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DATE

Monday, July 28, 2025, at 4:30 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer and President — Barry Sloane
  • Chief Financial Officer — Frank DeMaria
  • Chief Financial Officer, Newtek Bank National Association — Scott Price

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RISKS

  • Sloane directly acknowledged, “there are certain metrics that compare us in an unfavorable light” when using traditional bank industry benchmarks due to higher losses and provisions required by the unique SBA lending model.
  • Management guided to a lower gain on sale margin, from approximately $1.11 to $1.10, on government-guaranteed SBA 7(a) loans for the second half of calendar year 2024, due to the reintroduction of a fifty-five basis point SBA fee.

TAKEAWAYS

  • Revenue Growth: 15% year-over-year increase to $78.2 million in Q2 2025, up from $61 million in Q2 2024.
  • EPS Performance: Reported basic and diluted EPS of $0.53 and $0.52 in Q2 2025.
  • 2025 EPS Guidance: Full-year forecast for CY2024 remains unchanged at $2.10 to $2.50 per share, targeting 17% growth at the midpoint.
  • Business Deposits: Gained $50 million in business deposits sequentially, now comprising nearly 30% of total deposits; 80% of overall deposits are insured.
  • Cost of Funds: Declined by 28 basis points sequentially to 3.71%; Net interest margin increased from 4.90% to 5.46%.
  • ALP Loans and Securitization: The Alternative Loan Program completed its third successful securitization in 2025. The most recent deal (NALP 2025-1) marked the residual interest at a 14% yield, supporting a $218 million loan pool in the 2025-1 securitization.
  • Charge-offs: Total charge-offs for the held-for-investment portfolio were $5.1 million, identical to the previous quarter.
  • Allowance for Credit Losses: Bank’s unguaranteed SBA 7(a) book carries an 8.3% allowance; Over 90% of the bank’s ACL relates to the unguaranteed 7(a) loan segment.
  • Efficiency Ratio: Holding company improved efficiency ratio to 60.3% from 66.3% year-over-year while the balance sheet expanded 37% year-over-year
  • Tangible Book Value Growth: Increased sequentially by 3.7% and 21% year-over-year, while maintaining “a very healthy dividend.”
  • Pre-provision Earnings: Management highlighted continued strength, driven by wide lending spreads, sizable fee income, and branchless/scalable operating model.
  • NSPF Portfolio: Newtek Small Business Finance (legacy nonbank SBA lender) reduced its first-half loss to $8.7 million in 2025 from $28.7 million in calendar year 2024, with nonaccrual inflows slowing
  • ALP Originations: Second-half 2025 ALP loan originations are expected to be near $250 million, included in full-year earnings guidance.

SUMMARY

NewtekOne (NEWT 1.34%) reported double-digit revenue growth (15% in Q2 2025 vs. Q2 2024), improved efficiency, and reaffirmed robust full-year profitability guidance for CY2024, while emphasizing strong progress in digital account and loan origination across the small and medium-sized business segment. Management explained major balance sheet improvements -- including a substantial business deposit inflow, selective cost reduction, and increased net interest margin -- alongside detailed disclosure on ALP securitization economics and loan book seasoning. Securitization execution yielded significant gains in Q2 2025, and capital deployment strategies were described. But management also dialed expectations for future gain-on-sale margins while outlining expectations for higher loss provisions in coming periods.

  • Sloane addressed valuation disconnect, stating, “we’re different ... we don’t look like anybody else,” citing an innovative digital-first, fee-generation-heavy business model as a cause for peer comparison challenges.
  • Sloane described new deposit and payment product integrations, “When you open the bank account, you get an approved merchant account. One application one process, or two accounts,” illustrating further moves toward embedded finance for business customers.
  • Management highlighted a consistent 1% historical charge-off rate across ALP portfolios as of Q2 2025, which enhances confidence in credit performance and asset quality as the program scales.

