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Date
Wednesday, Oct. 29, 2025 at 4:30 p.m. ET
Call participants
President, Founder, and Chief Executive Officer — Barry Sloane
Chief Financial Officer, NewtekOne (NEWT 2.58%) — Frank DeMaria
Chief Financial Officer, Newtek Bank National Association — Scott Price
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Risks
Barry Sloane stated, "we can't live by the previous guidance given the basis of the government shutdown," indicating risk to near-term earnings predictability due to SBA operational uncertainty.
Management noted elevated nonperforming loans, with NPLs totaling 8.1% of loans—“which is fairly high compared to Community Bank or the banks that you typically look at,” according to Barry Sloane, explicitly acknowledging above-industry levels.
Sloane observed, "it's gonna be a much harder business to do business" due to recent changes in the SBA program and participant exits, suggesting a more challenging origination environment ahead.
Takeaways
Net income per share -- Basic EPS of $0.68 and diluted EPS of $0.67 for the quarter, and basic EPS of $1.57 and diluted EPS of $1.54 for the first nine months of the year.
EPS and revenue growth -- EPS increased 47% for the quarter compared to the prior period and rose 22% year-over-year for the first nine months. Revenue grew 19% for the quarter and 16% year-over-year for the first nine months.
Tangible book value per share -- Increased from $6.92 at the start of 2023 to $11.22 as of the quarter, after paying $0.76 per share in dividends during 2025.
Deposit growth -- Sequential increase in business deposits by $52 million (17%) and consumer deposits by $95 million (12%), achieved without branches, bankers, or BDOs.
Alternative loan program (ALP) securitization -- Plans to execute the largest ALP securitization to date in Q4 2025, targeting $325 million-$350 million in loans.
Capital raises -- Issued Series B preferred and common equity, increasing tier one capital by $80 million and common equity tier one by $30 million during the quarter.
Efficiency ratio -- Holding company efficiency ratio declined to 56.3 from 61.8.
Return on average assets -- Achieved a 3.15% return on average assets at the holding company for the quarter; at Newtek Bank, ROAA reached 3.57% for the quarter with a return on common equity of 32% for the quarter and efficiency ratio near 47% for the quarter.
Net interest margin (NIM) -- NIM at Newtek Bank was 5.4% for the quarter.
Allowance for credit losses -- Holding company allowance stood at 5.42% of loans for the quarter, supporting a loan-to-deposit ratio of 95% and 78% insured deposits for the quarter.
Nonperforming loan adjustments -- NPLs totaled 8.1% for the quarter, but adjusting for the wind-down NSBF (nonbank SBA lender) portfolio reduces NPLs to 3.8% of loans for the quarter.
NSBF loss trend -- NSBF segment loss decreased to $14 million in 2025, on track for an $18 million-$20 million loss for calendar year 2025, compared to $20.7 million and $28.7 million in 2024.
ALP loan characteristics -- ALP loans have a 47% weighted average LTV, weighted average gross coupon of 13.17%, and prepayment penalties for up to 48 months.
Securitization spread margins -- Recent ALP securitizations produced a 496 basis point spread after servicing fees for the 2024-1 deal, and 568 basis points for the most recent deal, with no transactional cost for deposits in this structure.
Subsidiary contributions -- Payment processing is expected to deliver $16.5 million in pretax income in 2025, the insurance agency is expected to contribute about $800,000 pretax, and the payroll business is expected to contribute about $600,000 pretax.
Deposit cost and coverage -- Average deposit cost was 3.72% for the quarter, with management targeting a potential reduction in deposit costs to 2%-2.5%, depending on cross-sell effectiveness.
Loan diversification strategy -- Management is increasing exposure to CRE and C&I lending to balance the current 89% concentration in SBA 7(a) loans.
Leverage ratios -- Holding company leverage ratio is about 12.5%.
Dividend policy -- Sloane stated, "it's possible but unlikely that we'll increase the dividend in the near term" and signaled share repurchases may take precedence over dividend increases.
Planned product launch -- Upcoming "NewtekOne Triple Play" will offer customers an unsecured credit line up to $10,000, a bank account, and merchant or payroll services in one bundled solution.
