Newtek Business Services Corp. (NEWT) Investor Conference Call Transcript

Summary of Newtek Business Services Corp. Investor Conference Call Company Overview - Company: Newtek Business Services Corp. (NASDAQ: NEWT) - Event: Investor Conference Call on December 14, 2022 - Participants: Barry Sloane (CEO), Nicholas Leger (CFO), John McCaffery (SVP of Accounting and Finance) [2][5] Key Points Discussed Acquisition of National Bank of New York City - Newtek is in the process of acquiring National Bank of New York City for $20 million, approximately 1x tangible book value [10][11] - Anticipated close date for the acquisition is between January 3 and January 23, 2023 [10] - The bank has a clean portfolio with only one nonperforming loan of over $3 million and approximately $120 million to $130 million in deposits [11][12] Transformation into a Financial Holding Company - Newtek is transitioning from a Business Development Corporation (BDC) to a financial holding company under the 1933 Act [6][39] - The holding company will have total assets of approximately $1.1 billion with a TCE ratio of 18% to 22% and a CET1 ratio of 19% to 21% [13][14] - The bank will start with around $250 million in total assets, expected to grow to $735 million in 12 months and $1.5 billion in 36 months [24][25] Financial Projections and Performance Targets - Projected return on average assets (ROAA) for 2023 is 3% to 4%, and return on tangible common equity (ROATCE) is expected to be between 18% and 22% [22] - Earnings per share (EPS) targets are projected at $1.70 to $2.00 for the first year and $2.80 to $3.20 for the second year [24] - The bank is expected to contribute about 50% of total revenues once operational [62] Deposit Strategy - Newtek plans to leverage its existing customer base, including 15,000 merchant processing accounts and 800 payroll clients, to gather deposits [22][23][55] - Initial deposit gathering will likely involve more expensive methods, transitioning to lower-cost deposits over time [53][54] - The company has a significant opportunity to attract deposits due to its existing relationships and services [55] The Newtek Advantage - Newtek aims to provide a comprehensive suite of services, termed "The Newtek Advantage," which includes personalized banking relationships, analytics, and integrated solutions for small businesses [30][31] - The platform will allow clients to manage various business functions, including payroll and payment processing, in one place [32][33] Management and Operational Readiness - The management team is experienced, with key personnel having extensive backgrounds in banking and finance [35][36] - Newtek is prepared to launch operations with a focus on risk management and compliance [38][39] Market Position and Future Outlook - Newtek believes that its unique structure and diversified revenue streams will allow it to compete effectively in the banking sector [40][41] - The transition to a financial holding company is expected to enhance growth potential and reduce the cost of capital [45][46] Conclusion - Newtek is optimistic about its future as it transitions into a financial holding company and prepares to operate the newly acquired bank, with a strong focus on leveraging existing relationships and technology to drive growth and profitability [49][50]