Executive Overview

NewtekOne, Inc. is a financial holding company that owns Newtek Bank, a branchless nationally chartered bank. The company provides a range of business and financial solutions to independent business owners (SMBs), including lending products, deposit accounts, payment processing, payroll services, and insurance brokerage.

In 2023, the company converted from a business development company (BDC) and non-bank lender to a financial holding company. This allowed it to acquire Newtek Bank and expand its product offerings. The company now originates and services SBA 7(a) loans, SBA 504 loans, commercial and industrial (C&I) loans, commercial real estate (CRE) loans, and asset-based lending (ABL) loans through its bank subsidiary.

The company’s primary sources of revenue are interest income, gains on sales of loans, servicing income, and electronic payment processing fees. Its main expenses include salaries, interest on deposits and borrowings, loan origination and servicing costs, and other operating expenses.

Conversion to a Financial Holding Company

In January 2023, NewtekOne withdrew its election to be regulated as a BDC and acquired Newtek Bank, becoming a financial holding company subject to regulation by the Federal Reserve. This allowed the company to consolidate its various subsidiaries, including its former non-bank lending operations, under the bank holding company structure.

As a result, NewtekOne no longer qualifies as a regulated investment company (RIC) for tax purposes and must file a consolidated federal income tax return starting in 2023. The company is now subject to corporate income taxes rather than the pass-through tax treatment it had as a RIC.

Historical Business and Regulation

Prior to the conversion, NewtekOne operated as a BDC, which limited the types of assets it could hold and required it to maintain certain capital ratios. As a BDC, it also elected to be treated as a RIC for tax purposes.

NewtekOne’s former non-bank subsidiary, NSBF, was previously the largest non-bank SBA 7(a) lender in the U.S. NSBF is now winding down its operations, with its SBA 7(a) loan originations transitioning to Newtek Bank.

Economic Developments

NewtekOne has observed several economic challenges, including commodity inflation, rising interest rates, bank failures, and global conflicts. These factors could adversely impact the company’s business and financial performance. The company monitors these developments and seeks to manage its investments accordingly.

Income and Expenses

NewtekOne generates the majority of its income from interest, gains on loan sales, servicing income, and electronic payment processing fees. Its primary expenses include salaries, interest on deposits and borrowings, loan origination and servicing costs, and other operating expenses.

For the nine months ended September 30, 2025, the company reported net income of $41.0 million, up from $32.5 million in the prior-year period. This increase was driven by higher interest income, gains on loan sales, and gains on residuals from securitizations, partially offset by higher provision for credit losses and interest expense.

Financial Condition

As of September 30, 2025, NewtekOne had total assets of $2.4 billion, up from $2.1 billion at the end of 2024. This increase was primarily due to growth in the company’s loan portfolio, both held for sale and held for investment.

The company’s loan portfolio consists of SBA 7(a) loans, SBA 504 loans, C&I loans, CRE loans, and ALP loans. Loans held for sale, at fair value, increased by $384.7 million, while loans held for investment, at amortized cost, grew by $197.5 million.

NewtekOne’s credit quality metrics showed an increase in nonperforming assets as a percentage of total assets, from 4.6% at the end of 2024 to 6.0% at September 30, 2025. This was driven by an increase in nonaccrual loans, particularly in the SBA 7(a) portfolio.

The company’s goodwill and intangible assets decreased slightly due to amortization during the period. It also recognized $76.7 million in residuals from a securitization of its ALP loans.

Liabilities and Capital

NewtekOne’s total liabilities increased by $248.8 million, or 14.1%, to $2.0 billion as of September 30, 2025. This was primarily due to a $200.0 million increase in deposits, as well as additional borrowings, including a new $88.6 million credit facility and the issuance of $30.0 million in 2030 Notes.

The company’s regulatory capital ratios remained strong, with the Tier 1 Capital to Risk-Weighted Assets ratio at 20.8% and the Total Capital to Risk-Weighted Assets ratio at 22.1% as of September 30, 2025. Newtek Bank’s capital ratios also exceeded well-capitalized thresholds.

Liquidity and Capital Resources

NewtekOne’s liquidity and capital resources come from deposits, company notes, securitization transactions, and cash flows from operations, including loan sales and repayments. The company has accessed the public debt markets through various note offerings and maintains an at-the-market (ATM) equity program.

In 2024, the company’s board approved a stock repurchase program and a debt repurchase program, allowing the company to repurchase up to 1.0 million shares of common stock and $5.0 million in aggregate principal amount of its 2029 Notes, respectively.

Segment Performance

NewtekOne has four reportable segments: Banking, Alternative Lending, NSBF, and Payments. The Banking segment, which includes Newtek Bank, was the largest contributor to net income, generating $30.9 million for the nine months ended September 30, 2025. This was followed by the Alternative Lending segment, which reported net income of $60.4 million.

The NSBF segment, which includes the legacy SBA 7(a) loan portfolio outside of Newtek Bank, reported a net loss of $13.6 million due to the wind-down of its operations. The Payments segment contributed $12.6 million to net income.

Outlook

While NewtekOne has successfully transitioned to a financial holding company structure, there can be no assurance regarding its continued lending prospects or operations in this new regulatory environment. The company remains subject to extensive regulation and supervision, which could adversely affect its business.

Additionally, the economic challenges and uncertainties discussed earlier could have a material adverse effect on the company’s financial condition, cash flows, and results of operations. NewtekOne will need to continue to navigate these headwinds and manage its investments and operations accordingly.

Overall, NewtekOne’s conversion to a financial holding company has allowed it to expand its product offerings and consolidate its various subsidiaries. However, the company faces both opportunities and risks as it operates in the current economic and regulatory environment.