NewtekOne, Inc. Q3 FY2026 earnings call

• Financial Results: Delivered basic and diluted EPS of $0.34. Tangible book value grew 10% year-over-year to $12.30 per share, with total growth of 78% since the bank acquisition in January 2023.
• Deposit Growth: Deposits more than doubled for the second consecutive quarter, reaching $2.6 billion from $142 million at acquisition. Core consumer deposits increased by $231 million quarter-over-quarter.
• Loan Origination: Year-to-date loan originations totaled $1.2 billion, up 12% year-over-year. NewTek Bank ranked #1 in SBA loan units and #2 in dollars for FY 2026.
• Operational Efficiency: Operating expenses remained flat despite 47% asset growth, demonstrating strong operating leverage. Net interest income rose 26% quarter-over-quarter and 30% year-over-year.
• Technology & Platform: Highlighted the proprietary 'NewTracker' system for automated lead generation and underwriting, acquiring referrals at zero cost. Emphasized the 'NewTek Advantage' portal offering real-time payments, payroll, and analytics.
• Service Quality: Maintained high customer satisfaction scores, ranking #1 on Trustpilot for payroll providers and #2 for real-time payments.

The transcript does not provide a breakdown of financial performance by specific product segments (e.g., Banking vs. BDC) in absolute terms or revenue contribution percentages for the quarter. The company reports consolidated earnings per share of $0.34 and total net interest income of $18.9 million, which represents 26% of total revenue for the quarter.

• EPS Guidance: Reiterated full-year 2026 EPS guidance range of $1.70 to $1.80.
• Strategic Shift: Management indicated a move toward holding loans on the balance sheet rather than selling them immediately, aiming to diversify income streams and compound returns over time.
• Origination Volumes: Muted expectations for origination volumes in the near term due to higher interest rates and inflationary pressures, coupled with tightened underwriting guidelines.

• Macroeconomic Pressure: Persistent inflation and elevated interest rates are creating stress on older vintage loans and making it more challenging to grow the business.
• Credit Quality Perception: Non-accruals appear high when including government guarantees (SBA), though excluding these guarantees, the rate is lower. This discrepancy causes issues with standard analyst models that do not adjust for guaranteed portions.
• Underwriting Tightening: The company has tightened underwriting guidelines to mitigate risk in the current environment.
• Deposit Competition: Risk of deposit outflows if competitors offer rates closer to risk-free Treasury yields, although NewTek attempts to retain customers through value-added services.

Q: Elizabeth Wainer asked about the drivers for the implied Q4 earnings step-up and whether soft small business confidence data is impacting SBA loan demand or borrower performance. / A: Barry Sloane attributed the Q4 lift to seasonal lending increases and compounding net interest income growth. Regarding credit quality, he acknowledged stress in historic portfolios due to prolonged high rates and inflation but stated risks are priced into CECL calculations. He noted that while loan-making is harder, they have muted origination volumes and tightened underwriting to manage risk, expecting relief once midterm elections pass and rates potentially drop.

Q: Emily Lee requested details on the size and economics of the expected Q1 2027 securitization and elaboration on 'exploring strategic alternatives' to recognize value. / A: Sloane disclosed plans for a financing with approximately $350-$400 million in collateral, likely issuing bonds in January. On strategy, he emphasized openness to conversations with alliance partners and technology providers to unlock value from their proprietary tech stack, citing a recent fintech acquisition as evidence of market undervaluation of similar platforms.

Q: Christopher Nolan asked if balance sheet growth would slow in Q4 pending the January securitization and confirmed if the NIM boost was due to moving SBA 7A loans to the bank. / A: Sloane explained that the January securitization will remove assets from the balance sheet, improving capital ratios. He confirmed the NIM improvement stems from accumulating SBA 7A loans on the bank's balance sheet, which expands the earning asset base, alongside lower borrowing costs at the holding company.

Q: Ben Graham (for Crispin Love) inquired about the drivers behind the increase in non-performers in the C&I LA loan book and the outlook for credit in this segment. / A: Sloane clarified there is no specific industry concentration driving the rise; it is a diversified portfolio. He explained that as loans season, defaults naturally occur, but the high spread (Treasuries + 950 bps), personal guarantees, and collateral offset these losses. He criticized traditional bank models for misinterpreting these metrics without accounting for the unique risk-reward structure of their secured, high-yield loans.