Newtek Business Services ((NEWT)) has held its Q2 earnings call. Read on for the main highlights of the call.
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NewtekOne’s recent earnings call painted a picture of robust growth and strategic successes, tempered by ongoing challenges. The company demonstrated strong revenue and deposit growth, alongside a successful alternative loan program, which has bolstered efficiency and profitability metrics. However, issues persist with Newtek Small Business Finance losses and credit provisions, indicating areas that require attention.
Revenue Growth
NewtekOne reported an impressive 15% revenue growth in Q2 2025, reaching $70.2 million compared to $61 million in Q2 2024. This significant increase underscores the company’s ability to enhance its financial performance year-over-year.
Deposit Growth and Cost of Funds
The company saw a $50 million sequential growth in business deposits, which contributed to a 28 basis point decline in the cost of funds, now at 3.71%. This improvement highlights NewtekOne’s effective management of its financial resources.
Net Interest Margin and EPS
NewtekOne’s net interest margin increased by 56 basis points, reflecting improved profitability. The company reported basic and diluted EPS of $0.53 and $0.52, respectively, with the first half EPS exceeding the midpoint of guidance.
Alternative Loan Program Success
The alternative loan program has been a notable success, completing three securitizations and significantly contributing to earnings per share. The program boasts high-quality loans with a marked yield of 14%.
Efficiency and Profitability
The efficiency ratio improved from 66.3% to 60.3% year-over-year, indicating enhanced operational efficiency. Strong ROAAs and ROTCEs further demonstrate NewtekOne’s robust operating leverage.
Newtek Small Business Finance Losses
While losses in Newtek Small Business Finance have decreased, they remain substantial, with a first half 2025 loss of $8.7 million. This area continues to be a challenge for the company.
NSBF Nonaccruals
Nonaccruals within Newtek Small Business Finance have been a persistent issue, although there was a decline quarter-over-quarter, suggesting some progress.
Provision for Credit Losses
The provision for credit losses is anticipated to increase in the second half of the year, signaling potential future credit challenges that NewtekOne may face.
Forward-Looking Guidance
NewtekOne maintained its EPS guidance of $2.10 to $2.50 for the full year 2024, despite the 15% revenue growth in Q2 2025. The company continues to focus on managing its cost of funds and net interest margin, with strategic growth in business deposits and a successful alternative loan program contributing to its financial outlook.
In conclusion, NewtekOne’s earnings call highlighted a strong performance with significant growth in revenue and deposits, alongside strategic successes in its alternative loan program. However, challenges with Newtek Small Business Finance losses and credit provisions remain. The company’s forward-looking guidance remains optimistic, with a focus on maintaining its financial momentum.