NewtekOne, Inc. (NEWT) Q4 2025 Earnings Call Transcript
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Overview
The earnings call summary reveals strong financial performance with improved efficiency ratios, deposit growth, and tangible book value. Product development and market strategy are promising, with new offerings and partnerships. Despite flat noninterest income, optimistic guidance and strategic initiatives are positive. The Q&A section highlights digital growth and competitive positioning, with some concerns about unclear management responses. Overall, the sentiment is positive, given the financial health and strategic plans, suggesting a potential stock price increase of 2% to 8%.
Key Financial Performance
Net Income Before Taxes for 2025 Approximately $80 million, up 16.4% year-over-year. The increase is attributed to overall business growth and operational efficiency.
Total Revenue for 2025 $284 million, up 10.6% from $257 million in 2024. The growth is due to increased net interest income and noninterest income.
Earnings Per Share (EPS) for Q4 2025 $0.65 (basic or diluted), aggregating to $2.21 (basic) and $2.18 (diluted) for 2025. This represents a 12% and 11% increase over 2024, respectively, driven by improved profitability.
Tangible Book Value for 2025 $12.19, up from approximately $6.92 at the start of the period. Growth is attributed to retained earnings and operational success.
Deposit Growth in Q4 2025 9,000 new deposit accounts opened. Business deposits increased by $34 million in the quarter and $164 million for the year. Consumer deposits grew by $167 million in the quarter and $293 million for the year, driven by strategic initiatives and partnerships.
Efficiency Ratio at Holdco for 2025 Declined from 63.2% to 58.3%, with assets up 33%. This improvement reflects operational efficiency and cost management.
Nonperforming Loans (NPLs) for Q4 2025 Declined from 7.3% to 6.9% over two consecutive quarters, indicating stabilization in credit quality.
Payments Business Adjusted EBITDA for 2025 $16.8 million, with expectations to grow to $17.9 million in 2026. Growth is due to increased integration with the bank and operational improvements.
Insurance Agency Pretax Income for 2025 $740,000, with expectations to grow to $1.6 million in 2026. Growth is driven by automated processes and integration with the bank.
Payroll Business Pretax Income for 2025 $450,000, with expectations to grow to $630,000 in 2026. Growth is attributed to its connection with the bank and increased client adoption.
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Operating Highlights
Digital account opening and lending operating systems: Celebrated the development of advanced digital account opening and lending operating systems, enhancing the company's ability to serve independent business owners.
Newtek Advantage: Highlighted as an off-balance sheet technological innovation to support clients.
Alternative Loan Program (ALP): Expanded the ALP with a successful securitization in January 2026, which was 10x oversubscribed, indicating strong market demand.
Deposit growth: Achieved significant growth with 9,000 new deposit accounts in Q4 2025 and $164 million increase in business deposits for the year.
Market focus on SMBs: Continued focus on serving the underserved demographic of small and medium-sized businesses (SMBs) in the U.S., representing 43% of nonfarm GDP.
Efficiency improvements: Reduced efficiency ratio at the holding company from 63.2% to 58.3%, and at the bank to approximately 47%.
Revenue and earnings growth: Reported net income before taxes of $80 million (up 16.4%) and total revenue of $284 million (up 10.6%) for 2025.
Cost of deposits: Lowered cost of deposits by 16 basis points sequentially, reflecting improved deposit mix.
Senior management hires: Added key senior management positions, including Chief Credit Officer, Chief Compliance Officer, Chief Financial Officer, and Chief Strategy Officer.
Shift to technology-enabled banking: Positioned as a technology-enabled financial institution, leveraging proprietary systems to reduce costs and enhance customer service.
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Risk or Challenges
Earnings headwinds from NSBF lending subsidiary: The NSBF lending subsidiary continues to generate losses, with a $20 million loss in 2025, down from $28.7 million in 2024. This remains a financial drag on the company, although the losses are expected to decline further in 2026.
Stress in legacy NSBF portfolio: The legacy NSBF portfolio, particularly loans from 2021-2023, has faced significant stress due to rising interest rates, inflation, and increased costs for labor, insurance, and rent. This has led to higher nonaccruals and defaults, although stabilization is now being observed.
Credit risk in ALP loans: While ALP loans have shown strong credit quality, there is still a risk of nonperformance, with $27.6 million in nonperforming ALP loans out of a $694 million current origination balance. Charge-offs have been low but remain a potential concern.
Regulatory and compliance risks: The company operates under multiple regulatory bodies, including the Federal Reserve and OCC, which adds complexity and potential risks related to compliance and regulatory changes.
Turnover of equity shareholders: The change in financial structure and acquisition of the bank has led to turnover of equity shareholders, which could impact investor confidence and stock performance.
Economic and market conditions: The company operates in a competitive and economically sensitive market, with potential risks from changes in interest rates, economic downturns, and competitive pressures from other technology-enabled banks.
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Guidance & Outlook
2026 EPS Guidance: The company has established an EPS guidance range of $2.15 to $2.55 for 2026, with a midpoint of $2.35.
Loan Originations for 2026: Projected $1 billion of SBA 7(a) originations, $500 million of ALP or long amortizing C&I loan originations, $175 million of SBA 504 originations, and $150 million of net growth in the combined C&I and CRE portfolios.
ALP Securitization Plans: The company plans to conduct a second ALP securitization in the fourth quarter of 2026, following the successful first securitization in January 2026.
NSBF Loss Reduction: The NSBF loss is expected to materially decline throughout 2026, following a reduction from $28.7 million in 2024 to approximately $20 million in 2025.
Deposit Growth and Cost Management: The company expects continued growth in both business and consumer deposits, with a focus on maintaining competitive market rates and reducing the cost of deposits.
