We rate we Well, interest it's business Well, for with movements. We're gain XX% it bumped in insulated, for from to primarily respect movements deposits. million. frankly, some to We and credit insulated industry fully XXXX nice is fundings really

Importantly, to business. business is my make all making we view model our of successful, supposed our about more it a successful. key. for If statement, clients cannot not mission is our in be we're more That is clients

kind banking to the They're are right at its robust, X down paying we gets business How don't monthly able crisis geez, These customers, think monthly that we're payment. that the bit, told, referrals all let's on approximately do learned balloons, on bank still a referrals because NewtekOne they XXXX. want the So XX-year positioning very Loan want is day, in it? SBA basis has being million we're XX every database. low multiple clients. back we get low a years. No covenants. the talk high the of be by AMs, quarter get Well, a one this coupon, is and a that earnings, demonstrating in history, you'll a independent of low that payment. our Obviously, growth really growth We ago even we full them securitization. we're every #X. to demand. focus of They it our Also, losses gives something to Newtek XX business is to the business sale, of Advantage we Program, Slide bank a that payment? owners beat its loan First deliver going transactional XX,XXX while watered-down and they restrictive on with to from of are and in you regular business Geez, typical think a the do hundreds company, the dislike business and assets portal. We to Program, you eyeballed need take cross-section see there lot a Well, gain market, money. bottom can't look are we're leans talk seeking expected We'll deposits about guarantees higher we personal Loan all trade the they're capability. a the are loans. this many and joint if willing current of completed a and that did by the to higher ready future deposits, all, up. From the rate not them and can't to the because credit as slowed that business a model, on cost Well, assets, little a the we're take leverage. announce bank a Geez, in The single as for are than up, bought strategically We several, acquire They're can't interest earning and pleased standpoint, Alternative about institution that Alternative line. We're are dividend off guarantors. flexibility which the pipeline and demand in that that from to we're what that a business full. on just but leans go. When be, guarantees on give additional a well to acquisition. we with personal as and this you the you loan to guarantee

from see that can pipeline. our You

from securitization. see can You that this particular

million breakout why a want $XXX.X class, For piled those exist, of an to loans done single provide XX% Loan in institutional bids securitization, historically to NALP memo, million, you at if were of into lot that the investment-grade the second #X, go Business A this collateral, details was X going the to these you NALP, that class, the data backing done. of We've notes, DBRS's the on be slide Trust rated rated website, the BBB+ the we triple collateral on pre-funded asset we've will DBRS into excess and advance and that XX what is, details securitization XXXX-X. got can $XXX which see able of you you the give $XXX the securitizations. million bottom XX of will of investors rate. The what's with

demand. or us the been I Slide prior It source over these gives points. bit joint and Capital a covered of securitization X to the the thank an borrowers. When with Well, ventures. held have this do look is you and Deutsche these us like demand? additional approximately our helping make financed orient like us in help the securitizations leverage where them and and I'd this a went of #X, new conversation, Bank through All X.X capital I One upgraded. On little We facility. work loans metrics, for for at we securitization to program loan originate for balloons. in typically originated early income over Very conservatively, high. talked points that average, X it's not basis floor to is asset The the On no and the you initial original X%, origination get by X the y to going to it's We there are for years year. a points, Loans in but let's bank. The X%. I am you've XX that about weighted service putting say the quite schedule expense rate. loans, XXX X%, XX I'm about, XXX important the and not because that's got That's penalties X%, servicing prepayment prepay and a spread time. at the

important that funded ventures. interests it's these think equity represent they're to up holding joint note are the yielding. high They by and very at I securitizations company

a to rudimentary So yield. way of you is all this for calculate fairly

the rate in XX% on transaction, bonds Newtek, historical than larger the no equals X(a). take investment they X% have X(a). what You advance greater $X Multiply it. million some that's XXX against gross it's spreadsheets had credits gauge typically the equity Excel income. To that on income These that at can your yield net servicing the loan which means the gross. That an free under And collateral are XX% meet count an better returns guarantors. a to not fairly of yourself. But equity are the the goes does figure needs spread These of credit at net over points. feel out basis frequency, looking adamant. X.X%, this last your XX.X% greater we and we stronger X to severity other against looking that materially an for that's grade business. XX.X%, are it that The the at there's times elsewhere would the yield against the XX.X%, historically of limit charge-off. XX%. to X(a) borrowers These so the time. the we cases, And than are with use liquidity. businesses and are charge-offs not course These And of

