8-K: NewtekOne Reports Strong 2024 Earnings, Raises 2025 Forecast

NewtekOne announces full year 2024 earnings of $1.97 per basic share and raises its full year 2025 earnings forecast to a range of $2.10 to $2.50 per basic and diluted common share.

Summary

• NewtekOne, Inc. reported its financial results for the three and twelve months ended December 31, 2024.
• Net income for the year was $50.9 million, with earnings per share (EPS) of $1.97 per basic and $1.96 per diluted common share.
• The company's net interest income for the year increased by 51.5% to $40.3 million.
• NewtekOne's Alternative Loan Program (ALP) loan closings saw a significant increase of 224.9% to $269.6 million for the year.
• The Newtek Payments segment reported a 33.1% increase in pretax income, reaching $16.2 million for the year.
• Total deposits at Newtek Bank were $1.04 billion at the end of 2024, representing a 100.3% increase year-over-year.
• SBA 7(a) loan closings increased by 15.2% to $954.3 million, surpassing the 2024 forecast of $935 million.
• The company is forecasting $1.0 billion in SBA 7(a) loan closings for 2025.
• NewtekOne has raised its 2025 annual EPS forecast range to $2.10 to $2.50 per basic and diluted common share.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, increased earnings forecast, and strategic growth initiatives. The management's comments are optimistic, and the company's performance is compared favorably to industry standards.

Positives

• NewtekOne reported a 55.6% increase in EPS for the three months ended December 31, 2024, compared to the previous quarter.
• Net interest income increased by 36.1% for the three months ended December 31, 2024, compared to the same period in 2023.
• Return on Tangible Common Equity (ROTCE) increased to 31.8% for the three months ended December 31, 2024.
• Return on Average Assets (ROAA) increased to 4.1% for the three months ended December 31, 2024.
• The efficiency ratio improved to 55.9% for the three months ended December 31, 2024.
• Total deposits at Newtek Bank increased by 100.3% year-over-year.
• The company completed a registered public offering of $75.0 million aggregate principal amount of its 8.625% Fixed Rate Senior Notes due 2029.
• NewtekOne's joint venture closed a $154.3 million alternative business loan backed securitization.

Negatives

• Net interest margin decreased by 9.1% for the three months ended December 31, 2024, compared to the previous quarter.
• Tier-1 leverage ratio decreased by 2.2% at December 31, 2024, compared to December 31, 2023.
• SBA 504 loan closings decreased by 9.2% for the twelve months ended December 31, 2024, compared to the same period in 2023.
• Total risk-based capital ratio at Newtek Bank decreased by 32.5% at December 31, 2024, compared to December 31, 2023.
• Tier-1 leverage ratio at Newtek Bank decreased by 28.3% at December 31, 2024, compared to December 31, 2023.

Risks

• The company's forward-looking statements are subject to risks and uncertainties, including those related to interest rates, monetary policy, and prevailing economic conditions.
• The company acknowledges that its assets under supervision, capital ratios, risk-weighted assets, supplementary leverage ratio, and balance sheet data are preliminary estimates and subject to change.
• The company manages a portfolio of loans with a higher risk and reward profile, which requires effective management of credit risk.

Future Outlook

NewtekOne anticipates continued growth in earnings and forecasts $1.0 billion in SBA 7(a) loan closings for 2025 and expects to generate $500 million of new originations in the ALP loan portfolio. The company is raising its full year 2025 EPS forecast range to $2.10 to $2.50 per basic and diluted common share and intends to maintain the current dividend payout.

Management Comments

• Barry Sloane, CEO, President and Chairman, expressed pleasure with the company's ability to achieve key metrics and milestones since acquiring Newtek Bank.
• Mr. Sloane highlighted the company's focus on deposit growth, loan growth, and the development of the Newtek Advantage.
• Mr. Sloane stated that the company's management team has done an excellent job of growing Newtek Bank's assets, liabilities, and profits while maintaining appropriate levels of capital and loan loss reserves.
• Mr. Sloane believes that the company's business model, with higher margins and lower operating expenses, has the ability to generate an attractive risk and reward scenario for all of its stakeholders.
• Mr. Sloane concluded that Newtek Bank is a true technology-enabled bank.

Industry Context

NewtekOne operates in the financial services industry, providing business and financial solutions to independent business owners. The company's focus on technology and its Newtek Advantage platform differentiate it from traditional banks. The company's growth in SBA lending and ALP loans reflects the increasing demand for financing among small businesses.

Comparison to Industry Standards

• NewtekOne's ROTCE and ROAA for the full year 2024 were 24.1% and 3.2%, respectively, which the company believes are leading metrics in the bank and bank holding company space.
• The company's efficiency ratios of 43.5% for Newtek Bank and 63.2% for NewtekOne in 2024 are below industry-level efficiency ratios.
• The company believes its business model can overcome obstacles in a compliant and frictionless manner that is highly attractive to its independent business owner client base due to, among other things, the Newtek Advantage.

Stakeholder Impact

• Shareholders can expect continued dividend payouts and potential for increased earnings.
• Independent business owners will benefit from the Newtek Advantage platform and access to financing solutions.
• Employees can expect continued growth and opportunities within the company.

Next Steps

• The company will host a conference call on February 27, 2025, to discuss the fourth quarter and full year 2024 financial and operating results.
• The company anticipates its third ALP securitization will occur during the first half of 2025.
• The company intends to grow Newtek Bank's conforming CRE and C&I loans, and SBA 504 loans at a faster rate than its SBA 7(a) loans in 2025.

Key Dates