NewtekOne's Q2 2025 Earnings Call: Unpacking Key Contradictions in Valuation, SBA Lending, and Expense Management

Residual calculation and valuation methodology, SBA lending and regulatory impact, deposit growth and cost reduction strategy, SBA loan production and pricing, and expenses and SG&A investment are the key contradictions discussed in NewtekOne, Inc.'s latest 2025Q2 earnings call.



Revenue Growth and Deposit Trends:
- NewtekOne reported 15% revenue growth in Q2 2025 to $70.2 million from $61 million in Q2 2024.
- Business deposits grew by $50 million sequentially, with a significant portion coming from DDA accounts.
- The growth in revenue and deposits was driven by integrated solutions in lending, merchant services, and payroll.

Alternative Loan Program (ALP) Success:
- The alternative loan program (ALP) showed strong performance, with a residual interest in recent securitization marked at a 14% yield.
- The program has a loan size average of about $5 million, and Newtek completed its third securitization with $180 million in bonds and $185 million in loans.
- ALP's success is attributed to its high-quality loans and the company's strategy of using securitizations for earnings accretion.

Credit Quality and Loss Provisions:
- NewtekOne's nonaccrual numbers within NSBF are stabilizing, with nonaccruals declining quarter-over-quarter.
- Losses in Newtek Small Business Finance reduced from $10.7 million to $3.7 million.
- This improvement is linked to effective risk management and the company's strategy of selling nonperforming loans.

Capital and Dividend Strategy:
- NewtekOne has more than adequate capital across the holding company, with a strong balance sheet supporting growth.
- The company maintained a healthy dividend, with tangible book value per share increasing 3.7% sequentially.
- Newtek's capital strategy focuses on utilizing its capital efficiently for growth and maintaining a strong dividend payout.