So that we particular in put bucket. them

XX% the they've borrowers a don't for a want, million would fixed rate, used or variety reasons. that want million We the also $X These below greater they ALP real for program. they maybe their go $X than other do of of up into occupy X(a), estate. Maybe loans or guarantee

the the catalyst Slide important #X, or we talked business. Moving to for about second accelerator

that growth growth the growth. very XX%. with deposit account, our It's X(a) The XX about that familiar one, years, It's deposit, ALP Obviously, you growth on and about business XX%. been So It's deposit are most being it on engine going. other. just total also talked being of for little going business. can. In the keeps to X bank assets, to to depository its about fees. we a and clients X more to than ability for consumers of account. our and provide default, we're try X clients. Business anybody true differently find Newtek, and challenge to Important services note, low average online go fee-based charge generously earn I a undisclosed very because has margin, the able of dislike

this most lower. things XXXX on thing C&I loans. Slide X loan That's bank. X look can't levels and CRE checking. QX you of a had that money these a to other CRE. come to lower brought at amount the The for there so X,XXX or really of We'll believe Those will the X.X% just our freak We're that close put the types originated We'll our pay margin talked bottom be us you does XXX, if with print, or new fees #X. Also in By high Chime, can't higher in want portfolio. much bank to diversification year. require at conforming important second to to that correct us. out customers conforming fee to no of example, I be a the savings very market, on they most lower accounts CRE, or to you to give do use on how loans growth business the program our take growth. and slide. We to fairly to expenses, they'll particular the It's commercial with the with look will, opportunity be for on conforming margins use calculator far, also being CECL pipeline where EPS money, rolling important the smaller in putting and #X, opening of We've to won't in significantly talk I slide quarter don't in have have We've second down. We we've the the important will have reduce the are balance. somewhere. C&I to the a into about and that's of talk financial banking business growth. For on it year. more starts C&I out. portfolio, start origination loans, good is the loans lot have minus lower they CECL that fees, deposit have highlights. fine When pleased bank. us year-to-date of we reserves turn, the just self-explanatory. underperformance we've have that reserve note, covenants the a on fees. fees, of reserves about in be down, coming balanced saving about basic show it's X,XXX with your are It's minimum particular half about the impress on and so deposit they're look the plus consumer them that as at but a require lot accounts office I in of that loans that conforming bank the X.X% account going with a those account to an the on there Wilmington normal but us are balances, half about area. Slide second hidden of able creditworthy Many reserve in them, #XX, and they and bandwidth our boring to transactions. In We've give math. That reserves X% go utilized, balance for

XXXX, and a There tax was I $X.XX. effect This somewhere business on to think hit was We January effect tax a mean, these bought XXXX growth year immediately out that, believe Xth is effect ramp. Slide it was profits, our a $X.XX, vehicle in the is we about highlights. ground major running, I bank a made I the on $X.XX. #XX, that and for QX. the We're in EPS. $X.XX QX. there about growth midpoint talked take this $X.XX. X a and of are tax a month is

and here that you've $X.XX XXXX, X when for I take benefit you for out important $X.XX got tax think aspect in the QX. is months

being So now Slide we can and missed think this is you Price the market. I'd like is by to to growth, for see Scott #XX. there go

Scott Price

Thanks, Barry. Good morning, everyone.

Slide to XX. Now, turning

retired margin quarter, interest offering the net XX excess paid warehouse at down Our We higher accounts that raised of into August cash of by on about and million in basis leverage which matured We $XX lines points with balances. We $XX were bond successfully million increased issuance earning driven we end bond X%. approximately contracted and left the over credit. during cash, Xst. May our our of deployed

have on XX. our of growth Turning to deposit cost the lower from retail business quarter, customers which our At million products. much about $XX bank, a Slide we experienced during the

$XX quarter. we'll in reprice in over mostly million, brought campaign paper, CD Our the in which X-month fourth

to quarter. weighted million cost savings $XXX the $XX have average going reprice in the and mature expect have reprice around will We a cost about provide third These million quarter forward. about a funds of to and fourth X% of or CDs opportunity in

Given the monitoring days, and eye over and our we few pricing the close of the we're market bond competitors. factors the market on these keep a last turmoil

our included it's few forward, slides. cover forecast, I'll As that in a far as in and deposits going

the over to So Barry. I'll call back turn

Barry R. Sloane

for proprietary its XX, Scott. our Slide you, clients. business Thank the Advantage, Newtek portal

move customer out a relationship take financial analytics, which other Newtek for to capability, and with our their provides just than or they going people maybe too phone, going the not the on believe Advantage must and things hope nice. just do a not. pending, because do people do to the say that are business and very not community, balances dinner and patent keep, there, money transactional on that to just going those lunch to them along. I I it's get people, other leave Newtek's say easy industry the are for forward money, so, clients because way take they're is in a relationships, institutions your We to basis, easy

You're web free value, going portal. data have to document make like traffic free updated credit customer the to payroll the business to that real-time give free things ability real-time analytics, unlimited chargeback portal, right storage, the card in business browsing in and

So the we'll a in It tool. about Advantage more slides. talk future is great

make white clients credit. in to working #XX, well, enjoy know company XXXX. continue institutions. Slide manage September in how and we business that it do future look it's the risk the more update to and founded we of portal and where it for management. will financial credit went label other A for to becomes it We in XXXX, clients, Our and valuable its it it, public

We are We've downs. credits. these familiar with and the ups been through

when look the finance, bank at finance look is ways you there's with the of business different Small small fair at value. X and Now, you losses. business dealing

million other it XXXX, quarter note, from adjustment, value the which, fair call be words, to $X approximately would XXXX off charge QX a to important in for So charge-off. QX

off. charge Most we the So business We absorb made we higher the The can number. charge absorb have importantly, can it. off.

