NewtekOne
NASDAQ: NEWT
$14.44 ▲ +0.12  (+0.84%)
At close: Jul 24, 2026 · 3:59 PM UTC
Financial Ratios
Market Cap412.26 Mn
P/E6.70
P/S1.43
Div. Yield0.07
Total Debt (Qtr)550.47 Mn
Add ratio to table…

About

NewtekOne, Inc. is a financial holding company subject to regulation by the Federal Reserve and the Federal Reserve Bank of Atlanta, providing business and financial solutions to independent business owners under the Newtek® and NewtekOne® brands. The company operates as a technology-enabled platform delivering lending, payments, payroll, insurance, and banking services without traditional bank branches or brokers. Its core strategy centers on acquiring clients through…

Read more ↓
Sector: Financial Services Industry: Banks - Regional CIK: 0001587987

Investment Thesis

▲ Bull case
  • NewtekOne Inc (NEWT) possesses a durable competitive advantage through its technology-driven underwriting platform, which enables rapid loan processing and superior risk management for small business loans under $350,000, a segment where competitors struggle due to outdated systems. Management highlighted the use of AI to analyze tax returns, lease agreements, and operating statements — capabilities that allow for accurate debt service coverage calculations and lien perfection without relying on traditional financial covenants. This technological edge translates into faster funding (seven-day loans), higher approval quality, and lower default rates, as evidenced by declining non-performing loans excluding government guarantees for four consecutive quarters. The company’s ability to underwrite these loans efficiently while maintaining strict adherence to the five C’s of credit creates a moat that is difficult for legacy banks or fintech lenders to replicate, particularly as they face mounting pressure to modernize legacy infrastructure. This positions NEWT to capture growing market share in the underserved SMB segment, where traditional lenders either avoid risk or impose prohibitively costly terms, thereby enabling NEWT to grow its loan book with better risk-adjusted returns than peers. The scalability of this tech stack, combined with low customer acquisition costs via the proprietary NewTracker tool generating 600–800 referrals daily, suggests the company can sustain double-digit loan growth without compromising credit quality — a key driver behind management’s confidence in achieving its 2026 EPS guidance of $2.35 and raising the 2027 midpoint to $2.60, well above current Street consensus of ~$2.43.
  • The strategic shift of originating and funding Commercial and Industrial Long Amortization (C&I LA) loans directly on Newtek Bank’s balance sheet — rather than through costly warehouse lines at the holding company — represents a transformative, underappreciated catalyst for profitability and capital efficiency. Historically, funding these loans via warehouse lines incurred costs of SOFR plus 3.25% and required significant equity capital (e.g., $150 million for a $500 million portfolio at 30% haircut), whereas bank-funded loans utilize core deposits at ~3.6–3.7% cost with near 10:1 leverage, dramatically improving net interest margins and return on assets. Management emphasized that this transition is not merely operational but structural, noting that the bank’s efficiency ratio improved to 40% in Q1 2026 and that moving C&I LA originations to the bank has increased the proportion of total loans held there from 57% in 2025 to 83% in Q1 2026. This shift reduces reliance on external financing, lowers the cost of funds, and enhances the bank’s ability to recycle capital through deposit growth — which has surged from $142 million to $1.9 billion in just 13 quarters. The resulting improvement in net interest income and return on tangible common equity (approaching 15%) is sustainable because it is grounded in core deposit growth and improved asset mix, not temporary market conditions. As the bank continues to scale its C&I LA book — with average loan sizes of $4–5 million enabling efficient scaling — the profitability uplift from this structural shift will compound over time, directly supporting the company’s long-term EPS growth trajectory and tangible book value accretion, which rose from $6.92 in Q1 2023 to $11.84 in Q1 2026 and is projected to reach $13.50 by year-end.
  • NEWT’s dominance in SBA 7(a) lending — particularly its position as the largest lender by units and top two or three by volume — provides a resilient, government-backed revenue stream that is less sensitive to economic cycles than commonly perceived, especially given recent regulatory changes that have weakened competitors. Management noted that new SBA rules requiring 100% U.S. citizen ownership and prohibiting the use of funds to refinance merchant cash advances (MCAs) or debit loans have disproportionately impacted fintech lenders lacking traditional underwriting capabilities, creating a vacuum that NEWT is uniquely positioned to fill. The company’s deep expertise in underwriting, combined with its ability to offer long-term, amortizing loans (10–25 years) at payments 7% lower than MCA alternatives, allows it to capture borrowers seeking to refinance high-cost debt — a segment representing 65–70% of MCA users with sustainable cash flows. Furthermore, NEWT’s practice of selling the guaranteed portion of SBA loans (75%) while retaining servicing rights generates recurring fee income without balance sheet burden, effectively turning its SBA platform into a high-margin, fee-based business. The non-guaranteed portion, while carrying higher risk, is conservatively underwritten with an average LTV of 47% and debt service coverage above 3x, and the allowance for credit losses has been prudently built via CECL as the portfolio seasoned. This combination of government-backed origination strength, competitor weakness due to regulatory shifts, and NEWT’s superior underwriting technology creates a durable moat in SBA lending that is not fully reflected in current valuations, particularly as the company continues to gain share in a market where traditional banks remain reluctant to lend to small businesses due to perceived complexity and low yields.
Read more
▼ Bear case
