NewtekOne(US:NEWT)2025-08-08 20:03PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents NewtekOne's unaudited consolidated financial statements for Q2 2025 and comparative 2024, covering financial condition, income, comprehensive income, equity, and cash flows, with detailed accounting notes Consolidated Statements of Financial Condition As of June 30, 2025, total assets increased to $2.13 billion, liabilities to $1.81 billion, and shareholders' equity to $312.2 million, reflecting growth in loans and deposits Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $2,126,217 | $2,059,912 | | Total Loans, Net | $1,598,215 | $1,392,253 | | Total Deposits | $1,083,828 | $973,052 | | Total Liabilities | $1,814,037 | $1,763,630 | | Total Shareholders' Equity | $312,180 | $296,282 | Consolidated Statements of Income For the six months ended June 30, 2025, net income available to common shareholders increased to $22.3 million from $19.8 million, driven by higher net interest income and securitization gains, resulting in diluted EPS of $0.87, up from $0.81 Key Income Statement Data (in thousands, except EPS) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Interest Income | $27,856 | $18,032 | | Provision for Credit Losses | $22,622 | $9,814 | | Total Noninterest Income | $108,673 | $101,387 | | Total Noninterest Expense | $83,486 | $81,723 | | Net Income Available to Common Shareholders | $22,270 | $19,795 | | Diluted EPS | $0.87 | $0.81 | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, the company experienced a net cash decrease of $168.1 million, primarily due to $260.5 million used in operating activities and $124.1 million in investing activities, partially offset by $216.5 million provided by financing activities Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(260,518) | $(35,751) | | Net Cash Used in Investing Activities | $(124,076) | $(97,763) | | Net Cash Provided by Financing Activities | $216,509 | $155,846 | | Net (Decrease) Increase in Cash | $(168,085) | $22,332 | Notes to Consolidated Financial Statements The notes provide detailed disclosures on the company's accounting policies, business segments, loan portfolios, securitization activities, fair value measurements, and debt obligations, including specifics on ACL methodology under CECL and Variable Interest Entities (VIEs) - The company is a financial holding company providing solutions to small and medium-sized businesses (SMBs) through its consolidated subsidiaries, including Newtek Bank28 - The Allowance for Credit Losses (ACL) is estimated using the Current Expected Credit Loss (CECL) model, which requires an estimate of credit losses expected over the life of a loan or pool of loans41 - The company consolidates Variable Interest Entities (VIEs) when it is determined to be the primary beneficiary, which includes several securitization trusts holding unguaranteed portions of SBA 7(a) loans4068 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results, providing an executive overview of its SMB-focused financial holding company business, including a detailed comparison of financial performance for Q2 2025 and 2024, liquidity, capital resources, and critical accounting policies Executive Overview NewtekOne operates as a financial holding company with a branchless national bank focused on SMBs, primarily generating income from noninterest sources like SBA 7(a) loan sales and market value adjustments, funded by deposits, credit lines, and securitizations, and regulated by the Federal Reserve and OCC - NewtekOne is a financial holding company with a branchless, OCC-chartered national bank focused on the SMB market187 - The majority of income is driven by noninterest income, particularly gains on sales of SBA 7(a) loans and market value adjustments187 - Funding sources include deposit products, capital and lines of credit for non-bank loans, securitizations, and public/private bond issuance188 Financial Condition As of June 30, 2025, total assets grew 3.2% to $2.1 billion, driven by increased loans, while total liabilities rose 2.9% to $1.8 billion due to higher deposits, and total borrowings decreased by $50.7 million Change in Assets and Liabilities (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $2,126,217 | $2,059,912 | $66,305 | | Total Loans, Net | $1,598,215 | $1,392,253 | $205,962 | | Total Deposits | $1,083,828 | $973,052 | $110,244 | | Total Borrowings | $657,327 | $708,041 | $(50,714) | - Non-accrual loans as a