Key insight: Several large lenders reported continued strong small business loan demand despite ongoing economic uncertainty and disruption. Expert quote: "We're not seeing any slowdown. We're actually seeing continued momentum," said U.S. Bancorp's head of SBA lending.What's at stake: The 7(a) program is SBA's flagship lending program, with volume topping $37 billion in the just-completed fiscal year. Lending under the Small Business Administration's flagship 7(a) program increased 20% in the just-complete ...

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 Viewpoint - BayFirst Financial Corp. plans to exit the SBA 7(a) lending business and sell $103 million of SBA 7(a) loan balances to Banesco USA, marking a strategic move to derisk its balance sheet and enhance long-term growth and shareholder value [1][2]. Company Overview - BayFirst Financial Corp. is a registered bank holding company based in St. Petersburg, Florida, with total assets of $1.34 billion as of June 30, 2025. It operates twelve full-service banking offices in the Tampa Bay-Sarasota region, offering a range of commercial and consumer banking services [5]. - Banesco USA, an independent Florida state-chartered bank founded in 2006, has $5.2 billion in assets as of June 30, 2025, and operates six branches across South Florida and Puerto Rico. The bank focuses on serving small and middle-market businesses, as well as professionals, with personalized financial services [6]. Transaction Details - BayFirst has signed a definitive agreement to sell $103 million in SBA 7(a) loans to Banesco USA at 97% of retained balances. Banesco USA will assume servicing of these loans and purchase servicing rights for book value [2][3]. - The transaction is expected to close in the fourth quarter of 2025, with the majority of BayFirst's current SBA lending staff being offered positions with Banesco USA [2][3]. Strategic Implications - The exit from the SBA 7(a) lending business allows BayFirst to focus on its community bank mission, enhancing its portfolio of stable checking and savings products, and creating opportunities for deposit growth and fee income [3]. - Banesco USA aims to leverage the acquisition of BayFirst's SBA lending team and loan portfolio to establish a nationwide SBA lending platform, enhancing its capabilities to serve small and mid-size companies across Florida and nationally [4].

Core Points - Byline Bank has been recognized as the Illinois SBA 7(a) Lender of the Year for the 16th consecutive year, originating $119.6 million in 7(a) loans in fiscal year 2024, which created 742 new jobs statewide [3][5] - In addition to the 7(a) award, Byline Bank was also named the 504 Third-Party Lender of the Year for originating $47.5 million in SBA 504 loans and the Export Lender of the Year for providing $6.1 million to Illinois exporters [4][5] - Byline Bank ranks nationally as a top SBA 7(a) lender with total loans of $504.6 million in FY2024, and it is also a top lender in several other states [6][7] Company Overview - Byline Bank, headquartered in Chicago, is a full-service commercial bank with approximately $9.7 billion in assets and operates 45 branch locations in the Chicago and Milwaukee metropolitan areas [8] - The bank specializes in government-guaranteed lending, particularly in SBA and USDA financing, and is recognized as a National Preferred SBA 7(a) Lender [7][8]

