NewtekOne(US:NEWT)2025-11-07 19:46Company Structure and Operations - In 2023, the company converted to a financial holding company from a BDC and a non-bank lender, acquiring NBNYC, which was renamed Newtek Bank[210]. - Newtek Bank is currently the second largest SBA 7(a) lender in the U.S. based on dollar volume of loans approved, following a transition of SBA 7(a) loan originations from NSBF[213]. - The company offers a range of financial services including lending products, FDIC insured deposit products, payments processing, payroll services, and insurance brokerage services[206]. - The company’s transition to a financial holding company means it is no longer treated as a RIC for U.S. federal income tax purposes, impacting its tax obligations[212]. - The company is subject to regulation and supervision by the Federal Reserve and the OCC, requiring investments in technology and compliance processes[208]. Financial Performance - The Company reported net income of $41.0 million for the nine months ended September 30, 2025, an increase of 26.5% from $32.5 million in the same period of 2024[238]. - Interest income on loans increased by $23.9 million, contributing to the overall growth in net income before taxes[239]. - Noninterest income rose by $15.8 million, reaching $169.1 million compared to $153.2 million in 2024[239]. - Consolidated net income rose by 50% to $17.9 million in 2025 from $11.9 million in 2024[313]. - The Banking segment reported net income of $30.866 million, down 13% from $35.339 million in the prior year, while Alternative Lending saw a significant increase in net income to $60.445 million, up 77% from $34.147 million[274]. Loan and Asset Management - Total loans increased by $488.1 million to $1.88 billion as of September 30, 2025, compared to $1.39 billion at December 31, 2024[223]. - The company’s loan products include SBA 7(a), ALP, SBA 504, and traditional C&I and CRE bank loans, with a focus on the SMB market[206]. - The company originated ALP loans with the intent to securitize them, closing a securitization backed by $216.6 million of ALP loans in the second quarter of 2025[214]. - The average balance of loans held for investment increased to $1.5 billion from $1.1 billion year-over-year, contributing to the rise in interest income[242]. - The average outstanding accrual loan portfolio increased to $1.6 billion for the three months ended September 30, 2025, up from $1.2 billion in the prior year, contributing to higher interest income[284]. Credit Losses and Reserves - The allowance for credit losses increased to $45.2 million, representing 5.4% of loans held for investment at amortized cost as of September 30, 2025, compared to $30.2 million, or 4.9%, at December 31, 2024[228]. - The provision for credit losses increased to $30.3 million in 2025 from $16.7 million in 2024, reflecting higher net charge-offs and specific reserves on evaluated loans[247]. - The Company has a reserve for credit losses based on the CECL approach, which estimates expected credit losses over the life of exposures, reflecting historical loss experience and current economic conditions[359]. Regulatory Compliance and Risk Management - The company is subject to extensive regulation as a financial holding company, which may adversely affect its business operations and lending prospects[216]. - The Company’s Asset/Liability Committee oversees risk management related to interest rate and liquidity risks, establishing policies and limits for effective management[379]. - The company’s interest rate risk management involves matched funding strategies, with assets and liabilities closely linked to mitigate adverse effects from interest rate changes[374]. - The company regularly models various forecasted rate projections to assess and manage potential risks from interest rate shifts[381]. Capital and Funding - Total assets increased by $339.2 million, or 16.5%, to $2.4 billion as of September 30, 2025, compared to $2.1 billion at December 31, 2024[222]. - Total liabilities increased by $248.8 million, or 14.1%, to $2.0 billion as of September 30, 2025, compared to $1.8 billion at December 31, 2024[234]. - The Company completed a public offering of $75.0 million aggregate principal amount of 8.625% notes due 2029 on September 16, 2024, to support its funding strategy[248]. - The Company has authorized a stock repurchase program for up to 1.0 million shares and a debt repurchase program for up to $5.0 million of its 2029 Notes[322]. Deposits and Liquidity - Total deposits were $1.2 billion, with a $0.2 billion increase from December 31, 2024, and insured deposits represented 78.3% of total deposits[235]. - As of September 30, 2025, the Company had total liquidity sources of $341.5 million, down from $483.8 million as of December 31, 2024[348]. - Newtek Bank maintained approximately $187.7 million in cash at the Federal Reserve to enhance liquidity, aligning with its business strategy[240]. Noninterest Income and Expenses - Noninterest income increased by 10.3% to $169.061 million, driven by a 140.3% increase in dividend income to $2.711 million[254]. - Total noninterest expense increased by 4.2% to $125.645 million, primarily due to higher salaries and employee benefits expenses, which rose by 6.6% to $64.424 million[267]. - Other loan origination and maintenance expenses increased by 54.1% to $14.468 million due to a larger volume of loan originations[270]. Securitization and Asset Management - The Company originated $216.6 million of collateral for the securitization of ALP loans, with Class A Notes priced at a yield of 6.338% and a weighted average yield of 6.62%[368]. - The 2023-1 Trust issued securitization notes for the par amount of $103.9 million, consisting of $84.3 million of Class A notes and $19.6 million of Class B notes[339]. - The 2022-1 Trust issued securitization notes for the par amount of $116.2 million, consisting of $95.4 million of Class A notes and $20.8 million of Class B notes[340]. Interest Rate Sensitivity - As of September 30, 2025, a +200 basis point change in interest rates is estimated to increase net interest income (NII) by 13.8% for the 12 months beginning September 30, 2025[383]. - A -200 basis point change in interest rates is estimated to decrease NII by 15.8% for the same period[383]. - The company is asset sensitive, with variable rate loans repricing fully with assumed interest rate changes, while fixed-rate notes will reprice at maturity[383].