NEWTZ — Newtek Business Services Corp. 5.50% Notes Due 2026

Summary of NewtekOne (NEWTZ) Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Earnings Per Share (EPS): Q3 EPS was $0.68 (basic) and $0.67 (diluted), with year-to-date EPS of $1.57 (basic) and $1.54 (diluted), reflecting a 47% increase year-over-year.
• Revenue Growth: Revenue increased by 19% year-over-year.
• Tangible Book Value: Grew from $6.92 in Q1 2023 to $11.22 in Q3 2025.
• Dividends: Quarterly dividend remains at $0.19, totaling $0.76 annually.
• Deposit Growth: Core deposits increased by $52 million (17%) for business deposits and $95 million (12%) for consumer deposits.
• Efficiency Ratio: Improved from 61.8% to 56.3% at the holding company, with operating expenses rising only 8.5% despite a 43% increase in assets.
• Return on Average Assets (ROAA): 3.15%, significantly above industry standards.

2. Strategic Updates and Business Highlights

• Customer Base Expansion: Opened 22,000 depository accounts and serviced 10,000 borrowers without traditional banking methods.
• Alternative Loan Program (ALP): Anticipating a record securitization of $325-$350 million in Q4 2025, marking the 17th securitization in NewtekOne's history.
• Technological Focus: Emphasized a technology-enabled banking model, integrating services like payroll and merchant processing to enhance customer engagement.
• Market Position: Positioned as a unique player in the small business lending space, differentiating from traditional community banks.

3. Forward Guidance and Outlook

• Q4 Guidance: Maintains previous guidance of $0.65 to $0.80 EPS, though acknowledges uncertainty due to the government shutdown.
• Long-term Growth: Plans to diversify loan offerings beyond SBA 7(a) loans to include more commercial real estate (CRE) and commercial and industrial (C&I) loans.
• Future Securitizations: Aiming for two securitizations annually, with a focus on increasing the size of these transactions.

4. Challenges and Points of Concern

• Credit Quality: Non-performing loans (NPLs) at 8.1%, higher than typical community banks, though management notes this is stabilizing and already accounted for in reserves.
• Market Volatility: Current economic conditions are challenging for small businesses, particularly in sectors like oil, gas, and agriculture.
• Regulatory Environment: The government shutdown poses risks to loan origination timelines, although the company has strategies to mitigate impacts.
• Competitive Pressures: Noted that several SBA lenders are exiting the market, which could lead to increased competition for remaining lenders.

5. Notable Q&A Insights

• Credit Trends: Management indicated a bifurcated economy, with certain sectors under pressure while consumer spending remains strong.
• SBA Loan Pipeline: Despite the shutdown, Newtek is still processing loans that were approved prior to the shutdown and has mechanisms to bridge financing.
• Dividend Policy: While the dividend is currently stable, management expressed a preference for potential stock buybacks over increasing dividends in the near term.
• Market Positioning: Management believes their business model will eventually be recognized positively in the market, despite current share price pressures.

Overall, NewtekOne demonstrated strong financial performance in Q3 2025, with significant growth in deposits and earnings, while also navigating challenges related to credit quality and regulatory uncertainties. The strategic focus on technology and diversification of loan offerings positions the company for future growth, albeit with caution regarding the economic landscape.