NewtekOne (NEWT) Analyst & Investor Day 2024 summary

Strategic transformation and business model

• Completed a 15-month transformation to a financial holding company with an OCC-chartered bank, focusing on technology-driven, frictionless banking for SMBs and leveraging digital platforms for direct customer engagement.

• Emphasizes a unique, non-traditional approach: no branches, bankers, or brokers, with a strategic objective to grow business deposits via digital channels and high-yield products.

• Technology assets like Newtek Advantage™ and NewTracker® provide integrated business services, digital onboarding, analytics, and document storage, enhancing operational efficiency and client stickiness.

• Management and board have deep experience in banking, credit, technology, and compliance, with key hires from IBERIABANK and other institutions in the past 18 months.

• Actively expanding digital banking back office and deposit-gathering capabilities, including new hires and office openings in Wilmington, NC.

Credit quality, underwriting, and portfolio management

• Maintains a 20+ year track record in small business lending, with robust underwriting, personal guarantees, and collateral requirements.

• SBA 7(a) loans have a cumulative 10-year charge-off rate of 4.47%; ALP and SBA 504 loans are higher quality with minimal or no charge-offs since 2022.

• ALP joint ventures expect cumulative charge-offs of 3% over the life of the program.

• Securitizations and joint ventures fund non-bank loans, with 13 completed (soon 14), all maintaining or improving ratings and a growing institutional investor base.

• Credit metrics are regularly reviewed by management, regulators, and auditors, with CECL reserves updated quarterly and a focus on prudent risk management.

Financial performance and guidance

• 2024 midpoint EPS guidance is $1.95, up from $1.20 in 2023 (excluding tax asset effects), with expectations for further growth in 2025 as ALP and deposit initiatives scale.

• ROAA was 2.8% and ROE 16.3% in 1Q24, with net interest margin at 2.92% and average loan yield at 9.49%.

• Non-interest income, especially gain on sale of 7(a) loans (11% average premium), is a primary revenue driver, with stable margins despite interest rate volatility.

• Business deposits grew by over $10 million in 1Q24; deposit growth is a core strategy, focusing on converting lending clients and leveraging integrated services.

• ALP origination is ramping, with $120 million expected by June and a 2024 target of $250–$400 million, supported by recent capital raises and securitization activity.