INDUSTRY GLOSSARY

  • ALP (Alternative Loan Program): Newtek’s proprietary lending initiative focused on originating, warehousing, and securitizing non-government-guaranteed small business loans, often held off-balance sheet.
  • NSPF (Newtek Small Business Finance): Legacy, now nonbank, SBA 7(a) loan origination platform currently in runoff mode and no longer originating new loans.
  • DDA (Demand Deposit Account): Non-interest-bearing commercial checking account product referenced as a primary driver of deposit growth at Newtek Bank.
  • ACL (Allowance for Credit Losses): Aggregate reserve set aside for potential loan losses, particularly discussed in context of unguaranteed SBA 7(a) exposures.
  • NIM (Net Interest Margin): Difference between interest income generated and interest paid out, expressed as a percentage of average earning assets at the bank.
  • ROAA (Return on Average Assets): Net income annualized as a percent of average assets, used here to show above-industry profitability.
  • ROTCE (Return on Tangible Common Equity): Annualized net income as a percentage of tangible common equity, a capital efficiency measure referenced at both the bank and holding company levels.

Full Conference Call Transcript

Barry Sloane: Thank you, operator, and welcome everyone to the NewtekOne NASDAQ Newt Second Quarter 2025 Financial Results Conference Call. My name is Barry Sloane, CEO and President of NewtekOne. Joining me here today on the call will be Frank DeMaria, Chief Financial Officer of NewtekOne, and Scott Price, the CFO of Newtek Bank National Association. I also want to introduce Bryce Rowe, who is not on the call, in charge of investor relations. Bryce joined the organization recently from the firm of B. Riley where he represented us well as the equity analyst for BDCs and banks. He has been very helpful and instrumental in shaping our presentation and deck to make it a little bit more digestible and understandable.

I also want to 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 and near future of our digital account opening and merchant account opening simultaneously as well as the reverse. Opening up a mid-instant merchant account and getting started. I also want to announce Vik Mahajanan has joined us recently. Vik has had a long-term career as an M&A 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 in the balance sheet. With that, I'd like to mention everybody to follow along on today's presentation. Please go to newtek1.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. Please ask everybody to familiarize yourself with that note.

On slide number three, an important part of our discussion today is really looking and focusing on what is NewtekOne, 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 of over 33 million independent business owners in the US. Some participants refer to them as SMEs, SMBs, subject small, medium-sized enterprises, small and medium-sized businesses. 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.

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 employment opportunity in the US. 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 is one of the more active 7(a) lenders through its nonbank and bank subsidiary has supported and stabilized over 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. But in being an SBA lender and the definition of an SBA 7(a) loan is a loan that is not available under normal bank circumstances. As a matter of fact, there's a test called 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 none 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 are certain metrics that compare us in an unfavorable light. NewtekOne is a financial holding company regulated by the Fed. 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 Margin Solution that does about $17 million 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 million. We do provide a full manual best-in-class on-demand solutions to its independent business owner clientele without using traditional bankers branches, brokers, or BDOs. 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 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 an 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. Frankly, from our perspective, we have a belief that we are already doing which is what they want to do. They want to acquire customers remotely. They want to really automate their business.

They want to use AI. These are things as you go through the presentation. Already in the process of doing. Slide number four. Q2 financial and operational successes. First off, we're maintaining our earnings per share guidance of $2.10 on the low to $2.50 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 Q2 2025, $78.2 million versus $61 million in Q2 2024. Some of the other operational and financial highlights and an important part is growth in business deposits. Business deposits come in 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 2 to 3% on your money. So we were very pleased that we were able to grow business deposits at the bank by $50 million sequentially with most of the money coming 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. Had a 28 basis point decline in our cost of funds. I think it came in about 3.71. The net interest margin at the bank increased by 56 basis points. And 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 talk about, which is the bill rate. Or, NAV of a government-guaranteed money market fund. 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, we went from a $10.7 million loss to a $4.9 million loss to a $3.7 million loss. And, Newtek Small Business Finance was the prior nonbank SBA lender. That is in a rundown mode, and it shows up at the holding company no longer lending. The alternative loan program will spend a lot of time on this today, and, hopefully, we'll be able to position this in a better light so people can understand the value of ALP, not just to our business customers, but to all our stakeholders, including shareholders.