percentage of loans held at amortized cost increased to 6.0% at June 30, 2025, from 3.9% at December 31, 2024209 Results of Operations This section provides a comparative analysis of the company's operational results for the three and six-month periods ending June 30, 2025, and 2024, showing net income growth to $23.1 million for six months and $13.7 million for three months, driven by higher net interest income and securitization gains Six Months Ended June 30 - Performance Summary (in thousands) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $27,856 | $18,032 | $9,824 | | Provision for Credit Losses | $22,622 | $9,814 | $12,808 | | Noninterest Income | $108,673 | $101,387 | $7,286 | | Net Income | $23,070 | $20,595 | $2,475 | Three Months Ended June 30 - Performance Summary (in thousands) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $13,923 | $9,126 | $4,797 | | Provision for Credit Losses | $9,117 | $5,799 | $3,318 | | Noninterest Income | $56,275 | $52,020 | $4,255 | | Net Income | $13,703 | $10,945 | $2,758 | - A significant driver of noninterest income in 2025 was a $31.5 million gain on residuals from a new securitization transaction, which did not occur in 2024246285 - Net gains on sales of loans decreased by 33.5% for the six-month period, from $42.9 million in 2024 to $28.5 million in 2025, due to lower sales volume and slightly lower premiums238243 Liquidity and Capital Resources The company's liquidity, sourced from deposits, notes, securitizations, and operations, totaled $287.2 million as of June 30, 2025, with all capital ratios for both the holding company and Newtek Bank exceeding 'well-capitalized' thresholds - Total liquidity sources stood at $287.2 million as of June 30, 2025, down from $483.8 million at year-end 2024, primarily due to a decrease in interest-bearing deposits held in other banks331 - The company maintains an 'at-the-market' (ATM) equity program allowing for the sale of up to 5.0 million shares of common stock304305 Newtek Bank Capital Ratios (June 30, 2025) | Ratio | Actual | Well-Capitalized Minimum | | :--- | :--- | :--- | | Tier 1 Capital (to Average Assets) | 11.4% | 5.0% | | Common Equity Tier 1 (to RWA) | 13.0% | 6.5% | | Tier 1 Capital (to RWA) | 13.0% | 8.0% | | Total Capital (to RWA) | 14.2% | 10.0% | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include interest rate fluctuations, funding availability, and the SBA secondary market, with interest rate risk managed by ALCO through EVE and NII simulations, indicating an asset-sensitive position as of June 30, 2025 - Principal market risks include interest rate fluctuations, funding ability, and the health of the secondary market for SBA loans373 Interest Rate Sensitivity Analysis (as of June 30, 2025) | Rate Change (bps) | Estimated Change in NII (12 Months) | Estimated Change in EVE | | :--- | :--- | :--- | | +200 | +17.0% | +1.4% | | +100 | +8.4% | +0.7% | | -100 | -9.7% | -0.6% | | -200 | -19.1% | -1.0% | - The company is considered asset-sensitive, as its variable-rate loan portfolio is expected to reprice faster than its funding sources in a changing rate environment384 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting identified during the quarter - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by this report388 - No material changes to internal control over financial reporting were identified during the quarter ended June 30, 2025389 PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is subject to routine legal proceedings, with management believing pending matters will not materially affect financial condition or results, while subsidiary NMS continues under a 2012 FTC permanent injunction - Management believes that pending legal matters will not have a material impact on the company's financial position or results392 Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2024 Form 10-K, advising investors to consider those existing risks - No material changes have occurred from the risk factors disclosed in the company's 2024 Form 10-K394 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company issued a small number of unregistered common stock shares for dividends on unvested restricted stock awards, totaling 35 shares valued at $367 for the six months ended June 30, 2025 Unregistered Shares Issued for RSA Dividends | Period | Shares Issued | Value | | :--- | :--- | :--- | | Six Months Ended June 30, 2025 | 35 | $367 | | Six Months Ended June 30, 2024 | 12 | $149 |