Core Insights - NewtekOne, Inc. has appointed Justine Martin as Chief Revenue Officer of its subsidiary Newtek Merchant Solutions, LLC, focusing on enhancing integration across payments, banking, and lending functions [1][3] - Martin brings over 30 years of experience in the payments processing industry, primarily from Bank of America's Merchant Services division, where she successfully led sales teams and drove client and revenue growth [2] - The company aims to redefine payment processing for independent business owners by offering a comprehensive, integrated solution that simplifies transactions and financial management [3] Company Overview - NewtekOne, Inc. is a financial holding company providing a wide range of business and financial solutions to independent business owners across the United States since 1999 [4] - The company's offerings include banking, business lending, electronic payment processing, accounts receivable financing, insurance solutions, and technology solutions [5] Strategic Goals - The company seeks to empower clients with a seamless payment processing experience, integrating various payment methods and providing real-time information to help businesses understand their operations better [3] - NewtekOne differentiates itself from traditional banks by offering lower-cost, comprehensive solutions tailored for small businesses, aiming to enhance client satisfaction and operational efficiency [3]

Financial Data and Key Metrics Changes - The company reported basic and diluted earnings per share of $0.68 and $0.67 for Q3 2025, with year-to-date earnings of $1.57 and $1.54, reflecting a growth rate of 47% and 22% respectively compared to the previous year [11][12] - Revenue growth was reported at 19% for the quarter, with a tangible book value increase from $6.92 to $11.22 per share [12][20] - The efficiency ratio improved from 61.8% to 56.3%, while return on average assets was 3.15%, significantly ahead of industry standards [14][17] Business Line Data and Key Metrics Changes - Core deposits increased, with business deposits rising by $52 million (17%) and consumer deposits by $95 million (12%) [12][20] - The alternative loan program (ALP) is expected to see its largest securitization to date, ranging from $325 million to $350 million, indicating strong growth potential [13][22] - The company has opened 22,000 depository accounts and has 10,000 borrowers in its database, showcasing its ability to operate without traditional banking methods [8][9] Market Data and Key Metrics Changes - The company is focusing on independent business owners, a market that represents 43% of U.S. GDP, with over 36 million business owners in the U.S. [10] - The company has stabilized its credit quality, with non-performing loans (NPLs) at 8.1%, which is high compared to community banks but has been written off or written down [17][19] - The company is avoiding volatile industries such as oil and gas, transportation, and agriculture, while maintaining a strong consumer side [40][41] Company Strategy and Development Direction - The company aims to leverage technology and efficiency to create a future-oriented business model for a technology-enabled bank [3][4] - There is a strategic focus on diversifying the loan portfolio by adding more commercial and industrial (C&I) and commercial real estate (CRE) loans [59] - The company plans to continue its growth trajectory while managing risks effectively, with a goal to enhance transparency and provide better insights into its operations [63][64] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current economic environment, despite challenges such as a government shutdown [42][44] - The company anticipates that the current credit cycle will stabilize, with expectations of lower provisions and a more favorable lending environment [18][41] - Management highlighted the importance of maintaining a strong capital position and the potential for increased leverage in the future [64] Other Important Information - The company has raised significant capital, including $80 million in Tier 1 capital and $30 million in common equity, to support its growth [13][35] - The company is also focusing on enhancing its payment processing, payroll, and insurance services, which are expected to contribute positively to its overall business model [33] Q&A Session Summary Question: Update on credit trends and market pressures - Management noted that the economy is experiencing a divide, with stress in small businesses due to rising rates, but the consumer side remains strong [40][41] Question: Guidance for Q4 amidst government shutdown - Management did not pull guidance but acknowledged the uncertainty due to the government shutdown, indicating that it could impact loan originations [42][44] Question: Impact of government shutdown on loan processing - Management confirmed that they are still able to process loans that were approved before the shutdown and have provisions to bridge borrowers through this period [43][44] Question: Tier 1 and total capital risk-based ratios - The company reported a Tier 1 capital ratio of about 12.5% and total risk-based capital just shy of 16% [45] Question: SBA lenders leaving the market - Management highlighted that some SBA lenders are exiting due to regulatory changes and increased competition, but the company remains well-positioned to capture market share [70]

