NewtekOne Q2 2025 Earnings Call Transcript

Key Takeaways

  • Positive Sentiment: EPS & Guidance: Q2 EPS of $0.53 (basic) beat the midpoint of guidance and full‐year EPS outlook remains unchanged at $2.10–$2.50.
  • Positive Sentiment: Revenue & Margin Growth: Q2 revenue rose 15% YoY to $78.2 M, net interest margin widened 56 bps to 5.46% and cost of funds fell 28 bps to 3.71%.
  • Positive Sentiment: ALP Securitization: Completed third Alternative Loan Program deal securitizing $216 M in loans and recognized a $32.4 M gain on residuals marked at a 14% yield, accretive to EPS.
  • Positive Sentiment: Deposit Expansion: Grew business deposits by $50 M sequentially, lifting core deposits to 30% of total and lowering overall funding costs.
  • Negative Sentiment: Higher Credit Costs Ahead: Management expects the provision‐to‐loan ratio to rise to 4.5%–5.5% in H2 as the loan portfolio seasons and CRE lending expands.
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Earnings Conference Call
NewtekOne Q2 2025
00:00 / 00:00

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Operator

Good day, and thank you for standing by. Welcome to the Newtek One Inc. Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session.

Operator

To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, President and Chief Executive Officer, Barry Sloane. Please go ahead.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Thank you, operator, and welcome everyone to the Newtek One NASDAQ Newt Second Quarter twenty twenty five Financial Results Conference Call. My name is Barry Sloane, CEO and President of Newtek One. Joining me here today on the call will be Frank De Maria, chief financial officer of NewtekOne, and Scott Price, the CFO of NewtekBank National Association. I also want to introduce Bryce Rowe, is not on the call in charge of Investor Relations. Bryce joined the organization recently from the firm of B.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Riley, where he represented us. Bryce, well, he was there was the equity analyst for BDCs and banks, and very helpful and instrumental in shaping our presentation and deck to make it a little bit more digestible and understandable. I also wanna give a couple of shout outs to some additional new hires. Kaplan, our chief strategy officer, joined us from Flagstar Bank. He's been incredibly instrumental in helping us with various near future of our digital account opening and merchant instant merchant account opening simultaneous as well as the reverse, opening up a mid instant merchant account and getting a I also want to announce, Vik Mahajanan has joined us recently.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Vik has had a long term career as an M and A banker at, and was our banker at Credit Suisse and Deutsche Bank. Vik is chief investment officer of the bank and has been working, very closely with the bank president, Peter Downs, in buying and selling loans and particularly developing a process for moving, nonperforming loans off the books and the balance sheet. With that, I'd like to, mention everybody to follow along on today's presentation. Please go to newtekone.com, go to the Investor Relations section, and the PowerPoint is hung there. On slide number two of the PowerPoint is our note regarding forward looking statements.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Please ask everybody to familiarize yourself with that note. On slide number three, important part of our discussion today is really looking and focusing on what is Newtek and what does it do, what's our mission statement, and what's our purpose. Well, it all starts off with the customer. We provide business and financial solutions to a target market over 33,000,000 independent business owners in The US. Some participants heard of them as SMEs, SMB subject, small, medium sized enterprises, small and medium sized businesses.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

And recently, we acquired a federally insured depository. It's important we choose and prefer not to be looked at just like a bank holding company or bank because as you go through this presentation, we really don't look like most of the bank holding companies and banks. We're different in a variety of different ways in terms of how we approach the customer, how do we provide a frictionless opportunity for the client, the type of revenues, earnings, that come through our system. So we look forward to discussing that presentation with you here today. Relative to the importance of the SMB, SME, or independent business owner class in The United States, according to the US Chamber of Commerce, small businesses employ almost half of the American workforce, and we do think as things go forward, particularly with artificial intelligence, they'll continue to be a very prominent, part of the employee employment opportunity in The US.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

SMBs represent 43 of US GDP, and 99% of the business in The United States identify themselves as small. Also important to note, according to the SBA's data, over the last five and a half years, NewtekOne as one of the more active seven a lenders through its nonbank and bank subsidiary has supported and stabilized over a 110,000 jobs. I think it's important to note that we do serve a public purpose and a public good. We're not just an SBA lender as you'll see throughout this presentation. We do all types of loans to this particular demographic.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

But in being an SBA lender and the definition of an SBA seven a loan is a loan that is not available, under normal bank circumstances. As a matter of fact, there's an test called the credit elsewhere test that says these types of loans do not qualify for a normal bank loan. It's important to note that we therefore have greater losses and greater provisions, but net of those losses and provisions and expense, we provide greater returns. So when we're comparing us to the rest of the banking industry, there's certain metrics that compare us in an unfavorable light. NewtekOne is a financial holding company regulated by the Fed.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We focus on using proprietary and patented advanced technological solutions to acquire customers and to solution them cost effectively. Also important to note, most bank holding companies don't have a lot of assets in them. We're extremely active as a bank holding company. Evidence Newtek Merchant Solutions that does about $17,000,000 of pretax income and EBITDA, and our alternative loan program business, which has balance sheet, or I should say loans that are made in joint ventures and in various structures that are about 450 to $500,000,000. We do provide a full menu of best in class on demand solutions to its independent business owner clientele without using traditional bankers, branches, brokers, or BDOs.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Through this methodology, we picked up 19,000 depository accounts since its inception. We do loans digitally and remotely, and we also handle our clients' ability to send money, receive money, payment payment processing solutions, payroll solutions, and insurance. In a nutshell, we are a technology oriented financial holding company operating and owning a digital bank that operates exclusively using online banking platform without which you traditionally see in a bank holding company and a bank. We believe that going forward, the banking industry will tremendously benefit from technology and artificial intelligence, which we are currently embracing and utilizing. It's important to note, we think that many of the institutions that you're familiar with will not look like the current bank of today.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Frankly, from our perspective, we have a belief that we are already doing, which is what they want to do. They wanna acquire customers remotely. They wanna, really automate their business. They wanna use AI. These are things as you go through the presentation, they're already in the process of doing.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Slide number four, q two financial and operational successes. First off, we're maintaining our earnings per share guidance of $2.1 on the low to 2.5 at the high. That's for calendar year 2024. Also important to note, one of the things we really don't talk enough about is revenue growth. We have 15% revenue growth in q two twenty twenty five, 78,200,000.0 versus 61,000,000 in q two twenty twenty four.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Some of the other operational and financial highlights and an important part is growth in business deposits. Business deposits come in on a less expensive basis. They're more transactional. But in order to get business deposits and we believe the noninterest bearing depository account will begin to go away over time. As a matter of fact, if you go to Coinbase and you own stablecoin, you probably get two to 3% on your money.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