It should be 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 million of the unrealized gain in Q1 did cause some of their investors some level of confusion.

I think it's important to note that from Q1 2025, to Q2, when we sold the government-guaranteed loans and moved the ALP loans off the balance sheet into the securitization, that actually got eliminated. The government-guaranteed 7(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. 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%. And 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 2025-1. Moving to slide number five, Second quarter CEO highlights.

For the earnings picture, basic and diluted EPS of 53 and 52¢, respectively. The first half basic and diluted EPS of $89.87, are above the midpoint of our guidance. Which is 78 to 92¢. We're leaving that annual $2.10 to $2.50 share EPS unchanged. And the midpoint implies an EPS growth rate of 17%, typically something, you know, 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 nonbank lender, Newtek Small Business Finance, with a first half 2025 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. And important to note, nonaccruals within NSPF actually declined quarter over quarter. Price of SPF, and that's '24 2024 versus 2025. Price of, SBA 7(a) loans were consistent. With our fair value marks. So the 7(a) loans that we held on an unrealized basis for Q1 sold into the second quarter. There was actually a nonexistent gain transfer had to recognize an unrealized loss to wipe out the unrealized gain. Then we had a realized gain for cash. So this offsets one another. We actually sold approximately 22 to 23 million of 504 loans. At a price of 104 and three-quarters with forty basis points of servicing. Also extremely profitable.

Important to note and we talked about why we're keeping some of the government's guaranteed 7(a) loans on our books. We're actually able to pick up a prime plus three or a 10.5% coupon 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 a 120 million to a 170 million. Capital One Bank went from 60 million to a 100 million.

So we're excited about the ability to continue to grow this business. Profitability and operating leverage still look great. Our efficiency ratio year over year at the holdco, 66.3 to 60.3. And we look at our OAAs 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, 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 new tech advantage. 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. We're very excited about that opportunity. We think a lot of money is gonna be moved over time. Particularly 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, we'll 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. 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 $4.4 billion in servicing. 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. 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 Q2, 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.

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 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. I'd certainly 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. Think a lot of our competitors are dreaming of net interest margins on that type of a basis.

Obviously, once again, when you look at our ROAAs, our ROTCs, 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. 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. We appreciate Bryce's contribution here.

A lot of the investors that we met up with they wanna 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 AOP loans that are in joint ventures or in securitizations or balance sheet they matter. We've had historically 1% charge-offs in our LP portfolio. And I think it's important to note that we're 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 billion holding company, we have a big operation. We believe, first of all, do between a billion and a half and $2 billion 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. 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. Then they get sold into a special purpose vehicle and create a securitization.

That is match fund Slide number 11 may be one of the most important slides in the deck. And maybe one of the most least understood aspects of our business. Number one, when we do AOP securitizations, the residual interest 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 you look at the spread income, the securitized ALP loans, carrier weighted average coupon, in the 2025 deal of 13.3 denotes have a weighted average yield of 6.6.

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 of those go into a special purpose vehicle. So there's no expense underneath that. Isn't that attractive? Well, just did this, and we I think, 218 million loans. 109 180, a 185 million of bonds, and we created this securitization. Known as NALP 2025-1. Also, we intend to regularly execute ALP securitizations with the loans on the balance sheet.

As a matter of fact, if you like what we did recently, about to do it again. We've got a 138 million of ALP loans currently sitting on our 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. So we're getting tremendous operating leverage. Also, the ALP business has an average loan size of about 5 million.

In the in the 7(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. 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. 504, 7(a), line of credit, which should be C&I loans, both term and revolvers. And CRE. If that pipeline of six to 900 business rolls a day, 2.5 million in 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 Q1 were reversed when those loans went into securitization. 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 keeps the high coupon, and it keeps the borrower from prepaying.