Summary of NewtekOne Conference Call Company Overview - **Company Name**: NewtekOne - **Ticker Symbol**: NEWT - **Operating History**: Established in 1998, with a current workforce of approximately 600 employees and $2.2 billion in assets, generating over $50 million in after-tax income [3][4] Business Model - **Operating Model**: NewtekOne operates as a technology-oriented enterprise without traditional banking structures such as branches or commercial bankers, focusing on providing business and financial solutions to independent business owners [4][5] - **Target Market**: Approximately 36 million businesses in the U.S., contributing to 43% of GDP [4] - **Efficiency Ratio**: The company maintains an efficiency ratio between 45% and 48%, indicating low operational expenses due to the absence of physical branches [7] Technology Utilization - **Technology Integration**: NewtekOne leverages technology to create a frictionless environment for clients, enabling services such as payroll, electronic payments, and business loans without the need for in-person meetings [5][6] - **Artificial Intelligence**: The company employs AI to enhance operational efficiency, including reading tax returns and improving client interactions [28] SBA 7(a) Loan Program - **SBA 7(a) Loans**: NewtekOne is one of the largest originators of SBA 7(a) loans, which offer long-term financing with lower monthly payments due to extended amortization periods [12][13] - **Government Guarantee**: The government guarantees 75% of the loan, reducing risk for NewtekOne, which retains 25% on its balance sheet [12][13] Economic Insights - **Current Economic Climate**: The company notes a divided economy, with sectors like technology thriving while others struggle due to rising costs in insurance, interest rates, and labor [15][16] - **Adaptation to Change**: Businesses that fail to adapt to new technologies and economic conditions face challenges, while NewtekOne's diversified approach has proven beneficial [16] Funding and Securitization - **Bank Acquisition Benefits**: The acquisition of a bank has diversified funding sources and reduced funding costs, allowing for more efficient capital management [17][18] - **Alternative Loan Program**: NewtekOne has developed an Alternative Loan Program with similar terms to SBA loans, focusing on personal guarantees and flexibility for borrowers [20][21] Profitability and Scalability - **Sustainable Profitability**: The company emphasizes its scalable business model, which is supported by technology and a focus on high-margin products [27][30] - **Market Positioning**: NewtekOne differentiates itself from community banks by offering innovative solutions and maintaining a competitive edge in the market [30][34] Conclusion - **Unique Business Proposition**: NewtekOne encourages investors to recognize its unique business model and the value it provides to independent business owners, rather than comparing it to traditional community banks [34]

Core Insights - NewtekOne reported diluted earnings per share (GAAP) of $0.52 for Q2 2025, matching analyst forecasts, while total revenue was $70.2 million, missing estimates by $3.7 million or about 5% [1][5] - Year-over-year, diluted earnings per share increased by 21%, and revenue rose by 15% [1][5] - The company highlighted improved profitability and cost control, but noted a shortfall in lending volume and revenue as key areas to monitor [1] Financial Performance - Q2 2025 diluted EPS (GAAP) was $0.52, in line with estimates, compared to $0.43 in Q2 2024, reflecting a 21% increase [2] - Total revenue for Q2 2025 was $70.2 million, falling short of the $73.9 million estimate, but up from $61.1 million in Q2 2024, marking a 15% increase [2] - Pre-provision net revenue (Non-GAAP) grew by 35.5% year-over-year to $27.9 million [2] - Efficiency ratio (Non-GAAP) improved to 60.3%, down 6 percentage points from the previous year [2] Lending and Deposits - SBA 7(a) loan originations decreased by 9%, from $226.5 million in Q2 2024 to $205.6 million in Q2 2025, which is critical for NewtekOne's revenue generation [6] - Commercial deposit balances increased by $50 million, or 19% quarter-over-quarter, while core consumer deposits rose by $14 million, or 2% [8] - The proportion of insured deposits was 78%, and net interest margin rose to 5.46% due to falling deposit costs [8] Technology and Operations - NewtekOne has focused on digital channels and proprietary software to enhance customer acquisition and operational efficiency [4][10] - Platforms like NewTracker and Newtek Advantage have been developed to streamline customer management and service delivery [7][10] - AI is utilized in loan underwriting and document review, improving decision-making speed and accuracy [7] Business Model and Strategy - NewtekOne's business model is centered around digital banking, leveraging technology to reduce costs associated with traditional banking [3][10] - The company aims to grow its SBA 7(a) lending program and expand its deposit base while maintaining cost efficiency and regulatory compliance [4] - The Alternative Loan Program (ALP) is also expanding, with $78.3 million in new loans and a $184 million securitization completed in April 2025 [9][11] Outlook and Guidance - Management reaffirmed its EPS outlook for fiscal 2025, targeting a GAAP range of $2.10 to $2.50, with a reported $0.89 per share in the first half of 2025 [12] - Return on average tangible common equity (non-GAAP) is expected to reach 18.7% to 22.0% in 2025 [12] - Investors are advised to monitor trends in loan originations, deposit growth, and efficiency metrics as the year progresses [13]