So we were very pleased that we were able to grow business deposits at the bank by $50,000,000 sequentially with most of the money coming in in the DDA account. The reason why we're able to do that is we're getting opportunities from lending, merchant services and payroll, all an integrated solution. With that, our cost of funds at the bank declined dramatically and is forecast to continue to come down. The best is yet to come. We had a 28 basis point decline in our cost of funds.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

I think it came in about 3.71. The net interest margin at the bank increased by 56 basis points. So once again, we're very pleased with what we've had at the bank with respect to a cost of funds. That's extremely important going forward. They were just beginning to get deposits below that risk free rate, which I talked about, which is the bill rate or NAV of a government guaranteed money market fund.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Importantly, we'll discuss this on one of the slides going forward. Losses continue to shrink in Newtek Small Business Finance. In the recent quarters, have from a $10,700,000 loss to a $4,900,000 loss to a $3,700,000 loss. And Newtek Small Business Finance was the prior non bank SBA lender that is in a rundown mode, and it's held up at the holding company no longer lending. The alternative loan program will spend a lot of time up on this today, and hopefully, we'll be able to position this in a better way so people can understand the value of ALP, not just to our business customers, but to all our stakeholders, including shareholders.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

It's extremely important to note that our alternative loan program, which has now completed three securitizations successfully, is growing, has high quality loans, and is very accretive to earnings per share. We're gonna talk about our operating leverage being captured and really supporting above average profitability. When you take a look at our ROAAs, ROTCEs, the expense ratios really extremely favorable on a comparative basis. Last bullet, a portion of the $18,000,000 of the unrealized gain in Q1 did cause some of our investors some level of confusion. Think I it's important to note that from q one twenty twenty five to q two, when we sold the government guaranteed loans and moved the ALP loans, off the balance sheet into the securitization, that actually got eliminated.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

The government guaranteed seven a loans were sold for cash, and the ALP loans were written down at full value to par to go into the equity stake in the securitization. I think it's important to note, we make loans and sell them. Most banks make loans, not at the growth rates that we do, and they hold them. We believe we're different than 95% of the other banks out there, and we're very, very excited about our business model now operating through 10 quarters of success. We're gonna talk a lot on this particular presentation about what we're doing in the ALP business in future slides, which I think should develop a better understanding of what we're doing.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

I think important to note, we'll come back to this, the residual interest in the ALP recent securitization in 2025 deal is marked at a 14 yield, including a loss severity and frequency or charge off rate historically over the life of the loans at 3%. This is something that we've consistently done as we've done three securitizations. One in 2022, one in 2024, and the more recent one, 2025 dash one. Moving to slide number five, second quarter CEO highlights. For the earnings picture, basic and diluted EPS of $0.53 and $0.52 respectively.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

The first half basic and diluted EPS of 89.87 are above the midpoint of our guidance, which is $0.78 to $0.92

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We're leaving that annual $2.1 to $2.5 share EPS unchanged, and the midpoint implies an EPS growth rate of 17%, typically something you don't see in most bank or bank holding companies. We talked about success in growing core deposits. We talked about the reduced headwinds from our SBA non bank lender, Newtek Small Business Finance, with a first half twenty five loss of 8.7 of the 2024 loss for the full calendar year was 28.7. So clearly, you could see that we're trending in the right direction. We have a slide to cover this.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

And important to note, non accruals within SPF actually declined quarter over quarter. Price of SB and that's 2024 versus 2025. Price of SBA seven loans were consistent with our fair value marks. So the seven loans that we held on an unrealized basis for q one sold into the second quarter. There was actually, a nonexistent, gain transfer.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We had to recognize an unrealized loss to wipe out the unrealized gain, and then we had a realized gain for cash. So this offsets one another. We actually sold approximately 22 to 23,000,000 of five zero four loans at a price of $1.00 4 and 3 quarters with 40 basis points of servicing, also extremely profitable. Important to note, and we talked about why we're keeping some of the government's guaranteed seven a loans on our books. We're actually able to pick up a prime plus three or a 10 and a half percent coupon.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

