NewtekOne, Inc. (NEWT) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary shows strong financial performance with significant growth in tangible book value and return on equity. Despite some net charge-offs, risk management remains robust. The Q&A section reveals positive sentiment, with expectations of continued loan growth and efficient capital use through securitization. Concerns about NII growth projections and unclear management responses slightly temper the overall sentiment. However, the guidance on EPS and loan originations, along with technological advancements and strategic diversification, suggest a positive outlook for the stock price movement.
Key Financial Performance
Total Assets Increased from $180 million to over $2 billion for National Bank of New York City, and the financial holding company has approximately $2.9 billion of assets. This growth is attributed to the acquisition of National Bank of New York City and subsequent deposit growth.
Deposits Grew from $140 million to over $2 billion in 3.25 years. Business deposits increased year-over-year by $173 million, and consumer deposits increased by $668 million. Growth attributed to the bank's attractive deposit offerings and technological advancements.
Efficiency Ratio 40% for Newtek Bank in Q1 2026. This reflects the bank's branchless and bankerless model, which reduces infrastructure costs.
Earnings Per Share (EPS) $0.43 for Q1 2026, reflecting 19% and 23% growth over Q1 2025 basic and diluted EPS, respectively. Growth attributed to technological advancements and increased loan originations.
Book Value Per Share Ended Q1 2026 at $12.35, with tangible book value at $11.84. This represents significant growth from $6.92 in Q1 2023, driven by technological advancements and increased loan originations.
Loan Originations 961 loan units originated in Q1 2026, up 40% year-over-year. In dollar terms, $391 million of loans were originated, compared to $366 million in Q1 2025. Growth attributed to technological advancements and AI-driven processes.
Operating Expense Increased by just over 7.5% year-over-year, while assets grew by 35%. This reflects the bank's ability to capture operating leverage.
Return on Average Assets 1.96% for Q1 2026, which is favorable compared to the industry. Growth attributed to efficient operations and technological advancements.
Deposit Accounts 37,000 deposit accounts at the end of Q1 2026, more than doubling year-over-year. Growth attributed to technological advancements and attractive deposit offerings.
C&I LA Loan Originations $85.7 million in Q1 2026, compared to $68.5 million in Q1 2025. Growth attributed to the bank's ability to fund these loans with deposits rather than warehouse facilities.
Tangible Book Value Growth Increased from $6.92 in Q1 2023 to $11.84 in Q1 2026, with cumulative common dividends declared at $2.43. Growth attributed to technological advancements and increased loan originations.
Net Charge-Offs Increased as the loan portfolio seasoned, but provisioning continues to cover net charge-offs. This reflects strong risk management practices.
Allowance for Credit Losses Continues to cover net charge-offs, with the bulk related to the unguaranteed 7(a) portfolio. This reflects strong risk management practices.
Return on Tangible Common Equity Approaching 15% in Q1 2026, reflecting strong profitability metrics.
Net Interest Margin (NIM) Experienced compression due to a shift in earning asset mix, but absolute dollar balance of net interest income continues to increase. Growth attributed to significant loan production in the second half of the quarter.
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Operating Highlights
Real-time payments: NewtekOne has adopted real-time payments and is now live with FedNow and The Clearing House RTP, enabling clients to receive payments instantly.
7-day business loan: Using AI, NewtekOne can fund small business loans under $350,000 within 7 days after application completion.
SBA lending leadership: NewtekOne is the largest SBA lender by units and among the top 2-3 by loan volume, supporting over 110,000 jobs in the last 5 years.
C&I LA program: The program has been expanded, with $85.7 million originated in Q1 2026, offering larger loans averaging $4-5 million, targeting seasoned borrowers.
Deposit growth: Deposits grew from $142 million to $1.9 billion in 13 quarters, with 37,000 deposit accounts as of Q1 2026, more than doubling year-over-year.
Technological advancements: AI is used for reading tax returns, lease agreements, and other documents, enabling efficient loan processing and deposit growth.
Diversification of loan portfolio: The C&I LA program and other initiatives are reducing reliance on SBA loans, with SBA loans now comprising 41% of the portfolio.
Controlled growth strategy: The company emphasizes methodical and controlled growth to manage risks effectively while expanding its operations.
