Newtek Business Services (NEWT:BUY) Loan funding up 40.7% in Q2:16. NEWT closes acquisition of bank-serv Partners for 4.3x forecasted EBITDA.

12-AUG-16 – Newtek Business Services (NEWT:BUY) Loan funding up 40.7% in Q2:16. NEWT closes acquisition of bank-serv Partners for 4.3x forecasted EBITDA. Company increases FY:16 dividend guidance by one cent to $1.53. We maintain our BUY rating and $16 price target.

Q2:16 HIGHLIGHTS

Investment portfolio grew 14.6% in H2:16 to $305.8 million.
SBA 7 (A) loan funding increased 40.7% in Q2:16 to $75.8 million. NEWT reaffirmed its guidance for 32% funding growth and loans totaling $320 million in FY:16.
Loan referrals rose 62% in Q2:16 to $3.7 billion and the loan pipeline grew 78.4% to $228.3 million, signaling the continuing strength of this business.
Acquisition of bank-serv Partners expected to add $30 million to SBA loan funding in FY:17. Bank-serv has relationships with 350 lending institutions and extends NEWT’s footprint in the Midwest.
Average net premium on loan sales improved to 12.28% from 11.72% one year earlier, contributing to stronger gains on sales.
NEWT originated 100 loans totaling $75.8 million and solds 90 loans for $51.2 million in Q2:16, resulting in realized gain on sale of $7.5 million.
G&A increased 40% to $4.2 million as a result of $1.5 million loss on lease liability from old office space and $400k of audit and stock valuation charges that won’t be repeated in H2:16.