NewtekOne, Inc. (NEWT) - Q3 2025 10-Q Summary
Business Context and Reporting Period
NewtekOne, Inc. is a financial holding company providing business and financial solutions to small-and-medium-sized businesses (SMBs). The company operates through four primary segments: Banking, Alternative Lending, NSBF (legacy portfolio), and Payments. This report covers the quarterly period ended September 30, 2025.
Key operational developments in the period included the divestiture of its technology subsidiary (NTS) in January 2025, the acquisition of 100% ownership of the NCL Joint Venture in August 2025, and the execution of a new $90 million credit facility with Goldman Sachs in September 2025.
Key Financial Metrics
| Metric | Q3 2025 (Three Months) | Q3 2024 (Three Months) | YTD 2025 (Nine Months) | YTD 2024 (Nine Months) |
|---|---|---|---|---|
| Net Income | $17.9 million | $11.9 million | $41.0 million | $32.5 million |
| Diluted EPS | $0.67 | $0.45 | $1.54 | $1.26 |
| Total Assets | $2.40 billion | $2.06 billion (Dec 2024) | $2.40 billion | $2.06 billion (Dec 2024) |
| Net Interest Income | $14.5 million | $11.0 million | $42.4 million | $29.0 million |
| Noninterest Income | $60.4 million | $51.9 million | $169.1 million | $153.2 million |
| Provision for Credit Losses | $7.7 million | $6.9 million | $30.3 million | $16.7 million |
| Cash & Equivalents | $216.9 million | $190.4 million (Sep 2024) | $216.9 million | $190.4 million (Sep 2024) |
| Total Deposits | $1.18 billion | $973.1 million (Dec 2024) | $1.18 billion | $973.1 million (Dec 2024) |
| Total Borrowings | $748.5 million | $708.0 million (Dec 2024) | $748.5 million | $708.0 million (Dec 2024) |
Material Changes vs. Prior Period
- Profitability Growth: Net income increased 50% year-over-year for Q3 2025 ($17.9M vs $11.9M) and 26% year-over-year for the nine-month period ($41.0M vs $32.5M). This was driven by higher interest income and significant noninterest income gains.
- Noninterest Income Drivers: A $30.0 million net gain on residuals in securitizations (from the 2025-1 Trust) and a $35.6 million net gain on loans under the fair value option significantly boosted YTD income. Conversely, net gains on sales of loans decreased 44.5% YTD due to lower sales volumes and premiums.
- Expense Management: Technology services expense dropped to zero YTD 2025 following the sale of the NTS subsidiary. However, other general and administrative costs increased 47.9% YTD due to standalone technology costs post-divestiture.
- Balance Sheet Expansion: Total assets grew 16.5% from December 2024, driven by a $384.7 million increase in loans held for sale (at fair value) and a $212.4 million increase in loans held for investment (at amortized cost).
- Debt Restructuring: The company repaid the NMS Webster Note in full and entered a new $90 million Goldman Facility. It also issued $30 million in 2030 Notes and exchanged 2025 8.125% Notes for 2027 Notes.
Guidance, Outlook, and Risks
Management Commentary: Management highlighted a focus on increasing liquidity, maintaining a significant portion of cash at the Federal Reserve ($187.7 million), and growing deposits. The Alternative Lending segment shifted strategy to originate loans with the intent to securitize rather than sell to joint ventures, evidenced by the successful 2025-1 Trust securitization.
Risks and Contingencies:
- SBA Program Dependency: The company notes that the SBA 7(a) and 504 programs are currently frozen due to the federal government shutdown, which could materially and adversely affect lending business.
- Interest Rate Risk: The company is asset-sensitive; rising rates are expected to increase net interest income, while falling rates could compress margins.
- Credit Quality: Nonperforming assets increased to 6.0% of total assets ($146.7 million) from 4.6% at year-end 2024. The provision for credit losses increased significantly ($30.3M YTD) due to higher net charge-offs and specific reserves on SBA 7(a) loans.
- Legal Proceedings: The company is subject to routine litigation and a permanent injunction from the FTC regarding certain business practices of its NMS subsidiary.
Investor Verification Checklist
- SBA Program Status: Verify the impact of the federal government shutdown on SBA 7(a) and 504 loan originations and the timeline for program resumption.
- Credit Quality Trends: Monitor the trajectory of nonperforming assets (currently 6.0%) and the adequacy of the Allowance for Credit Losses ($45.2 million) given the increase in provision expense.
- Securitization Performance: Assess the performance of the 2025-1 Trust and the sustainability of the $30 million gain on residuals, which was a major YTD income driver.
- Debt Maturities: Review the upcoming maturity of the $115 million 2026 Notes (due Feb 2026) and the company's refinancing strategy.
- Dividend Sustainability: Confirm the ability to maintain the quarterly common dividend ($0.19/share) and preferred dividends given the increased interest expense and credit provisions.