That was one of the factors that helped the NIM at the bank. The alternative loan program performed exceptionally well. In June and July, both Deutsche Bank and Capital One, we closed the Capital One deal today, we're pleased to say, upsides our credit facilities, which we use to fund and warehouse ALP loans before securitizations. Deutsche Bank went for $120,000,000 to $170,000,000 Capital One Bank went from $60,000,000 to $100,000,000 So we're excited about the ability to continue to grow this business. Profitability and operating leverage still look great.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Our efficiency ratio year over year at the HoldCo, 66.3% to 60.3%. And we look at our ROAAs and our TCEs, exceptionally strong. Slide number six, our annual forecasts are readily available on this particular slide. As we look at our business model, and you've heard me talk about this in previous presentations, we solve three primary problems in the banking industry. One, we're able to acquire deposits below the risk free rate because of the Newtek advantage.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We give the customer analytics, transactional capability, and data. We enable them to send money and receive money. We have integrated solutions between the bank deposit account and a merchant account with chargebacks, refunds, batches, all in the Newtek Advantage. In addition to that, you can make payroll from the Newtek Advantage. The ability to move money with us owning the payroll business, owning the merchant business, being able to do ACH, being able to do wire, and we will position this organization for stablecoin in the future.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We're very excited about that opportunity. We think a lot of money is gonna be moved over time, particularly, when you're dealing with, out of country transactions, and we will be able to position ourselves for that. Banking institutions that do not give a real frictionless seamless opportunity for customers to send money and receive money will be in a tough spot. Once again, you've gotta provide value for the customer. I think it's also important to note what other institutions are talking about, we are doing.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We're completely digital. There's no branches. There's no traditional bankers. We're really doing a great job in acquiring clients. Our loan book, we estimate by the end of the year to be approximately 10,000 borrowers and 4,400,000,000.0 in servicing.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

At the bottom of slide number six, you could see our forecast from here to the rest of the year. Our ROAA for the second quarter 2.5%, ROTCE 19.4%. Look, these are outstretched numbers and it's based upon our model. I think it's important to note, making loans and selling them is what we do. We've been doing it for twenty years.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We'll probably do it for another twenty years. It provides great returns. It provides great risk adjusted returns. I suggest everyone go to slide number seven in the deck, and you could see once again a lot of our performance metrics, net income, diluted EPS, pre provision net revenue, all the numbers that we talked about, a very, very strong q two financial highlights on slide number seven. Also important to note when you look at our capital position, we have more than adequate capital across the holdco.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

But, also importantly, you could see our growth. We have the ability to utilize that capital. A lot of people or banking institutions or financial holding companies, they have the capital, but they can't utilize it. We have the ability to do both and to generate those types of returns. On slide number eight, you could look at our financial highlights from the bank.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

I'd surely like to point out the cost of deposits declining from 3.99 to 3.71. A lot of that's benefited by being able to pick up the bank deposits. Net interest margin grew from 4.9 to 5.46. I think a lot of our competitors are dreaming of net interest margins on that type of a basis. And obviously, once again, when you look at our ROAAs, our ROTCEs, this is at the bank, 3.94% ROAA, return on tangible common equity, 35% with more than adequate capital at the bottom of the page on Slide number eight.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

On Slide number nine, another one of our success stories is growing tangible book value per share, increased 3.7% sequentially quarter over quarter and 21% year over year. Extremely important, we were able to increase our tangible book value while paying a very healthy dividend. So we're excited about that. It's a great opportunity for shareholders to get that dividend and watch tangible book grow. Slide number 10, I think was an important slide.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We appreciate Bryce's contribution here. A lot of the investors that we met up with, they want to see where all the assets are in a breakout, looking at the different buckets. This is extremely important from an evaluation standpoint to see what's on balance sheet, what is technically off balance sheet on a non GAAP basis. But a lot of the ALP loans that are in joint ventures or in securitizations or balance sheet may matter. We've had historically 1% charge offs in our ALP portfolio.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

And I think it's important to note that for a good lender on a risk reward basis, we've been doing this for twenty years. We've historically come out on top. Also important to note, for approximately a little over a billion dollar bank and a little over $2,000,000,000 holding company, we have a big operation. We believe, first of all, we do between a billion and a half and $2,000,000,000 worth of loans a year. So I think it's because we sell off the government guaranteed piece, we don't get full credit for that, quote, unquote, amount of activity.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Once again, we make loans, and we sell them. We sell the government guaranteed pieces. And on the ALP loans, we create them. We warehouse them, and then they get sold into a special purpose vehicle and create a securitization that is match funded. Slide number 11 may be one of the most important slides in the deck and maybe one of the most most least understood aspects of our business.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Number one, when we do AOP securitizations, the residual interests are valued at a 14% yield with a 15% frequency of default and a 20% severity with a 3% charge off. We mark these to market as we've done regularly since 2022 every quarter. And basically, whatever premium is associated with it gets amortized. I think it's important to note when you look at the spread income, the securitized LP loans carry weighted average coupon in the 2025 deal of 13.3. The notes have a weighted average yield of 6.6.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Now when you take the 100 basis points out for servicing, it's a 570 basis point spread. So I would ask everybody on this call, if I was to go to a bank of our size and our stature and say you can get 570 basis points match funded and you need no employees because all the loans go into a special purpose vehicle, so there's no expense underneath that. Isn't that attractive? Well, we just did this, and we put, I think, 218,000,000 of loans, 109 $180,185,000,000 of bonds, and we created this securitization known as NALP twenty twenty five dash one. Also, we intend to regularly execute ALP securitizations with the loans on the balance sheet.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

As a matter of fact, if you like what we did recently, we're about to do it again. We've got a 138,000,000 of ALP loans currently sitting on the balance sheet. I think you'll see another securitization again in the fourth quarter. Once the loans go into that special purpose vehicle, they get written down, then the, residual piece gets valued at the yields that we talked about, which are market clearing yields. Once again, important to note, this is extremely accretive, very valuable, and this activity is used from the entire overhead of the bank and of the holding company.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