Summary
Driven by technology-enabled deposit gathering and loan production, NewtekOne management confirmed preparations for the company's largest-ever alternative loan program securitization and highlighted strategic capital actions supporting growth and resilience. Risk commentary centered on elevated NPLs, the government shutdown's impact on guidance and SBA lending, and anticipated SBA sector headwinds. Diversification efforts target reducing heavy SBA concentration by growing CRE, C&I, and ALP originations, while cross-selling subsidiary services enhances deposit stability and earnings contribution.
Sloane acknowledged that "we believe our data will show that." NPL trends are stabilizing as new portfolios season, but emphasized reserve sufficiency and adherence to plan.
Frank DeMaria explained that quarterly fair value-linked revenue volatility is tied to ALP loan originations and inventory buildup ahead of securitization closes.
Sloane described the company’s ability to acquire deposits below the risk-free rate without traditional branches, positioning this as a unique efficiency enabled by integrated product offerings.
Management is planning an analyst day in December or January to provide updated forward guidance and additional strategic clarity following the three-year anniversary as a bank holding company.
Recent sector exits by competing SBA lenders are explicitly acknowledged, with management positioning NewtekOne to capture future market share as others withdraw from SBA programs.
Industry glossary
ALP (Alternative Loan Program): NewtekOne’s proprietary non-SBA term loan platform, featuring securitizations funded by institutional investors and targeted at larger, higher-quality business borrowers.
NSBF: Legacy nonbank SBA lender subsidiary, now in wind-down mode, with loan portfolios held outside the regulated bank structure.
NPL (Nonperforming loan): A loan where the borrower is not making scheduled payments, including both past due and nonaccrual balances.
7(a) loan: U.S. Small Business Administration’s primary loan program providing working capital to qualified small businesses, often with partial government guarantees.
CRE: Commercial real estate lending, typically secured by income-producing property.
C&I: Commercial and industrial lending, generally for business purposes not secured by real estate.
CECL: Current expected credit loss, an accounting standard requiring forward-looking loss estimation at loan origination.
PLP: Preferred Lenders Program, SBA designation granting lenders streamlined approval authority for 7(a) loans.
NIM: Net interest margin, the spread between interest earned and paid, expressed as a percentage of average earning assets.
Efficiency ratio: Noninterest expense as a percentage of revenue, measuring operating efficiency.
Full Conference Call Transcript
Barry Sloane: Thank you, operator, and welcome, participants, to our Q3 2025 Financial Results conference call. I'm Barry Sloane, president, founder, CEO of NewtekOne, and Newtek Bank National Association. Joining me on today's call is Frank DeMaria, chief financial officer of NewtekOne, the publicly traded holding company. Stock symbol NEWT on the Nasdaq, and Scott Price, our chief financial officer of Newtek Bank National Association. We certainly appreciate everybody attending the call today and the effort that you've made in analyzing and evaluating Newtek as an investment opportunity. I'd like everybody to try to focus today in addition to the great financial numbers that we put out, really look at the investment in NewtekOne from a business perspective.
How we raise deposits, how we make loans, how we're able to do this with low expense ratios in the marketplace, and really create what we believe is a business model for the future for a technology-enabled bank. Once again, focusing on technology and efficiency in a market that we clearly see is rapidly changing. Obviously, the focus on credit quality is important. I think we'll be able to demonstrate that holding company through the NSPF results. We have a slide to demonstrate that.
We're also gonna be able to focus on freezing deposits below the risk-free rate, which we also think there'll be future benefits based upon how we have ourselves situated in the new tech advantage, by performing payroll for our customers, merchant services for our customers, connected with a bank account, which we actually think is rare and unique in the marketplace today. In addition to that, as you could see from the press release we just put out, we have some outstanding numbers for return on average assets, on tangible common equity, efficiency ratio, and also, we're excited about approaching our three-year anniversary as a bank holding company, owning a nationally chartered bank.
