NEWTG — NewtekOne, Inc. 8.50% Fixed Rate Senior Notes due 2029

NewtekOne, Inc. (NEWTG) Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Net Income Before Taxes: Approximately $80 million for 2025, up 16.4% year-over-year.
• Total Revenue: $284 million, a 10.6% increase from $257 million in 2024.
• Earnings Per Share (EPS): $0.65 for Q4; basic EPS for 2025 at $2.21 (up 1211% YoY), diluted at $2.18. Guidance for 2026 EPS is projected at $2.15 to $2.55, with a midpoint of $2.35.
• Tangible Book Value: Increased to $12.19 from approximately $6.92 at the start of the year.
• Efficiency Ratio: Improved from 63.2% to 58.3% at the HoldCo, with the bank's efficiency ratio around 47%.
• Return on Average Assets (ROAA): 2.78% for the year.

2. Strategic Updates and Business Highlights

• Depository Accounts: Opened 9,000 new accounts in Q4, with a total of 34,000 active accounts.
• Acquisition: Celebrated the three-year anniversary of owning an OCC-chartered bank, which has grown from $180 million in assets to approximately $1.415 billion.
• Loan Programs: Focus on long-term loans (10-25 years) with lower monthly payments, distinguishing from competitors who offer shorter-term, high-interest loans.
• Technological Innovations: Emphasis on digital account opening and integrated solutions for independent business owners, enhancing customer experience.
• Credit Quality: Nonperforming loans (NPLs) declined for two consecutive quarters, with a decrease from 7.3% to 6.9% in 2025.

3. Forward Guidance and Outlook

• 2026 Projections: Anticipate $1 billion in SBA 7(a) originations, $500 million in alternative loan program (ALP) originations, and continued growth in combined C&I and CRE portfolios.
• Deposit Growth: Expect ongoing increases in business and consumer deposits, aided by competitive rates and integrated banking solutions.
• Operational Efficiency: Continued focus on maintaining or improving the efficiency ratio while managing expenses.

4. Bad News, Challenges, or Points of Concern

• NSBF Losses: The Newtek Small Business Finance (NSBF) subsidiary reported a loss of approximately $20 million in 2025, down from $28.7 million in 2024, but still a concern as it represents a legacy issue.
• Market Conditions: The economic environment remains K-shaped, with businesses in lower segments facing challenges, while those in the middle and upper segments perform better.
• SBA Market Dynamics: Changes in SBA regulations and increased competition from fintechs may impact future originations and profitability.
• First Quarter Weakness: Historically, Q1 tends to be a weaker quarter for lending, which may affect early 2026 performance.

5. Notable Q&A Insights

• Deposit Growth Drivers: The increase in deposit accounts is attributed to a frictionless digital experience and competitive rates, with 50% of business lending clients opening deposit accounts.
• SBA Loan Performance: Newtek's SBA loans are performing at industry average levels, with a focus on maintaining strong margins compared to competitors.
• Expense Management: Management indicated a commitment to controlling expenses while investing in technology and business development to support growth.
• Market Positioning: Newtek aims to differentiate itself from competitors by providing long-term, patient capital loans, rather than high-interest, short-term loans prevalent in the market.

Overall, NewtekOne demonstrated strong financial performance in 2025, with strategic initiatives aimed at enhancing customer experience and operational efficiency, despite facing challenges in the competitive landscape and legacy issues from its NSBF subsidiary.