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01/11 03:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents mixed signals: strong revenue growth and improved efficiency are positive, but uncertainties like the government shutdown and unclear guidance impact sentiment negatively. The company's strategy to diversify its loan portfolio and ALP growth is promising, yet the reluctance to increase dividends and the cautious stance on guidance due to external factors create a neutral outlook.
Q3 Basic and Diluted Earnings Per Share $0.68 and $0.67 respectively, with a year-over-year growth of 47% and 22%. This growth is attributed to revenue growth of 19% to 16% respectively.
Tangible Book Value Per Share Increased from $6.92 in Q1 2023 to $11.22 in Q3 2025. This growth occurred while paying a dividend of $0.76 annually ($0.19 per quarter).
Core Deposits Growth Business deposits grew by $52 million (17%) and consumer deposits by $95 million (12%) sequentially over the quarter. This growth was achieved without traditional branches, bankers, brokers, or BDOs.
Alternative Loan Program (ALP) Securitization Expected to reach $325 million to $350 million in Q4 2025, marking the largest securitization to date. This program has historically had charge-offs below 1%.
Capital Position Tier 1 capital and common equity Tier 1 increased by $80 million and $30 million respectively, bolstering the capital structure.
Efficiency Ratio Declined from 61.8% to 56.3% at the holding company level, even as assets grew by 43% and operating expenses increased by only 8.5%.
Return on Average Assets (ROAA) 3.15% for Q3 2025, significantly ahead of industry standards.
Nonaccrual Loans (NPLs) NPLs to total loans stood at 8.1%, which is high compared to community banks but has been written down. Adjusted NPLs (excluding NSBF portfolio) are at 3.8%.
Net Interest Margin (NIM) 5.4% for Q3 2025, significantly higher than top banks.
Allowance for Credit Losses 5.42%, indicating strong reserves to support higher losses and charge-offs.
NSBF Losses Losses from the nonbank lender in wind-down mode are expected to decline from $28.7 million in 2024 to $18 million-$20 million in 2025.
Payment Processing Business Contribution Expected to contribute $16.5 million in pretax income for 2025.
Insurance Policies 10,000 policies in 2025, up 34% year-over-year, contributing $800,000 in pretax income.
Payroll Business Contributing $600,000 in pretax income with 20,000 employees serviced.
NewtekOne Triple Play: A new offering that provides customers with an unsecured line of credit up to $10,000, a bank account, and a merchant or payroll account, all bundled together.
Market focus on SMEs and SMBs: Targeting over 36 million small and medium-sized businesses in the U.S., which represent 43% of U.S. GDP. The company has supported or stabilized over 110,000 jobs through the SBA 7(a) program.
Deposit growth: Core deposits grew significantly, with business deposits increasing by $52 million (17%) and consumer deposits by $95 million (12%) sequentially. Deposits are being raised without traditional branches or bankers.
Efficiency improvements: The efficiency ratio declined from 61.8% to 56.3% at the holding company level, while operating expenses grew only 8.5% despite a 43% increase in assets.
Alternative Loan Program (ALP): The company is preparing its largest ALP securitization to date, valued at $325-$350 million. This program has historically low charge-offs and high profitability.
Capital structure enhancement: Raised $80 million in Tier 1 capital and $30 million in common equity Tier 1, improving capital ratios to support growth.
Shift to technology-enabled banking: Positioning as a technology-oriented financial holding company, focusing on cost-effective customer acquisition and remote operations without traditional branches.
Credit Quality and Non-Performing Loans (NPLs): NPLs are relatively high at 8.1%, which is significantly higher than typical community banks. While these have been written down, they still represent a risk to profitability and stability. The legacy nonbank lender (NSBF) is in wind-down mode but continues to generate losses, albeit at a declining rate. Nonaccrual inflows have decelerated, but the portfolio still poses challenges.
