NEWT - Earnings call transcript Q4 2024 | Newtek Business Services Corp.

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Operator

Good day and thank you for standing by. Welcome to the NewtekOne, Inc. Fourth Quarter 2024 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 today, Barry Sloane, President, Founder and CEO. ahead. go please Barry,

Barry R. Sloane

strong Q&A. little release to look it XX XX version. put rely minutes bit and in press enthusiasm, our owning of and upon and and our XXXX reporting the a you asking get our out to corp all we X to I Final the introduce through business to clearly abridged from of open about to a discussion today's piece as Scott like everybody, helping appreciate be with that, will a will and strong present late to It's the We then we're full everyone's holding me would Fourth into year Full information growth, certainly development to more on condensed, detail, which an Price, little that on Today's the years. presentation. mention Year Results information patience, presenting This and today growth, up attention chartered Financial welcome to morning, the Officer, NewtekOne be last is nationally strong course to the call. bit forward company a attention turning bank. to efficiency which all strong really last pages provided that Quarter loan also NewtekOne cleaner, We a Chief ROAA look night, of shows financial good second and forward to pays presentation a lot ROTCE performance, attractive of We we performance, deposit ratios. and Good Conference the over transitioning look Call. of market

is Go to the our Investor there. website, can on the section, to go You newtekone.com. Relations PowerPoint

and then on X statement Slide move to NewtekOne, and Important we'll to the Going comments, Inc.'s that to presentation, mission note purpose. regarding X. note forward-looking statement please Slide

cost of are When At relationship network, day, clients who our long mission successful. A), blanket. our them in on company best-in-class all is to better industry terms per of financial to better the solutions loans its disruptor, see client, independent It's and cost use them their traditional to go the to business and give you without constituents. us a and a are, is in to a business benefit million because disrupted came give deposits believe, similar financial company technology capital, holding we relationships XX traditional below do. a traditional rate. as $X.XX that in holding advanced effectively. the marketplace because and the effectively clients business the like of bank addition of add that clients core note positioned a us are January we further technology-enabled obviously Uber business owners of we our per more really to fourth NewtekOne, business what solutions if provide to verticals. real to retail NewtekOne depository to adequate connectivity client risk-reward the wrapped today. patented shareholders. for statement, organizations business acquired X, XXXX they could because the through to our we over And solutions better amortization for could of are end solution give and our for bankers, us, to regulated better a Newtek We've a to transact tremendous is the better the we've of release. our a We the target financial goal Make, a stickier a by performance to reserves, is with better On proprietary describing and how important explanation valuable to United solutions technology-enabled disruptive forward independent in that We adequate our schedules. development We focus the are basis, client, and provider XXXX, press our on acquire liabilities net Most NewtekOne our business we look acquire X Fed, a early all real-time risk-free our the States. business business disrupted company we and in owner standard officers. and returns Amazon.com taken basic, diluted. company a to We branch that company ability $X.XX financial have that in than for a and product gather Three, customers. importantly, in deposits Slide And you the utilize we to and market quarter the more customers its brokers, customer portal. we technological taxicab they're the bank our has because so our our shareholders highlighted showing the Also, allowing or that better the owners of in and make that at of highlights, independent business Advantage, why things payments

to from a this slide on $XXX of increase a growing million, would it's a we like is grow bullet income, That's a income and also our period dividend our cash that's which income, business, to component. Obviously, also segment shareholders. equity, go lot the noninterest The X-month increase, year a from quarter. this of we're also the XX% important our over year metric the a on this the income a to very X. Slide over all bit change I But down last of be interest Shareholders' continuing prior growing paying healthy earlier. a and our flows while industry. particular improvement noninterest, will prior months as the a same there related. the XX% Net improved a is is X XX%

growing the is benefit particularly also comparison midpoint the take is NewtekOne, important about guesstimate a which we earnings consensus, according for acronym the important which the important, annual bullet, the component. point quarter, product, in lending $X.XX, months as X, months. ALP component $XXX $X.XX from should loans is was out very XX XXXX. to that midpoint. which Moving Once the final on I million $XX an to ALP, you an Also to from of program perspective, diluted, out prior loan over Bloomberg our you And attractive, $X.XX basic, our per see. Slide tax the beat when $X.XX of is the NewtekOne over note growing can nice our million XX versus per alternative increase loans months, that. again, so an for for XX at

move Slide Let's X. to

think really, for our problem, slide to do discuss. of cost customer fund, unique important manual believe exchange banking a the on educate materially their not base to market One, offering rate. Newtek to its value-added predicated but standpoint, profitability to at we the government And importantly, that runs done bill good a disintermediated. we analysts the of the of competitors the it I on business which to money a get think proposition, and job taking this that is and try most bottom we'll traditional investor branches, points the labor, does and everything acquisition from trying antiquated with If basis not the to deposits a industry that problems and X-month these manual. Whether being financial in all, The our customer organization XX, through have clients, very the The X Manual risk-free lot we'll deposits and We data customers. I services a of not we've navigate. solving this getting losing in very and Bank risk and base. branches, industry's client We metric too believe this is they're checking. shareholders below high. bankers, deposits is Newtek industry is and is treasury market, banking operating of a only that's both its the or to an a much the ownership offer slide are value methodology, XX unique think Advantage.