And we're very pleased that we have been able to demonstrate our ability to manage the bank, manage risk, and hit all of our strategic goals and objectives importantly, according to plan. Investors that focus on what we're doing in the marketplace we believe, will be aptly rewarded over the course of time. We do believe that we really don't compare and contrast well to $300 to $500 million community banks. I just came from a conference sponsored by the American Bankers Association on small business finance and small business as a targeted marketplace. I met some of my competitors. We're just very different than them in every facet.
We'll try to bring some of that as we go through the call. Love for you to ask questions. Why could we grow deposits below the risk-free rate without traditional bankers and branches? Why are NPLs higher? Important to note, they're higher but we're still profitable. And, also, why are these three things that we do very well gonna continue, such as raising deposits below the risk-free rate, being able to do loans with our lending operating system in remote locations, as well as the important progress that we've made in our alternative loan program. We'll focus on that today. For those people following along, please go to newtek1.com. Go to the investor relations section.
Where you can find the PowerPoint presentation. Please go to slide number two and note the statement regarding forward-looking statements. Make sure that gets absorbed. Go to slide number three. Important always to reemphasize the mission of the company. Because at the end of the day, it always gets down to the customer. To do a good job for the customer and there's good margin in your business, you're gonna do well for all your stakeholders. Our mission has not changed since the company was formed in 1998. Which is providing business and financial solutions to independent business owners, all across The United States.
Within this mission, and recently acquiring a bank and being a bank holding company, we've opened up 22,000 depository accounts in our window of time. And we have 10,000 borrowers in our database that we've been able to do. Remotely without traditional bankers, brokers, BDOs, or branches. We do payroll for 20,000 employees. We're processing electronic payments for over $5 billion on an annualized basis. On slide number four, once again, focusing on who we are, and our mission statement. Take a look at Newtek being a technology-oriented financial holding company. We look at that particular organization as we are now also a depository. That's important to note. We do not wanna be compared as a community bank that's traditional.
We don't look like one. We don't compare like one. And what we really do well is acquire customers cost-effectively, service their needs with great margin, and make loans on a risk-adjusted basis. We manage credit risk. We don't avoid it. So if you look at our financial statements, we typically have higher reserves. We also have higher nonaccruals. But on a net basis, after that expense, we're still extraordinarily profitable. So in January 2023, Newtek acquired what is now known as Newtek Bank National Association, add depository solutions. We use proprietary and patented advanced technological solutions to acquire customers cost-effectively. We receive about 600 business referrals that are unique a day.
And we have a full menu of best-in-class on-demand solutions our customers they want you on demand. A typical entrepreneur and business owner doesn't necessarily want you from nine to five Monday to Friday. They want you on Saturday. They want you on Sunday. They want you in the evenings. We service as independent business owner clientele, which is extremely important. When you go to slide number five, and focusing on this target market of independent business owners, SMEs, SMBs, small and medium-sized enterprises, small, medium-sized businesses. There's more than 36 million business owners in The US according to the SBA. According to US Chamber of Commerce, represents 43% of US GDP.
And according to the Small Business Administration's website, through the last five years, we have been able to support or stabilize over 110,000 jobs which is the second highest amount of jobs supported by all the lenders in the SBA seven a program. We think this market is important. We think it is valuable. We do know that the top four banks and many other financial institutions based upon what I saw at these recent conferences are trying to figure out how to bank this particular customer base and they have to go beyond just getting their deposits which they typically take in a non-interest bearing fashion.
We do that for this customer base, and we believe we're being rewarded for that. Slide number six talks about those nuts and bolts that we all like to focus on. We take our slide rulers out and our compasses and our protractors and look at all these nice numbers that we've got. So we have a very healthy Q3. And 2025 earnings and revenue growth. When you look at Q3 basic and diluted, 68 and 67¢. Over the course of the first nine months of the year, a buck 57 and a buck 54. The growth rates are up 47% comparatively and 22% when you look at that year-over-year comparison with revenue growth of 19 to 16%, respectively.
