8-K: NewtekOne Reports Strong Q2 2025 Earnings with Significant EPS and Revenue Growth

NewtekOne, Inc. announced robust second-quarter 2025 financial results, reporting increased basic and diluted EPS, higher total revenue, and improved efficiency, driven by growth in business deposits and strategic loan securitizations.

Summary

• Basic earnings per share (EPS) were $0.53 for the three months ended June 30, 2025, reflecting a 23% year-over-year increase from $0.43 in 2Q24.
• Diluted EPS were $0.52 for the three months ended June 30, 2025, reflecting a 21% year-over-year increase from $0.43 in 2Q24.
• Book value per common share ended 2Q25 at $11.11, up 12.9% year-over-year and 3.5% quarter-over-quarter.
• Tangible book value per common share ended 2Q25 at $10.55, up 21.5% year-over-year and 3.7% quarter-over-quarter, marking the ninth consecutive quarter of increase.
• Total revenue, defined as the sum of net interest income and noninterest income, was $70.2 million for 2Q25, up 15% over $61.1 million for 2Q24.
• Net income before taxes for 2Q25 was approximately $18.8 million, up 27.0% year-over-year from $14.8 million for 2Q24.
• Pre-provision net revenue (PPNR) for 2Q25 was approximately $27.9 million, an increase of 35.5% year-over-year from $20.6 million for 2Q24.
• The efficiency ratio improved to 60.3% for 2Q25 from 66.3% for 2Q24.
• Return on average assets (ROAA) was 2.50%, Return on average equity (ROAE) was 17.4%, and Return on average tangible common equity (ROTCE) was 19.4% for 2Q25.
• SBA 7(a) loan originations approximated $205.6 million for 2Q25, compared to $226.5 million for 2Q24.
• The company sold $42.1 million of guaranteed portions of SBA 7(a) loans and $23.5 million of SBA 504 loans in 2Q25.
• Alternative Loan Program (ALP) loan originations were $78.3 million for 2Q25, with program-to-date ALP loan originations reaching roughly $632 million.
• In April, the company closed a $184 million securitization backed by $216 million of ALP loans, representing its 16th rated securitization.
• Commercial deposits at Newtek Bank increased $50.0 million, or 19% quarter-over-quarter, while core consumer deposits grew $14.0 million, or 2% quarter-over-quarter.
• Insured deposits comprised 78% of total deposits.
• Newtek ALP Holdings amended and upsized its revolving credit facility with Deutsche Bank AG to $170 million and an additional ALP warehouse facility with Capital One, N.A. from $60 million to $100 million.
• A quarterly cash dividend of $0.19 per share on outstanding common shares was paid on July 21, 2025.
• Newtek Bank's efficiency ratio was 49% for 2Q25, and its cost of deposits declined 28 basis points sequentially, fueling 56 basis points of net interest margin expansion.
• The payment processing division, Newtek Merchant Solutions, is expected to generate approximately $17 million of EBITDA in 2025.
• First half of 2025 basic and diluted EPS were $0.89 and $0.87, respectively, which is within the 1H25 guidance range of $0.78-$0.92/share.

Sentiment

Score: 8

Explanation: The filing reports strong financial performance across key metrics, including significant EPS growth, improved profitability ratios, and increased book value. Strategic initiatives like successful securitizations and expanded credit facilities for ALP loans demonstrate robust operational execution and future growth potential. While SBA 7(a) originations saw a slight decline, the overall picture is very positive, with management expressing confidence in future growth and maintaining guidance.

