NewtekOne, Inc. 8.00% Fixed Rate Senior Notes due 2028 Q4 FY2025 earnings call

• Celebrated 3-year anniversary of owning an OCC chartered bank and acquisition in Jan 2023.
• Opened 9,000 new depository accounts and 34,000 active depository accounts.
• Highlighted technology like digital account opening and lending operating systems.
• Noted net income before taxes up 16.4% and total revenue up 10.6% in 2025.
• Focus on independent business owners (SMBs) as target market.
• Changed financial structure, with HoldCo regulated by Fed and bank by OCC.
• Tangible book value ended 2025 at $12.19, materially grown from ~$6.92 initially.
• January 2026 closed largest securitization for alternative loan program, which was 10 times oversubscribed.
• NSBF lending subsidiary loss expected to continue declining in 2026.
• ALP loans have stronger credit quality than 7(a) loans, with great margins and prepaid penalties.

For the fourth quarter 2025 and annual 2025, net income before taxes was approximately $80 million, up 16.4%. Total revenue, defined as the sum of net interest income and noninterest income, was $284 million, up 10.6% over 2024's $257 million. Deposit growth was significant with 9,000 new depository accounts and 34,000 active depository accounts opened. In terms of lending, ALP loans had a current origination balance of $694 million with nonperforming ALP loans at $27.6 million. The efficiency ratio at the HoldCo declined from 63.2 to 58.3 with assets up 33%, and at the bank, it was approximately 47%. The NSBF lending subsidiary's loss was $28.7 million in 2024 and expected to be ~$20 million in 2025, with further decline expected in 2026.

• 2026 EPS guidance range: $2.15 to $2.55, midpoint $2.35.
• Projections include $1 billion of SBA 7(a) originations, $500 million of ALP (long amortizing C&I loan) originations, $175 million of SBA 504 originations, and $150 million of net growth in combined C&I and CRE portfolios.
• Quarterly EPS view for 2026 reflects first quarter securitization and projection of second securitization in fourth quarter.

• NSBF lending subsidiary had a stressed portfolio from tougher vintages of 2021-2023, though stabilization in credits is seen.
• Impact of rate changes on loan debt service coverage, as rates went up 3-5 points affecting debt service.
• SBA rule changes, like citizenship issue and requiring forecasting of debt service coverage, which could disrupt competitors but also affect operations.
• Potential attrition of deposit clients if rates change significantly, though current deposit base is stable due to market rates and frictionless access.

Q: Tim Switzer asked about the sizable increase in deposit account openings in the quarter and expectations going forward.

A: Barry R. Sloane said it's due to frictionless digital access, generous deposit rates with 78% insured, and growing alliance partners.

Q: Tim Switzer also asked about noninterest income detail, specifically gain on sale.

A: Barry R. Sloane mentioned SBA world changes like citizenship issue and SBA moving away from SBSS score, expecting volumes to improve.

Q: Stephen Moss asked about business confidence and activity.

A: Barry R. Sloane said it's a k-shaped economy, with some businesses struggling and others doing well, hoping productivity kicks in in 2026.

Q: Stephen Moss asked about AOP originations cadence.

A: Barry R. Sloane said first quarter is typically weak for lending, but ALP loans have a good reputation for long-term patient capital.

Q: Christopher Nolan asked about leverage for EPS growth in 2026 and deposit growth mechanism.

A: Barry R. Sloane said leverage from growing business deposits and ALP loans, and deposit growth is via automatic application using loan data with KYC/AML/BSA checks.

Q: Dylan Hines asked about Newtek's SBA loans performance vs others.

A: Barry R. Sloane said 5-year and 10-year charge-off rates are about industry average, but margins dwarf some competitors.