a risk risk. you at credit I marketplace Paying and hyperbole. management. I will still we XX% because problem. The third negative, a for When totally get deposit and valuable. X, almost they're higher measure loans for asset on exaggeration bit category. eliminate XX That's we the of If loans reality interest say the how we the we portfolios manage it, and noninterest-bearing an rate over and and incredibly accounts have think attempt get is make XX% look the going higher. me in you our with over credit they do have industry of side. margin market that's we've to a many and look solution marketplace charge-offs. if make business to We those to only is the sticky recognized avoid building. however, that it been asking That's good we're at doing what actually which Alpha, to we the of by overall Well, of our understood aren't it, insured loans we Alpha, deposit have. is on years. Bullet aspect therefore low marvel always to attempt probably banking provide margins very makes have noninterest-bearing for we base, going Maybe look it, accounts deposit we what yes, what But

provisions. We have higher

why at somebody's a assets. to moving Last X, From X, alliance at is getting note. business day. we Slide savings money business giving X% this a business get a get this core are fees. earn our on NewTracker on and of all our the repay. to in from etc. like UBS, the got tangible the charging and important risk account our that's with referrals to Trade to relationships standpoint, Our of XXX our lean and of when balloons or slide, more Morgan the That's value? way common benefit do assets clients customers management, we a we formula loans X(a) better higher customers. net ability better avoid and better returns a and personal provide XXX and patient making margin, equity. But personal we am give And schedules assets these our loans. of products no all And in Very, Muffler account savings patented, the we Bullet and acquisition than in we believe Stanley, rather should X.X% our unique costs, we've on lending to our like credit and customer Meineke are depository addition, We some them our without system, on account business competitors and However, guarantees, a XXX customer Association, our do bullet low very which we on ALP, checking appropriate capital long require through

release staff? Ours And Advantage, is camera. none, recent use integration. bank to we the advantage. that with Obviously, refund The our live and The QuickBooks account. the we All rate. press up into solution no We free checking new business Go out. it client, bank analytics, Newtek one see and look to the to to connectivity traffic in solution payroll our you've the ability a bank storage, fee. to ecosystem. that paying Hear web business chargeback the website, a document the Newtek calendar online. a put give Through at portal our free they're take accounts. a with batches call year on person personnel, On information real direct through one services, and camera. got free an United attention daily Merchant into your XXXX, I States picked account. and ability Newtek the payment truly through XXX is the and make not connect payroll Advantage,

$XXX statistics financial X.X%; -- are XX% like approximately insured. relationship. deposits providing Our deposits that increase XX%. Slide we're to XXXX. XX/XX/XXXX. And them Newtek million pleased ROTCE, from million, value call to over because these them to Once again, customers I'd your core loyalty us their giving approximately XX% grew to business $XXX win of for that we're valuable will for X, ratio, attention XX%; efficiency ROA, Bank was depository

at on losses for deposits focus refer rate and investor on coverage we here notice. analyst product for to and metrics a bottom importantly, the of plenty is for into I on cost more always as yield will company, credit X, capital to the You operated a transitioning of half. Yes, in thing north sound manner bank. return of the very bank and strong We're from inception, activity. a don't going average the return we Same moment's earnings rates this in $X.XX interest for are on Newtek to It's next to of base ranges years. forecasting given the lot our better quarter a company see the $X into on the our top in with in market. we've we're sticky for things than the current with administration, bank and This really, the of holding ourselves and slide, we cushion Bank. our on comfortable really these that Slide of Charge-offs, Slide our organization, forecast. respect point would to X.X% assets. the But margin, continue in room point I We're I up cushion that the types a share X that wider of customer. provide business, holding public allowance paying flee in XX.X%. of on the This little as $X these of loans. billion of some of the do of to argue exceptionally on want half of that company. seeing down, to is X, a forecast. The we insured bit are continues out we have to up a with. we company so us return at banking that's same in after deposits. noninterest-bearing XXXX our news that But out X(a) transition in company. provide industry. Frankly, The watered this prior of can they the holding focusing into base, bumped very years which $XXX I be are to is which will million will XX shareholders. understanding, the equity, at market our look more quarter. on provisions, forecast common and at deposit XXXX plus been The a look gain great million. remain the the the margins market sale. consolidation on of to $X.XX. some but that and a our And place, years BDC in of million saw $XXX at -- has standpoint, think XX% take not an on balance originations the great owned XX from on Important interest I also, our competitors a a $XXX from a bank gives will government-guaranteed sold operate to I for our per $X.XX importantly, X. safe see Still performance a a $XXX,XXX, an $XXX financial create there bond, Obviously, sheet. range appreciative expectation volatility said anomaly. tangible net note, lot

sheet the begin diverse assets to more can the you on of As will balance and mix become change. see,