Positives

• Basic EPS increased 23% year-over-year to $0.53 for 2Q25.
• Diluted EPS increased 21% year-over-year to $0.52 for 2Q25.
• Book value per common share rose 12.9% year-over-year and 3.5% quarter-over-quarter to $11.11.
• Tangible book value per common share increased 21.5% year-over-year and 3.7% quarter-over-quarter to $10.55, marking the ninth consecutive quarter of increase.
• Total revenue grew 15% year-over-year to $70.2 million for 2Q25.
• Net income before taxes increased 27.0% year-over-year to $18.8 million.
• Pre-provision net revenue (PPNR) increased 35.5% year-over-year to $27.9 million.
• Efficiency ratio improved to 60.3% from 66.3% in 2Q24, indicating better operational leverage.
• Return on average assets (ROAA) was 2.50% and Return on average tangible common equity (ROTCE) was 19.4%, both indicating strong profitability.
• Commercial deposits at Newtek Bank increased significantly by $50.0 million, or 19% quarter-over-quarter.
• Core consumer deposits grew by $14.0 million, or 2% quarter-over-quarter.
• Cost of deposits at Newtek Bank declined by 28 basis points sequentially, fueling net interest margin expansion.
• Net interest margin at Newtek Bank expanded by 56 basis points.
• Successful securitization of $216 million of ALP loans in April, the company's 16th rated securitization.
• Upsizing of revolving credit facilities with Deutsche Bank AG (to $170 million) and Capital One, N.A. (to $100 million), providing increased funding for ALP loan originations.
• Legacy SBA loan portfolio at Newtek Small Business Finance showed meaningful improvement in both bottom line performance and credit trends.
• Payment processing division (Newtek Merchant Solutions) is expected to generate approximately $17 million of EBITDA in 2025.
• First half 2025 EPS results ($0.89 basic, $0.87 diluted) are within the company's guidance range of $0.78-$0.92/share.

Negatives

• SBA 7(a) loan originations decreased to $205.6 million for 2Q25, compared to $226.5 million for 2Q24.

Risks

• Actual results may differ materially from forward-looking statements due to significant risks and uncertainties.
• Information regarding assets under supervision, capital ratios, risk-weighted assets, supplementary leverage ratio, and balance sheet data consists of preliminary estimates and are subject to change with filings with regulatory agencies and the filing of the Company's Form 10-Q for the period ended June 30, 2025.
• Detailed risks are outlined in the 'Risk Factors' sections of the company's other filings with the Securities and Exchange Commission.

Future Outlook

The company maintains its full-year 2025 EPS guidance range of $2.10-$2.50, with implied ROAA of 2.2%-2.7%, ROAE of 17.2%-20.2%, and ROTCE of 18.7%-22.0%. Management expects to execute another ALP securitization in the fourth quarter of 2025. Growth in the business model is anticipated beyond 2025, driven by the extension of major provisions of the "Tax Cuts and Jobs Act" and new tax incentives for independent business owners. The company plans to continue leveraging technology and artificial intelligence in loan processing, underwriting, closings, and sales to enhance efficiency and customer experience.

Management Comments

• "We are once again pleased to post solid quarterly results that include basic and diluted EPS of $0.53 and $0.52, respectively."
• "We were particularly encouraged to see tangible book value per share climb for a ninth consecutive quarter while paying a healthy dividend, as well as by increases in business deposits, stabilizing credit trends, and continued growth of our ALP vertical."
• "Our strategy is to operate our nationally chartered bank subsidiary, Newtek Bank, without the traditional bankers, brokers, branches, or business development officers most banks employ, and we are extremely encouraged by the underlying metrics achieved at the Bank."
• "The digital, nontraditional operating strategy supports our ability to run the Bank with a low operating efficiency ratio, which was 49% for 2Q25, without sacrificing the ability to gather high quality, lower cost deposits and to manage credit risk."
• "Growth in the all-important category of business deposits continues to track nicely with roughly $50 million added in 2Q25, reflecting a Q/Q increase of 19%."
• "Acquiring deposits of existing and new business customers and solutioning merchant services, payroll, and lending is at the core of our operating strategy to provide a benefit to deposit customers who are earning a rate of interest that is below the risk-free rate, which we sum up in one product: The Newtek Advantage."
• "The growth in business deposits supported a 28 basis point sequential decline in the cost of deposits, which fueled 56 basis points of net interest margin expansion at the Bank."
• "NewtekOne is unique in that we have meaningful business activity at the holding company level. In fact, with our ALP Program, we are actively and directly participating in the origination and securitization of private credit."
• "We are very pleased with our second quarter execution on the securitization of $216 million of ALP loans at a 670 basis point spread, which includes 100 basis points of servicing rights, to the market clearing yield on the securitization notes sold."
• "For the first half of 2025, we have produced basic and diluted EPS of $0.89 and $0.87, respectively, which is within our 1H25 guidance range of $0.78-$0.92/share, and we are maintaining our $2.10-$2.50 guidance range for 2025."
• "We see growth in our business model beyond 2025 based on the extension of major provisions of the 'Tax Cuts and Jobs Act' and new tax incentives for our independent business owner client base."
• "We are excited about our future as a truly digitized business and financial solutions provider operating a depository, breaking the mold of traditional banking while embracing technology and artificial intelligence."
• "We leverage AI in the areas of loan processing, underwriting, closings, and sales; for example, by using AI to automate complex document reviews and analyzing sales calls, the Company is able to deliver faster, more consistent, and compliant lending decisions, while enhancing the customer experience and operational efficiency."

