DEFA14A: NewtekOne Reports Strong 2024 Performance, Driven by Strategic Transformation

NewtekOne highlights significant growth in earnings, loan closings, and deposit balances following its transformation into a financial holding company.

Summary

• NewtekOne, Inc. is executing its business strategy following its transformation from a business development company (BDC) to a financial holding company.
• The company acquired and converted a nationally chartered single branch bank into Newtek Bank, N.A., supporting digital deposit account opening and providing tools for independent business owner clients.
• In 2024, diluted earnings per share (EPS) were $1.96, compared to $1.88 in 2023; adjusting for a 2023 tax benefit, EPS increased by 50%.
• The return on average assets (ROAA) was 3.2% in 2024.
• The return on average tangible common equity (ROATCE) was 24.1% in 2024.
• The efficiency ratio improved to 63.2% in 2024 from 71.9% in 2023.
• SBA 7(a) loan closings increased by 15% to $954 million in 2024.
• Alternative loan program (ALP) loan closings reached $270 million in 2024, compared to $83 million in 2023.
• Total loan closings amounted to $1.5 billion in 2024, up from $1.1 billion in 2023.
• Deposit balances at Newtek Bank more than doubled in 2024, exceeding $1 billion, compared to $519 million at the end of 2023.
• Business deposits ended 2024 at $216 million, a 96% increase over 2023.
• The number of deposit accounts increased from 1,400 in January 2023 to over 15,000.
• Newtek Payments generated $16 million of pre-tax income in 2024, a 33% increase over 2023, processing $5.3 billion of transactions.
• Tangible book value per common share grew 16% in 2024 to $9.39/share.
• Total assets climbed 44% to $2.1 billion from $1.4 billion at the end of 2023.
• The total risk-based capital ratio increased from 19.1% in 2023 to 19.7% in 2024, and the tier 1 capital ratio improved from 16.2% to 17.0%.

Sentiment

Score: 9

Explanation: The document presents a highly positive outlook with strong financial results and strategic progress, indicating a favorable sentiment.

Positives

• Diluted EPS increased by 50% in 2024, adjusted for a 2023 tax benefit.
• ROAA reached 3.2% in 2024.
• ROATCE was 24.1% in 2024.
• The efficiency ratio improved to 63.2% in 2024.
• SBA 7(a) loan closings increased by 15% to $954 million in 2024.
• ALP loan closings reached $270 million in 2024.
• Total loan closings amounted to $1.5 billion in 2024.
• Deposit balances at Newtek Bank more than doubled in 2024, exceeding $1 billion.
• Business deposits grew by 96% in 2024, ending at $216 million.
• The number of deposit accounts increased significantly.
• Newtek Payments pre-tax income increased by 33% in 2024.
• Tangible book value per common share grew 16% in 2024 to $9.39/share.
• Total assets climbed 44% to $2.1 billion.
• The total risk-based capital ratio and tier 1 capital ratio improved.
• NewtekOne's technology-enabled platform and business model are relevant in today's banking industry.
• The company offers a complete set of business and financial solutions with 24/7/365 availability.
• NewtekOne generated a return on average assets of 3.2%, which was roughly 3.7x the average of publicly traded peers with $1 billion $10 billion of assets.
• The equity/assets ratio of 14.4% at the end of 2024 was 2.7x the peer average.

Future Outlook

NewtekOne remains committed to growing earnings, client base, and market share while delivering industry-leading profitability.

Management Comments

• We are only in the early innings of this iteration of NewtekOnes journey.
• The addition of Newtek Bank to the NewtekOne family just over two years ago represents an important step in NewtekOnes evolution.
• We believe NewtekOnes technology-enabled platform and business model are relevant in todays banking industry.
• The opportunity to transform from a BDC to a financial holding company was the most recent, and we remain committed to make good on that opportunity.

Industry Context

NewtekOne emphasizes its unique, technology-enabled platform and business model, differentiating itself from traditional banks and highlighting its efficiency and profitability compared to peers.

Comparison to Industry Standards

• NewtekOne generated a return on average assets of 3.2%, which was roughly 3.7x the average of publicly traded peers with $1 billion $10 billion of assets.
• The equity/assets ratio of 14.4% at the end of 2024 was 2.7x the peer average.

Stakeholder Impact

• Shareholders benefit from increased earnings and tangible book value.
• Clients gain access to a broader range of financial solutions and improved service.
• Employees are part of a growing and profitable organization.

Key Dates

Keywords

NewtekOne, financial holding company, Newtek Bank, SBA 7(a) loans, alternative loan program, deposits, payments, earnings per share, ROAA, ROATCE, efficiency ratio, loan closings, tangible book value, assets