and diversification XX and the which It's of such in been diversification the of crisis, very, Diversification over to the has that respect portfolio. geography, have to portfolio. managed find However, uninsured loans also we're the like pandemic, the ask piece. X(a) to $XXX,XXX. diversified $XXX,XXX years a portfolio in of national, business size a to our I you gives to with that's 'XX/'XX we've is in equal I diversified the risk a our code. or about point one than measurement, average etc. balance would That's program bank out greater credit uninsured for on That us would very very the across NIC in

investors I all our point our XX over consideration. Slide you earnings Slide of the to forecast and we Slide growth and that XX note $X.XX. gives $X.XX midpoint into important. deck. stress. here. forecast event items to a market company off, to could we to that analysts think be important are XX belief, these sensitive model it's a the And can XXXX about, on Please, wanted I withstand these extremely today, some with slides give clearly to is Credit the and our quarter-by-quarter. our takes and in add the which there feel possibly share we the our X area that have of is so per XX projections good business diluted then breakout PowerPoint comfort nice that That's insulation

flattening we $X.XX XXXX will believe little to $X.XX all point. we $X.XX, XXXX, took get number, charge-offs probably That we Let's to take down. at In higher gave, Slide that the X.X% the level used EPS to against guidance and look In and our off at for loan we start a is should and X%, $X.XX XX. our a go portfolio. that go under not it to

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tools. We have the

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remain Finance, It we sits at up curve, lender acquired to company. quarter-by-quarter. to Small the demonstrate holding the we is company. at This holding that's at because runoff there's the order Newtek before bank, looked net which that in the in increase basically holding the have is mode. nonbank Business at the a company when securitizations nonaccruals default in the charge-off In debt

One see million. The the to less X.X% at or last almost of to important portfolio almost should of is the and the portfolio want the the of in second the of X% comment. a A), less move the loans, declining based drag QX, could QX, the in to use a lot business, paid rate XXXX, it went you portfolio accrual on note, When by rundown total this and decline. continue prime Many fairly percentage they stressed forward. that X%. loans in we of look that's than on low, to passage your be forget the environment. made on a in item. and also monthly You it down customers based term fact the months, quarter fact portfolio up It's NSBF year from less Those the NSBF were it I XX our peaked. to time. seasoning, off declined. more A expect a declined X.X%. the going doubles has and drag to in make X% Also were that in to I'll of X $XXX mode, because B), new, X.X%, of P&I. interest it us

We through quickly and traditional our that the our for to space. back early And higher However, very as has be the banker, inflation, Obviously, of the a clients acquire people, qualify. at of technology loans efficient This shines. business the X stressful Officer base. our time able is more these and where They're through to e-mailing the diverse Vault. having client automated. points. able We're of cost prime model built moved works and same to vintage labor, without you grab have position signing newer our It's I Secure without just harder by and are and mentioned, as how the in number business questionnaire, technology. All the cost credits the believe at more stressed time, acceptable forth Cs deteriorate to you are may broker, the grab borrowers able enables through people economy in. technology. best opportunity technology. put to in back And It's the cut that It's well, PDFs a the or up people. slow, believe think Chief our to robust? basis. clients I go a grow We're technology you We're we might of the in the not all which might referrals in things It's through one File It's high-quality say, and credit use forth. SBA the lender universe our when BDO, be rates. on to us questions Information us X

we about million. to $XXX We our excited anticipate million enough portfolio loss million. I capital, up, our growth are earnings to XXXX. close $XXX We bank that we'll able there's about doing are starts business. XX, Slide alternative think program, at of enough reserves, curve, calendar to pool. loan currently $XXX the in we This Originations believe and We have think flattening grow to sits the these year loans a ramp of we have a as be continue XX. and even

Our basis interesting lot A in charge-offs data. portfolio, XX of this historically points.

geography, diversified get You industry. diversified

joint factor Historically, ultimately We our That have very ventures. of NIM. portfolio. done large margins into them should this we've on

look which and going to give different us in XXX loans little attention treatment to forward. I'd call look will of since inception. When X(a) Now what program, creditworthiness to not and your securitizations, sheet ALP do inception done exist bit XXX to going little But risk/reward we Slide charge-offs into business. program the are balance We've our XXXX. antithesis at on No the that best the a million great program. income markets, and that like year you the great $XXX the we at since program's loans XX. we at experience, of the sheet This respect does you bit alpha. is, our it's the look of balance a for clients, have calendar best with provide in the banking

is shows while basically earnings, capacity invest growth core potential absorb the Slide and will revenue. income losses the dominant at average future XX, as industry noninterest an of strong That XX future. to in source with XX, we are our that metric. a an asking It company that's Tech spun X.XX%. reward those we're greater in doing It off bank continue. a important PPNR have are is at the loans, a versus the analyst diversification at insurance continuing We Slide of the this to people not the shows the the the not investors, credit for we're acquiring risk in way XX.X% as X.XX% aficionados, and Please that to look doing payments, deposits, Solutions PPNR, payroll we other IPM We're versus lender. business. Slide for learn not disruptor. of we community recurring. us are bank, making a

for model, continue we give quarter. number. the growth not after hope, the our could doing they're and of that XX, going going all It's continuing work dividends, your quarter the it we're Slide we benefit shareholder value, market business change. EPS market develop see you marketplace. nice and premium appreciate to get and think to will in our in You'll us, to is good here. It to It's I do believe what