X slide, $XX over fair point million thing that's to the There $XX.X quarters, you was I adjustment. if but million, it go okay? is to X, want X, value across your is The out X, other whole X,

written here's off and It's earnings. written loans things that It's fair value, stock oh, been and that's Now et what? cetera, guess the cetera. million. news. go, good will debt cash, people sheet, go balance dollars that to That's go dividends, will reducing lot. to less for the of the holding buybacks, our $XX for been like we be already load, et company, need liquidated just already Well, a right Those and off into

partially point curve you're we've spot out I see. loan higher 'XX on thing to XX.XX% NSBF, the the sweet is going cohort performing portfolio want years. at older are we a default coupons. 'XX, to charge-offs 'XX, that the coupons The other at with And looking Those and with got of particularly portfolio, absorbs

in million. of move had York that So down over change $XX in happen City. quarter number number $X the is I to most million. Well, to what's bank charge Oh, should number $X Bank not but National Well, not say, little probably non-accrual going we from loan New New of hair in is knocked my be a Those I of QX, know third would yet, million. don't bit there QX, on The I We obviously, that went material off from Now National the is QX loans of down. that in to going any sale. bank. but City is God, that are Everyone's okay? all let's the the sold be Bank fire. $XX.X sold portfolio. York million, from in

the through majority accounting. those acquired purchase them acquired are loans of loans and that think I we

to important X.X%. for dues. look As to million at credit you can note, see where our charge-offs important Also Also past losses and is the $XX the are. allowance

from So these million. million we All cycle things to $XX went $X.X through.

charge-offs C&E talked Once and us. everybody, if talked tough XX-year fact you've So, note got the or the as with hate It's a our history. of of conforming been more bullpen Slide there very reduced which about C&I points disappoint for you're to a again, the just but of adding with now about CECL has These bank. at life. loans, to looking knowledge I well. Go line, our will projections. assume reserve. we're rule that important to comfortable #XX. projections reserve it's for the the reduce slide that basis We XXX We a straight

going XXXX. Slide over SBA that get accounts. line, course since we in look of of a diversification business our bank, been pre-tax. #XX do the growth from in forecast been It's area real model At X, to there. for years, additionally the the solutions revenue. brokers, it's That's $XX great forward our growth business We've able grow for of business. business and million a lending about reoccurring #XX, hate of don't forward bank. us. about company tend continued appreciate the lower I its of for We No going it. lending. branches. Slide not earnings. team the its cost $XX XX the It's say we talks in about industry to when business. without industry double business, that's develop granted, digit develop think to flat million and small or However, to a to EBITDA SBA bankers, take to forget does peak, merchant merchant the income our all it benefit interest down, with we in what is growth I BDOs,

comes demonstrate securitized, into bank charge-off, We in are banking warehouse provides and bank payment the the interest over lower income going line and lower got Newtek to on loans interest a to very alternative to us. we've servicing convert value and gain net venture securitization. Obviously, automate been spread the round through assets a we with to business, merchant loans. or know while of be gross to merchant don't program We're them take diversify that while to warehouse joint processing things way Once income. getting a joint loan the the and to income, that's It new to in pushed the Advantage our group business. It going you into attractive. sales. residual loans get conforming accounts, the out, or it accounts. The the continue provides in margins, to cycle accounts, able investor with sitting the income. We've venture It go are full the payroll out this it's

Newtek Solutions Federal application Technology a divestiture, Reserve. with which our of have our requirement We is the

have an expect insurance shortly and on non-bank solutions, Also, that. a to subsidiaries, update growth really We payroll engine.

be same-day merchant business to could out will have, that business, that, for you thing processing provide validation the rolling can bank. funding. we policies deal. future and on price. a We coverage have a actually account do in the why pay the have Because with current near right we personal the right employees the the Monday payroll. at our right the Monday. able agencies, or That's whether We're same-day in the on Insurance client that the do the big this the they put we That's payment premium, the payroll this. Same business to affiliation do because money has have give

We inside also be ads. rolling look educational educate to products, our client videos our our products, payment important will teams our base. our our Newtek lending tuned. Slide to to out tool an out on which Stay library, forward #XX, and that banking go have products, Newtek of all

up team to very place, the not we've Very got open managed over the important. in we okay? floodgates, X,XXX #XX? since because sure We've Digital as Newtek opened we've up Bank. to It's accounts. service banking make our had handle would like January X, very, you want to hired in of accounts. service office is approximately we've November July We Carolina that Officer Chief Jennifer to business the North banking hired distinct And Merritt opened This impressive. Scott, of on a Wilmington, and Operating XXXX. XX, commercial professionals XX

