NewtekOne(US:NEWT)2023-02-28 20:07Financial Data and Key Metrics Changes - The company reported total investment income of $23.1 million for Q4 2022, a 6.9% decrease from $24.8 million in Q4 2021, primarily due to a drop in dividends from portfolio companies [90] - The net investment loss for Q4 2022 was $5.4 million or $0.22 per share, compared to a net investment income of $1.6 million or $0.7 per share in Q4 2021 [101] - The company anticipates total assets to grow from $1.62 billion at the end of 2022 to $1.7 billion by the end of 2023 and $2.1 billion by the end of 2024 [43][45] Business Line Data and Key Metrics Changes - The company funded a record $775 million in SBA 7(a) loans in 2022, up from $362 million, with a forecast of $885 million for 2023 [65] - Servicing income increased by 27% to $3.8 million in Q4 2022 compared to $3 million in the same quarter in 2021 [58] - The non-conforming C&I loan business is expected to grow significantly, with projections of increasing from $600 million in 2023 to about $1 billion in 2024 [1][16] Market Data and Key Metrics Changes - The company noted a favorable trend in non-accruals as a percentage of loans at fair value, indicating improved credit quality [49] - The company has tightened underwriting criteria, resulting in higher FICO and SBSS scores for new originations, suggesting a focus on better-quality borrowers [50] Company Strategy and Development Direction - The company has transitioned to a financial holding company, allowing it to offer a broader range of financial solutions and reduce reliance on equity sales [12][14] - The strategy includes diversifying the loan portfolio with conforming C&I and CRE loans, which are expected to enhance stability and profitability [34] - The company aims to leverage lower-cost deposits to improve net interest margins and overall profitability [42][78] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to meet growth targets despite a slowing economy, citing strong liquidity and government support for customers [3][25] - The company anticipates a return on average assets and return on tangible common equity to be robust, with projections of 3.28% to 3.75% for 2023 and 2024 [78] - Management highlighted the importance of maintaining a consistent dividend, projecting it to be stable for about a year before reassessing based on earnings performance [38] Other Important Information - The company declared a dividend of $2.75 for 2022 and aims to maintain a top quartile dividend yield of around 4% [67][98] - The company has received a BBB+ rating from Egan-Jones for its net debt, indicating strong creditworthiness [74] Q&A Session Summary Question: How comfortable is the company with its growth targets, especially in non-conforming C&I? - Management indicated comfort with the targets, acknowledging the challenges of projecting in a volatile market but expressing confidence based on historical performance [2] Question: What is the update on the PLP status and its implications? - Management noted that the PLP status is crucial for financing 7(a) and 504 loans, and they are optimistic about achieving this status [6][34] Question: How does the company view the current economic environment? - Management sees a slowing economy but not a severe downturn, emphasizing strong liquidity and support from government programs for their customer base [3][25] Question: What are the expectations for the joint venture investments? - Management expects a consolidated net return of 20% to 30% from joint venture investments, highlighting the potential for significant returns [115][116] Question: How relevant is the Q4 report to future performance? - Management stated that while the Q4 report reflects past performance, the transition to a financial holding company marks a new beginning with different operational metrics [126][127]