NewtekOne, Inc. (NASDAQ:NEWT): A Disruptive Technology-Enabled Financial Holding Company Delivering Robust Growth and Profitability

Published on March 15, 2025 | Ticker: NEWT

NewtekOne, Inc. (NASDAQ:NEWT) is a remarkable financial holding company that has successfully navigated its transition from a Business Development Company (BDC) to a technology-enabled disruptive force in the banking and financial services industry. With a relentless focus on serving the needs of over 30 million independent business owners across the United States, NewtekOne has established itself as a premier provider of innovative business and financial solutions.

Company Background and Evolution

Founded in 1999, NewtekOne's journey has been marked by a steadfast commitment to innovation and a deep understanding of the unique challenges faced by small and medium-sized businesses (SMBs). The company's origins can be traced back to its inception as a provider of business and financial solutions to independent business owners and SMBs across the United States. Initially, NewtekOne focused on providing SBA 7(a) loans, electronic payment processing, managed technology solutions, insurance services, and payroll and benefits solutions to its target market.

From 2012 to 2022, NewtekOne's subsidiary Newtek Small Business Finance, LLC (NSBF) consistently held the position of the largest non-bank SBA 7(a) lender in the U.S. based on dollar volume of loan approvals. During this period, NSBF employed a strategic approach to loan structuring, allowing it to sell the government-guaranteed portions of SBA 7(a) loans and securitize the unguaranteed portions. This innovative model enabled the company to recover its capital and earn excess capital on each loan, typically within a year, demonstrating NewtekOne's financial acumen and ability to maximize returns.

Strategic Acquisition and Transition

In January 2023, NewtekOne made a pivotal move by acquiring National Bank of New York City (NBNYC), a national bank regulated and supervised by the OCC. NBNYC was subsequently renamed Newtek Bank, N.A. and became NewtekOne's wholly-owned bank subsidiary. This acquisition marked a significant milestone in the company's evolution, facilitating its transition from a Business Development Company (BDC) to a financial holding company subject to regulation and supervision by the Federal Reserve.

As a result of this strategic acquisition and transition, NewtekOne now consolidates the financial results of its various banking, lending, payments, technology, and other business service subsidiaries. This integration has allowed the company to offer a more comprehensive suite of services, including depository products, while leveraging its technology infrastructure to enhance the overall customer experience.

Financial Performance

NewtekOne's financial performance has been nothing short of impressive. For the full year 2024, the company reported net income of $32.5 million, or $1.97 per basic and $1.96 per diluted common share. This strong performance was driven by a combination of robust loan origination, growth in its alternative lending program (ALP), and the expansion of its non-interest income streams, including servicing income, electronic payment processing, and technology-related services.

The company's commitment to technology-enabled solutions has been a key differentiator, allowing it to acquire customers cost-effectively and deliver a superior customer experience. NewtekOne's proprietary and patented technology platforms, such as NewTracker, have enabled the company to streamline its loan origination processes, enhance risk management, and provide its clients with a highly personalized and efficient suite of business and financial services.

For the third quarter of 2024, NewtekOne reported revenue of $31.27 million and net income of $11.93 million. The company's cash position stood at $190.42 million as of the most recent reporting period.

NewtekOne operates through four main business segments: Banking, Technology, NSBF, and Payments. The Banking segment, which includes Newtek Bank and its consolidated subsidiary Small Business Lending (SBL), reported net interest income of $28.25 million and net income of $35.34 million for the nine months ended September 30, 2024. The Payments segment generated $39.09 million in noninterest income and $14.17 million in net income during the same period. The NSBF segment recorded $12.16 million in net interest income and $17.96 million in net income. The Technology segment, which is classified as held for sale, reported $51,000 in net income.

Revenue Diversification and Profitability

One of the standout features of NewtekOne's business model is its ability to generate consistent and diverse revenue streams. In 2024, the company reported that non-interest income accounted for a dominant 68% of its total revenue, underscoring the strength and resilience of its diversified business model. This revenue mix, combined with the company's strong credit underwriting practices and disciplined risk management, has allowed NewtekOne to weather economic cycles and maintain profitability even in challenging environments.

Looking ahead, NewtekOne has provided a robust outlook for 2025, forecasting earnings per share in the range of $2.10 to $2.50 per basic and diluted common share, with a midpoint of $2.30. This guidance reflects the company's confidence in its ability to continue expanding its loan portfolio, grow its deposit base, and further leverage its technology-enabled platform to drive operational efficiencies and enhance profitability. The company has broken down its 2025 guidance by quarter, projecting $0.28 - $0.32 for Q1, $0.55 - $0.65 for Q2, $0.52 - $0.64 for Q3, and $0.75 - $0.89 for Q4.

NewtekOne's bank subsidiary, Newtek Bank, reported impressive profitability metrics in 2024, including a Return on Average Assets (ROAA) of 6.3% and a Return on Tangible Common Equity (ROTCE) of 48%. The bank's efficiency ratio was 42% in 2024, demonstrating strong operational performance. Furthermore, the company expects charge-offs for the bank loan portfolio to be less than 2% in 2025, reflecting its prudent risk management practices.

The company's Alternative Loan Program (ALP) is expected to grow significantly, with projected originations of $500 million in 2025, up from $269 million in 2024. This growth in the ALP underscores NewtekOne's ability to diversify its lending portfolio and capitalize on new market opportunities.

Challenges and Risk Management

However, it is important to note that NewtekOne's journey has not been without its challenges. The company's transition from a BDC to a financial holding company has required navigating a complex regulatory landscape, which has necessitated significant investments in compliance, risk management, and technological infrastructure. Additionally, the company's legacy portfolio of Small Business Administration (SBA) 7(a) loans held through its non-bank subsidiary, Newtek Small Business Finance (NSBF), has experienced higher levels of credit deterioration in the current economic environment.

Despite these headwinds, NewtekOne has demonstrated its resilience and agility. The company has proactively addressed the credit quality issues within the NSBF portfolio, while simultaneously focusing on the growth and diversification of its loan portfolio at Newtek Bank. Moreover, NewtekOne has leveraged its technological capabilities to enhance its risk management practices, enabling it to effectively navigate the evolving credit landscape.

Liquidity

NewtekOne's liquidity position remains strong, supported by its diversified funding sources and robust cash flow generation. The company's transition to a bank holding company has further enhanced its access to stable funding through customer deposits, reducing its reliance on more volatile wholesale funding sources. This improved liquidity profile provides NewtekOne with greater flexibility to pursue growth opportunities and navigate potential market disruptions.

The company's available credit lines include a Webster NMS Note with a $54.87 million commitment and $33.67 million outstanding, an SPV I Capital One Facility with a $60 million commitment and $7.56 million outstanding, an SPV II Deutsche Bank Facility with a $50 million commitment and $328,000 outstanding, an SPV III One Florida Bank Facility with a $30 million commitment and $104,000 outstanding, and FHLB Advances with a $106.51 million commitment and $15.80 million outstanding. These credit facilities provide NewtekOne with additional financial flexibility to support its growth initiatives and manage liquidity needs.

Conclusion

In conclusion, NewtekOne, Inc. (NASDAQ:NEWT) is a remarkable financial holding company that has seamlessly transitioned from a BDC to a technology-enabled disruptor in the banking and financial services industry. With its robust financial performance, diversified revenue streams, and innovative technology-driven solutions, NewtekOne is well-positioned to continue delivering value to its shareholders and empowering independent business owners across the United States. As the company navigates the next phase of its growth, investors would be wise to closely monitor NewtekOne's strategic initiatives and its ability to execute on its ambitious plans for the future.

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