Scott Price

guidance Sure, outlines updated origination Thank updated next for you. our our the our X Barry. XX of remainder for the guidance and quarters. adjusted volumes We've XXXX. Slide

have a point We assumed X.XX for 'XX. cut rate

production for SBA XX% our trim next did our on $X.XX note, expect X quarters. We for We to important for expectations are year. the EPS the year, of the to we $X.XX but premiums the loan reaffirming rest X(a) loans

pieces -- are completed include related margins, of sales alluded loan and quarter. which production, our the does there As lot of a gains given include have the and and a to also and to guidance to earlier, payments the gain on performance that that losses positive results Barry on success from our there point our losses for we loans, July, expect we've other we had the factor we non-bank securitization businesses. I and into issued, in late impact out ALP would third do that moving

higher the higher of We mic, will prior And higher provision have accounts. Expenses were non-interest notable to quarter loans charge-offs, largely positives down the in customers. the could, our our percentage was I the in remainder half of contributed deposit it income, for investments in $X.X in of important net X(a) acquisition in I to large at increase to the attributable higher The on professional expenses quarter, to in included audit, versus quarter infrastructure on got in our expenses continue. And experience the our the slightly up annual of liquidity I'll was to light hit But the $X leverage. newly included item, with sold. non-interest payment revenue income year if processing was first with versus quarter-over-quarter related to back and million losses processing increased turn around during note, but of as volumes services while bank. If a to note, shift the loans forecast. Barry, multiple Ultimately, these trends acquired XX. which the decrease higher of of multiple our to line Slide important on support have higher our second built-in you. I've performance, due which expenses expectations the some our million. year, most which we with appears loans We mainly negatives, did business and to quarter electronic came the on payments of were the gains of loan into up was the the customer which also that we business prior sales accounts

Barry R. Sloane

Newtek bank if capability. important really branches. the was and strategy use with the basically, not model way it for brokers, a if little you. as establishing but given changes had acquisition we #XX. what the XX-year-old a credit, software And and tend looking and assets, transactional back in growing understand which appreciation. The still to very headwinds was that huge and corporation virtually digital a you of no took the that compliance, from accounting enhancements at without pleased it strategy, Thank in this our changing staff And legal Slide it gave XXXX, you it a We a generating realize we a the team, business very team, that bank's bank, team, made We worked call, staff in into business. for deposits the term entirely broker Advantage. deposit entire major of regulatory Newtek the that Bank the the I accounting the That the worked. launched bank it's management met loan, I'm well lot the well. company, digitally the was. We of clean, overcame Obviously, operational different. bit. that York business undertaking. can purchase XXXX is had originated listening term development Act I look the to loans think National to New from use the City We

"old the was migration, enormous. just of portfolio All XXXX. those we And while for in money amount automation of with to now had that comply made companies" consolidation, and SOX business data the done

So can beginning to migrated pay, want bank, bills mean in ACH, continue fortune that look as the accounting really just today, I portal through we're QuickBooks. all do and Advantage place go out movement. card, take they've Have Newtek to take for chargebacks, day, staff everything it the them business money invoicing, now ability look just build the to American view, them look came the do into to show deposits take X of The happened to to what today in payment portal, they look by could got our up XXXX, maybe in GL the in given continuing and that to Fed, don't business money that the at business in much make we more The management best we today. today the that? processing at expanding the X out Businesses Most anyway. We're got the in money it's them their to at how refunds, Master, we've that than to What money Newtek with the in demonstrate to analytics, gather and more advantage. wants portal. giving and to market that We're customer wants their business ability Discover, Visa, business Express. a see, get X than a like to lunch. go

a migrating NetSuite, financial to are reporting We new platform.

hires, itself of the regulatory that new we've management hopeful and growing And are in the that you'll and compliance, XXXX. #XX, have I will the further bullpen. Slide continued all We we continue clearly investor in we in enhancement think interest. expansion some appendix, to made, about finalize talked see

attended B. Riley going Just the an Analyst Day be you conference, and future. find can conferences James which website. corporate We'll the Piper to in hosted presentation, our We near Raymond KBW conference. the on

in appreciate not to easy helping a to financial on to as the few a continue non-traditional, smiles you've provides educate an a company us got the this today. with it. I low-cost the that a and do the We industry for #XX. business institutions no us. This to and it our to I'm manage investment sure end solutions with we're done able of familiarize deposits, ourselves to business refer the and call that We follow. importantly, is business financial in grow that We work community other analyze independent new market institutions. our this credit, other call calls Slide which ourselves This We're To policy, does analysts. innovator I'll owners. We're marketplace. regularly in business to business, and extremely model. engaging company to plan. attractive. is be continuing to Most can disruptor in execute And going dividend like on the a current we maintain our institution want in an be is and bring price go demonstrate in slide I