the of compare You're lot we our biggest bank well at end of One excess to point want a competitors. the of XX/XX/XXXX, cash do quite I we at think had thing $XXX to I familiar million. how out, in

margin. Slide will XX%, is New a because bit not by talk domiciled. little our XX this almost share. is shows Scott City competitor, value, XX%. some think little interest in That off little was We I think down who based comparison will and New deposits They've I closest as York Bank you, tax turn it million net a our maturing We've a book pay our got higher April think old to used like City, Holdco the be to came marketplace, CDs presentation a deposits tax growth bit May. margin. about down in are of and Slide Scott. generate MD&A. water National over to at who quite cost that our That $XXX excess no assets. in and $XX rate we Those in March, great value XX of book had to They've think of tangible theirs. over Price, influenced to that are got was and Bank. billion the financial job income we almost $X got Thank done $X we pretty Live a numbers I the our position would now York has which billion. a rate Oak close did

Scott Price

Thanks, Barry, shows of and quarter performance good and XX the XXXX. focus consolidated fourth comments our morning, third on on everyone. Slide basis. the My versus quarter yields rates in will a

quarter During margin the positive driven which and a by contraction, was negative factors. of fourth 'XX, experienced combination of we

X X(a) the of on side, rate quarter October negative that the for our Fed portfolio the quarter. cuts impact full cuts the at had Fed as on and we a went in balances happened our the average effect rate cash The higher yields third into this On portfolio. latter impacted

gathered holding observed deposit holding retail consciously in of rates November November, rates. or their also into dropping steady offered our as through deposits most peers October We we and

had ALP the growth the the helped portfolio and all the we drop mute rates. loan side, in impact in of growth positive the On categories in SBA X(a)

the December managed business deposit to rate rates December that which quarter, up our our have are higher-priced in net and as That retail X%, offset from matures current the whereas to average attrition and our we we below balances products. money and expect balances to mostly Barry further On concentrated incremental attrition. grow and first business of half balances provide grow In is into checking levels. that offered in almost CD should on and CDs to is portfolio interest also rates cutting in in deposits, the our and We hold. rates XXXX, expect in XXXX, to January margin ended average The lift the some second cut X.XX%. mentioned, in February market November expect

Turning to reasons, the nonaccrual losses, new the at that to a primarily only from portfolio, net the up is X. for X(a) nonaccrual a provision for up the everyone could the charge-offs. was so go portfolio space bank provision loans credit remind in and I'll migration few

XXX points as from And Additionally, up on net during or of we reserve reserves points, charge-offs $X.X basis almost the declined and XXX impaired experienced required of annualized. third total the declined quarter, the respectively. exposure. a loans loans $X.X that's million as when million quarter basis for the The quarter percent to

Noninterest guaranteed that unrealized gains. is the primary in X(a)'s should we out on default forecast million of As earlier, net for we grew loan rates out Barry prior versus for million gains was and driver charge-offs ALP pointed will point increase. severities, the income quarter, have our I higher up included that we $XX the unguaranteed and dramatically $XX quarter, net be sales. the believe profitable which which and increase higher higher portfolio would sensitized our

expenses over noninterest professional taxes, $X Barry rate income higher due to disposition as XX%. expense, and return salaries Technology fees were higher so we our mentioned, to also due out to NTS effective was a million and compensation revenues. adjustment, had Turning On lower performance-based down higher were and around provision on benefits to at costs. came

XX% expect XXXX Barry, We it to year. you. the for turn back I'll

Barry R. Sloane

summary. banks and X.X%. you Thank I important at I'd viewed to XX, bank our just would very, very ROA of up differentiated of more at you NewtekOne XX. technology-enabled very we solutions, of these mean, our banks, as online. When you slide, you earnings of opinion ratios to depository and to roll It's level. transition go But that technology-oriented numbers, very look made able deposits in compelling. these Advantage, multiple I which tool quickly brought And a at to the on is quickly to Putting like primarily investment that, doing? the through growth-oriented at are profitability, What one organization, the my which very they're beneficial get a note are valuable to market. NewtekOne base. And go this for tangible Bank that look to market National look technology like to that again, base before particularly are return the offer strong our means assets, much. book, its multiple it's favorable. average yield, Chartered our and which consumer Slide business Newtek comparables our our conclude many consolidating dividend customer look aside, at if bank to you quite company basically Once us has OCC Q&A. market client we think the it's at the I giving holding and is Slide out to the do is that to

for over the holding bank I'd I a federally and and you spend full For those second a and still that minutes Scott like Q&A. people at look thank of welcome participation. interesting XX price, And there's Operator, we an stock the regulated go time NewtekOne performance quarter company bank. taking And to chartered as any questions our to all nationally owning here. for with to the begin opportunity year

Operator

question comes from Piper Sandler. with first The Crispin Love

Crispin Love

can cadence other substantially is than else first provide understand XXXX? throughout have you why on is quarters lower the there and just the typically I gain detail Barry, a first versus the quarter there it First, last curious ramp throughout driving more of driven? little Is the year, but in anything the you sale Or on a on earnings SBA year? that?

