NewtekOne’s Q3 2025 earnings call demonstrated remarkable financial performance, including a surge in tangible book value and deposits, signaling a robust operational model ready to capitalize on a changing SBA lending landscape and enhanced capital structure.
The recent NewtekOne (NASDAQ: NEWT) Q3 2025 earnings call, held on Wednesday, October 29, 2025, provided a comprehensive look into the company’s financial health, strategic initiatives, and outlook for the future. Led by President, Founder, and CEO Barry Sloane, alongside CFO Frank DeMaria and Newtek Bank CFO Scott Price, the call underscored NewtekOne’s unique position as a technology-enabled bank adapting to a dynamic financial landscape.
A Digital Bank Forging a New Path
Since its formation in 1998, NewtekOne has focused on providing business and financial solutions to independent business owners across the United States. This mission gained a new dimension with the acquisition of Newtek Bank National Association in January 2023. The company emphasizes its technology-oriented approach, distinguishing itself from traditional community banks. Its ability to acquire customers cost-effectively, service their needs with strong margins, and manage credit risk proactively forms the bedrock of its strategy.
Sloane highlighted that the bank’s assets have grown substantially from approximately $180 million at the time of acquisition to about $1.4 billion currently, with the consolidated holding company assets around $2.4 billion. This rapid growth, achieved without traditional branches, bankers, or BDOs, is a testament to its digital-first model, which leverages proprietary and patented advanced technological solutions. The company currently manages 22,000 depository accounts, 10,000 borrowers, and processes electronic payments for over $5 billion annually, underscoring its significant market presence among small and medium-sized enterprises (SMBs).
Q3 2025 Financial Highlights: Growth and Efficiency
The Q3 2025 results painted a picture of strong financial performance and operational efficiency:
- Net Income Per Share: Basic EPS of $0.68 for the quarter and $1.57 for the first nine months. Diluted EPS stood at $0.67 for the quarter and $1.54 for the first nine months.
- EPS and Revenue Growth: Quarterly EPS surged 47% compared to the prior period, with a 22% year-over-year increase for the first nine months. Revenue grew 19% for the quarter and 16% year-over-year for the first nine months.
- Tangible Book Value (TBV) Per Share: Significantly increased from $6.92 at the start of 2023 to $11.22 as of Q3 2025, even after distributing $0.76 per share in dividends during 2025.
- Deposit Growth: Business deposits rose sequentially by $52 million (17%), and consumer deposits by $95 million (12%). The average deposit cost for the quarter was 3.72%, with management targeting a potential reduction to 2%-2.5% through cross-sell effectiveness.
- Efficiency Ratios: The holding company efficiency ratio declined to 56.3% from 61.8%. At Newtek Bank, the return on average assets (ROAA) reached 3.57%, with a return on common equity of 32% and an efficiency ratio near 47% for the quarter.
- Net Interest Margin (NIM): Newtek Bank’s NIM was a robust 5.4% for the quarter, reflecting the recurring benefit of its growing portfolio.
- Allowance for Credit Losses: Stood at 5.42% of loans for the holding company, supporting a loan-to-deposit ratio of 95% and 78% insured deposits.
Navigating Risks: NPLs, Government Shutdown, and SBA Program Changes
Despite the strong performance, management openly addressed several risks and challenges. Elevated nonperforming loans (NPLs) were noted at 8.1% of total loans, a figure higher than typical community banks. However, adjusting for the wind-down of the legacy NSBF (nonbank SBA lender) portfolio, NPLs reduce to 3.8%. Barry Sloane emphasized that these numbers are stabilizing as new portfolios season, and the allowance for credit losses is adequate.
The potential impact of a government shutdown was another significant concern, leading management to acknowledge that they “can’t live by the previous guidance given the basis of the government shutdown.” This uncertainty affects near-term earnings predictability, particularly for SBA 7(a) loans, a primary U.S. Small Business Administration loan program. NewtekOne, having navigated previous shutdowns, employs bridge financing to support borrowers and mitigate effects.