So we're getting tremendous operating leverage. Also, the AOP business has an average loan size of about 5,000,000. In the in the seven a business, the average loan size is 400 to 450,000. So the ability to get to I'll make up the number. A billion dollars of loans, it's 200 units.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We'll do probably 2,500 to 2,700 loan units this year, totally within our capability. And we take the same pipeline that we use for all of our lending programs, Five zero four seven a line of credit, which would be c and I loans, both term and revolvers and CRE. It's that pipeline of six to 900 business referrals a day, two and a half billion in the database that we're able to reach customers and let them know that we will do these types of loans. On slide number 11, we have detailed the mechanics to make sure that the market understands how these assets are flowing through the income statement and the balance sheet. The unrealized gains on securitized loans that appeared in q one reversed when those loans went into the securitization.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

So the unrealized gain on the retained residual book of which about 87% of the principal value went into rated debt instruments. The 13% is the equity piece. Servicing asset that was created also shows up. That's the 100 basis points I talked about. Also important to note, these loans have prepayment penalties, which keeps the loan on the books.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

It keeps the high coupon, and it keeps the borrower from prepaying. It's a 5% penalty in year 5% in year 5% in year 3% in year four. The duration of these particular loans in the portfolio is between four to five years. All important data to think about when you're looking at, our ALP business, particularly with this information on slide number 11. If you look at the net income in the securitization, it's probably priced at about five and a half times cash flow.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

So I ask everybody on this call, would you like creating assets and valuing them at five and a half times cash flow in a business that's growing without expense associated with it once it's put into the securitization. We like the business a lot. Let's go to slide number 12, credit quality. We've talked about this at the slide that you've seen in the past. The non accrual increase in NHBF is slowing.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We put some numbers around that. I think this is an important bullet number three. As a nonbank lender, we generally retain the loans that are in default and liquidated them. We didn't sell them. Well, now that we're in this business and people are very hypersensitive to nonaccruals, even though they get marked to the market, the hits been taken, and they ultimately get turned into cash.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We are in the process of selling nonperforming loans both at NSPF and in the bank. I think you'll start to see some activity on this in the near future, which will validate our valuations, but most importantly, return capital to us and maybe put us in more normal types of ratios and metrics that we all hold on to in our hands. Once again, to note the LP loans performing well using the on and off balance sheet LP balances. We have a 1% historic charge off rate as of 06/30/2025. And some of the data that you see on the chart here is important, not to exaggerate the NSBF portfolio, which frankly, when I get asked questions about the great financial crisis.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

The great financial crisis in my opinion was 2122, and '23 for SBA lending, where rates basically rose between three to 5% on loans that originated in that vintage year. So we took quite a bit of losses on those on that particular portfolio. And I think as you go to the next slide on 13, important to note, the percentage of portfolio age loans less than twenty four months, zero. So we have a seasoned portfolio in there. We think the real pain of the n s NSBF portfolio is behind us.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

The portfolio is paying down quickly. We have approximately $200,000,000 of capital in NSBF that we believe will be freeing up as these securities pay down, and we had cleanup calls, which would be very useful to doing things like, paying off debt, buying back stock, paying dividends, all the things that shareholders really like and enjoy. So the NSPF portfolio continues to pay down. It paid off, during the last calendar year about 1 and 2,000,000 or roughly 30%. We do believe that non accrual inflows in the NSPF hit their peak in q two twenty twenty four, continue to accelerate, and we think that, NSPF is gonna wind up being an important, opportunity for us.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Once again, the remaining a lot of the remaining loans in NSPF are I'll use the word trapped in free securitizations. The 2021 deal, 2022 deal, 2023 deal. So prepayments, loan liquidations are all held for the bondholders. So once those bonds get their cleanup quote or paid off and get released, all this cash flow and the equity will be freed up for a variety of different uses. I'd now like to, have Frank De Maria present slide number 14 and on.

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

Thanks, Barry. Turning to slide 15, we provide some context around the held for investment loan portfolio at the bank. We account for the bank's held for investment portfolio on a cost basis compared to the fair value accounting that's applied to our other loan portfolios. 61% of the bank's held for investment portfolio consists of unguaranteed SBA seven loans, which is built from the '3 when the bank began originating seven loans. Prior to that, the seven loans were originated by our non bank lender.

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

The bank's been building allowance for credit losses against that portfolio, more than 90% of which is related to the unguaranteed seven book, which currently carries an allowance equal to 8.3% of unguaranteed seven balances. 70 of the seven allowance is characterized as collectively assessed of which less than 5% of the total ACL is related to qualitative adjustments and 30% of the ACL is held against individually assessed loans. While our ACL continues to build, it's building at a lower rate than in previous quarters resulting in a sequential decrease in the provision, which continues to more than cover net charge offs. Moving to deposits on slide 16, Barry talked about the success we're having on the business deposit front, which were up $50,000,000 sequentially and now represent almost 30 percent of deposits. We saw another meaningful move lower in our cost of deposits and believe the cost could continue to decline if we continue to execute on business deposit growth.

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

Our loan to deposit ratio is north of 90% and nearly 80% of our deposits are insured. We're using deposits to fund loan growth as the bank's bond portfolio is only $14,000,000 on a $1,300,000,000 bank balance sheet. On slide 17, we highlight NewtekOne's strong pre provision earnings profile, which is a function of the wider lending spreads we capture, our healthy levels of fee income fueled by selling, securitizing and servicing loans, and the broker list branch with operating infrastructure that's scalable by design. As we layer on more securitizations and build the ALP business, the already impressive level of pre provision earnings could improve. Last thing to reiterate on slide, as Barry mentioned, the year over year revenue growth is 15%.