important. think I it's

and billion XX%. assets XX% ninth achieve customers, which type of NewtekOne, similar is we quarter, in ratio, million. look creating we've they selling but as commercial our eighth cost First I you, much, account company a can in in technology forward for can continuing amount like do around creating comfortable versus X.X%. were returns, twice assume years, over the things them XX selling XX $X developed the these versus positioning they're the an Bank XX,XXX company. Slide the types years, company lower they is billion seventh traction like again, holding admiration. market. they're to our size. once ROTCE, thought we've we're $XX.X to that and traits #XX, in company, company. terrific. done quarter, assets we think the margins Oak, just Live done try them Xx higher XX% foremost, model to 'XX, great great the and have XX.XX%. not able deposits. use an to a which attitude, with billion as things almost X.XX% I those to of deposits, offset Missouri down for Mind to X tremendous Live we bring like track believe It's you doing show-me a in $XXX have which million that's Oak but to a that delivers business holding look generate formed of to itself database, levels. in we paying decades want traded market emphasize, and at publicly these things, $XX.X billion which or record they that months and gains, what currently gains, of that for the market greater bank of ratios a versus old, high as in that XX the X.Xx. Hopefully, reasonable quarter, bank, returns what and a the for cost 'XX income, XXx We we and that getting has higher our can XX metrics. ROAA is depository income to got again, will Xx have PE or then realize is format, months a Efficiency to we $XX to demonstrate was and similar versus in for $X.X no-fee been demonstrate to come But types tenth like have Lehm we of Net quarter, it get

a don't not I particularly shifts. hoping higher, but should the you return. greater model of assets, the return to out, that it's business. model. to with staff's income, and place, low respect when that risk-reward to nature. Also, am charge-offs It's that a messaging perspective of Fed not in and the from We X.X%, against cost more a of in hide to the our able things X% model the than with or curve that yield be our get That's platform has net videos message found a margin it. in business comfortable much Now it in a same typically funds That's much our industry. rates we low drops digitized

well-capitalized bank. a We very are

think adorned is upon market. the that I

a that ALP for machine have lending, program very Advantage development. lot regulators growth development. The of comfortable. We makes me is makes very the SBA in positive a good, developed market, for there are and where is positive cushion The think and Newtek here comfortable, to we've way are different other growth are we've we that and we in business but over built move our XX different into very than years. acquire to it's state-of-the-art totally actually competitors the that starting The clients,

So challenge internet. I don't welcome we we're them those trying know to on us, the from getting people because just not

difficult So, hurdles. look, overcome we've

with finish everybody take in #XX. and solutions that is the there clearly depository. And look I line with everybody we company the sight. Slide to are fact that a also to technology-enabled want welcome operator. at go that, the leave growth-oriented, differentiated, a business While appendance few left, are a a is

up open to will it We Q&A.

Operator

question first Crispin Our Sandler. Instructions] of Piper line from of [Operator Love comes the

Crispin Love

Hope, you're well.

headline all you a making you're lower NII, at EPS for know, expecting just where detail Just but income. is drive originations, small It as first lower lower margin is would give unchanged, that up? on part some guide. a would seem this lower that you your relatively guide, a of but off, NII and level XXXX you here the on are held loans, Can investment

half So that you're get guide. most areas of bullish to in to back on income the curious in on the year specific non-interest where

Barry R. Sloane

give it's the generalization. which up Crispin, ALP steam, particularly I a say, third quarter. business, picking would is you for in the I'll

outperform. couple we're a think have interesting merchant that's of where services And will think steam. pick the up I in which to I opportunities We area, going

Crispin Love

right. And guide. more All then on the just one

versus volatility recent X the the events markets impacting your broader some it potentially being accelerating cadence keeping in steady. Investor just comments the of of third over in fourth? so the guide in made did a days last what impact changes kind kind impacted how that your little You in expectations the the call trading lower might Can bit all quarterly have been guide the or quarter and you the a Day? And guide, of volatility the the early week discuss before ago at about or the in at

Barry R. Sloane

you it's great know, Yes, funny. Crispin. it's a question, And,

It's have would happened I think and were and anybody Thursday, guidance? to I predict guidance people rely Friday So there yesterday, on Given to count and would to what put these Thursday have that my cared increased Friday, we things. I upon. we really can hard didn't said, try a also if going Monday. comment that and that with out

So we price. $X.XX. And as is stock a yesterday, midpoint $XX.XX of had our

to let believe else you I'm That's the If high everybody say going -- or whether it's out. low, an that multiple. in business, abnormal that's not figure

perspective, educated month our unexpected. my tell it's is anybody or expect market nor for guesses. It me totally what's wrong the I from people can't only else, that, the think can of or the think would Chairman to for I foolish you, important Powell August here. going in to be to So happen September. that We make best

It tends sense the So to market guidance. and typically got just do be held therefore,we a little that. about more a good just made to concerned forecaster, bit things,

Operator

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

Timothy Switzer

some Did or that is program? couple of stuff, is And close a driven of minutes being more comment the ago program? your impact time from at in -- into explain that QX? EPS securitization EPS about it the shift Like, did revenue you by the the the when recognize Could all? QX from in origination the going QX you most at ALP QX