Alternative Loan Program (ALP): The ALP is a key growth area but carries risks due to its reliance on securitizations for funding. While historical charge-offs have been low, the program's expansion and reliance on external funding mechanisms could expose the company to market and liquidity risks.
Regulatory and Capital Requirements: The company has bolstered its capital position through preferred and common equity issuances, but its reliance on securitizations and complex funding structures could attract regulatory scrutiny or require additional capital adjustments.
Deposit Growth and Cost: The company is growing deposits without traditional branches, but the sustainability of acquiring deposits below the risk-free rate remains uncertain. This could impact margins if deposit costs rise.
Economic and Market Conditions: The company operates in a rapidly changing market environment, including rising interest rates and economic uncertainties, which could impact loan performance and deposit growth.
Legacy Nonbank Lending Portfolio (NSBF): The NSBF portfolio is in wind-down mode but continues to generate losses. While these losses are declining, they still impact overall financial performance and could take 12-24 months to fully resolve.
Operational Efficiency: While the efficiency ratio has improved, the company’s rapid growth in assets and operations could strain resources and lead to operational inefficiencies if not managed carefully.
Alternative Loan Program (ALP) Securitization: The company expects to execute its largest ALP securitization in Q4 2025, with a range of $325 million to $350 million in ALP loans. This will be the 17th securitization in NewtekOne's history and the fourth in this category.
Capital Position and Structure: The company raised $80 million in Tier 1 capital and $30 million in common equity Tier 1, bolstering its capital ratios to support growth rates safely and soundly.
Efficiency Ratio: The efficiency ratio at the holding company declined from 61.8% to 56.3%, with operating expenses growing at a slower rate than total assets and revenues.
Deposit Growth: Deposits grew by 11% quarter-over-quarter, with a focus on reducing deposit costs to 2%-2.5% through integration with merchant, payroll, and insurance services.
NewtekOne Triple Play Offering: The company plans to launch the NewtekOne Triple Play, offering customers an unsecured line of credit up to $10,000, a bank account, and a merchant or payroll account.
SBA 7(a) Loan Portfolio Strategy: The company plans to diversify its loan portfolio by adding more CRE and C&I loans to reduce concentration in SBA 7(a) loans.
NSBF Portfolio Wind-Down: The NSBF portfolio is in wind-down mode, with nonaccrual inflows decelerating and expected losses for 2025 projected at $18 million to $20 million, down from $28.7 million in 2024.
Growth in Business Segments: The payment processing business is expected to contribute $16.5 million in pretax income for 2025, while the insurance agency and payroll business are projected to contribute $800,000 and $600,000 in pretax income, respectively.
Dividend Payment: Paid a healthy dividend to shareholders, currently $0.19 per quarter or $0.76 annually.
Share Buyback: No specific mention of a share buyback program in the transcript.
The earnings call presents mixed signals: strong revenue growth and improved efficiency are positive, but uncertainties like the government shutdown and unclear guidance impact sentiment negatively. The company's strategy to diversify its loan portfolio and ALP growth is promising, yet the reluctance to increase dividends and the cautious stance on guidance due to external factors create a neutral outlook.
The earnings call summary reveals strong financial performance with high ROAA and ROTCE, indicating profitability. The Q&A session highlights growth in deposits and successful securitization strategies, although management's vague responses on stock valuation and integration impacts introduce some uncertainty. The stable expense outlook and no dividend increase align with a conservative approach. Overall, the positive financial metrics, clear growth strategies, and lack of significant negative trends suggest a positive stock price movement in the short term.
The earnings call presents mixed signals. While there are strong financial metrics like EPS growth and a healthy dividend payout, concerns arise from increased charge-offs and economic pressures. The Q&A reveals management's evasiveness on specific issues, suggesting underlying uncertainties. The strategic plans, including stock buyback and growth initiatives, are positive, but the impact of competitive and economic challenges tempers enthusiasm. Overall, the sentiment is balanced, leading to a neutral prediction.
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