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 this 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 the company’s conservative approach to managing risk in its loan portfolio.

Noninterest income, which includes fees and gains from loan sales, servicing income, and electronic payment processing, totaled $224.9 million in 2025, a 3.5% increase from the prior year. Notable contributors to noninterest income were a $30.0 million gain on residuals from a securitization transaction and a $55.9 million increase in net gains on loans accounted for under the fair value option.

Total noninterest expense increased 2.1% to $166.1 million, primarily due to higher salaries and employee benefits, as well as other loan origination and maintenance costs. This was partially offset by a 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 19.0% 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 53.0% increase from the prior year-end. This growth was driven by higher originations of 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, 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 $260.0 million to $851.5 million, reflecting the expansion of Newtek Bank’s lending activities.

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 remains focused on prudent underwriting and portfolio diversification to manage credit risk.

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 42.2% increase from the prior year-end. This growth was driven by competitive interest rates and the company’s efforts to foster sticky deposit relationships through its Newtek Advantage platform.

Borrowings increased to $819.9 million, up from $708.0 million a year earlier. This included $88.4 million in new borrowings under Newtek’s NMS Goldman Facility, as well as $115.1 million in additional borrowings on its SPV II facility. These increases were partially offset by the repayment of the NMS Webster Note and maturities of other debt.

The company 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. This provides Newtek with the flexibility to fund its operations and growth initiatives.

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 8.0% regulatory minimum, and Newtek Bank’s total capital ratio was 13.4%, also exceeding the 10.0% well-capitalized threshold.

The company has established an Asset/Liability Committee (ALCO) to oversee the management of interest rate risk, liquidity risk, and other balance sheet risks. Newtek’s interest rate profile is a mix of fixed and variable rates, with some assets and liabilities matched to mitigate interest rate sensitivity. The company also depends on the availability of the secondary market for its SBA loan sales, which could be impacted by changes in market conditions and interest rates.

Outlook and Strategic Priorities

Newtek’s transition to a financial holding company provides the company with expanded opportunities to serve the SMB market through its range of business and financial solutions, including lending, electronic payment processing, insurance services, and payroll and benefits solutions. The company’s Newtek Advantage platform offers independent business owners a comprehensive suite of services and analytics to support their operations.

Going forward, Newtek’s strategic priorities include:

1. Continued growth and diversification of its loan portfolio, with a focus on SBA 7(a) loans, SBA 504 loans, and ALP loans.
2. Expansion of its deposit base and optimization of its funding mix to support lending activities.
3. Leveraging its technology platform and Newtek Advantage offering to deepen relationships with SMB clients and cross-sell its suite of solutions.
4. Prudent risk management, including maintaining strong credit quality and regulatory capital ratios.
5. Exploring opportunities for strategic acquisitions or partnerships to further enhance its capabilities and market reach.

Overall, Newtek’s transformation into a financial holding company positions the company for continued growth and diversification in the SMB market, while emphasizing the importance of sound risk management and regulatory compliance. The company’s focus on providing comprehensive business and financial solutions to independent business owners is expected to drive long-term value creation for its shareholders.