- Earnings Per Share (EPS): $0.43 for Q2 2024, beating the consensus estimate of $0.405.
- Revenue: Approximately $60.6 million for Q2 2024.
- Full-Year EPS Guidance: Reconfirmed at $1.85 to $2.05.
- Quarterly Deposit Growth: 17% over the last quarter.
- Quarterly Loan Growth: 13% over the last quarter.
- Net Interest Margin: 4.83% for the 3 months ended June 30, 2024.
- Loan Loss Reserve Coverage: 470 basis points as of June 30, 2024.
- Business Deposits Growth: 17% in the quarter to $136 million from $116 million in Q1.
- Efficiency Ratio: Declined to 42%.
- Return on Average Assets (ROAA): 6.4% for the quarter.
- Return on Tangible Common Equity (ROTCE): 48.8% for the quarter.
- Capital Ratios: Extremely healthy, with some metrics being twice the industry average.
- Net Income: $0.43 for Q2 2024, up from $0.27 in Q2 2023.
- Bond Offering: Completed a $71 million offering of 8.5% fixed rate notes.
- Net Interest Margin Contraction: 12 basis points during the quarter.
- Deposit Growth from Business Customers: $20 million during the quarter.
- CD Campaign: Brought in over $79 million, mostly in 6-month paper.
- Non-Interest Income: Slightly higher on increased liquidity and leverage.
- Provision for Loan Losses: Up $1.8 million versus the prior quarter.
- Net Gains on Sales of Loans: Up on higher volumes of loans sold.
- Expenses: Down versus prior quarter, with notable decreases in professional services expenses.
Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NewtekOne Inc (NEWT, Financial) reported Q2 2024 earnings of $0.43 per share, beating the consensus estimate of $0.405.
- Quarterly deposit growth at Newtek Bank was approximately 17%, significantly higher than the industry average.
- Net interest margin remained stable at 4.83% for the three months ended June 30, 2024.
- The company completed a successful securitization of its Alternative Loan Program, demonstrating strong demand and investor interest.
- NewtekOne Inc (NEWT) reaffirmed its full-year 2024 EPS guidance of $1.85 to $2.05, showing confidence in its financial outlook.
Negative Points
- Net interest margin contracted by 12 basis points during the quarter due to increased leverage and higher cash balances.
- The company experienced higher expenses for credit losses, which are anticipated to continue.
- Origination underperformance in 504, conforming C&I, and CRE loans was noted, with expectations to correct this in the second half of the year.
- Non-accrual loans increased to $13.5 million, primarily from the National Bank of New York City portfolio.
- The company faces challenges in managing credit and interest rate risks, particularly with the higher cost of deposits and expected charge-offs.
Q & A Highlights
Q: On the 2024 guide, EPS at a headline level is unchanged, but you are expecting lower originations, lower held-for-investment loans, and a lower margin guide. Can you give some detail on where you're making that up?
A: It's in the ALP business, which is picking up steam, particularly for the third quarter. We have a couple of interesting opportunities in the merchant services area, which I think will pick up steam. And that's where I think we're going to outperform. (Barry Sloane, CEO)
Q: Can you discuss how the recent market volatility impacted your guide?
A: Given what happened Thursday, Friday, and yesterday, it made sense to hold the guidance. We try to put guidance out there that people can count on and rely upon. Our midpoint is $1.95, and as of yesterday, we had a $12.50 stock price. It's important for people to expect the unexpected. (Barry Sloane, CEO)
Q: Could you explain your comment about the shift in EPS from Q3 to Q4 being driven by the ALP program?
A: We have a lot of different factors internally with respect to joint ventures, transition from one venture into another that could potentially change gain on sales margins in one quarter or another. We feel very comfortable that Q3 and Q4 together will get us within the margin that we gave it to. (Barry Sloane, CEO)
Q: What were the drivers behind the jump in other non-interest income this quarter?
A: The big driver is the alternative loan program. We did a lot of loans, and when you look at the value of those loans, they're very valuable. (Barry Sloane, CEO)
Q: Can you give a little color on the underperformance in 504 loan originations this quarter and why you think it will pick up in the second half?
A: We believe that given where we were in the balance, we're a little over-weighted on 7(a). We will add to conforming C&I and conforming CRE in the third and fourth quarters to balance that out. We were not able to execute on that as well as we thought in Q1 and Q2. (Barry Sloane, CEO)
Q: How much does the total non-performing loan volume impact reserving or provisioning for the quarter?
A: We go through a detailed analysis of the non-performing portfolio, including a full collateral analysis and where the borrower is in terms of past due payments and fees. We reserve $0.50 on the dollar for loans below $50,000. (M. Scott Price, CFO)
Q: Should we expect flat gain on sale in the second half of the year?
A: We're expecting on balance pretty similar production numbers for the third quarter, slightly higher. The premium on loans for the quarter was 11.02%, and we're expecting 11% for the third. (M. Scott Price, CFO)
Q: How do you plan to bundle services that the Newtek Advantage can offer to better attract low-cost business deposits?
A: We will roll out same-day payroll and same-day funding for payment processing. These services will be integrated into the client's banking portal, providing a comprehensive view of their financial activities. (Barry Sloane, CEO)
Q: Are you providing more upfront for some of your lending products due to the fluid macro backdrop?
A: We are trying to be pragmatic and realistic. The higher interest rates have put stress on business owners, especially those with loans from '21, '22, and '23. We are trying to be conservative in our forecasts. (Barry Sloane, CEO)
Q: What is the timing for the disposition of the technology piece of the business?
A: The date in the application is Q1 2025. (Barry Sloane, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
