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NewtekOne, Inc. (NEWT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 diluted EPS was $0.35, ahead of the company’s $0.28–$0.32 guidance range, driven by stronger PPNR and noninterest income, despite a heavier provision; the quarter is seasonally the weakest for NEWT .
  • Management reiterated 2025 EPS guidance of $2.10–$2.50 and increased its 2025 deposit growth plan to $345M (from $245M in early April), while maintaining targets for SBA 7(a) fundings ($1.0B), SBA 504 closings ($250M), ALP originations ($500M), and CRE/C&I growth ($225M) .
  • Mix improved: commercial deposits rose Q/Q and cost of deposits is expected to drift to ~3.80–3.85% in 2025; bank NIM expanded Y/Y and Q/Q, with management temporarily holding more SBA guaranteed portions to capture spread before sale .
  • The NSBF wind-down drag continues to abate (loss reduced more than 50% Q/Q), and non-accrual inflows decelerated for a third straight quarter; management emphasized robust PPNR (~$25.2M) and efficiency improvements (62.1%) as buffers against credit headwinds .

What Went Well and What Went Wrong

What Went Well

  • EPS beat internal guidance and PPNR grew 47% Y/Y to ~$25.2M; efficiency ratio improved to 62.1% (from 70.6% in 1Q24), underscoring operating leverage at both Holdco and Bank .
  • Deposit mix improved: commercial deposits +12% Q/Q, core consumer +2% Q/Q; management expects deposit costs to trend down to ~3.80–3.85% for 2025, supporting NIM .
  • NSBF wind-down better-than-feared: NSBF loss fell from $10.7M (4Q24) to $5.0M (1Q25); non-accrual inflows decelerated for a third quarter; portfolio is seasoned (100% >24 months) and now 21% of total loans (vs 41% a year ago) .

What Went Wrong

  • Provision for credit losses increased to $13.5M (vs $9.5M in 4Q24 and $4.0M in 1Q24) as the SBA 7(a) bank portfolio seasons along the default curve; ROAA of 1.81% reflected heavier provisioning in a seasonally slow quarter .
  • Net loss on loan servicing assets remained a headwind at $(3.7)M, though improved Q/Q; management explained the dynamic as the portfolio winds down at NSBF and the accounting impact of held assets .
  • Gain on sale mix shifted (more guaranteed portions temporarily retained), creating modeling complexity; management highlighted it won’t hold for an extended period (likely 1–3 months) .

Financial Results

Quarterly performance vs prior periods

MetricQ1 2024Q4 2024Q1 2025
Diluted EPS ($)$0.38 $0.69 $0.35
Basic EPS ($)$0.38 $0.70 $0.36
Total income (NII + Noninterest) ($M)$58.27 $75.37 $66.33
Net interest income ($M)$8.91 $11.29 $13.93
Noninterest income ($M)$49.37 $64.07 $52.40
Provision for credit losses ($M)$4.02 $9.47 $13.50
PPNR ($M)$17.11 $33.23 $25.15
Efficiency ratio (%)70.6% 55.9% 62.1%
Net interest margin (%)2.92% 2.80% 3.04%
ROAA (%)2.76%4.08%1.81%

Q1 2025 vs S&P Global consensus

MetricActualConsensusSurprise
Diluted EPS ($)$0.35$0.354*(0.004)
Revenue ($M)$90.29*$63.22*+$27.07

Values marked with * retrieved from S&P Global.

Lending and deposit KPIs

KPIQ1 2024Q1 2025
SBA 7(a) originations ($M)$211.5 $213.4
ALP originations ($M)—$68.5
SBA 504 originations ($M)—~$16.9
SBA 504 loan sales ($M)—$12.9
CRE loans originated at Bank ($M)—$41.2
C&I loans originated at Bank ($M)—$22.7
Commercial deposits (Q/Q change)—+$28M; +12% Q/Q
Core consumer deposits (Q/Q change)—+$17M; +2% Q/Q
Wholesale deposits (Q/Q change)—$(24)M; (33%) Q/Q

Additional balance sheet datapoints:

  • Book value per common share: $10.73; Tangible book value per common share: $10.17 .
  • Loans held for investment at amortized cost (net): $672.5M; Allowance for credit losses: $38.6M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
EPSFY 2025$2.10–$2.50 (raised on Feb 26) $2.10–$2.50 (reiterated May 6) Maintained
SBA 7(a) fundingsFY 2025$1.0B $1.0B Maintained
SBA 504 closingsFY 2025$250M $250M Maintained
ALP originationsFY 2025$500M $500M Maintained
CRE + C&I loan portfolio growthFY 2025$225M $225M Maintained
Bank deposit growthFY 2025$245M (Apr 8) $345M (May 6) Raised
Effective tax rateFY 2025~26% (Q4 call) ~26% reiterated context (no change mentioned in Q1) Maintained
Quarterly dividend2025 cadence$0.19 per share declared/paid Q1 (Apr 30) Ongoing Board discretion (no change) Maintained