It's a 5% penalty in year one. 5% in year two. 5% in year three, and 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. 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. It's a slide that you've seen in the past. The nonaccrual increase in NHBF is slowing. 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 hit's been taken. And they ultimately get turned into cash. 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, important to note, the ELP loan is performing well. Using the on and off balance sheet ELP 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 will frankly I get asked questions about the great financial crisis, The great financial crisis, in my opinion, 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 is zero. So we have a seasoned portfolio in there.

We think the real pain of the NSPF portfolio is behind us. The portfolio is paying down quickly. We have approximately $200 million capital in MSBF 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 a 120 a 102 million, roughly 30%. We do believe that nonaccrual inflows in the NSPF hit their peak in Q2 2024.

Continue to decelerate, And we think that NSVF is gonna wind up being an important opportunity for us. Once again, the remaining a lot of the remaining loans in NSPF are I'll use the word trapped in free securitization. The 2021 deal, 2022 deal, 2023 deal. So prepayments loan liquidations are all held for the bondholders. 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 DeMaria present slide number 14 and on.

Frank DeMaria: Thanks, Barry. Turning to slide 15, we provide some context around the held for investment loan portfolio at the bank. 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 7(a) loans which is built from the '23 when the bank began originating 7(a) loans. Prior to that, the 7(a) loans were originated by our nonbank lender. The bank's been building allowance for credit losses against that portfolio. More than 90% of which is related to the unguaranteed 7(a) book, which currently carries an allowance equal to 8.3% of unguaranteed 7(a) balances.

70% of the 7(a) 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 million sequentially and now represent almost 30% of deposit 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 this deposit growth. 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 million on a $1.3 billion 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 brokerless branch of 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 this slide, as Barry mentioned, the year-over-year revenue growth is 15%. 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: Thank you. Appreciate it. Slide eight the average net premium from SBA 7(a) loans For second quarter 2025, we averaged $1.10.91. 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 7(a)'s for the rest of the year in the second half will be about a 110. Think it's important to note we have this in our earnings guidance. That's extremely important. The big differential in price is based upon there's a 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 wanna point out the ALP loan originations for the second half of 2025. Expected to approximate 250 million. 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 AOP business which is on a pretty good growth track right now and does extremely well for the organization.

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

Operator: Thank you. Please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. And our first question will come from Tim Switzer from KBW. Your line is now open.

Tim Switzer: Hey. Good afternoon, guys. How are you doing?

Barry Sloane: Good, Tim. How are you? Doing alright. 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 million of growth on the commercial deposit side? And then, you know, what are your expectations going forward for that initiative and then bringing down deposit cost going forward?

Barry Sloane: Thank you, Tim. Look. I think that what's important for our organization is to be able to bring business to us. Account is 1%. Our business savings is three and a half, and it's truly a zero fee. I would And for the new tech advantage, we give the clients a tremendous benefit both in merchant services and in payroll we will be 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 that 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 total business account portfolio is about 4,000. And to be perfectly honest and frank, there 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. 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 or through our software and do an analysis as to where they would save money. From a technological standpoint, when they go to the Newtek Advantage, they could look at the bank information, ACH's, Fedwires, maybe soon to be stable calling They can also see their refund card their refunds, their chargebacks, their batches, from that day. 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: 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? Frank, could you talk to that one?

Frank DeMaria: Yeah. It was $5 million, Tim.

Tim Switzer: Okay. So pretty flat with last quarter?

Frank DeMaria: Yeah. $5.5.1 to be exact exactly.

Tim Switzer: Okay. So exactly the same as last quarter.

Frank DeMaria: That's right.

Tim Switzer: And then the other question I had is, you guys did a really good job of last quarter helping us kinda break down the various drivers that went through that net fair value line item. And, obviously, it was a negative $11.8 million this quarter. And I know that security date or the securitized 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: I'm gonna let you do that with the numbers and the debits and the credits.