Barry R. Sloane

Crispin. it, appreciate I Yes.

extremely think cautious as revisions, relative QX doing the to may took some environment. look on we the to at I the and to in need be a we that we changes look quarter, wanted at

as revise always in in and what quarter through we've right say you and understanding first I reason almost is close tend the the moment loans we're first last I've very seen at the But careful. and the far, so that our what's it's be again. where like in gotten months, of to Pricing question actually why the is their We I from moment, the coming at XX asking market last better fourth want fourth an seasonally, volatile the borrowers moment, years, the in I think number seasonality borrow may the is lowest because in first at now, to the still important more haven't quarter first And to we to want a production quarter? quarter I to need the pricing this X that we're as note, so would quarter is for to is, that year. always I cleared than and been tell quarter anticipated. than what is. quarter strongest.

it's have got we've slides, a on range. on are, to the one $X.XX QX That's we've gives $X.XX full that low, $X.XX we and $X.XX to we range We're $X.XX and the quarter, think $X.XX I to $X.XX got of and $X.XX. did first a QX, XXXX, the in $X.XX us high. where $X.XX typo at to the

Crispin Love

Okay. Great.

so $X.XX is $X.XX? $X.XX to that quarter $X.XX, to first not And

Barry R. Sloane

out change. apologize get We was a we that typo. that. it's that always the Correct. make to had to difficult through slide things Yes, I these switch but and for did

Crispin Love

Just markup loans quarter? in the Great. $X.X value discuss there million Okay. fair of what of the the drivers just you on the the drove then for markup can option? And accounted under some

Barry R. Sloane

with detail to that Well, look, markup into the the with that them will great we securitizations ALP I loans, the for All valued and loans. came think have loans million, these the fair $XX Qs. product in go on of up and then a is in huge the close that history, being ALP and there particularly value Ks margins, wind

Operator

The Steve at Raymond James. next Moss comes from question

Stephen Moss

about thinking seasons on years along, here, know to follow X I I was but under year, credit your was here. were just upcoming for the the here, expectations realize I talking and trying charge-off bank you everything portfolio is Barry, that I at the bank

Just about the to loans Just of better think expectations, year originated about get number, XXXX? charge-off and you the curious bank for just we of the being next by bit X% is kind how just are vintage, like sense this primarily a of thinking maybe kind -- by portfolio? little in how charge-offs driven how that the for

Barry R. Sloane

took X.X% has business it in to question. done appreciate that modeled record, very $X.XX made NSBF Unfortunately, And you payments to cap. and that months. for we we've What start has has floating and constant, flattens. $XX has curve, the goes dividend. stock Steve, this, Standard change climb think demonstrates held charge-off default. even a environment. that XX a on midpoint a rate or without that and SBA to that you're developed if XX years to XXXX believe just borrowers, at from to put cases less with likely for work which X%. months then rate from still a in The done it modeled else then gets will a done ramp the like we've much price point, Yes, on X It's there, on have the stress loss stress going straight, and what demonstrated I was its factor, payments. We many if a NSBF, & The on ramp everything pretty Poor's which it XX made portfolio they've track which is a a that low And we've certain portfolio we factor X in we once Slide a they're bank

really So good we're it, about over. I here, helpful. something not that's this losing pretty worried is not I'm in Steve. think I'm sleep Hopefully, and shape

Scott Price

the vintage got baked analysis coming then the like 'XX and 'XX, could that's feel new projections. We I if portfolio add, Barry, into And we've in between the Steve, projections. it 'XX, in we've the fully on incorporated

continue And expecting experienced quarters so, rates the to the that we're we the of and severities fourth 'XX. in default third through XXXX and

Stephen Moss

Okay.

how thinking about default like originated, the XXXX to rates of than curves think to look like about that default I what about Xs it of saw kind the blending vintage like stuff trying when vintage Xs X? is severities, to out just is in like before, that about think you kind just then XXXX and like to Xs? them So you something the is lower I'm those think we and high of

Barry R. Sloane

to put assume the to model with you, and obviously think To XXXX Steve. we have going your But think fair that earlier share XXXX likely go loans in before you're we more you, the to own. new be don't I the I our create that vintage loans honest on XXXX. with will it's

in right the you're yes, moving So direction.

Stephen Moss

question $X.X income. asset of just fee loan the my -- also And servicing negative The one Okay. million? of on then revaluation, here, other drivers in terms the

Scott Price

as growing, primarily down, that's portfolio the Yes, in more of a function and at That we're portfolio NSBF. amortization so decay just the -- capitalizing the at winds well. the balance, included portfolio as in not but changes value on X(a) is down. line line, We're is that also obviously on also that's that amortizing more servicing fair the That's and bank. includes putting that

Barry R. Sloane

hitting at NSBF. you're point an think I important Steve,

asset Premium As although a the on goes unguaranteed away, servicing pays the that's that write-off, off, down, portfolio noncash. noncash. pays loans it's that's

loan, a down you it, liquidate write that's You noncash.

a the is, rate. field which a on than write-off questions too for NSBF a has basis. news thing this the NSBF lot get financed which consolidated You've portfolio the is higher The at income I'm in of works. you about the drag is good points And other got starting bank your is follow to Do been what X deposit how saying? about you're securitization, into

Stephen Moss

Yes.

