8-K: NewtekOne Reports Strong 1Q26 Earnings Growth

NewtekOne, Inc. reported 1Q26 diluted EPS of $0.43, representing a 23% year-over-year increase, driven by robust deposit growth and strategic loan portfolio shifts.

Summary

• Reported 1Q26 diluted EPS of $0.43, up 23% from $0.35 in 1Q25.
• Net interest income rose 23.6% year-over-year to $17.2 million.
• Net income before taxes reached $17.1 million, a 46.7% increase compared to 1Q25.
• Successfully closed a $295 million securitization backed by Alternative Loan Program (ALP) loans.
• Transitioned origination and funding of C&I long-amortizing loans to Newtek Bank, utilizing deposit funding instead of warehouse credit facilities.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, characterized by solid EPS growth, successful deposit gathering, and strategic operational improvements that enhance long-term profitability.

Positives

• Diluted EPS growth of 23% year-over-year.
• Business deposits grew 66% Y/Y and consumer deposits grew 88% Y/Y.
• Return on average tangible common equity (ROTCE) improved to 14.8% from 13.8% in 1Q25.
• Record deposit account openings for the second consecutive quarter, exceeding 10,000 accounts.
• Successful $295 million securitization, which was 10x oversubscribed.

Negatives

• Efficiency ratio increased slightly to 62.4% from 62.1% in 1Q25.
• Net loss on loan servicing assets of $6.2 million for the quarter.
• Significant net loss on loans under the fair value option of $49.6 million.
• Provision for credit losses increased to $9.6 million from $8.4 million in the previous quarter.

Risks

• Loan portfolio is still climbing the default curve; management notes the weighted average life of 18 months typically flattens at 36 months.
• Exposure to credit risk as the bank expands its loan portfolio.
• Reliance on technology-enabled platforms and AI processes which may face integration or operational risks.
• Market sensitivity to interest rate fluctuations affecting deposit costs and loan demand.

Future Outlook

Management reaffirmed its 2026 EPS guidance range of $2.15-$2.55 and established a new target of 10% EPS growth for 2027, implying an EPS range of $2.40-$2.80.

Management Comments

• We remain comfortable with our 2026 EPS guidance range of $2.15-$2.55.
• We are establishing a target of 10% EPS growth for 2027.
• Funding C&I LA Loans at the Bank is logistically and economically more attractive.
• We believe our deposits thesis is playing out.

Industry Context

StockSavvy.ai notes that NewtekOne continues to differentiate itself from traditional regional banks by operating as a technology-enabled financial holding company, focusing on digital-first deposit acquisition and diversified business lending, which contrasts with the branch-heavy models of legacy competitors.

Comparison to Industry Standards

• The company's 1.96% ROAA compares favorably to many traditional regional banks which often struggle to maintain ROAA above 1.0% in the current interest rate environment.
• The shift to funding loans via deposits rather than warehouse facilities aligns with industry best practices for reducing cost of funds and improving net interest margins.
• The efficiency ratio of 62.4% is competitive for a digital-first financial institution, though slightly higher than top-tier lean digital banks.

Stakeholder Impact

• Shareholders benefit from consistent dividend payments and strong EPS growth.
• Business clients gain access to faster capital and integrated financial tools via the Newtek Advantage portal.
• Depositors benefit from market-rate interest on business and consumer accounts.

Next Steps

• Continue scaling deposit growth at Newtek Bank.
• Execute on the 2026 loan origination target of $1.8 billion.
• Monitor the default curve of the loan portfolio as it matures toward the 36-month mark.

Key Dates

Recommendation

The company is demonstrating successful execution of its digital banking strategy, evidenced by strong deposit growth and EPS performance within guidance, making it an attractive prospect for growth-oriented investors.

Keywords

NewtekOne, NEWT, Financial Holding Company, SBA Lending, Digital Banking, Securitization, Earnings Report