  • NewtekOne Inc (NEWT) faces significant and underappreciated pressure from its exceptionally low loan-to-deposit ratio (LDR), which reflects a structural imbalance where the bank is holding excessive liquidity — approximately $390 million in cash at the Federal Reserve — that is dragging on net interest margin and signaling either weak loan demand or overly conservative underwriting, despite management’s claims of strong pipeline growth. While management characterizes this liquidity as a strategic buffer for future opportunities, the persistence of such high levels — especially after 13 quarters of deposit growth from $142 million to $1.9 billion — suggests that the bank may be struggling to convert deposits into earning assets at a pace commensurate with its funding growth, raising concerns about the sustainability of its deposit-cost advantage. The company’s reliance on non-interest-bearing or low-cost deposits to fund loans is undermined if those funds remain idle, as the opportunity cost of holding cash at the Fed (earning near-zero returns) directly reduces net interest income and return on assets. This imbalance is not merely a timing issue, as CFO Frank DeMaria acknowledged the quarter’s lower yields were partly due to timing of loan bookings, but the scale of excess liquidity implies deeper issues in loan origination velocity or credit appetite. If the bank cannot deploy its growing deposit base efficiently, its much-touted cost-of-funds advantage will erode, forcing it to either accept lower-yielding loans (worsening margins) or increase rates to attract borrowers — both of which would compress profitability and contradict the narrative of improving returns driven by structural shifts in funding.
  • The company’s growing reliance on securitization as a primary funding mechanism for its C&I LA and SBA loan portfolios introduces hidden complexity and counterparty risk that is not adequately reflected in its reported profitability metrics, particularly as the benefits of securitization — such as improved advance rates and reduced capital requirements — are offset by servicing obligations, retained exposure through owner certificates, and the need to maintain robust infrastructure to manage these structures. While management highlights the economic advantage of moving C&I LA loans from warehouse lines (SOFR + 3.25%) to bank-funded deposits, they simultaneously rely on securitization to take loans off the balance sheet, which reintroduces funding costs through the issuance of securities whose interest expense exceeds that of bank deposits. This creates a contradiction: if bank funding is truly superior, why continue securitizing? The answer lies in capital constraints — the holding company’s leverage ratio of 13.1% (as disclosed by DeMaria) suggests it is nearing internal limits, necessitating securitization to free up capital for new originations. However, this process is not cost-free; the company retains the owner certificate (typically 15% of the deal), which must be permanently financed by the holding company, and servicing fees reduce the net spread (e.g., from 6.6% gross to 5.66% net in the 2026-1 deal). Furthermore, the success of securitization depends on sustained investor demand — evidenced by the 10x oversubscription of the 2026-1 deal — but this demand could reverse if market conditions deteriorate, leaving NEWT with unsold inventory or forced to retain risk on its books. The company’s disclosure that it has paid down two warehouse lines to zero (from Capital One and Deutsche Bank) indicates progress, but the continued use of securitization reveals that the balance sheet optimization is incomplete and introduces refinancing and market timing risks that are not captured in its steady EPS guidance.
  • NEWT’s exposure to the evolving regulatory and competitive landscape in the SBA 7(a) program presents a material, under-discussed risk that could undermine its historically strong performance in this segment, particularly as the company’s success is increasingly dependent on navigating policy shifts that favor traditional lenders over fintechs — a dynamic that may not persist indefinitely. Management cited recent SBA rule changes — including the 100% U.S. citizen ownership requirement and ban on using funds to refinance MCAs — as having reduced volume by 10–20% and weakened competitors lacking underwriting rigor, thereby creating an opening for NEWT. However, this advantage is contingent on the persistence of these rules and the continued inability of fintechs to adapt their technology to meet SBA’s stringent documentation and cash flow analysis requirements. If competitors successfully upgrade their platforms — particularly those with significant venture capital backing — to incorporate AI-driven tax return analysis, lease scrutiny, and debt service modeling (capabilities NEWT claims as proprietary), NEWT’s technological moat could erode rapidly. Moreover, the company’s reliance on selling the guaranteed portion of SBA loans creates revenue volatility tied to secondary market demand for those securities, which is sensitive to interest rate fluctuations and investor appetite for government-guaranteed assets. A rise in long-term rates could depress gain-on-sale premiums, directly impacting the non-interest income that has been a key contributor to profitability. Finally, the concentration of risk in the non-guaranteed SBA portfolio — which comprises nearly 60% of the held-for-investment book and drives the bulk of the allowance for credit losses — remains a concern, as even conservative underwriting (47% LTV, 3x+ DSCR) may not fully insulate the portfolio from downturns in specific sectors (e.g., retail, hospitality) where small businesses are disproportionately vulnerable. The company’s narrative of being a “leader” in SBA lending assumes continued market share gains, but if regulatory or competitive shifts reverse, this segment could become a source of earnings volatility rather than a stable anchor.
Read more

Investment, Issuer Affiliation Breakdown of Revenue (2022)

Peer Comparison

Companies in the Banks - Regional
S.No. Ticker Company Market CapP/EP/STotal Debt (Qtr)
1 KB KB Financial Group Inc. 42,090.38 Bn0.00 Bn0.01 Mn56.66 Bn
2 SHG Shinhan Financial Group Co Ltd 33,919.15 Bn0.00 Bn0.00 Mn40.46 Bn
3 BCH Bank Of Chile 4,123.52 Bn368.17 Bn1.57 Mn0.00 Bn
4 LYG Lloyds Banking Group plc 360.83 Bn0.00 Bn0.00 Mn42.37 Bn
5 FCAP First Capital Inc 204.17 Bn0.00 Bn0.03 Mn-
6 LARK Landmark Bancorp Inc 187.97 Bn0.00 Bn0.00 Mn0.00 Bn
7 NWG NatWest Group plc 144.82 Bn0.00 Bn0.00 Mn94.66 Bn
8 PNC Pnc Financial Services Group, Inc. 101.80 Bn0.00 Bn0.00 Mn21.42 Bn