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

Slide 18 supports the scalable operating infrastructure comments I just made. The balance sheet climbed 37% over the last year while operating expenses were up just 4% and the efficiency ratio once again improved on a year over year basis. We believe we have the infrastructure to manage a much larger balance sheet. And with that, I'll turn it back to Barry for slide 19.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Thank you. Slide 18, the average net premium from SBA seven loans. For second quarter twenty twenty five, we averaged 110.91. I think it's I think it's important to note that the SBA changed some of its rules and regulations, and we believe that the market clean premium government guaranteed seven a's for the rest of the year in the second half will be about a 110. I think it's important to note we have this in our earnings guidance.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

That's extremely important. The big differential in price is based upon there's a fifty fifty five basis points fee that there's some loans that we have in the pipe that will be available without the 55 basis point fee. The SBA put it back in to basically better balance its loss reserves, which frankly makes a lot of sense. So I just wanna point out, we are guiding to a lower gain on sale from approximately a 111 to a 110, but it's in our numbers and it's in our guidance. I also want to point out that ALP loan originations for the 2025 are expected to approximate $250,000,000.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

That is also in our midpoint of $2.10 to $2.50. On slide number 19, another, Bryce Rowe original, adjusted net margin. This is basically a good analysis of really taking a look at and obviously, it's non GAAP, but all the loans that we have both on the balance sheet and off the balance sheet to basically give us, you know, I guess, what I would refer to as an adjusted NIM. So the adjusted NIM, when you start to add on the loan the ALP loans that are in joint ventures and then the 2025 deal gets you about 3.51. We do believe that's gonna continue to grow, particularly as we grow, the ALP business, which is on a pretty good growth track right now and does extremely well for the organization.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

With that, operator, we're now open to Q and A.

Operator

Thank you. And our first question will come from Tim Switzer from KBW. Your line is now open.

Tim Switzer
Vice President at Keefe, Bruyette & Woods (KBW)

Hey, good afternoon guys. How are you doing?

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Good, Tim. How are you?

Tim Switzer
Vice President at Keefe, Bruyette & Woods (KBW)

Doing all right. Thank you for taking my questions. The first question I have is on the deposit trends with the growth in the commercial deposits and, lower deposit costs overall. Can you talk about some of the drivers there? What helped bring in, I think it was about $50,000,000 of growth, on the commercial deposit side?

Tim Switzer
Vice President at Keefe, Bruyette & Woods (KBW)

And then, you know, what are your expectations going forward for that, initiative and then bringing down deposit costs going forward?

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Thank you, Tim. Look. I think that what's important for our organization is to be able to bring business Our banking account is 1%. Our business savings is three and a half, and it's truly a zero fee opportunity. And for the new advantage, we give our clients a tremendous benefit both in merchant services and in payroll, moving back and forth with the solution. So, you know, I think the days of getting a depository account where it isn't linked to a solution for a business to send and receive money is a problem. We had a lot of success, particularly in the lending arena where our borrowers are making payments out of a Newtek bank account. To be frank with you, we need to improve the utilization. We've opened up I think the the total business account portfolio is about 4,000.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

And to be perfectly honest and frank, there there's a lower level of utilization on those accounts that we like, but we're gonna get there. Also, on the payment side, you know, you're doing payment processing. Well, it comes with a bank account. You're doing payroll. Well, it comes with a bank account.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Now in addition to offering the bank account, it's a zero fee account. It's a higher rate account. We are able to take the customer's banking depository information, run it through our software, and do an analysis as to where they will save money. Now from a technological standpoint, when they go to the Newtek advantage, they could look at the bank information, ACHs, Fedwires, maybe soon to be sample. They can also see their refund card, their refunds, their chargebacks, their batches from that day.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

They can make payroll from the advantage, and all of this ties in. I also think on a selective basis, we're gonna be offering a line of credit and a bank account that is gonna be part of our full arsenal to provide the SMB, SME, and independent business owner client base the best of all solutions, and that's our that's our focus.

Tim Switzer
Vice President at Keefe, Bruyette & Woods (KBW)

Okay. Great. That was really helpful. And then I apologize if I'm missing this somewhere, but what were your total charge offs this quarter for your held for investment portfolio?

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Frank, could you talk about one?

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

Yeah. It was 5,000,000, Tim.

Tim Switzer
Vice President at Keefe, Bruyette & Woods (KBW)

Okay. So pretty flat with last quarter?

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

Yeah. $5.5.1 to be exact exactly.

Tim Switzer
Vice President at Keefe, Bruyette & Woods (KBW)

Okay. So exactly the same as last quarter.

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

That's right.

Tim Switzer
Vice President at Keefe, Bruyette & Woods (KBW)

And then the other question I had is, you guys did a really good job of last quarter helping us kind of break down the the various drivers that went through that net fair value line item. And, obviously, it was, you know, a negative 11,800,000.0 this quarter.

Tim Switzer
Vice President at Keefe, Bruyette & Woods (KBW)

And I I know that secured the or the loans had an impact on that and the reversal from the held for sale SBA loans last quarter. Can you give us the different pieces of that and particularly what the gain was on ALP loans this quarter?

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Frank, I'm going to let you do that with the numbers and the debits and the credits.

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

Yeah, that's fine. So Tim, the previous unrealized gains, as Barry mentioned earlier, on the ALP loans was $35,100,000 So that was reversed, which is the primary component, as you mentioned, of that $11,700,000

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

By reverse, Frank, you mean written down to zero, right? In other words Correct.