Efficiency Ratio Improvement: The company aims to further improve its efficiency ratio, which declined from 63% to 58% in 2025, supported by technological and operational infrastructure.
Insurance and Payroll Business Growth: The insurance agency is forecasted to grow pretax income from $740 million in 2025 to $1.6 billion in 2026, while payroll is expected to increase pretax net income from $450,000 to $630,000.
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Shareholder Return Plan
Dividend Payment: The company has paid $2.24 of dividends during its period as a bank holding company.
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Key Q&A
Q:What drove the 50% increase in deposit account openings this quarter and what are the expectations going forward?
A:The increase was driven by the ability to access accounts digitally in a frictionless manner for both business and consumer deposits. The bank offers generous rates with no fees, and 78% of deposits are insured. Clients are sticking with the bank, and alliance partners are contributing to growth. The bank expects to continue growing deposits to fuel loan growth.
Q:Why was the gain on sale in noninterest income flat quarter-over-quarter, and what are the expectations for next year?
A:The 7(a) business is expected to pick up again despite disruptions like citizenship issues and changes in SBA rules. The bank is better positioned competitively due to its credit-focused approach and technology. The guidance for next year includes $1 billion in SBA originations.
Q:What were the net charge-offs for the bank subsidiary?
A:Net charge-offs were $8.2 million for the quarter and $23 million for the year.
Q:What portion of the gain on loans accounted for under fair value was from ALP loans versus SBA loans?
A:Approximately 35% of the gain was from ALP loans, with the remainder from SBA loans. There was a slight loss in NSBF, amounting to a $20 million loss for the full year and a $6-7 million loss for the quarter.
Q:What is the current state of business confidence and activity compared to 6 or 12 months ago?
A:Business confidence is good overall, with businesses willing to invest in technology. However, the economy is K-shaped, with lower-end market businesses struggling while middle and upper-market businesses perform well. Inflation and commodity prices remain concerns.
Q:What are the expectations for ALP originations throughout the year?
A:The first quarter is typically weak, but the bank is bullish on ALP originations due to its reputation for offering long-term, patient capital. The bank aims to differentiate itself from MCA players by providing better loan products.
Q:How is the bank managing expenses and investments?
A:The bank is focusing on business deposit functionality and gathering while maintaining expense control. It plans to add executives in business development but does not expect explosive expense growth. Revenue growth is expected to outpace expenses.
Q:What is the leverage for EPS growth in 2026 given the flat efficiency ratio?
A:Leverage for EPS growth is expected from growing business deposits, particularly from payroll and merchant services, and from larger ALP loans. The bank aims to lower the cost of funds and increase loan volumes.
Q:What mechanisms are driving deposit growth?
A:The bank has automated the process of opening deposit accounts using loan application data. Borrowers are required to make loan payments from Newtek accounts, which are low-interest-bearing core deposit accounts.
Q:How are Newtek's SBA loans performing compared to others in the sector?
A:Newtek's SBA loans have strong margins, with a NIM of 5.25%. The bank focuses on treating customers well and offering full-margin loans, which differentiates it from competitors.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer or lacked clarity on the specific breakdown of gain on loans accounted for under fair value, particularly the unrealized gain between ALP and 7(a) loans. Additionally, while discussing business confidence and activity, the response included general observations but lacked specific data or detailed insights.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ACL
ALP loan
Bank
Chief
NSBF
OCC
Officer
SBA
Slide book
acquisition
asset
balance sheet
bank account
book value
client
cost
credit
deposit
efficiency
flexibility
income
institution
insurance
lending
loss
market
month
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origination
period
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portfolio
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securitization
securitizations
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NEWT Transcript
NewtekOne, Inc. (NEWT) Q1 2026 Earnings Call Transcript
Positive4-30
The earnings call summary shows strong financial performance with significant growth in tangible book value and return on equity. Despite some net charge-offs, risk management remains robust. The Q&A section reveals positive sentiment, with expectations of continued loan growth and efficient capital use through securitization. Concerns about NII growth projections and unclear management responses slightly temper the overall sentiment. However, the guidance on EPS and loan originations, along with technological advancements and strategic diversification, suggest a positive outlook for the stock price movement.
NewtekOne, Inc. (NEWT) Q4 2025 Earnings Call Transcript
Positive1-29
The earnings call summary reveals strong financial performance with improved efficiency ratios, deposit growth, and tangible book value. Product development and market strategy are promising, with new offerings and partnerships. Despite flat noninterest income, optimistic guidance and strategic initiatives are positive. The Q&A section highlights digital growth and competitive positioning, with some concerns about unclear management responses. Overall, the sentiment is positive, given the financial health and strategic plans, suggesting a potential stock price increase of 2% to 8%.
NewtekOne, Inc. (NEWT) Q3 2025 Earnings Call Transcript
Unknown10-29
The earnings call presents mixed signals: strong revenue growth and improved efficiency are positive, but uncertainties like the government shutdown and unclear guidance impact sentiment negatively. The company's strategy to diversify its loan portfolio and ALP growth is promising, yet the reluctance to increase dividends and the cautious stance on guidance due to external factors create a neutral outlook.
NewtekOne, Inc. (NEWT) Q2 2025 Earnings Call Transcript
Positive7-28
The earnings call summary reveals strong financial performance with high ROAA and ROTCE, indicating profitability. The Q&A session highlights growth in deposits and successful securitization strategies, although management's vague responses on stock valuation and integration impacts introduce some uncertainty. The stable expense outlook and no dividend increase align with a conservative approach. Overall, the positive financial metrics, clear growth strategies, and lack of significant negative trends suggest a positive stock price movement in the short term.
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