Newtek’s Transition to a Financial Holding Company

NewtekOne, Inc. (formerly Newtek Business Services Corp.) has undergone a major transformation, becoming a financial holding company as of January 6, 2023. This change allows the company to provide a wider range of business and financial solutions to independent business owners (SMBs) across the United States.

Prior to the transition, Newtek operated as a business development company (BDC) regulated under the Investment Company Act of 1940. Now, as a financial holding company, Newtek is subject to regulation and supervision by the Federal Reserve and the Federal Reserve Bank of Atlanta. This shift has significant implications for the company’s operations, financial reporting, and tax status.

Financial Performance Overview

For the fiscal year ended December 31, 2025, Newtek generated $158.4 million in total interest income, a 30.5% increase from the prior year. This was driven by growth in the company’s loan portfolio, including SBA 7(a) loans, SBA 504 loans, and its Alternative Lending Program (ALP) loans.

Newtek’s net interest income after provision for credit losses was $21.2 million in 2025, up from $14.1 million in 2024. The increase was due to higher interest income, partially offset by a $12.5 million rise in the provision for credit losses to $38.7 million. This provision reflects Newtek’s conservative approach to maintaining adequate reserves against potential loan losses.

Noninterest income, which includes revenue from electronic payment processing, servicing fees, and gains on loan sales, totaled $224.9 million in 2025, a 3.5% increase from the prior year. Notable contributors to noninterest income were a $30 million gain on residuals from a securitization transaction and a $56 million gain on loans accounted for under the fair value option.

Operating expenses increased 2.1% to $166.1 million, primarily due to higher salaries and benefits, loan origination and maintenance costs, and other general and administrative expenses. This was partially offset by a $12.3 million decrease in technology services expenses following the divestiture of Newtek’s managed technology solutions business.

Overall, Newtek reported net income of $60.5 million in 2025, up 19% from $50.9 million in 2024. This translated to earnings per share of $2.21 basic and $2.18 diluted, compared to $1.97 basic and $1.96 diluted in the prior year.

Loan Portfolio and Credit Quality

Newtek’s total loan portfolio, including loans held for sale and loans held for investment, grew to $2.1 billion as of December 31, 2025, a 53% increase from the prior year-end. This was driven by growth in SBA 7(a) loans, SBA 504 loans, and ALP loans.

The company’s loans held for sale, carried at fair value, increased by $599.6 million to $971.8 million. This was primarily due to a $396.9 million increase in SBA 7(a) loans and a $202.7 million increase in ALP loans. Loans held for investment, at amortized cost, grew by $260 million to $851.5 million.

Credit quality remained relatively stable, with nonperforming loans as a percentage of total loans held for investment at 8.8% as of December 31, 2025, up from 3.9% a year earlier. The allowance for credit losses increased to $45.2 million, or 5.0% of loans held for investment at amortized cost, from $30.2 million, or 4.9%, in the prior year. Management continues to focus on prudent underwriting and portfolio diversification to maintain credit quality.

Funding and Liquidity

Newtek’s primary sources of funding include deposits, borrowings, and proceeds from loan sales and securitizations. As of December 31, 2025, the company had total deposits of $1.4 billion, a $444.4 million increase from the prior year. This growth was driven by competitive interest rates and Newtek’s efforts to foster sticky deposit relationships through its Newtek Advantage platform.

Borrowings totaled $819.9 million at the end of 2025, up from $708 million a year earlier. This included $314.2 million in bank lines of credit, $378.6 million in parent company notes, and $127.1 million in notes payable related to securitization trusts.

Newtek maintains a diversified liquidity profile, with $386.7 million in available liquidity sources as of December 31, 2025, including unrestricted cash, lines of credit, and borrowing capacity at the Federal Home Loan Bank and other financial institutions. The company’s liquidity position provides flexibility to fund operations and react to market conditions.

Regulatory Capital and Risk Management

As a financial holding company, Newtek and its subsidiary Newtek Bank are subject to various regulatory capital requirements administered by the Federal Reserve and other banking agencies. As of December 31, 2025, Newtek’s total capital ratio was 21.8%, well above the 8% regulatory minimum. Newtek Bank’s total capital ratio was 13.4%, also exceeding the well-capitalized threshold of 10%.

Newtek has established an Asset/Liability Committee (ALCO) to oversee the management of interest rate risk, liquidity risk, and other balance sheet risks. The company employs strategies involving its loan portfolio, funding sources, and hedging to mitigate these risks and maintain a prudent risk profile.

Outlook and Risks

Newtek’s transition to a financial holding company structure provides opportunities to expand its suite of business and financial solutions for SMB clients. However, the company faces several risks, including:

• Regulatory oversight and compliance as a financial holding company
• Potential disruptions in the secondary market for SBA loans
• Rising interest rates and their impact on loan pricing and funding costs
• Economic conditions and their effect on the financial health of Newtek’s SMB clients

Management remains focused on prudent risk management, diversification of the loan portfolio, and leveraging Newtek’s technology platform to deliver value-added services to its independent business owner customers. The company’s strong capital position and liquidity provide a solid foundation to navigate the evolving financial services landscape.

Overall, Newtek’s transformation into a financial holding company represents a significant milestone, positioning the company to capitalize on opportunities in the SMB market while maintaining a disciplined approach to risk management. The company’s financial performance in 2025 demonstrates its ability to generate growth and profitability in this new regulatory environment.