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Risk or Challenges
Credit Quality: Concerns about credit quality in the current volatile market were highlighted, though the company claims stabilization of credit metrics.
Loan Portfolio Risk: The company is experiencing seasoning in its loan portfolio, leading to an anticipated increase in net charge-offs. This risk is being managed through CECL calculations and provisioning.
Net Interest Margin Compression: The bank experienced a meaningful shift in its earning asset mix due to deposit growth, leading to net interest margin compression.
Securitization Costs: Securitization costs are higher than bank deposits, though they provide match-funding benefits. This could impact profitability if not managed effectively.
Economic Environment: The company acknowledges the challenges posed by inflation and rising interest rates, which have created difficulties for small businesses, impacting loan performance.
Operational Growth Risks: The company is focused on controlled growth to avoid overextension, which could lead to operational inefficiencies or increased risk exposure.
Regulatory Compliance: As a bank holding company, the firm is subject to stringent regulatory requirements, which could pose challenges in maintaining compliance.
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Guidance & Outlook
2026 EPS Guidance: Reconfirmed 2026 EPS guidance at $2.35 midpoint.
2027 EPS Guidance: Established a $2.60 midpoint for 2027 EPS guidance.
Loan Origination Growth: Loan originations in Q1 2026 increased by 40% year-over-year, with March showing significant momentum. April is expected to continue with approximately 10% year-over-year growth.
Deposit Growth: Deposits have grown significantly, with 37,000 deposit accounts at the end of Q1 2026, more than doubling year-over-year. Business deposits increased by $37 million quarter-over-quarter and $173 million year-over-year.
C&I LA Loan Program: The C&I LA loan program is expected to drive growth with an average loan size of $4 million to $5 million, enabling better quality growth and diversification of the portfolio.
Technological Advancements: Continued use of AI and technology to streamline loan processing and improve efficiency, including the ability to fund loans under $350,000 within 7 days.
Securitization Strategy: Plans to securitize C&I LA loans from the bank's balance sheet to improve funding efficiency and profitability.
Future Product Offerings: Plans to expand automated offerings to include property and casualty insurance in the near future.
Credit Quality: Delinquencies and non-performing loans (NPLs) have declined for consecutive quarters, indicating improved credit quality.
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Shareholder Return Plan
Dividend Growth: The company has shown significant growth in tangible book value per share, which includes cumulative common dividends declared. Since the conversion, $2.43 of cumulative common dividends have been declared, contributing to a total shareholder value increase of $7.35.
Shareholder Value: The company has delivered $7.35 of value to shareholders, which includes tangible book value growth and dividends.
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Key Q&A
Q:What is the trajectory of loan growth going forward?
A:Barry Sloane stated that loan growth will primarily occur within the bank, with no loan origination at the holding company. He expects low double-digit growth, greater diversification, and improved credit metrics due to more C&I LA loans being added.
Q:Will the deposit growth normalize or maintain liquidity?
A:Barry Sloane mentioned that while the current liquidity of $390 million is excessive, they will maintain a good amount of liquidity. He highlighted their strong customer service and technology adoption, which will likely lead to more business deposits over time.
Q:What caused the lower loan yields this quarter?
A:Frank DeMaria explained that the decrease was due to ALP loans going off balance sheet at the beginning of the quarter and later originations of higher-yielding ALP loans. This timing issue should normalize in the second quarter.
Q:Is the company approaching capitalization constraints due to growth?
A:Barry Sloane clarified that they are not stretching or overusing capital. He expects capitalization and income to improve as loans are added back to the balance sheet. Frank DeMaria noted the holding company's leverage ratio is 13.1%.
Q:What is the impact of the 7-day loan program?
A:Barry Sloane indicated that while specific data isn't broken out, the program has contributed to a 10% increase in total loans year-over-year. He expects this trend to continue with double-digit growth without compromising credit quality.
Q:How does the securitization model benefit the company?
A:Barry Sloane explained that securitization allows for an 85% advance rate, reducing the equity capital needed compared to traditional holding company financing. This is a significant benefit, enabling more efficient capital use.
Q:What is the outlook for cost of funds and NII growth?
