NewtekOne's Strategic Momentum in ALP Lending and Deposit Growth: A Case for Sustained Earnings and Market Capture

In the evolving fintech lending landscape, NewtekOne, Inc. (NASDAQ: NTEK) has emerged as a standout player, leveraging its technology-driven business model to capitalize on fragmented markets and shifting interest rates. With a second-quarter 2025 (2Q25) performance that reaffirmed its full-year earnings guidance, the company is demonstrating a rare combination of operational efficiency, strategic innovation, and deposit-driven scalability. For investors, the question is not just whether NewtekOne can sustain its momentum—but whether it can outperform peers in a sector poised for explosive growth.

ALP Lending: A High-Margin Engine for Growth

NewtekOne's Alternative Loan Program (ALP) is the cornerstone of its financial strategy. In 2Q25, the company originated $78.3 million in ALP loans, with a full-year projection of $250 million. These loans, which target small business owners seeking flexible financing, are structured with a weighted average coupon of 13.3%, while securitization notes carry a 6.6% coupon—generating a robust 670-basis-point spread. This spread is critical: it not only fuels profitability but also insulates the company from interest rate volatility, a key concern as global markets brace for divergent monetary policies.

The recent $184 million securitization of ALP loans in April 2025 further underscores NewtekOne's ability to scale its lending operations. By offloading $216 million of loans from its balance sheet, the company reduced risk exposure while maintaining cash flow through interest income. This “originate-to-distribute” model is particularly advantageous in a fragmented fintech market, where liquidity management and capital efficiency are paramount.

Deposit Growth: A Tailwind for Margin Expansion

NewtekOne's deposit strategy is equally compelling. In 2Q25, commercial deposits at Newtek Bank surged 19% quarter-over-quarter to $50 million, while core consumer deposits grew by $14 million. This growth is not merely a function of market share capture—it's a strategic lever. By offering the “Newtek Advantage,” a product that provides below-risk-free-rate deposits, the company is incentivizing small business owners to consolidate their financial relationships. The result? A cost of deposits that fell 28 basis points sequentially, driving a 56-basis-point expansion in net interest margin (NIM).

In a market where falling interest rates in Europe and cautious rate hikes in the U.S. are creating pricing pressures, NewtekOne's deposit base acts as a buffer. The company's 78% insured deposit mix also mitigates the risk of a “banking panic,” a vulnerability that has plagued smaller institutions in recent years. This stability allows NewtekOne to fund its ALP loans at lower costs than many competitors, further widening its margin advantage.

Earnings Guidance: A Test of Sustained Execution

NewtekOne's 2Q25 earnings of $0.52 per share—a 21% year-over-year increase—were driven by a 35.5% jump in pre-provision net revenue (PPNR) and a 2.50% ROAA. The company's efficiency ratio, a key metric for fintechs, improved to 60.3% from 66.3% in 2Q24, reflecting the scalability of its digital infrastructure. With full-year guidance of $2.10–$2.50 EPS and a clean balance sheet (with $427 million in off-balance-sheet ALP loans), the company appears well-positioned to meet its targets.

However, the real test lies in the second half of 2025. The company's Q3 and Q4 EPS guidance of $0.60–$0.75 and $0.65–$0.80, respectively, will depend on the success of its planned fourth-quarter securitization and continued deposit growth. If these milestones are achieved, NewtekOne could outperform even the most optimistic projections for the fintech lending sector, which is expected to grow at a 27.2% CAGR through 2033.

Market Positioning: Fragmentation as a Strategic Asset

The fintech lending market in 2025 is a mosaic of niche players, from balance-sheet lenders like OnDeck to marketplace lenders like LendingClub. NewtekOne's hybrid model—combining AI-driven underwriting with a deposit-generating bank charter—allows it to compete on multiple fronts. Its low operating efficiency ratio (49% in 2Q25) and focus on SMEs (small and medium-sized enterprises) position it to capture market share in regions like North America, which dominates 40% of the global fintech lending market.

Moreover, NewtekOne's technological edge is hard to replicate. By integrating AI into loan processing, underwriting, and sales, the company reduces administrative costs and accelerates decision-making—a critical differentiator in a market where speed and personalization are king. This innovation is particularly valuable in a digital-first borrower ecosystem, where embedded lending and blockchain-based credit systems are gaining traction.

Risks and Opportunities in a Shifting Rate Environment

While NewtekOne's strategies are robust, the company must navigate a complex interest rate environment. In the U.S., where personal loan rates have climbed to 12.33%, rising costs could dampen demand. Conversely, Europe's projected rate cuts may create new opportunities for ALP expansion. NewtekOne's ability to pivot between markets—leveraging its global footprint and securitization expertise—will be key to mitigating these risks.

Investors should also monitor the company's legacy SBA loan portfolio at its NSBF subsidiary. While losses have declined significantly, a resurgence in non-accrual loans could pressure margins. However, with the NSBF portfolio down 30% year-over-year and non-accrual inflows peaking in Q2 2024, the risk appears manageable.

Investment Thesis: A Buy for the Long-Term

For long-term investors, NewtekOne presents an attractive case. Its ALP lending model, deposit growth, and AI-driven efficiency are creating a flywheel effect: stronger margins fund more lending, which attracts more deposits, which further reduce costs. In a fragmented fintech market, where innovation and execution are the keys to survival, NewtekOne has both.

With a projected $250 million in ALP originations for 2H25 and a deposit base primed for growth, the company is well-positioned to outperform peers. At current valuations, which trade at a discount to its ROTCE of 19.4%, NewtekOne offers a compelling risk-reward profile. Investors who align with its strategic vision—leveraging technology to democratize access to capital for small businesses—may find this stock to be a standout in the fintech sector.