NewtekOne(US:NEWT)2023-08-07 20:06Company Overview - As of June 30, 2023, the company ranked as the second largest SBA 7(a) lender based on dollar volume of loans approved, combining Newtek Bank and NSBF[249]. - The company completed the acquisition of NBNYC, now renamed Newtek Bank, contributing $31 million in cash and merging two subsidiaries, enhancing its financial services capabilities[244]. - The company is now a financial holding company, subject to regulation by the Federal Reserve, and has withdrawn its previous BDC election, affecting its operational structure and compliance requirements[244]. - The company no longer qualifies as a RIC for U.S. federal income tax purposes, which changes its tax obligations and financial reporting[248]. Financial Performance - For the six months ended June 30, 2023, the company reported net income of $18.54 million, a decrease of 20.0% from $23.17 million for the same period in 2022[280]. - For the six months ended June 30, 2023, the company reported a consolidated net income of $18.6 million, compared to a net income of $24.5 million for the same period in 2022, reflecting a decrease of approximately 24.3%[322]. - The Company reported a loss attributable to noncontrolling interests of $31, impacting the net income attributable to NewtekOne, Inc. to $18.57 million[281]. - For the three months ended June 30, 2023, the Company reported net income of $6.9 million, a decrease of 48.9% compared to $13.5 million for the same period in 2022[328]. Revenue Streams - Noninterest income increased by 87.3% to $89.22 million in 2023, compared to $47.64 million in 2022, driven by significant growth in technology and IT support income and electronic payment processing income[298]. - The payments segment contributed $5.5 million to consolidated net income, with $22.8 million of noninterest income from various processing services[324]. - The technology segment contributed $16.5 million of noninterest income and incurred $15.2 million of noninterest expense for the six months ended June 30, 2023[325]. - The company generated $10.7 million in electronic payment processing income, reflecting a new revenue stream[347]. Loan and Asset Management - Total loans reached $873.8 million, an increase of $349.4 million from $524.4 million at December 31, 2022, primarily due to the consolidation of previously controlled portfolio companies and new loan originations[269]. - The company originated 721 SBA loans totaling $343.8 million for the six months ended June 30, 2023, compared to 576 loans totaling $363.9 million for the same period in 2022, indicating a 25.2% increase in the number of loans originated[312]. - The average outstanding accrual loan portfolio increased to $636.7 million in 2023 from $479.1 million in 2022, reflecting growth in SBA 7(A) loans and total commercial loan originations[283]. - The company transitioned SBA 7(a) loan originations to Newtek Bank as NSBF begins to wind down operations, continuing to manage existing loans until maturity or liquidation[249]. Financial Position - Total assets increased to $1.4 billion as of June 30, 2023, reflecting a growth of $440.2 million, or 44.1%, compared to $1.0 billion at December 31, 2022[268]. - Total deposits amounted to $447.4 million at June 30, 2023, with $38.2 million in non-interest bearing deposits and $409.1 million in interest bearing deposits, marking the first deposits recorded since the acquisition[275]. - Borrowings increased to $697.4 million at June 30, 2023, up from $539.3 million at December 31, 2022, driven by new notes payable and bank borrowings from newly consolidating entities[277]. - The company maintains an asset coverage requirement of at least 150% due to covenants in its outstanding 2024 and 2026 Notes[245]. Expenses and Losses - Salaries and employee benefits expense increased by 301.1% to $38.5 million for the six months ended June 30, 2023, compared to $9.6 million in the same period of 2022[305]. - Total non-interest expense for the three months ended June 30, 2023, was $40.180 million, an increase of 156.7% compared to $15.652 million in 2022[354]. - The total other expense for the six months ended June 30, 2023, was $79.4 million, an increase of 161.4% compared to $30.4 million in the same period of 2022[305]. - The provision for loan credit losses was $3.9 million for the six months ended June 30, 2023, compared to no provision in the same period in 2022 due to a change in accounting methodology[296]. Capital and Financing - The company raised approximately $111.3 million from the issuance of $115.0 million aggregate principal amount of 5.50% 2026 Notes, net of underwriter's fees and expenses[380]. - The company completed a private placement offering of $50.0 million aggregate principal amount of 8.125% notes due 2025, with net proceeds of approximately $48.94 million[392]. - The company was in compliance with all covenants related to the 2024 and 2026 Notes as of June 30, 2023[387]. - The Capital One facility was increased from $100.0 million to $150.0 million in June 2019, with various amendments to interest rates and terms[393]. Tax and Regulatory Matters - The company recognized an income tax benefit of $2.3 million during the six months ended June 30, 2023, primarily related to carried forward net operating losses[320]. - The company reported a deferred tax asset, net of $4.6 million, and a deferred tax liability, net of $19.2 million, reflecting changes in tax positions[436]. Market Conditions and Economic Factors - The company has observed significant economic challenges, including rising interest rates and supply chain interruptions, which may impact future performance and borrower defaults[254]. - The company adopted the CECL approach for estimating credit losses, which requires an estimate of expected credit losses over the life of an exposure[425].