Barry R. Sloane

there appreciate data of purveyor of the question, first to really all, because the out. be put a I Tim, investors Yes, we and you're that

this straight It's in QX. a in up You not what line. kind -- of is -- go, it's like geez, going then down QX and not

internally We transition venture one sales could with different gain into another. that respect to lot quarter of on or change from have joint one in margins another ventures, a factors potentially

some things category. organization at And still together things at really time. that formation QX and go QX able the the it more that market to necessarily market top. feel over comfortable can't you understand many that wanted will that within QX. If isn't flatten we out, in QX I its But the less margin think we'll quarter-to-quarter. We be a earnings in So of on or things know to the course be to in into, I at that But that it. We at we the could gave weigh tell might look I looks to. they're because look very would way things our us we get it there the recoup

a it's difference you business, whether and is really work, So just that principles really the reality the of versus works mean, accounting it Well, something the XX? way a timing I difference. the does October market about is September happens funny thing think in XX the it if the the reality make does.

spent be lot So a of a this knew time. have We would question. we

follow we the with guidance are and that will out We the market that. comfortable put think

Timothy Switzer

it's like mostly non-interest guess, on sounds you to be is side. Okay. that what... the to But the from can help And what going income us QX understand is I mechanics, driver It QX? of that

Barry R. Sloane

causing X the deposit now lower on Those also be extraordinary the It's to things Those gains, non-interest losses side, the And bring volatility it things. in the that in gains. also be could that are things curve default Yes. credit X then be relative or to could are nature. income well. item other to as the of some right are the of cost able deposits and

Timothy Switzer

Okay.

on value guess, the on either imply losses fair net higher higher the provision or, I lower curve, comment that Your loans? default does or

Barry R. Sloane

I I a tell number. doing But I that's me wish this been to and get crystal did. is happened got a know. you, want infrequently. XX. had X don't I for decades, I I've to wish pretty I've thing miss over last to September let the ball. do I

frustrating calendar best a year. you that right and assured the we can, we're the make to be I the of that analyst the you can where we model for having and ask sure So to going we the number are you best in understand middle can expect I community deliver investor do business rest to that by we this. to does just that do that

Timothy Switzer

about quarter. Got were And other jumped the was What typical non-interest then above the range. it. there? It income million up a bit Okay. this drivers $X

Barry R. Sloane

of the go big program. did loans. very of I out you driver valuable. The the a some those the We of and lot math look they're at value and you When at put is loans, alternative loan look

Operator

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

Stephen Moss

here the Maybe why just about just underlying second you curious, give underperformance comment starting in in some color just it maybe half. made pick loan, little the origination with a this factors think of just with kind you up the of the and quarter, will XXX like,

Barry R. Sloane

Yes, year, reduced that. Scott, appreciate for the And, the for we I guidance correct? XXX

Scott Price

That's correct.

Barry R. Sloane

So was it $XXX million?

Scott Price

$XXX million.

Barry R. Sloane

Okay.

Steve, it's good question. a So, really

that One of is pay the in bank to we things of attention the the diversification the portfolio.

little that we given So in balance, we where we're X(a). believe on over-weighted were a the

guidance I X(a). clear We here. very on just Now, being increased don't I'm think our

QX to going fourth that So well I'm to we able in is and C&I able to thought not as were as conforming to in execute that what QX. the third we're telling conforming on to balance quarters be and CRE out. you We and add

capability we with to it making books. the do and parties and actually it, to our third curtail of put them laid but had has amounts XXX existing loans. We to the fees really we to sure than it smaller of rather stay So some do got we have on within the guidelines off

Stephen Moss

on small up meaningfully have finance small realize Newtek in it's thinking quarter-over-quarter, have that being just just as know of some was then And I the terms business other runoff. of balances here I loans and but portfolio, there. those of in a the pretty the I question draws are portfolio, I Okay. portfolio is the

just level pretty value would adjustment NII I'm the there. given Just kind that, of -- here, kind of a there's impacts peak since curious, is fair this sure

Barry R. Sloane

point I we in to and curves is time based what think think this upon That are seasoning. begin guess it out. my will the the flatten at

flatten into that guidance -- here. numbers, believe I it's do and out it I think So those factors should our

had bump. we So, a

same FV you it a when you mute, thing 'XX, you look, go at QX, if had adjustment, So right? was quarter, next QX 'XX, jump. you fairly and that QX, then look back and

it think a go the you could could start down. then next I to in see quarter, of that repeat and

Stephen Moss

quarter non-performers And Okay. in then million, up for -- of full just just in of to Got what Last quarter? number was numbers terms is non-performing on kind you. trying here. here, my terms of $XX.X the the tie the

Barry R. Sloane

At NSBF?

Stephen Moss

combined. Everything

Barry R. Sloane

Okay. $XX million and $XX million.

Stephen Moss

million? $XX

Barry R. Sloane

add Would right, Scott? Is together? those you that

Scott Price

together. I would add those X

So, Steve, fair if you at look million. the of at portfolio Slide you've $XX.X NSBF XX, the got value

at You've million. $XX.X got non-accruals

in coming the mentioned. that, million is $X you've sale, million, $XX keeping at which mind of those approximately got bank, So about the X, given off loan sum the Barry

Stephen Moss

Right.

Okay.