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

Written down the par.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Set by the loss.

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

That's right. Written down the par in the losses.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Note that. I had a couple of investors say, gee, you're double counting, and oh, we're not double counting. That's that's not it.

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

No. That's okay. And they were written down, as Barry mentioned, certain for the securitization. That ultimately results in a net gain that you see about 32,400,000.0 on the value of the equity interest. For the quarter, the ALP loan gains were about 6,300,000.0.

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

So that kind of helps offset, that's part of the offset of that loan, of that loss, as well as the the seven a on guaranteed loans that are also being held on the books before they before they get sold.

Tim Switzer
Vice President at Keefe, Bruyette & Woods (KBW)

Okay. Great. Thank you, guys.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Thank you.

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

You're welcome.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

And, Tim, also, I I think if you go to slide number 12 and you look across the numbers, you could see that we've got a lot of stability here. Now I do wanna point out with a a good chunk of the bank's health for investment portfolio being fairly mature pay higher accruals.

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

Barry, I think we lost you there. You may have to repeat that.

Operator

Pardon me. Please stand by. Mr. Sloan, are you able to hear us? Pardon me, please stand by. Your conference will resume momentarily. Hi, mister.

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

Sorry. I think you're back.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Operator, are we reconnected?

Operator

Yes. Are you able to hear us again?

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

I hear you. Yeah.

Operator

Okay.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

So, I don't know if it came through, but I wanted to point out on slide number 12, there's a lot of stability when you run your finger across of NPLs, on and off balance sheet and ex NSBF. We ex NSBF because we do believe that's a runoff portfolio and a tough portfolio.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

With that said, the provision at the bank for the second quarter was down from the first quarter. And that's just a function of not having non accruals roll into the book. We do believe that that will pick back up. It's expected. We're reserved for it.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

The reserves are basically almost capital, basically, because if you have a loss, it goes right against the reserve. So we feel good about the business. We're not overly concerned about the credit aspects of the portfolio because of the reserves. Next question, operator.

Operator

Thank you. Our next question will come from Crispin Love from Piper Sandler. Your line is now open.

Crispin Love
Crispin Love
Director - Equity Research at Piper Sandler Companies

Thanks. Good afternoon. I just want to follow-up on the net gain in residual and securitizations line. So $32,000,000 in the quarter. I'm just curious on the go forward there.

Crispin Love
Crispin Love
Director - Equity Research at Piper Sandler Companies

Will those only occur when you do ALP securitizations? Just curious what's changed there and then what we should expect going forward?

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Yes, is go ahead, Frank, you can answer the question.

Frank DeMaria
Frank DeMaria
EVP & CFO at NewtekOne

Yeah, I was going say, so what's changed there is this is the first time Crispin, that we've done this and own 100% of the residual. In contrast, previously, we were doing those through fiftyfifty joint ventures. So, the difference there is those would go through that joint venture and non controlled interest line. We do anticipate doing these type of structures in the future, But that's the difference there between the two prior ALP securitizations.

Crispin Love
Crispin Love
Director - Equity Research at Piper Sandler Companies

Okay. And then just on the SBA rule changes that went into effect June 1, you cited the margin impacts, again on sale margin impacts. But I'm curious on volumes. Would you expect a drop off in volumes in the seven product? Curious on just your overall thoughts on the changes and then if you've seen any noticeable differences in the the past couple of months since they went into effect.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Chris, that's a good question. I I don't believe for our purposes because it's very different. The non bank lenders in the space are having a lot of difficulty. They don't have the staff. They don't have the capability to comply with the new changes.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We're very proud of the fact that we are totally comfortable. We're not changing our our guidance for a billion dollars of seven a's for the year. And by the way, when I say we're going to one ten, you know, the mix could change between the ten year paper and a twenty five year paper, which could change the gain. But right now, we're not making a change. We do believe, and I've said this before, it's a harder market to find good credits as well as tariffs, which clearly were an issue in April and a less of an issue today, I think slowed down the borrowing appetite of a lot of customers.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

And that's beginning to change when you see these tariff deals, people are more optimistic. So we feel pretty good about the second half of the year.

Crispin Love
Crispin Love
Director - Equity Research at Piper Sandler Companies

Great. Thank you, Barry. Appreciate taking my questions and Frank too.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Thank you.

Operator

Thank you. Our next question will come from Mark Silk from Silk Investment Advisors. Your line is open. Please check that your line is not on mute. And again, Mark Silk, your line is now open.

Operator

Thank you. We will move on to our next question. Our next question will come from Steve Moss from Raymond James. Your line is now open.

Steve Moss
Steve Moss
Director at Raymond James Financial

Hi, good afternoon.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Hey. Good afternoon, Steve.

Steve Moss
Steve Moss
Director at Raymond James Financial

Barry. How's it going?

Steve Moss
Steve Moss
Director at Raymond James Financial

Barry, maybe just starting with the extended holding period for seven loans. Just kind of curious, like, how do we think about that? Is that just a small timing difference? Or is it going to be a little longer in duration?

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

I think you're you're referring to the NPLs. Right? Non performing loans?

Steve Moss
Steve Moss
Director at Raymond James Financial

Oh, I thought I maybe I misread that. I thought I read that there's a little extended period for holding seven eight Oh, you're

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

holding them on the balance sheet. Got it. Yeah. We're looking at a holding period of sixty to seventy five days, maybe ninety, but rolling into the next quarter. You know, we don't we still intend on selling them for cash gains.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We found that this is a good strategy for us. It's helping our net interest income. So I I think you're looking at sixty to seventy five days.

