NewtekOne(NEWT) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported earnings per share of $0.45 for Q3 2024, which was above the street consensus of$0.43, and would have been $0.47 without a deferred tax charge of$527,000 [10][11][14] - Return on average assets (ROAA) was 6.3%, and return on tangible common equity (ROTCE) was 49%, with a net interest margin (NIM) of 5.29% [20][11] - The provision for loan losses was higher than expected at $6.9 million, indicating a focus on risk-adjusted returns [11][12] Business Line Data and Key Metrics Changes - The bank experienced a 12$75 million in bonds, with an 8.625% coupon [19] - The average yield on loans was reported at 11.12%, which does not include gain on sale income [20] - The company is positioned to grow its payment processing segment, which is not directly tied to rate movements [28] Company Strategy and Development Direction - The company aims to provide a frictionless banking experience for customers, leveraging technology to enhance service delivery [29] - There is a focus on integrating the payments business with banking services to create a comprehensive ecosystem for small to medium-sized businesses [38] - The company is transitioning to a financial holding company and divesting its technology unit to focus on core banking operations [56][58] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a diluted earnings per share range of $2 to$2.25 for 2025, reflecting an 8% to 12.5% increase over 2024 [27][29] - The management team emphasized their experience in risk management and their ability to navigate economic challenges, citing past performance during crises [61][66] - The company is optimistic about its growth trajectory, particularly in the ALP and payment processing segments, which are expected to drive future profitability [28][76] Other Important Information - The company has a strong management team with extensive banking experience, which is crucial for scaling operations [72] - The insurance agency business has seen growth, with a 37% increase in active policies since becoming a bank [53] - The company is focused on maintaining transparency and aligning interests with employees and shareholders [80] Q&A Session Summary Question: What are the expectations for future earnings growth? - Management confirmed guidance for 2025 earnings per share in the range of $2 to$2.25, indicating confidence in continued growth despite market volatility [27][29] Question: How is the company managing risk in its loan portfolio? - Management highlighted their proactive approach to risk management, including higher loan loss reserves and a focus on risk-adjusted returns [11][64] Question: What is the strategy for the payment processing segment? - The company is integrating its payment processing services with banking operations to provide a comprehensive solution for small business clients, enhancing customer value [38][41]