NewtekOne, Inc. (NEWT) Earnings

Management highlights

- Strategic Positioning & Mission - NewTekOne's core mission is to serve underserved U.S. independent small and medium business owners, a demographic representing 36 million businesses and 43% of U.S. GDP. The firm is the second-largest SBA 7A lender by volume and first by units, and has supported creation of 280,000 jobs over the past six and a half years. - The firm uses a technology-first, branch-free model to reduce friction, cut overhead, and improve customer access, with recent adoption of AI for customer data analysis to further improve processing speed. Management believes its technology stack is already mature, while large incumbent banks are still investing heavily to reach this level of digital capability. - The firm is shifting from a model focused on gain-on-sale income from loan securitizations to a more stable model centered on recurring net interest income from loans held on the bank balance sheet, to align with industry valuation multiples. - Balance Sheet & Financial Highlights - Tangible book value per share has grown 75.3% over 12 quarters since the firm converted to a bank holding company structure, continuing to grow nicely in Q2 2026. Q2 2026 basic/diluted EPS came in at $0.48/$0.47, in line with expected ranges. - Total deposits grew from $142 million to $2.2 billion over 14 quarters, with non-affiliate deposits up $15 million and core consumer deposits up $297 million in Q2 2026. 81% of deposits are FDIC-insured under the $250,000 limit, the loan-to-deposit ratio is 90%, and core consumer deposits are sticky with near-zero acquisition cost. - Securitization & Credit Performance - All three active CNI long amortization loan securitizations have grown overcollateralization (OC) consistently: 2026-1 OC grew by $11 million from its initial $47 million, 2025-1 OC grew by $13.4 million from $31.6 million to $45 million, and 2024 OC grew by $14 million. All notes have paid down as expected. - ACL ratio is 5.31% against unguaranteed loans (4.14% excluding non-accrual government guaranteed loans), and net charge-offs declined in the quarter despite a small increase in 30-day past due loans, which management expects as the young bank portfolio matures. Over 23 years of SMB lending across 17 securitizations, NewTekOne has never had a credit watch or rating downgrade. - Product & Technology Highlights - All customer and referral tracking, loan processing, and account management run through the in-house NewTracker and NewTek Advantage platforms, which support digital account opening, real-time payments, integrated payroll processing, and customer business analytics. The firm generates 600-800 unique business referrals per day through its digital platform.

Guidance

- Management withdrew previous full-year EPS guidance of $0.79-$0.89 because of the strategic shift to holding more SBA loans on balance sheet rather than selling them for gain-on-sale income, which will reduce near-term headline EPS. - A new updated guidance will be released after 45 to 60 days, as the firm completes number crunching to reflect the new business mix and strategic changes including expansion into SBA Express lending. - The firm plans to conduct a $300-$400 million C&I loan securitization out of NewTek Bank in Q4 2026, in line with past securitization activity.

Segment performance

NewTekOne operates two core reporting segments: the parent holding company and NewTek Bank National Association (the nationally chartered bank subsidiary). NewTek Bank (the primary operating segment after ongoing structural shifts): - Net interest income rose 54.3% year-over-year from 16.2 million USD in Q2 2025 to 25 million USD in Q2 2026, as more business activity was moved to the bank. The segment contributes 100% of the firm's growing recurring net interest income, and now houses the C&I lending, SBA 7A lending, payroll solutions, and deposit gathering businesses. - Pre-provision net revenue (PPNR) grew in absolute terms with balance sheet growth, registering 4.22% as a percentage of average assets for Q2 2026, down from 5.25% in Q2 2025 but still well above the industry average of under 2%. - Return on average assets (ROAA) and return on tangible common equity (OTCE) are substantially above industry averages, with 89% of the bank's allowance for credit losses allocated to unguaranteed SBA 7A loans, resulting in an 8.56% ACL coverage ratio for this higher-risk portfolio. Holding Company (the non-bank parent segment): - Asset growth hit 50% year-over-year, while holding company expenses grew only 3.6% year-over-year, delivering strong operating leverage. The holding company posted a 2% ROA, which compares favorably to peer industry averages. Net interest margin (NIM) contracted in the quarter because most income-generating operations have been moved to the bank segment, leaving only residual assets and more expensive legacy debt at the holding company.

Risks & headwinds

- Near-term EPS will be lower than previous guidance due to the shift from immediate gain-on-sale income to slower-recurring net interest income, which will reduce top-line results for the next couple of quarters. - Current elevated interest rates have reduced borrower demand for long amortization C&I loans, creating a headwind for loan origination volume. - The small increase in non-performing guaranteed loans is driven by a more aggressive strategy of buying back defaulted SBA loans from the secondary market, which adds NPLs to the balance sheet in the near term, though the government guarantee remains in place for most of this exposure. - Large incumbent banks are slow to adopt new digital business models, creating delayed traction for potential white-label technology licensing deals with larger financial institutions.

Analyst Q&A

• Q: What is the rationale for holding more guaranteed portions of SBA loans on the balance sheet, and what is the near- and long-term impact on earnings? /

  A: Management is shifting the business mix to prioritize more stable recurring net interest income instead of volatile gain-on-sale income, which it expects will close the 5x multiple gap between NewTekOne's current valuation and higher banking industry peer valuations. Near-term, EPS will be lower because lower near-term gain-on-sale revenue will not be fully offset by new net interest income immediately. Over the long term, the shift will deliver more stable income, and the new CNILA business will also add net interest income while loans accumulate for securitization. Management expects investors should focus on the long-term business model change rather than quarterly earnings volatility.

• Q: How realistic is the opportunity to white-label NewTekOne's SMB-focused technology platform for other large banks, and how much traction have you gotten? /

  A: The firm already has multiple material opportunities with large financial institutions in the pipeline. NewTekOne's branchless, AI-augmented digital model for acquiring and serving SMBs is highly attractive to incumbents that want to cut overhead and improve service, and no other firm offers the same fully integrated capability. Traction is growing, but large banks change strategy slowly, so revenue from this segment will ramp gradually over time. Current daily referral volume of 600-800 already reflects early traction from these partnership relationships.

• Q: Can you provide background on the $15 million Samad Holdings bankruptcy loan, including recovery prospects? /

  A: The loan is part of an existing securitization, and is collateralized by seven or eight operating summer camps plus additional outside collateral. The camps are still operating, cash flowing, and are in the process of being sold as part of the bankruptcy process. Management expects full recovery of the loan balance based on the current fair value of the collateral, though a final marking cannot be completed until the bankruptcy process concludes.

• Q: Will holding more loans on balance sheet create pressure for deposit growth, and how confident are you in your deposit gathering capability? /

  A: The firm currently holds over $500 million in cash at the Federal Reserve, so it has substantial existing liquidity to support additional loan growth. NewTekOne's digital deposit acquisition model has very low customer acquisition costs, allows the firm to pay competitive rates to depositors without branch overhead, and core consumer deposits are sticky. Over 80% of deposits are insured, and customer satisfaction ratings are very high, so deposit growth has consistently outpaced expectations, and management is confident it can continue to grow deposits to match loan demand.

• Q: Why did net interest margin contract at the holding company in the quarter, and is the shift to bank operations intended to improve valuation? /

  A: NIM contracted at the holding company because almost all income-generating lending and deposit operations are being moved to the bank, leaving only residual assets and more expensive legacy debt at the holding company. Moving more operations to the bank is intended to capture what was historically gain-on-sale income as net interest income, which is generally preferred by bank investors and may help improve the firm's trading multiple. The shift also aligns with regulatory expectations and lets the firm leverage the bank's lower cost of deposits to improve long-term profitability.