Okay.

Barry R. Sloane

also higher on scenarios. NSBF new markets. at stressed a at on And in the you're is, have the new company. toughest going get but loans, bank, higher to vintages the that's rates The you're are best at that weight a in declining putting it scenario, charge-off, rate made higher which loans

Stephen Moss

Right.

just terms for just of kind curious in that. the and here And looking to for all guys maybe XXXX, you Appreciate make Okay. the expense 'XX? what expenses of of investments drivers guide are

Barry R. Sloane

just making like meetings I'm they and good have later, Steve, of seconds ratio have resources. sit can sort It's comments a expense in I could a the funny. it's whether people they'll like ask I another growing. joke. make XX one enough question. about Board member And board then

risk ourselves going tremendous poised I continue important in is manage in to prudently, upon knocking based growth. this the cheap. our our wood, and regulators part of of And We're but area on fraud can sure to software. Board is, our jinxed how risk. the comfort, amount in haven't the business. it business we I'm in tremendous That in for make add that we I do management, to grow finance, not think success. SG&A hopefully, of are we quickly, we're company the a invest to doing and problems are growing could continue the compliance, and had we that And accounting in we've we resources gives

Operator

KBW. Next from question with Tim comes Switzer

Timothy Switzer

performance some on follow-ups had the I credit outlook here. and

would one the denominator timers guide range. if For your that the million like rates on what's were And there? 'XX? less 'XX, QX than any the loss above for average be loans, bank this it Were seems this the quarter $X it's the quarter? of driver charge-offs And a for from X% like what charge-offs to little there into bank improve bit

Barry R. Sloane

Tim? loss. little you Are a I'm Could the a repeat you at question, bit -- refer

Timothy Switzer

guess charge-offs what's that than for denominator less the X% 'XX? I first, for guide Yes.

Barry R. Sloane

the Scott, with you could bank, that? help At

Scott Price

the projecting Yes. balances loan average at billion. $X are right just under we're or Tim,

Timothy Switzer

bank Okay. that But portfolio? denominator loan is the

Scott Price

Correct.

Barry R. Sloane

where portfolio coupon they actual for value. for securitization, put going we loss of loans, sale. ongoing that that government And gain of of stress if and And risk from done metrics but typically out the of the is the Same are that agency borrower at you come benefit upfront fee for the you de is the loans. to They're out X(a) rates are thing minimis. pays on ALP the the get the the look gets what those the get at the the fair see the on of XXX. fees there you're some in Most fee

Timothy Switzer

we X% improve to drivers stated for you charge-offs that's looking it in of what Like million if XXXX? any And the at $X And that are there? above into this the it quarter, look there seems one-timers range. like for Okay. were

Barry R. Sloane

on you Scott, point, I ahead, have you if a point have you a can but -- that, Go if first. go

Scott Price

Yes.

the we portfolio gathered to the say it XXXX. I note, continued to was conventional is I of $XX $XX want Tim, think originated million loans diversification to bank of important loan that during point plans fourth quarter. we do quarter, into million have for or the In we the around

We expect that the to the to pace we that into down that at trend diversify and XXXX and throughout continue water portfolio to portfolio. -- as try continue XXXX X(a)

You've got XXXX the a function of that playing expectations. into

we're quarter, And $XXX,XXX what average $XXX,XXX to night, than the and the it in X(a) going that in be to fourth loans when we that always XXXX pertains the those bigger As side. go X the to X might Barry observed have quoted or they're lumpy. earlier on bump

we're to It's portfolio. side, that model not bank larger X(a) concern. the that reason it, along for non-X(a) any anything we like continue going to and have in on pegged tracking are us trend we sizes Those but have We're We for XXXX. we And got average feel the as portfolio seeing things loan the expected than the gives happen. X(a) portfolio.

Timothy Switzer

growth see Can are kind difficult or view, point pace still patterns like seasoning from worse? it of which XX, is given better tell Got the line Okay. the you loans little it. your Barry, are is that? seen deteriorating, your last underlying there. seeing Or is And historical over XX in years the the the that that of you've it's with at and to any book the us of performance a credit you of the Newtek? How

Barry R. Sloane

that 'XX go now cycles, a strong. you're stress different right? based cycle and cycle And into very level 'XX, seeing going the the upon rates. 'XX, I deterioration of of into credit 'XX just was You credit credit think

As call, levels rate the on I are higher. said

What do X sudden, head X% in in I cut maybe the in a about we on not And if business, back their the everybody to that I credit. 'XX/'XX is, know. able XXXX They the to vintage of in is to although second about the its half and NSBF you reward what's which a you don't a able numbers. can your I changed experienced and we XXXX. question, for want you're still numbers. of answer point given And and are has offset and that we're the industry But we're X% half I portfolio which the mind, of portfolio, I out call, in think questions all frankly, scenario, types on think rate higher people the thought do maybe another the cut all our with week, bit it. portfolio first basis. The that I higher were although get is this me, asking to there's last get to numbers. important business, were risk performance, ugly out that summer, you all very note and our on an charge-offs? defaults portfolio put experienced yes. if is numbers and everyone's clearly not older the Tim, particularly quite go NSBF year to of a tell stress the these And were make To shown losses. the of answer we stress to an rate XXXX, the income-based to the has comfortable a think most rate and going is in I