Steve Moss
Steve Moss
Director at Raymond James Financial

Okay. Got you. And then in terms of I'm not sure I heard you correctly. Did you say you're still sticking with $1,000,000,000 in SBA originations for the current year expectation?

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Correct. Yes, sir.

Steve Moss
Steve Moss
Director at Raymond James Financial

Okay. Got you. And then in terms of just thinking about the in terms of just thinking about expenses here, just kind of curious as to what you think for back half expenses. Should they be relatively stable? Or you know, I know you have investments obviously ongoing, so maybe that drives up expenses. Just kinda curious how we think about that.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Hopefully, flattish. I think, when we looked at our expenses for q two twenty twenty five versus q two twenty twenty four, I think there was only a 4% increase. So, it's one of my favorite topics, Steve, when the expense the expense things come to my desk from consultants and staff and things of that nature. But I would say flattish would be a good guesstimate.

Steve Moss
Steve Moss
Director at Raymond James Financial

Okay.

Steve Moss
Steve Moss
Director at Raymond James Financial

Got you. And maybe if we could just go back to the net gain on residuals and securitization. So you had $32,400,000 is you have you're holding the entire residual, which to me looks like that was $32,000,000 based on the bullet where you closed $184,000,000 securitization backed by $216,000,000 in out loans. So basically, am I thinking about this correct is like you hold the equity interest, you're judging what the cushion is in terms of that 32,000,000 extra cushion, you are putting up 14% discount. Did I hear that correctly?

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Yeah. 14% discount with a 15% default frequency over the life and a 20% severity, which will be a 3% charge off. That after that charge off, you get to the 14%.

Steve Moss
Steve Moss
Director at Raymond James Financial

Okay.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

And and, Steve, the book value, I believe, is around 35,000,000.

Steve Moss
Steve Moss
Director at Raymond James Financial

Okay.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

And we we look at this a variety of different ways. One of the things I think that's important is as you add that portfolio seasons, okay, two things are gonna happen. You're getting closer to being an attractive prepay when the prepay penalties wear off, but you're also getting the cash flow from the interest income less the interest expense. I think what you'll see is when you do the math, it pretty close I'm not saying it's positive or negative, but it's pretty close.

Steve Moss
Steve Moss
Director at Raymond James Financial

Okay.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

And if you look at the valuation, it's approximately five and a half times income.

Steve Moss
Steve Moss
Director at Raymond James Financial

Okay.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Okay?

Steve Moss
Steve Moss
Director at Raymond James Financial

That's everything for now. Thank you very much.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Thank you, Steve.

Operator

Thank you. Our next question will come from Christopher Nolan from Ladenburg Thalmann and Co. Your line is open.

Christopher Nolan
SVP - Equity Research at Ladenburg Thalmann & Co. Inc

Barry, on your comments that you expect the provision to go higher in the second half of the year, if I heard you correctly.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Yes.

Christopher Nolan
SVP - Equity Research at Ladenburg Thalmann & Co. Inc

Yeah. Where should we expect the reserve ratio to go at it's and that's allowance relative to period end loans.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Yeah. That's a good question. You know, and the other thing too and I I do appreciate the question. I I the funny thing about the business, and I'm, you know, not a career banker, but that provision to me, that's like capital. So I like a big provision.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

It breaks out a lot of people, just to be frank with you. Matter of fact, when people reduce the provision, in many cases, the stock goes up because people think that, people are forecasting bluer skies ahead. I like having the cushion. And, also, even with that cushion and that provision, we're still good on our numbers, which I think is, you know, an attractive performance. I I do believe that for the most of the calendar year, we're probably gonna be I'm gonna give you a range, four and a half to five and a half.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Now one thing I will tell you, some of that may change as we look to grow the CRE book as a bigger percentage and the c and I book. The traditional bank loans due in five years, full covenant package, full book. So those loans have much lower provisions than the seven a business. Matter of fact, I think the seven a business currently accounts for about 90% of the total provision. I think it's about 92%.

Christopher Nolan
SVP - Equity Research at Ladenburg Thalmann & Co. Inc

Yeah. In the past, the regulators viewed loan loss provisions as reserve capitals or capitals well, and they sort of put the brakes on banks in terms of not over provisioning. Are you seeing from the the regulators that they're giving you more flexibility in terms of how much you're willing to provision?

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

It's another good question. Frankly, you know, we've been in the banking business now for ten quarters, and people said, oh, gee. You know, the reg listen. It's been a very solid relationship. They haven't like the three little bears said, it's too hot or too cold.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

They seem to be comfortable with really where we are. Now I wanna be very clear here. I think that one of the reasons we were an attractive application candidate is because we do the loans that the banking industry, in many cases, doesn't wanna do. And that's to SMEs, SMBs with higher provisions and the fact that we've got twenty years worth of experience. So no.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

And I I by the way, great question. We're not what a lot of banks do is they lower the provision to boost the income up. That's not where we're where our heads are at. I mean, no. We like the provision.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

After doing this for twenty years, we think this is the right provision.

Christopher Nolan
SVP - Equity Research at Ladenburg Thalmann & Co. Inc

Okay. And given that you're really overearning the dividend, is it possible we could see a little increase in dividend?

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

I don't know. I think we're the Rodney Dangerfield of stocks right now. So, no, I I tell you the truth. The dividend is very healthy, and I think we'd be more likely to do other things than increase the dividend at this point. I mean, we're we're well above where the average bank is, and we're very hopeful that the type of presentation we made today, I've gotten a lot more help, a lot more clarity.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We'll get people to better understand what we're trying to do. It's and I and I won't tell you that it's not complicated as it is, but it makes money. So we do what makes money.