Frank DeMaria: Yeah. That's fine. So, Tim, the previous unrealized gains, as Barry mentioned earlier, on the ALP loans was $35.1 million. So that was reversed. Which is the primary component, as you mentioned, of that $11.7 million. By reverse, Frank, you mean you mean written down to zero. Right?

Barry Sloane: In other words Correct. Written down the par. Set by the loss.

Frank DeMaria: That's right. Written down the par and the loss are sold in that. I got a couple of investors. See, you're double counting in oh, we're not double counting.

Barry Sloane: That's alright. No. That's okay. They were written down, as Barry mentioned, certain for the securitization. That ultimately results in a net gain that you see about $32.4 million on the value of the equity interest.

Tim Switzer: For the for the quarter, the ALP loan gains were about $6.3 million. So that kinda helps offset It's part of the offset of that loan of that loss as well as the 7(a) on guaranteed loans that are also being held on the books before they before they get sold.

Tim Switzer: Okay. Great. Thank you, guys.

Barry Sloane: Thank you. You're welcome. And, Tim, also, 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 a good chunk of the bank's held for investment portfolio being fairly mature, Pay higher accruals Barry, think we lost you there. You may have to repeat that.

Operator: Pardon me. Please stand by. Mister Sloan, are you able to hear us? Pardon me, please stand by. Your conference will resume momentarily. Hi, mister. Sorry. I think you're back.

Barry Sloane: Operator, are we reconnected?

Operator: Yes. Are you able to hear us again?

Barry Sloane: I hear you. Yeah.

Operator: Okay.

Barry Sloane: 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. 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. 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 nonaccruals roll into the into the book. We do believe that will pick back up. It's expected. We're reserved for it. The reserves are basically calc 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: Thanks. Good afternoon. I just want to follow-up on the net gain in residual and securitizations line. So $32 million in the quarter. I'm just curious on the go forward there. Will those only occur when you do ALP securitization Just curious what's changed there and then what we should expect going forward.

Frank DeMaria: Yes. That is Frank. You can answer the question. Yeah. I was gonna say, so what's changed there is this is the first time that Crispin, that we've done this and own a 100% of the residual in contrast previously, we were doing those through fifty joint ventures. So the difference there is those would go through that joint venture. And non-controlled interest line. We do we do anticipate doing these types of structures in the future, but that's the difference there between the two prior ALP securitizations.

Crispin Love: Okay. Alright. Thanks. And then just on the SBA rule changes that went into effect June 1, you cited the margin impacts, the gain on sale margin impacts. But I'm curious on volumes. Would you expect a drop-off in volumes in the 7(a) product Curious on just your overall thoughts on the changes and then if you've seen any noticeable differences in the past couple of months since they went into effect.

Barry Sloane: Crispin, this is a good question. I don't believe for our purposes because it's very different. The nonbank 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. We're very proud of the fact that we are totally comfortable We're not changing our guidance for a billion dollars of 7(a)'s for the year. Now by the way, when I say we're going to $1.10, 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 are less of an issue today, I think slowed down the borrowing appetite of a lot of customers. And that's beginning to change when you see these tariff deals People are more optimistic. We feel pretty good about the second half of the year.

Crispin Love: Great. Thank you, Barry. Appreciate taking my questions. I'm Frank too. Thank you.

Operator: Thank you. And as a reminder, to ask a 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. 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: Hi. Good afternoon.

Barry Sloane: Hey. Afternoon, Steve Barry.

Steve Moss: How's it going? Barry, maybe just starting with the extended holding period for 7(a) loans kinda curious, like, you know, how do we think about that? Is that just you know, a small timing difference, or is it gonna be know, a little longer in duration? I think you're you're referring to the NPLs. Right? Non-performing wells? Oh, I thought I maybe I misread that. I thought I read there's a little extend period for holding 7(a)s Oh, you're 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.

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

Steve Moss: 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 billion in SBA originations for the current year expectation? Correct.

Barry Sloane: Yes, sir.

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

Barry Sloane: Hopefully, flattish. I think, when we looked at our expenses for Q2 2025, versus Q2 2024, 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 come I would say flattish would be a good guesstimate.