Industry Context

NewtekOne's results highlight a successful strategy of operating a nationally chartered bank subsidiary, Newtek Bank, with a digital, non-traditional model, avoiding traditional branches and bankers. This approach allows for a low operating efficiency ratio (49% for Newtek Bank in 2Q25) while attracting high-quality, lower-cost business deposits. The company's active participation in private credit origination and securitization through its ALP Program positions it within a growing segment of alternative finance. The emphasis on leveraging AI in lending processes aligns with broader fintech trends aimed at improving efficiency and customer experience in financial services. The growth in business deposits and declining cost of deposits at Newtek Bank also reflects a competitive advantage in a rising interest rate environment.

Comparison to Industry Standards

• Newtek Bank's efficiency ratio of 49% for 2Q25 is significantly lower than the industry average for traditional banks, which often range from 55% to 65% or higher, demonstrating superior operational efficiency through its digital model.
• The company's return on average assets (ROAA) of 2.50% and return on average tangible common equity (ROTCE) of 19.4% for 2Q25 are considered above-average profitability metrics compared to many traditional banking institutions, which typically target ROAA in the 1.0%-1.5% range and ROTCE in the 10%-15% range.
• The successful execution of its 16th rated securitization, including the recent NALP Business Loan Trust 2025-1, demonstrates a robust capability in the asset-backed securitization market, comparable to larger financial institutions active in structured finance.
• The company's focus on "breaking the mold of traditional banking" and leveraging AI for loan processing and underwriting positions it as an innovator, contrasting with more conventional banks that may be slower to adopt such technologies.

Stakeholder Impact

• Shareholders: Positive impact due to increased EPS, book value, tangible book value, and continued payment of a healthy quarterly cash dividend of $0.19 per share. The maintained full-year EPS guidance also provides confidence.
• Employees: Positive impact from a growing and profitable company, potentially leading to stability and opportunities, especially with the focus on technology and AI.
• Customers (Independent Business Owners): Positive impact from the company's mission to provide business and financial solutions, including banking, lending, payment processing, and technology solutions, aimed at helping them grow sales, control expenses, and reduce risk. The "Newtek Advantage" product aims to provide benefits to deposit customers.
• Creditors/Lenders (Deutsche Bank AG, Capital One, N.A.): Positive impact as the company successfully executes securitizations and expands its credit facilities, demonstrating a healthy and growing lending business.
• Regulatory Authorities: The company operates a nationally chartered bank subsidiary (Newtek Bank, N.A.) and files with the SEC, indicating adherence to regulatory frameworks.

Next Steps

• NewtekOne will file its Form 10-Q for the period ended June 30, 2025.
• Expectation to execute another ALP securitization in the fourth quarter of 2025.
• A conference call to discuss the second quarter 2025 financial and operating results was scheduled for July 28, 2025, 4:30 p.m. ET.

Key Dates

Recommendation

The filing demonstrates exceptional financial performance with significant year-over-year growth in EPS, revenue, and profitability metrics like ROAA and ROTCE, which are well above industry averages. The consistent increase in tangible book value for nine consecutive quarters, coupled with a healthy dividend, signals strong shareholder value creation. Strategic initiatives, particularly the successful ALP securitizations and expanded credit facilities, underscore robust operational execution and a clear path for future growth in the private credit and digital banking sectors. The company's innovative, low-cost digital banking model and effective use of AI provide a sustainable competitive advantage. While SBA 7(a) originations saw a slight dip, the overall positive trends, maintained full-year guidance, and strong management commentary suggest a compelling investment opportunity.

Keywords

Financial Holding Company, Business Lending, SBA Lending, Alternative Loan Program, ALP, Securitization, Electronic Payment Processing, Newtek Bank, Commercial Deposits, Small Business Finance, Private Credit, Fintech, AI in Lending, Financial Results, Earnings, EPS, Book Value, Tangible Book Value, Revenue, Net Income, PPNR, Efficiency Ratio, ROAA, ROAE, ROTCE, Dividends