Important trends in book value. $11.72. Mind you, we started off in 2023, with tangible book value of $6.92 per share and that's growth to $11.22. So a tremendous growth in tangible book. All the while, we pay the very healthy dividend to our shareholders. Currently 19¢ a quarter or 76¢ for the year. We've also experienced continued success in growing core deposits. Business deposits sequentially over the quarter of $52 million or 17%, Consumer deposits climbed $95 million or 12%. We're growing deposits without the use of branches, bankers, brokers, or BDOs. Next bullet talks about a very important category, which we refer to as our new techs. It's Newtek's alternative loan program.
In our alternative loan program, we finance that through securitizations. Use securitizations to be able to better asset liability match these longer-term duration-based assets. We are currently expecting an ALP securitization in 2025 that'll be our largest to date. The range here of $325 to $350 million of ALP loans will clearly be our biggest. This will be the seventeenth securitization in NewtekOne's history. And fourth in this particular category. We're excited about it. We look forward to bringing it and, should be a very profitable endeavor for all of our shareholders. Capital position, bolstering capital structure simplified. In the recent quarter, we were very pleased with the capital that we raised. We issued series b preferred in common equity.
We boosted tier one capital and common equity tier one by roughly $80 million and $30 million, respectively. We're very pleased that we're able to boost our capital ratios to support the growth rates that we're doing on a safe and sound basis. Regarding operating leverage, our efficiency ratio declined from 61.8 to 56.3 at the holding company even with assets up 43% but operating expense is only up eight and a half percent. Our return on average assets for the quarter was 3.15% and continued to trend well ahead of the industry. Payments, payroll, insurance, additive to earnings, good value proposition. We'll talk about that. Within the confines of the presentation today.
But also importantly, they're very additive to our deposit gathering. Function, and they bring tremendous value to our business customers. If you're doing business with ADP, for example, you're not really connected, to an ADP bank account because they're not a bank. If you're doing payments through Worldpay or Fiserv, you're not really connected to a bank. With us, we give you one solution, fully integrated, with a dashboard called the new tech advantage that gives you transactional capability, analytics, and data to be able to manage your transactions. So one other important item for Q3 financial highlights in NSBF, that is our nonbank lender that is in a wind-down mode, this is leftover from when we were a BDC.
This is held up at the holding company. The loss in this business, because it is not originating, it's in a wind-down mode, keeps going smaller and smaller. We've got a slide to accentuate that. So we had a $14 million loss for 2025. In 2024, the full year's loss was $20.7 million. So we're probably trending to an $18 to $20 million type loss. That is gonna continue to decline over time, we have a slide to focus on that. On slide number seven, we could focus on the Q3 2025 financial highlights. We talked about return on assets, return on equity, return on tangible common equity, efficiency ratio. All very, very strong, particularly compared to industry standards.
I would like to point out that our NPL's total loans at 8.1% which is fairly high compared to Community Bank or the banks that you typically look at. But I think it's important to note this has already been written off or written down. So the important part to notice is as we're building new portfolios, these numbers are stabilizing, and we believe our data will show that. When you adjust for the NPLs, it's 3.8%. That'll be taking out the NSPF portfolio, which was probably underwritten during one of the most difficult times for small business finance. 2021, 2022, and 2023. Going through that zero rate environment with Prime was 3%.
We know Prime went up to eight and a half at some point, now it's starting to come down. But when we think it's finally at our back, we're experiencing lower provisions. And we believe this is stabilizing and will be less of a headwind going further. Slide number eight, Newtek Bank National Association, the financial highlights, please go to the last column, Q3 2025. ROAA, 3.57. Return on change of common equity, 32%. Efficiency ratio, rounds up to forty seven. NIM, 5.4%. I look at the NIMs, some of the top four banks, just towards that. This is that reoccurring benefit that you're gonna get as we begin to bill a bigger and bigger portfolio at the bank.
Needless to say, at the bank, we're dealing with CECL, which is negatively biased us currently because you have that big charge up front and you don't get that high coupon from this particular portfolio until over time. So I think that due to the negative type of accounting machinations from CECL, this will be more beneficial as time goes on as we begin to use the balance sheet more, particularly with SBA seven a lending, keeping some loans on our balance sheet, not selling them all off, that's the strategy that we've seen other people in the space being quite successful with.