A:Barry Sloane and Frank DeMaria noted that funding loans with deposits at lower rates (around 4%) compared to previous funding methods (around 7%) will result in noticeable cost savings and NII growth. However, projections of $24-$25 million in NII growth are slightly high.
Q:When is the next securitization expected, and how large will it be?
A:Barry Sloane stated that the next securitization is expected in the fourth quarter, with a collateral pool of $400-$500 million, all coming from the bank.
Q:What is the current state of the SBA market and borrower confidence?
A:Barry Sloane noted that changes in SBA program rules have reduced volume by 10%-20%. However, the company is competitive with its 7-day loan program and expects to regain previous volumes. He also highlighted challenges for fintechs in the market.
Q:Are loan sizes shrinking, and what is the strategy for diversification?
A:Barry Sloane acknowledged smaller loan sizes in the SBA bucket but emphasized diversification across different credit aspects and loan sizes. This strategy has served the company well over two decades.
Q:What was the SBA gain-on-sale premium this quarter, and what is the trajectory of premiums?
A:Barry Sloane stated that the premium was around 1.105%, with pricing being maintained due to reduced supply. Frank DeMaria reported a net gain on sale of $26.7 million for the quarter.
Q:What percentage of production is floating versus fixed?
A:Barry Sloane confirmed that 100% of the production is floating.
Q:What is the average account size for new business deposits?
A:Frank DeMaria stated that the average account size is around $10,000 for consumer accounts and $200,000-$250,000 for business accounts.
Q:Review of Unclear Management Responses
A:Christopher Nolan expressed confusion regarding the recharacterization of income from securitizations, and Barry Sloane's explanation did not fully clarify the matter. Additionally, Stephen Moss's question about NII growth projections was partially addressed, but the exact figures remained uncertain.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bank New
CI LA
CI loan
FedNow
LA loan
LA program
National Bank
New York
Newtek Bank
NewtekOne Newtek
SBA borrower
Sloane President
States solution
Street consensus
York City
account man
acquisition
advance rate
agreement
balloon payment
bank CI
bank balance
business
cash flow
diversification
dollar
expertise
facility
financials
government
loan unit
man life
manner
matter
million
note
purpose
unit loan
warehouse
NEWT Transcript
NewtekOne, Inc. (NEWT) Q1 2026 Earnings Call Transcript
Positive4-30
The earnings call summary shows strong financial performance with significant growth in tangible book value and return on equity. Despite some net charge-offs, risk management remains robust. The Q&A section reveals positive sentiment, with expectations of continued loan growth and efficient capital use through securitization. Concerns about NII growth projections and unclear management responses slightly temper the overall sentiment. However, the guidance on EPS and loan originations, along with technological advancements and strategic diversification, suggest a positive outlook for the stock price movement.
NewtekOne, Inc. (NEWT) Q4 2025 Earnings Call Transcript
Positive1-29
The earnings call summary reveals strong financial performance with improved efficiency ratios, deposit growth, and tangible book value. Product development and market strategy are promising, with new offerings and partnerships. Despite flat noninterest income, optimistic guidance and strategic initiatives are positive. The Q&A section highlights digital growth and competitive positioning, with some concerns about unclear management responses. Overall, the sentiment is positive, given the financial health and strategic plans, suggesting a potential stock price increase of 2% to 8%.
NewtekOne, Inc. (NEWT) Q3 2025 Earnings Call Transcript
Unknown10-29
The earnings call presents mixed signals: strong revenue growth and improved efficiency are positive, but uncertainties like the government shutdown and unclear guidance impact sentiment negatively. The company's strategy to diversify its loan portfolio and ALP growth is promising, yet the reluctance to increase dividends and the cautious stance on guidance due to external factors create a neutral outlook.
NewtekOne, Inc. (NEWT) Q2 2025 Earnings Call Transcript
Positive7-28
The earnings call summary reveals strong financial performance with high ROAA and ROTCE, indicating profitability. The Q&A session highlights growth in deposits and successful securitization strategies, although management's vague responses on stock valuation and integration impacts introduce some uncertainty. The stable expense outlook and no dividend increase align with a conservative approach. Overall, the positive financial metrics, clear growth strategies, and lack of significant negative trends suggest a positive stock price movement in the short term.
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