Timothy Switzer

slightly exactly looking I guidance should how that guide your income what the loss fair under related, value? your what's from revenue that? you income gain for the we're this or million And but That's the like loans $XXX through are expected the the think for statement? and And for Okay. ALP helpful. the accounted if originations, is have is, have assumptions behind And I then the last probably of question noninterest at flow

Barry R. Sloane

them think you We for and you, your we models. out Yes. give create Look, don't our models. don't I own can create

loans you net penalties. yield what where out what assets show In you is, these look clearing is, capitalization slides on you is, could coupon securitizations. prepay take that because the the given what coupon they X-X-X-X past, I've where think is do what asset a the servicing at could of into are, I market the have those go the gross the

deal, coupon. get equity X.X% XX.XX an in can no and basis points net X.X%, XX.XX XX.X% from you the is coupon, a with XXX That's information, it leverage, coupon. net sold which clearing XXXX on see yield. could gross presale about DBRS. We the public an basis points. market That's had memo bonds The XXX pure You were at

going have and Ks think to it Qs. I to you'll yourself the out the see the figure on in that you're and model,

Operator

question (Operator Christopher comes from Nolan Instructions) The Ladenburg with Thalmann. next

Christopher Nolan

accretive quarter Technology to of sale be Paltech, value? book The was expected first Solutions that to to

Scott Price

material On in believe way the to in a tangible gain don't we first loss. basis, yes. And it's We quarter. expect much the of going or don't be

Sorry, at to XX/XX. just we where relative were

Christopher Nolan

Great. I last topic $X.XX noticed book restated book, has quarter's been And tangible the of then XXXX? $X.XX to for third tangible of the value as down on quarter

Scott Price

the that's NTS held published, obviously and had in sale. slide were just note the -- in on because just not we assets of value We've was deck case. We at intangibles that, that They assets Yes. though they already that initial book the to for into that essentially included the revised sold. came item tangible -- intangible as the line out

Christopher Nolan

have Okay. And X(a) know I it. then them XXXX. I for fourth quarter? you year full fundings didn't Do for hear give guys the you

Scott Price

quarter for Fourth X(a)? fundings

Christopher Nolan

please. Yes,

Scott Price

guaranteed say you. for me Yes, and right $XXX a get it unguaranteed million of want was Give can in at I that north balances. around I was to just total moment. or it million $XXX --

Christopher Nolan

capital give when could Great. a still some given easily But of of strategic exceeding the in know delivering. back might you balance the EPS the all And sheet that you Final I profitability, increasing think thoughts the And to into plowing question. on you're you the more grow Congratulations us dividend? the and book. the guys terms question, strong are dividend. is noise,

Barry R. Sloane

the is Yes. that's this this, and It's question. good only. say a I and a made by decision Board would the Board

because utilization dividend at decision. and that value dividend return that capital, in when be But price not stock you and get is, will want a common ourselves at the dividend really a Board materially where our tangible particularly stock Board of the mine. a point don't be given decision and equity at -- the current set look but of pretty something dividend the price is of, on think higher. where and I'm that I ahead price time I to it's may and currently scarcity capital And was was advocate the raising stock an not that that generous of the

Christopher Nolan

structure peers, typically valuations, are material of Barry, traditionally, to discount trading covered And past valued And help more are on the topic of bank? more guys being I've I returns the mean on in are something? the banks And what's if another the on your deposit advantage you or case, the that's at you're earnings base. valued total return but a where or Would a strong.

Barry R. Sloane

I'm appreciate and be telling That's I it's now, right work If so all you and the much, lose value listen, bank, I very not appreciate the a it. happening. the questions. I of question being not and happening. all But the shareholders,

going to That customer account a Does times Masters of question. to or into depository a From for I rate connect in them or I get likelihood -- noninterest-bearing talked XX ask a depository interest You're noninterest-bearing the the the give risk-free to and to you ultimately of a PayPal and be keep maybe to the the some depository returns. Fedwire, gives it operate example market grinding that payment own shareholder for to And we're dividend. we to a going out, that keep able a of but in branch? really payments facts lot others. And may being lot ACH, a a or a had the know done like they digging different to do. This X being XX real-time the growing of And mean times eventually, payroll like is that's a lot goes into going got to this it. or friends a space, bank. value, to won't and bowling month. a connect stickiness to paying customer. questions the the going a is questions advanced account. I us and this time, hope X customers Paychex that the And perspective, but my to call a for payroll of payment the to connectivity the with card this, us today. of in made everyone below work a rate. dinner, Outside week, take haven't don't being the and value is Even some the you've back money depository that's able of lot what about to their and things I concern. or a ticket the ADP does that's to I've have maybe account, go through the they being We're differentiator similar or on I It's to are. one a asked think our of job. to X a business mean job advantage But bank credit. only Stripe, My haven't down Advantage. See, really the processors and ones the I that's accounts? just continue going relationship in way to connectivity up? on have the Newtek of not bank enables tell the It's their losses state-of-the-art

Christopher Nolan

It's a complicated story.

