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

NewtekOne, Inc. (NEWTG) Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics:

• Earnings Per Share (EPS): Reported at $0.43, exceeding consensus by $0.01 and reflecting 19% and 23% growth over Q1 2025.
• Book Value: Ended Q1 2026 at $12.35 per share; tangible book value at $11.84, up from $6.92 in Q1 2023.
• Loan Originations: 961 loan units originated, a 40% increase year-over-year, totaling $391 million compared to $366 million in Q1 2025.
• Deposits: Grew to $1.9 billion, with 37,000 deposit accounts, more than doubling year-over-year.
• Return on Average Assets: 1.96%, favorable compared to industry standards.
• Efficiency Ratio: 40% for Newtek Bank, indicating strong operational efficiency.

2. Strategic Updates and Business Highlights:

• Technological Advancements: Emphasis on real-time payments and AI-driven loan processing, enabling faster approvals (7-day loans for amounts under $350,000).
• Market Position: Newtek is the largest SBA lender by units and ranks among the top by loan volume, having stabilized and supported over 110,000 jobs in the last five years.
• C&I Loan Program: Launched C&I long amortization loans, contributing $85.7 million in originations, with plans for diversification into commercial real estate and short-amortization loans.
• Securitization Strategy: Transitioning to funding loans through bank deposits rather than warehouse lines, enhancing profitability and reducing capital requirements.

3. Forward Guidance and Outlook:

• 2026 EPS Guidance: Reaffirmed at a midpoint of $2.35, with a target of $2.60 for 2027.
• Loan Growth: Expected to continue at low double-digit rates, with improved credit metrics from the introduction of C&I LA loans.
• NII Growth: Anticipated increase in net interest income due to reduced funding costs and a favorable asset mix as more loans are funded through deposits.

4. Bad News, Challenges, or Points of Concern:

• NIM Compression: Net interest margin has compressed due to a shift in earning asset mix, although absolute net interest income is increasing.
• Market Volatility: Concerns about borrower confidence and activity levels in the SBA market due to recent regulatory changes that have reduced eligible borrowers.
• Securitization Timing: The timing of securitizations may affect short-term profitability, with potential capital constraints as growth continues.
• Credit Quality: While non-performing loans (NPLs) are down, there is a noted increase in net charge-offs as the loan portfolio seasons.

5. Notable Q&A Insights:

• Balance Sheet Growth: Management indicated that future loan growth will primarily occur within the bank, with expectations of continued diversification and improved credit metrics.
• Deposit Liquidity: While current liquidity levels are high, management plans to maintain a healthy amount of cash at the Fed to support future lending.
• SBA Market Dynamics: Changes in SBA regulations have reduced borrower eligibility, but Newtek believes it can remain competitive by offering better terms than alternative financing options.
• Loan Size Trends: There is a mix of loan sizes, with smaller SBA loans but larger C&I LA loans, reflecting a strategy of diversification in the loan portfolio.

Overall, NewtekOne demonstrated strong growth metrics and strategic advancements in Q1 2026, while also navigating challenges related to market conditions and regulatory changes.