Steve Moss: Okay. Got you. And maybe if we could just go back to the net gain on residuals and securitization. So you had $32.4 million you know, is you have you're holding the entire residual, which to me looks like that was $32 million based on the bullet where you closed a $184 million securitization. Backed by $260 million in out loans. So, basically, am I thinking about this correct? It's like, you hold the equity interest, You're judging what the cushion is. Terms of that $32 million. Extra cushion, and you are putting up 14% discount. Did I hear that correctly?

Barry Sloane: 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%.

Frank DeMaria: Okay. And, Steve, the book value, I believe, is around $35 million.

Steve Moss: Okay. And we look at this a variety of different ways. One of the things I think that's important is as you as that portfolio seasons, okay, two things are gonna happen. You're getting closure 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: Okay. And if you look at the valuation, it's approximately five and a half times income.

Steve Moss: Okay. That's everything for now. Thank you very much.

Barry Sloane: Thank you, Steve. Thank you.

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

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

Barry Sloane: Yeah. Are you where should we expect the reserve ratio to go? It's and that's allowance relative to period-end loans. Yeah. That's a good question. You know, and the other thing too, and I do appreciate the question. 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. 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 do believe that for the most of the calendar year, probably gonna be I'm gonna give you a range four and a half to five and a half. 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 7(a) business.

Matter of fact, I think the 7(a) business currently accounts for about 90% of the total provision. Think it's about 92%. Yeah. In the past, the regulators viewed loan loss provisions as reserve capitals or capital as well. And they sort of put the brakes on banks in terms of not overprovisioning. Are you seeing from the regulators that they're giving you more flexibility in terms of how much you're willing to provision?

Barry Sloane: It's another good question. Frankly, know, we've been in the banking business now for ten quarters, and all people said, oh, gee. You know, the regular listen. It's been a very solid relationship. They haven't like, the three little bears said it's too hot or too cold. 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 at 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, And I and 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. After doing this for twenty years, we think this is the right provision.

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

Barry Sloane: I don't know. I think we're the Rodney Dangerfield of stocks right now. So no. I tell you the truth. The dividend is very healthy. And I think we be more likely to do other things than increase the dividend at this point. I mean, 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 We'll get people to better understand what we're trying to do. It's 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: Okay. Thank you for thanks for the answers.

Barry Sloane: Thank you. Thank you.

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

Mark Silk: Okay. Here we go, Barry. You got you hear me now?

Barry Sloane: Yes. Right. Okay. I think I'm John Mark.

Mark Silk: Yep. Switch from a from a cell phone to a landline. For question number one, as a shareholder, I'm perplexed that your stock trade to the PE around five or six while the industry trades higher. You explain why you think that is?

Barry Sloane: I think we are we're different for unique. We're also getting better at telling our story. We put out a lot of information. That's just a lot of parts to what we're doing. Part of it is because we're disruptive. Here's here's an 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 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.

I mean, 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 they're doing deals with banks. They're really doing syndicated bank loans. Or leveraged bank loans. 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? 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. That's what 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. But we're making money. We've got capital. And we're gonna continue to do this.

And, you know, 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. We don't we don't score as well as I would like to have scored.

Mark Silk: 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? Are you getting new bank accounts because of payroll processing and the payment processing. You know, 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 you know, 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: 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, or two accounts. Important to note, we're not charging people. There are no fee 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? At zero fee and provides better analytics upfront. Same thing for payroll. Same thing for lending.

So having these things fully integrated very important, 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. We then contact them and tell them it's available. They then sign them the application to activate it. But now we could show hey. You don't have to go further. It's available. Here's the great cost. Here's the great integration. Here's the great analytics. Come look at the new tech advantage. So we give the customer an advantage to putting all these things together.

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.

Mark Silk: Okay. That sounds interesting. Thanks for answering my questions.

Barry Sloane: Thank you. Thank you.

Operator: 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: 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. 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.