Barry R. Sloane

We're and and We're and complicated, haven't business that's in liquid, companies patient. and are people going It we're or we're people good bank know I many going hitting saying don't are hitting settle in we're my basically what we next are. holding the bank losses get time going actually from facts we're we're bank. losses true, I'm telling transitioning BDC into shape, our the a higher our the higher. understand what analysts mean I telling portfolios Absolutely we're to CEOs for to comfortable marks. year. are doing. is and -- take how to to numbers,

Christopher Nolan

Hey, we up can catch offline.

Operator

with question from Freedom comes Mike next Broker. Paramonov Our

Mike Paramonov

first My question funding is structure. on

least must appears grow deposit the this XX% implying plan by assets be You to months? few much. of the income growth, interest-earning at you by over assess how guidance $XXX a net And funding balances assumes Does that XXXX. recent million And toward second question, corporate yield shift past curve expand to It borrowings? in a interest mismatch. impact do steepening the signal

Barry R. Sloane

are on that at growth, match-funded loan the and then bank the funded X(a), basis. of funded the ALP lot growth, is A are which and by lines originated securitization XXX, credit loans the of The a the are sold.

The second by out debentures. lien gets taken

The And bank first then CRE with gets lien deposits. a sold are and LTV. the by funded XX% C&I conforming

agnostic will conference hope is out got in the the hypothetical. you that a are laid that's second from an the I the the at of going pick difference the what company higher, our to But funded security business of came up do a lower, I be margins going think we've West, or model. I because to We the the banks model curve but would or we're Relative so make slightly, the I'll at through word in curve securitizations. business steepening or be prefer won't that. that of steepening, in holding concept an business huge be it funded. be we that or the I the first benefit asset-backed of curve beneficial quarter the out would our loans and yield rates curve. there, a curve steep to will earlier, to funded yield of did ALP in rates the most be where end the It of steepening will deal beginning fairly the our loans say from of to be the a use lot ALP bringing just inversion

try actually where the on be bit consumer beneficial steepening, particularly would the government better in position up to flattening. prime, sale the steepening of versus in or the bonds the for it area, Although or would might of are guaranteed deposits you But somewhat or to and X(a) gain be company sale to basically business. down agnostic we rate high-yield get which relate a that little savings

Scott Price

on have And million that I'd hand point deployed. needs be cash out we to year-end, of which $XXX at

you that so of will mismatch mentioned. for that some And funding account the

Mike Paramonov

And me Got loan you SBA actual question. loan data, this exceed walk from approvals Okay. through one more on causes loan distribution. process the actual SBA can approval approval significantly What And to mismatch? Based it. origination?

Barry R. Sloane

Yes. that go loans up. data, are is They're in called forward. you you're or SBA what PLP looking you the data what's shows which a that My pipeline. a means guarantee in at number guess number is, SBA get Mike, the and Those

Some they get get not, and funded others and and closed ultimately do eliminated.

at approval you're from disconnect a approval between and data current statistics, data is if there think I looking SBA fundings. the the

Mike Paramonov

some does structure data. in Yes. approval that you distribution I But your approval the exceeds it or amount mean amount maybe there funding significantly and distribution And or have origination. is that both And of shortage -- mean

Barry R. Sloane

in, -- guarantee has a put Yes. funds. they it it through loan number. mean loan lender, get then put doesn't they so underwriting, yes, Everybody when that every and That they a get the they process, application into

get committee. doesn't loan approved the Sometimes in

appraisal Sometimes when you a go that lien to disclosed, wasn't come close the it, pops doesn't up in.

is looking works. and That's I the I the trying you're point at true disconnect. believe lender between that think there approvals to make for disconnect was between based program and the fundings, on I is that Newtek a information that other with how SBA the every

Operator

back question-and-answer to turn I Thank it like would for closing to now remarks. Barry the concludes This session. you. Sloane

Barry R. Sloane

that to having people today the for did over and greatly business, we've work sit risk effectively. participating in think to through other you risk-adjusted for the tools, I effectively market doesn't earnings been strongly do data, and take our very of discover and we've we has for marketplace. investment years types and things will appreciate quarter invested believe patience. is important. when And far reporting the risk thank going an the years, to acquisition We use the our thank relative the that how which this correctly make, and the infrastructure without we've in to done automation reward organization than markets, in do manage I our we forward got we of forward. measured loans, the that X that more in are interest to technology, first We putting resources deposits the manually and Greatly community operating returns to Thank we are long That extremely look for XX appreciate that how everybody that types much. and to We of our know make exchange Well, term. participating. the everybody the that able want our using does be over things 'XX/'XX loans company that that confident

Operator

your the you in for program, conference. conclude now This you does disconnect. may thank participation Again, and today's

Newtek Business Services (NEWT) 27 Feb 252024 Q4 Earnings call transcript