Newtek's Q4 2024: Navigating Contradictions in Credit Loss, Deposit Growth, and Risk Management

These are the key contradictions discussed in Newtek Business Services' latest 2024Q4 earnings call, specifically including: Credit Loss Expectations and Loan Portfolio Management, Deposit Growth Strategy, SBA Gain on Sale Margins and Expectations, and Credit Risk Management Strategies:



Strong Financial Performance:
- NewtekOne reported EPS of $1.97 per basic and $1.96 per diluted, marking a 43% improvement over the prior year.
- The growth was driven by strong loan growth and deposit growth, along with a significant increase in net interest income.

Diverse Loan Portfolio and Risk Management:
- The company's loan portfolio showed a significant growth, including $269 million in ALP loans and $672 million in 504 loans since inception.
- NewtekOne managed risk by focusing on long-term amortization schedules, personal guarantees, and diversifying its loan portfolio by industry and geography.

Deposit and Liquidity Management:
- Core business deposits grew to $216 million, with a $106 million increase from the previous year.
- The company attracted and retained deposits through its Newtek Advantage ecosystem, offering value-added services like free document storage and payroll services.

Efficiency and Profitability Ratio:
- Newtek Bank reported an ROA of 6.3% and a ROTCE of 48%, with an efficiency ratio of 42%.
- This strong profitability was attributed to a focus on cost-effective technology and providing high-value services to customers.

Technology and Business Model Innovation:
- NewtekOne leveraged its technology to acquire clients cost-effectively and offer unique solutions, such as the Newtek Advantage portal, which provides comprehensive business solutions.
- This innovation has been a key driver of the company's growth and differentiation in the market.