Financial Data and Key Metrics Changes - The company reported a revenue growth of 15% in Q2 2025, reaching $78.2 million compared to $61 million in Q2 2024 [14] - Earnings per share (EPS) guidance for 2024 remains unchanged at $2.1 to $2.5, with a midpoint implying a growth rate of 17% [23][24] - The net interest margin at the bank increased by 56 basis points, reaching 5.46% [34] - The cost of deposits declined from 3.99% to 3.71% [34] Business Line Data and Key Metrics Changes - Business deposits grew by $50 million sequentially, with most coming from demand deposit accounts [16] - Losses in Newtek Small Business Finance decreased from $10.7 million to $3.7 million over recent quarters [18] - The alternative loan program (ALP) has completed three successful securitizations and is growing with high-quality loans [19][21] Market Data and Key Metrics Changes - The company estimates that by the end of the year, its loan book will consist of approximately 10,000 borrowers and $4.4 billion in servicing [30] - The average net premium from SBA 7 loans for Q2 2025 was 110.91, with expectations for a slight decrease to 110 for the second half of the year [56] Company Strategy and Development Direction - The company aims to provide integrated solutions for small and medium-sized businesses (SMBs) and independent business owners, focusing on technology and digital banking [6][12] - The strategy includes acquiring deposits below the risk-free rate and enhancing customer analytics and transactional capabilities [27] - The company is positioning itself for future opportunities in stablecoin transactions [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the second half of the year, despite challenges in finding good credits and tariffs impacting borrowing appetite [92] - The company anticipates a higher provision for the second half of the year, with a reserve ratio expected to be between 4.5% to 5.5% [119] Other Important Information - The company has a historical charge-off rate of 1% in its ALP portfolio [36] - The tangible book value per share increased by 3.7% sequentially and 21% year-over-year [35] Q&A Session Summary Question: What helped bring in $50 million of growth on the commercial deposit side? - Management highlighted the benefits of their banking account offerings and integrated solutions for clients, which have driven deposit growth [63][64] Question: What were the total charge-offs this quarter for the held-for-investment portfolio? - Total charge-offs were reported at $5 million, consistent with the previous quarter [68] Question: Can you break down the various drivers that went through the net fair value line item? - The primary component of the negative $11.7 million was the reversal of previous unrealized gains on ALP loans, which were written down to zero [72][73] Question: Will the net gain in residuals and securitizations only occur with ALP securitizations? - Management confirmed that this is the first time they own 100% of the residual, which differs from previous joint ventures [88] Question: What are the expectations for SBA originations for the current year? - Management confirmed they are sticking with the expectation of $1 billion in SBA originations for the year [99]

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]

Financial Performance Highlights - Second quarter earnings per share (EPS) reached $0.53 basic and $0.52 diluted, while first half EPS exceeded the midpoint of guidance at $0.89 basic and $0.87 diluted respectively[9] - NewtekOne maintains its 2025 EPS guidance range of $2.10-$2.50, projecting an annual EPS growth of 17% at the midpoint[9] - Net income increased by 27% year-over-year, from $10.5 million to $13.3 million[11] - Diluted EPS increased by 21% year-over-year, from $0.43 to $0.52[11] - The company's efficiency ratio improved from 66.3% to 60.3% year-over-year[9, 48] Balance Sheet and Loan Portfolio - Business deposits increased by $50 million, a 19% increase quarter-over-quarter[9] - Total loans increased from $1.33 billion to $2.07 billion year-over-year[21] - Newtek Bank's loans held for investment (HFI) increased by 70% year-over-year, from $451.8 million to $767.8 million[11] - Alternative Loan Program (ALP) loans held for sale (HFS) increased by 114% year-over-year, from $64.4 million to $138.0 million[11] Credit Quality and Loan Sales - Newtek Bank sold $23.5 million of SBA 504 loans and $42.1 million of guaranteed portions of SBA 7(a) loans in 2Q25[9] - The company completed a securitization of ALP loans in April, issuing $184 million of notes backed by $216 million of ALP loans[25] - The weighted average net premium received on the sale of guaranteed portions of SBA 7(a) loans was 111%[52]

Core Insights - FinWise Bancorp reported strong financial performance for the second quarter of 2025, with loan originations reaching $1.5 billion, net income of $4.1 million, and diluted earnings per share of $0.29, reflecting solid growth and effective expense management [2][4][6]. Financial Performance - Loan originations totaled $1.5 billion for the quarter, an increase from $1.3 billion in the previous quarter and $1.2 billion year-over-year [6][10]. - Net income was $4.1 million, up from $3.2 million in the prior quarter and the same period last year [6][19]. - Diluted earnings per share were $0.29, compared to $0.23 in the previous quarter and $0.24 a year ago [6][19]. - The efficiency ratio improved to 59.5%, down from 64.8% in the prior quarter and 66.8% year-over-year, indicating better productivity [6][17]. Asset Quality - Nonperforming loans increased to $39.7 million, representing 7.5% of total loans held-for-investment, compared to $29.9 million (6.1%) in the prior quarter and $27.9 million (6.5%) a year ago [29][30]. - The allowance for credit losses was 3.1% of total loans held-for-investment, up from 2.9% in the previous quarter [29][30]. Balance Sheet - Total assets grew to $842.5 million, up from $804.1 million in the prior quarter and $617.8 million year-over-year [20][43]. - Total shareholders' equity increased to $182.0 million, compared to $177.4 million in the previous quarter and $165.8 million a year ago [25][43]. Non-Interest Income and Expenses - Non-interest income for the quarter was $10.3 million, an increase from $7.8 million in the prior quarter and $5.2 million year-over-year, driven by higher Strategic Program fees and gains on loan sales [13][15]. - Total non-interest expenses rose to $14.9 million, compared to $14.3 million in the previous quarter, primarily due to increased salaries and employee benefits [16][19]. Capital Ratios - The leverage ratio was 18.0%, down from 18.8% in the prior quarter, but still above the regulatory well-capitalized requirement of 9.0% [27].