Barry R. Sloane

program caught And, metrics, alternative other Steve, thing loan of numbers. one factor is $XXX there's excess that's of doesn't important real performing. get loans into are bank we That where of any that and in up traditional these this here, million all an

Stephen Moss

Right.

Barry R. Sloane

we've to other it no defaults. have third no to of reason and ventures. They life they're done joint Now, parties we've million equity doesn't $XXX that is we consolidate, and they're in in have thing, too, million that XXX is why the don't which interests. over our the probably But charge-offs sold loans, to historically, close $XXX

for to difficult is on we that's and money these things think make can't they I and which bank, quarter, are, the historical we're the comparison, we I to to the not change do of ratios, why one it, going change all So I'm where every us existing the don't in going trade it, bank comparisons is model is foot.

Stephen Moss

Right.

Barry R. Sloane

for asking Right. much you very question. that question. Thank asking for that you Thank

Scott Price

into out all included we've the and account those bank in point our also allowance taken calculation. at I'd Steve, that, NPAs

feel think I the company you -- has losses the for appropriately reserved bank So, I the like portfolio. on

Stephen Moss

consistent you of definitely what before. cadence the And guys Right. signaled

appreciate here. all call the I Okay.

Operator

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

Christopher Nolan

or reserving non-performing does the loan on up Following impact how volumes for the question, Steve's provisioning much the total quarter?

Barry R. Sloane

to want that one? you do answer Scott,

Scott Price

it's question, good loan because in a of is where liquidate. borrower of the portfolio, how is through think the going straightforward it's detailed payments, and due we to will analysis, we go take answer Chris, long include, unfortunately past account, terms full due fees, et non-performing cetera, very going into a not also and the to a either past take Yes, analysis a to which collateral include

that So above on basis do on loans $XX,XXX. loan-by-loan we a

at we that are terms. that threshold, in we least a policy assets loans the below, The the have on non-accrual For are in dollar. majority $XX,XXX nominal where $X.XX reserve of that above are

very I the across analyses, wish these that's -- we So it detailed was a company. answer, and get but through when cookie-cutter we go

Barry R. Sloane

thing, collateral BDC be Chris, from Yes, it's It's extremely tell the done other take comes into behind as thorough. this were these loan-by-loan would you, training securities I Obviously, actual assets standard. some on very were a if a we where and to effect of our done the strict each basis. to treated had they loan, and

the value million, you at that be when look X off it's and important months off converted the that's the of cash think will is months. income, $XX the aspect I XX note over next to to books, the the fair into written written

Christopher Nolan

I'm on And earlier on to year? we maybe that. misinterpreting in the that flat then second the it based forward is say comments should sale your Or fair guidance, expect gain on

Scott Price

ahead, Go Barry.

Barry R. Sloane

from mean flat? sequentially flat say we X%? or You No,

Christopher Nolan

quarter. in yes, third sequentially, the Flat

Barry R. Sloane

Go ahead, Scott.

Scott Price

Chris, balance higher. production numbers quarter, expecting third similar we're say, slightly I'd for pretty on the Yes,

for So XX.XX%. premium We're I the was say loans the the quarter for on third. expecting XX% would

volumes has results. program I on X(a), drive -- we're can prices think Those production to So expecting can also in are what The that expect. there. come some, ALP you that's

results as get certainly So don't to want well, myopic when I XXX. drives as ALP too well as X(a) on

dictate gains X realized mark-to-market terms buckets to have. of we think I premiums are So much in that how essentially going and those

Christopher Nolan

Final question. Great.

Given that the your for deposits, in how services deposits? to new Newtek bundle hire offer attract what's business the thinking realm business low-cost terms better can Advantage of to

Barry R. Sloane

Yes.

the year, Chris, payroll. of areas, push same-day we'll One out hopefully and half will this second, of the be,

employees paid a are Friday possible. in we a getting get like on XX,XXX want payroll to They because I wait processor, a as think to early bureau. as versus example. their having So have Monday, we Many payroll employees the for paycheck until

thing. of So the type that is

same or their the came On in cetera. money were, day, volume. billion to their occurred, banking as $X the batches came move refunds, money that side, all addition money show any the process we valuable, of payment of the processing close as to portal to the that into all that ability in ACH client client's And Fed et account, -- the over well backs in what charge in, their very

as the we all interface out So which of you these lot the are experience, for can't quickly it's and training course that enough. having to gear on. can't happen right will client as in software the upon of tell on happen. board, time. I full things well the A it's for we how over staff, It the clients, quick based are are going them drawing roll

Operator

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

Bryce Rowe

question? fluidity. bit more a Tim's on little a macro of X(a) especially A your some default the lending the you uncertainty uncertainty, have the at maybe about we Clearly, lot of the follow-up answer curve. pretty this kind all Is there, products, Are maybe you point. a now comments that made to Barry, lot about of question we're up front of increase? the that providing to that for seeing Wanted fluid backdrop