Christopher Nolan
SVP - Equity Research at Ladenburg Thalmann & Co. Inc

Okay. Thank you for thanks for the answers.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Thank you.

Operator

Thank you. And our next question will come from Mark Silk from Silk Investment Advisors. Your line is open.

Marc Silk
CEO, Investment Advisor, Portfolio Manager & Analyst at Silk Investment Advisors

Okay. Here we go, Barry. You hear me now?

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Yes. Right. I think it's my job, Mark.

Marc Silk
CEO, Investment Advisor, Portfolio Manager & Analyst at Silk Investment Advisors

Yep. Switched from a cell phone to a landline. For question number one, as a shareholder, I'm perplexed that your stock traded at PE around five or six while the industry trades higher. Can you explain why you think that is?

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

I think we're different. We're unique. We're also getting better at, telling our story. We put out a lot of information. But it's just a lot of parts to what we're doing.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Part of it is because we're disruptive. Here's here's a organization that took over a manual one branch bank, opened up 19,000 depository accounts, funds 2,500 unique borrowers digitally, has 350 customer facing people on camera, is using AI to synthesize data into reports instead of manual inputs. I I just think that the market doesn't we don't look like anybody else. And the other thing, you know, people talk about doing this. We're doing it.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

I mean, I I I got a comment like program or private credit. Google private credit. Google alternative loans. Oh, all these money managers are talking about doing it, and and they're doing deals with banks. They're really doing syndicated bank loans or leveraged bank loans.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We're actually doing it. We've been doing it since 2019. So I think that this is just gonna take time for people to get comfortable with, look at the accounting, get a better understanding of it, look at the metrics quarter to quarter. I mean, I went to a conference recently. I had a very sophisticated, extremely bright individual say to me, well, Barry, what if you don't make any loans next quarter?

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Will you lose money? And I said, yeah. If Apple doesn't sell any iPhones and GM doesn't sell any cards, they're gonna lose money too. We make loans, and we sell them. That's the business model.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

That's we've done for twenty years. And it generates high returns and equity even after loan losses and provisions for that. So I think that's part of the problem, which is different. We look different. People have warned me that, you know, this wouldn't be a bed of roses or a bowl of cherries, and they were right.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

But we're making money. We've got capital, and we're gonna continue to do this. And, you know, if you keep if you keep earning money and you keep paying a dividend at some time when people are more comfortable with it, they'll jump in and participate. We're okay with it. The other thing I would say is the investment group that we're in, which are, you know, community based banks, that's a tough comp for us, particularly if you're looking at the traditional metrics.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We don't we don't score as well as I would like to have scored.

Marc Silk
CEO, Investment Advisor, Portfolio Manager & Analyst at Silk Investment Advisors

Okay. That's a fair assessment. And then I'm trying to maybe you can give us some color. So are you are you getting your business so let's break this down. So are you getting your business from your payroll and payment as far as new bank accounts?

Marc Silk
CEO, Investment Advisor, Portfolio Manager & Analyst at Silk Investment Advisors

Are you getting new bank accounts because of payroll processing and the and the payment processing? Obviously, you get them both, but maybe give us show us where a lot of it's coming from. And then, obviously, you're getting some from maybe your high return on checking accounts. So maybe give us some color there as how this mesh of the business is really paying off.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

So in the near future, you will see us announcing and launching the technology. When you open the bank account, you get an approved merchant account. One application, one process, but two accounts. Important to note, we're not charging people. There are no fee.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

So it's not like we're giving them something that they're not aware of, but now they could do both things and take advantage of the new tech advantage. By the way, you can't process an electronic payment without a bank account. So why not use our bank account? That's zero fee and provides better analytics upfront. Same thing for payroll.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Same thing for lending. So having these things fully integrated, very important, not it's not a Wells Fargo situation where we're charging customers unwittingly or unknowingly. We're giving them an open account to use or not use and not charge not charging it for them. And I say, it's it's not open without their knowledge. It is open.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

We then contact them and tell them it's available. They then sign in the application to activate it. But now we could show show, hey. You don't have to go further. It's available.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Here's a great cost. Here's a great integration. Here's a great analytics. Come look at the new tech advantage. So we give the customer an advantage to putting all these things together.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

It's a little bit similar to Shopify. We don't unbundle all the stuff. Well, frankly, what Amazon does, where everything comes together in one unique integrated model for the customer.

Marc Silk
CEO, Investment Advisor, Portfolio Manager & Analyst at Silk Investment Advisors

Okay. That sounds interesting. Thanks for answering my questions.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Thank you.

Operator

Thank you. And I am showing no further questions from our phone lines. I'd now like to turn the conference back over to Barry Sloane for any closing remarks.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

Thank you very much, everybody, for attending. Appreciate it. We look forward to reporting our next quarter and continuing to generate the types of earnings and returns that you've now gotten used to. And, once again, wanna greatly thank my senior management team. I know I named a few people, but I can't name them all.

Barry Sloane
Barry Sloane
President, Chairman & CEO at NewtekOne

They do a great job for all of our stakeholders, shareholders, customers, and employees. Thank you very much. Have a great day.

Operator

Thank you. This does conclude today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a great day.

Executives
Analysts
    • Tim Switzer
      Vice President at Keefe, Bruyette & Woods (KBW)
    • Crispin Love
      Director - Equity Research at Piper Sandler Companies
    • Steve Moss
    • Christopher Nolan
      SVP - Equity Research at Ladenburg Thalmann & Co. Inc
    • Marc Silk
      CEO, Investment Advisor, Portfolio Manager & Analyst at Silk Investment Advisors