Financial Performance - Net income was $0.2 million and diluted EPS was $0.02[15] - Total revenue reached $33.5 million, a decrease of 5.6% from 1Q25 but an increase of 3.7% from 2Q24[15] - Pre-tax, pre-provision income was $11.7 million, down 1.8% from 1Q25 but up 17.2% from 2Q24[15] - Net interest margin was 1.96%, and FTE NIM was 2.04%, up 14 and 13 bps respectively from 1Q25[15] Loan Portfolio - Total portfolio loan balances increased by $108.2 million, or 2.5%, from 1Q25[19] - Commercial loan balances increased by $108.2 million, or 3.2%, from 1Q25[19] - 2Q25 funded portfolio loan origination yields were 7.55%, down 23 bps from 1Q25[19] Deposit Update - Total deposits increased 7.1% from 1Q25 and are up 24.0% from 2Q24[22] - Cash and unused borrowing capacity totaled $2.3 billion at June 30, 2025[27] - Loan to deposits ratio remains favorable at 82.3%[27] Credit Quality - Net charge-offs were $14.3 million in 2Q25, primarily in small business lending and franchise finance[7] - Nonperforming loans increased $9.3 million from 1Q25 to $43.5 million as of June 30, 2025, representing 1.00% of total loans[7]

Financial Performance - GAAP net loss for 2Q25 was $(27.9) million, or $(0.22) per diluted share[4], while net income excluding notable items was $24.5 million, or $0.19 per diluted share[4] - Net interest income before provision for credit losses increased by 17% QoQ to $117.53 million[64] - Noninterest income totaled $(23) million, including a net loss of $39 million from legacy securities AFS repositioning[48]; excluding notable items, noninterest income was $16 million, up 1% QoQ and 44% YoY[48] - GAAP noninterest expense was $109 million, including merger-related costs[52]; excluding notable items, noninterest expense was $92 million, up 13% QoQ[52] Balance Sheet & Capital - Total deposits reached $15.9 billion at 6/30/25, up 10% QoQ, largely due to the Territorial acquisition[5, 18] - Loans receivable totaled $14.4 billion at 6/30/25, up 8% QoQ, also largely reflecting the Territorial acquisition[5, 21] - Total capital ratio was 13.76% at 6/30/25[5] - Tangible common equity (TCE) ratio was 9.43% at 6/30/25[5] Asset Quality - Nonperforming assets (NPA) were $113 million, or 0.61% of total assets at 6/30/25[5] - Criticized loans decreased by 8% QoQ to 2.87% of total loans[5] - Net charge-offs (NCO) were $12 million in 2Q25, or 33bps of average loans, annualized[59] Strategic Initiatives - The acquisition of Territorial Bancorp Inc added $1.7 billion of stable, low-cost deposits and $1.0 billion of residential mortgage loans[5] - Repositioned $418 million of legacy investment securities available-for-sale (AFS) in June 2025, expected to contribute approximately $12 million to interest income annually[5, 36] Outlook - The company anticipates high single-digit % growth for end-of-period loans in 2025[60] - The company anticipates high single-digit % growth for net interest income in 2025[60] - The company anticipates upper-20s % growth for noninterest income (excluding notable items) in 2025[60]