NewtekOne’s Earnings Call: Positive Surprises Amid Challenges

Newtek Business Services ((NEWT)) has held its Q1 earnings call. Read on for the main highlights of the call.

NewtekOne, Inc. recently held its earnings call, revealing a generally positive sentiment despite some challenges. The company reported a positive earnings surprise, showcasing strong performance in loan securitizations and deposit growth. However, it also acknowledged the tougher credit environment and ongoing issues with the NSBF portfolio. NewtekOne is actively managing these challenges, though it remains cautious about potential impacts from regulatory changes.

Earnings Beat Expectations

NewtekOne, Inc. exceeded expectations with its first quarter 2025 earnings, reporting $0.35 diluted earnings per share, surpassing the consensus estimate of $0.31. This earnings beat highlights the company’s robust financial performance and strategic management.

Strong Loan Securitization Performance

The company successfully securitized approximately $215 million of loans, achieving a 570 basis point spread. This indicates a strong performance in their Alternative Loan Program, reflecting the company’s ability to effectively manage and capitalize on its loan portfolio.

Deposit Growth and Cost Management

NewtekOne continued to see growth in core deposits, with an expected decrease in the average cost of deposits from 4% to 3.8%-3.85% for 2025. This growth demonstrates effective cost management and strategic deposit acquisition.

Improved Efficiency Ratio

The efficiency ratio improved significantly from 71% to 62%, underscoring the company’s focus on cost management and the scalability of its digital banking model. This improvement is a testament to NewtekOne’s operational efficiency.

Pre-Provision Net Revenue Growth

Pre-provision net revenue saw a 47% year-over-year increase, driven by non-interest income activities. This growth highlights the company’s diverse revenue streams and its ability to generate income beyond traditional interest-based activities.

Challenging Credit Environment

The company acknowledged tougher credit conditions and increased charge-offs, particularly in the SBA 7(a) loan portfolio. This reflects the broader economic challenges impacting the credit market, which NewtekOne is actively managing.

NSBF Portfolio Challenges

NewtekOne reported a $4.9 million loss in the NSBF portfolio for Q1 2025, a reduction from $10.7 million in Q4 2024. While this indicates ongoing challenges, it also shows progress in winding down this portfolio.

Potential Impact of SBA Changes

The company expressed concerns about SBA changes, including the return of the 55 basis point lender service fee, which could impact gain on sale margins. These regulatory changes are being closely monitored for their potential effects on the company’s financial performance.

Forward-Looking Guidance

NewtekOne provided significant guidance during the earnings call, maintaining an annual EPS forecast of $2.10 to $2.50, indicating projected annual EPS growth of 17%. The company anticipates credit headwinds and has adjusted its loan origination strategy to focus on holding government-guaranteed SBA loans longer. Additionally, a 47% increase in shareholder equity over two years was reported, emphasizing the company’s strong financial foundation and innovative business model.

In summary, NewtekOne, Inc.’s earnings call reflected a positive outlook with strong financial performance, despite some challenges. The company demonstrated resilience through strategic management of its loan portfolio and deposit growth, while also preparing for potential regulatory impacts. Investors can take confidence in NewtekOne’s proactive approach and robust financial health as it navigates the current economic landscape.