Earnings Call Themes & Trends

TopicQ3 2024Q4 2024Q1 2025Trend
AI/technology enablementEmphasized digital bank, Newtek Advantage; tech hires Continued tech-first strategy; QuickBooks integration Using AI in underwriting/ops; digital-only model reiterated Building; expanding use cases
Deposit strategy/costEarly traction in business deposits; “zero-fee” pitch Expected attrition in higher-cost CDs; shift to business deposits Commercial/core growth Q/Q; cost of deposits to ~3.8–3.85% FY25 Mix improving; cost trending lower
ALP programScaling; on-balance sheet build; JV/securitize $90M Q/Q growth; FV gains driver $216M ALP securitization at 6.62% WAM yield; 570 bps spread Strong momentum; favorable execution
SBA 7(a) program & gain on saleCore model; recurring gains highlighted Gains and FV markups discussed Temporarily retaining guaranteed pieces; ~$8M SBA gain cited Tactics shifting; still core profit lever
Credit/NSBF wind-downElevated provisions; reserves ~5% guidance Charge-offs ramp with seasoning, modeled into 2025 NSBF loss fell to $5.0M; non-accrual inflows slowing Stabilizing at NSBF; bank portfolio seasoning
Regulatory/SBA rule changesn/aGuidance framework, credit curve disclosures SBA reintroduced 55 bps lender fee; full underwriting on small loans; modest margin impact expected in H2 Manageable headwind; potential share gain vs new entrants

Management Commentary

  • “We are extremely pleased to post solid quarterly results that include diluted EPS of $0.35, ahead of the guidance range… despite a heavier loan loss provision.”
  • “PPNR… produced profitability roughly two times the average profitability of banks with $1 to $10 billion of assets.”
  • “NSBF loss decreased more than 50% Q/Q… from a loss of $10.7 million for 4Q24 to a loss of $5.0 million for 1Q25… We continue to expect that the drag from NSBF should be materially lower in 2025 than the $28.7 million drag it was in 2024.”
  • “Our alternative loan program (ALP)… and our merchant services business (NMS) generate significant earnings… allowing us to sustain above-average EPS growth, tangible book value per share growth, and profitability.”
  • “Consensus was $0.31 [ex an outlier]; we previously forecasted $0.28 to $0.32. I consider that a beat.”
  • “We are holding more guaranteed SBA pieces briefly to capture spread income; not for an extended period.”

Q&A Highlights

  • Fair value and gain composition: About ~$8M tied to SBA guaranteed participations being held before sale; ALP fair value gains were the majority of the $18M FV line, aided by higher advance and good bond execution in the April securitization .
  • SBA program changes: 55 bps lender service fee could reduce gain-on-sale pricing by ~0.5–1.0 point; full underwriting for small loans should reduce weaker competition; NEWT had not loosened its underwriting and sees potential share gains .
  • Deposit costs and mix: Average cost ~4% at the Bank in Q1; expected to drift to ~3.8–3.85% for 2025 with ~$250M CDs maturing near 5% and lower reinvest rates; focus on business deposits and selective brokered .
  • Credit outlook: Bank portfolio is newer and seasoning; 2025 assumptions incorporate higher defaults/severities; NSBF drag should decline materially as securitizations are called and run-off continues .
  • Guidance cadence: Company maintained FY25 EPS range ($2.10–$2.50) and adjusted quarterly ranges intra-year (Q2 lower, Q3 higher) while reiterating midpoint of $2.30 in prepared materials .

Estimates Context

  • Q1 2025 vs S&P Global consensus: EPS $0.35 vs $0.354*; Revenue $90.29M* vs $63.22M*. Management beat internal EPS guidance and delivered a sizeable revenue beat vs S&P data, aided by noninterest income and FV effects. Values retrieved from S&P Global.
  • FY 2025: S&P EPS consensus $2.221* vs management guidance of $2.10–$2.50 (midpoint $2.30) . Values retrieved from S&P Global.

Key Takeaways for Investors

  • PPNR and efficiency remain the key buffers: $25.2M PPNR and a 62.1% efficiency ratio in a seasonally weak quarter position NEWT to absorb elevated provisions while maintaining profitability .
  • Deposit mix/cost trajectory is constructive: commercial and core deposits grew Q/Q, wholesale declined; management sees cost of deposits trending to ~3.8–3.85% in 2025, a tailwind for NIM .
  • ALP is an earnings growth engine: the April securitization executed at a 6.62% WAM note yield vs ~12.30% net loan coupon (≈570 bps spread), with capacity expanding via upsized warehouses—supporting recurring monetization and FV accretion .
  • NSBF headwind is fading: loss reduced >50% Q/Q to ~$5.0M; non-accrual inflows slowing; run-off and bond calls should continue to free capital and reduce drag through 2025 .
  • Modeling nuances (FV vs gain-on-sale) persist near term: temporary retention of SBA guaranteed pieces favors spread capture and can reclassify income between FV and gain-on-sale; management expects short holding periods .
  • Guidance intact with raised deposit growth: company reiterated FY25 EPS and loan production targets and increased 2025 deposit growth target to $345M, signaling confidence in funding/income trajectory .
  • Trading lens: Narrative likely improves as investors gain comfort with (a) deposit cost downtrend, (b) NSBF runoff de-risking, and (c) repeatable ALP execution—offsetting visibility challenges from FV accounting and SBA program tweaks .

Notes:

  • All company figures and quotes are from NEWT’s Q1 2025 8-K press release and attachments, Q1 2025 earnings call transcript, and relevant Q1 2025-period press releases – – – – –.
  • S&P Global consensus/actual revenue and EPS values marked with * are Values retrieved from S&P Global.