Furthermore, recent changes in the SBA program, such as restrictions on refinancing merchant cash advances and stringent U.S. citizenship requirements for even minimal ownership stakes, are creating a “much harder business to do business.” Sloane noted that several competitors, including a top 20 lender like May 1, have exited the SBA lending space due to these changes, potentially allowing NewtekOne to capture market share in the long run.
Strategic Growth Pillars: ALP, Diversification, and Subsidiary Synergy
The Power of Alternative Loan Program (ALP)
The Alternative Loan Program (ALP) is a proprietary, non-SBA term loan platform, a significant growth driver for NewtekOne. These loans are financed through securitizations, which help match fund these longer-term assets. The company is planning its largest-ever ALP securitization in Q4 2025, targeting $325 million to $350 million in loans. This will be the seventeenth securitization in NewtekOne’s history and the fourth in the ALP category.
Key characteristics of ALP loans highlight their quality and profitability:
- Weighted average loan-to-value (LTV) of 47%.
- Weighted average gross coupon of 13.17%.
- Prepayment penalties for up to 48 months, ensuring longer-term spread income.
- Recent ALP securitizations produced impressive spreads after servicing fees: 496 basis points for the 2024-1 deal and 568 basis points for the most recent transaction, with no transactional cost for deposits.
Diversifying the Loan Portfolio
To balance its current 89% concentration in SBA 7(a) loans, NewtekOne is strategically increasing its exposure to commercial real estate (CRE) and commercial and industrial (C&I) lending. This diversification is expected to create a more balanced and resilient loan portfolio within Newtek Bank.
Subsidiary Contributions and the “Triple Play”
NewtekOne’s non-bank subsidiaries contribute significantly to its earnings and deposit-gathering capabilities. For 2025, payment processing is expected to deliver $16.5 million in pretax income, the insurance agency around $800,000, and the payroll business approximately $600,000. These services are integrated into the Newtek Advantage dashboard, providing a “one solution” approach for business clients and fostering sticky, attractive deposits.
Looking ahead, the company plans to launch the “NewtekOne Triple Play,” a bundled offering providing credit-approved customers an unsecured credit line up to $10,000, a bank account, and either merchant or payroll services. This innovative package aims to deepen customer relationships and enhance cross-selling opportunities.
Capital Strength and Shareholder Value
NewtekOne has been proactive in bolstering its capital structure. In the recent quarter, it issued Series B preferred and common equity, increasing Tier 1 capital by $80 million and common equity Tier 1 by $30 million. Additionally, the merchant business, Newtek Merchant Solutions, secured a $95 million financing solution through Goldman Sachs Alternatives, providing ample liquidity into 2026. The holding company’s leverage ratio stands at approximately 12.5%.
Regarding shareholder returns, Barry Sloane indicated that while the company maintains a healthy dividend (currently $0.19 per quarter or $0.76 annually), an immediate increase is “possible but unlikely.” He suggested that share repurchases might take precedence over dividend increases in the near term, reflecting a focus on capital management and long-term value creation.
Long-Term Outlook and Investor Engagement
Despite market skepticism, Barry Sloane expressed confidence in NewtekOne’s business model and its ability to continue delivering strong results. He drew comparisons to other fintech and digital banking entities like LendingClub and Live Oak Bank, suggesting that NewtekOne’s current valuation might not fully reflect its long-term potential due to a “familiarity issue” in the market. Sloane asserted that investors who understand the business model and its sustained profitability should appreciate the stock.
Management plans to host an analyst day in December or early January to provide updated forward guidance and further strategic clarity, coinciding with its three-year anniversary as a bank holding company. This event will be crucial for offering a deeper dive into their future plans and metrics, aiming for better market recognition for their growth and operational efficiency.
The SBA 7(a) loan program, a vital channel for small business financing, has undergone changes that can impact lenders. For more information on the program, interested investors can consult the U.S. Small Business Administration’s official website.