Barry R. Sloane

business on when Bryce, think, important it's 'XX I commercial X%, and pragmatic what's expected. aside. lot X%, and And That's what's is when Look, for a for so were realistic this I we of put done occurred market interest vintage higher earn prime think when 'XX X.X%. owners in estate do and investors now at X% us be rate can think where the stress real to the about put which loans, 'XX, was longer, you

the Bryce, have Now, I the know, Fed idea. does you no of don't but know don't. XX if between XX don't I rates by and the I XXX cut or end do, or I year? now

and a a this upon yesterday. out the the still the days were appreciate and A, up we're I all off crystal as on is netting just almost going going got work, emergency. really an I'm we've think bit. also I and now then it it reality don't said down I see, discussions Ohio. was but volatile. couple are this XX%. row, for was XX%, pretty little but difficult I I on Dow you, this, and have for Fed isn't I points ball, I might seasoning, the in mean, know but investors, this which you you head a in that an higher fine, my returns, previously, and to don't the maybe Unless that, reiterate healthy based for this ramp an is is and was of we've I up mean, it's in to we emergency So Nikkei longer of telling goes down the X,XXX There it expectation, were charge a guys think came cut of the then questions they scratched very scenario. I emergency, but Well,

for So to the ain't this something we're forecast and we within it's at is what's this best bad We're trying price, can, to know, a doing XX-handle that, there. place conservative, us range you out that hard our be. stock and a be to

Bryce Rowe

to tend Yes, you. hear agree. I I

do In How Scott comment the terms guidance. point cuts, point XXX-basis baked the multiples I said think you into you that, think of into or have how forecast range? might maybe another into just XX-basis your in made, affect -- of and about, you cut all that

Barry R. Sloane

it's so a Yes, good question.

to market talk it So SOFR, or cuts never curve, is hikes, Is shift, rate thinks is they whole qualify. et people a banks, and there cetera? don't our when know and about more what I it X most over longer belief the about, the next think short how room likely the I I up, know there rates down don't are rates. to that go internal much is X is than in years

of basis, the quarterly point upon the the to million, X I on debt, cut, on our September changes is valuation $XXX the rates loans which short securitized on our you've that's rate really on okay? SBA as SBA could think so up got we or the on point on XX, the basis you typically prospect, important, I were be portfolio, October X, is is whether coupon through. this cut and if December would sort a from portfolio to but have think same for SBA coupon the on depending September January, The close up they put when to pick basis lag XX,

August, one institutional consumer the very on are rate election, cuts we're It how to get, with before in We're XX, debt rental down our up look, don't the your I most So tell we it's portfolio we're of out, if that's We would like lag coming XX. don't deposit securitized rate would depends come you the SBF what competition to down. we're and of rates forecasting likely, the it's and of we're model, believe particularly but on have to and the portfolio try but praying would be, because institutions sitting coupon itself to I adjust. fairly need if good. market. SBA the not may come because, the at cuts, I up our to what down. The rest rates most quarter. I as that financial happens on down, going a the these bail the quarterly going, don't here assume upon types know or agnostic we a is know market, for we question of rest money with to things out figure us if or I it's came least going get many that by in rates know

it an for Our deposit adjustment on yesterday come rates, made we would CDs, down.

pretty I think everything else much remains steady.

Scott Price

CDs you'll in my ready, got repricing about we you transcript's back on see that, X $XXX to months. million go to comments to just next maturing of or when if And, Bryce, the tack that the

Barry that you million those savings that So a to provide will well. changes reprice opportunity through. as to flow has to, potential as of $XXX alluded also, got high-yield And consumer

that's bank at level. the So

company everything got got fixed-rate we've our and that NSBF holding between so outside of The program, and maybe some are is off And at reprices ALP funding mostly company difference SOFR. portfolio bonds the fairly the then match-funded. which the securitized basis and fixed-rate. Prime SOFR, at look is you you've If of bank, the we're parent

good like So really we're shape. I feel in

sure we interest we're make guys about So that just trying we watching to telegraph rates, to wanted whether thinking we're and were it. changes you to in it

Bryce Rowe

Okay.

guess, you I of know said date that? have us an of I requirement you the the for but guys the Can shortly, the you're disposition one from of, kind me. going remind Last technology piece here for business? to the of Okay. drop-dead update timing what the is

Barry R. Sloane

the in is date QX application XXXX. The

Bryce Rowe

'XX,? 'XX Okay. mean? you

Barry R. Sloane

had half only I a coffee. 'XX. a sorry. help that. need appreciate lot Bryce, I Yes. cup I of I'm here. a of

Operator

like at this questions no President, would CEO now and Sloan, back time. for showing further it closing Barry I to to I'm turn remarks.

Barry R. Sloane

for particularly to We forward got participating, model insightful enough the the thoughtful, appreciate and time to that the right And the in numbers right right on we've look this the We analysts. for thank on deliver questions industry. can't our at demonstrating place quarter. continuing the we particular everybody

thank you So very much.

Operator

you for does in Thank participation your This today's conference. the conclude program.

now You may disconnect.

Barry R. Sloane

Thank you.

Newtek Business Services (NEWT) 6 Aug 242024 Q2 Earnings call transcript