Look at our quarter over quarter loan growth, 9% held for investment, deposits up 11%, I'm reading research reports from other banks, size that were being compared against. They're growing two, 3%, and they're getting rave reviews. Don't know what the problem with us is, but we'll keep doing this, and I'm sure we'll get there eventually. Look at our capital ratios. Very strong. 11 up to close to 15% on the three. Key leverage ratios. Once again, very important allowance for credit losses. 5.42%. We have the reserves that will be able to support higher losses and higher charge offs. Slide number nine, tangible book value per share growth. We talked about this earlier. Real tremendous increase.
All the while, we paid a healthy dividend out to our shareholders. Of 76¢ on annual basis. 19¢ per quarter. But you can see tangible book value increasing materially. From 6.92 to $11.22. Really, we're very proud of growing this tangible book value number. Slide number 10, deposits. We talked about the growth in deposits. We're currently at about 3.72% on deposits. Think that number can maybe get down to two to two and a half percent. That's gonna depend upon the merchant business and the payroll business. And the insurance agency and the lender. Helping chip in and embracing clients to give us the depository account all of the other things that we do.
From a risk standpoint, 78% of our deposits are insured. Very valuable. With a loan to deposit ratio. Of 95%. Slide number 11. Alternative loan program. Extremely important to NewtekOne. This business is currently done up at the holding company. It was developed in 2019. Historically, our charge off have been below 1%. I believe they had $5.7 million of charge offs historically. $720 million of total loans originated. Important to understand what this program is about. We have a funnel to lend money to businesses. When the referrals come in, the customer doesn't know what the best loan might be for them. It could be a revolver. It could be a 7 a loan.
It could be a $5.00 4 loan, or it could be what we refer to as the Newtek alternative loan program. Which has similar characteristics to a 7 a in that it's got a ten year or twenty five year fully amortizing amount of principal with no balloon, but the credits are much, much stronger. We have guarantors that range from 5 to $100 million. On AOP loans. Our average loan size is about 4 to $5 million. So great growth opportunity. You know, if you do 200 units a day on loans, it's a billion dollars of loans. So we do believe there's great growth opportunities here. As we'll show you in slides going forward, very profitable opportunity.
It's important to note that Newtek, unlike these other three to five hundred million banks, make loans and sell them. Or sell them into securitization vehicles. Other banks hold them. One of the reasons why they hold them is they can't replace them. We have a machine that makes loans and sells them. We have a machine that acquires deposits. This machine has been going on for over two decades. Except for the depository side, obviously. That's somewhat new, but we're showing that we're able to acquire deposits at attractive rates. I think it's extremely important to be able to analyze this alternative loan program business. As I mentioned, we're about to do our fourth securitization in Q4 2025.
The biggest ever. On number 12, this will give you an idea of what the metrics are. For these types of loans. First of all, high FICO scores. Weighted average LTV in originations, 47%. Debt service coverage on average, 3.4 times. Weighted average gross coupon, thirteen point one seven. And we say weighted average spread to the base rate. The base rate is the five-year treasury. So these loans are typically fixed for five, and then they adjust at the margin. They're flawed at the initial rates. They can never go down. They also have prepayment penalties of 5% in the first thirty-six months, and then 3% in months thirty-six to forty-eight. So these are not prepaid.
We want that spread income. To be kept over a long period of time. So we talk about diversification in states. Diversification in industry, let's go to slide number 13. So we have these securitizations on our books. On slide 13, the 2022 dash one deal that's been paid off. So we wound up having all the cash flows behind the bonds repay the bonds. So the bonds don't exist. The security holders are very happy. They got their money back. And we're able to roll these loans into a new transaction. The 2024 dash one was our next deal. That was done with a joint venture partner. Similar to 2022 dash one.
So you could take a look at the AOP loans, the weighted average yield, notes and securitization, the spread the weighted average rate, of six seventy two. Now the important part is the gross spread before the servicing fee and after the servicing fee. So we're the servicer. It's a good servicing stream because of the call protection. The servicing lasts for a long period of time. 496 basis points on twenty four dash one. On the recent deal, it was five sixty eight. We believe that the spreads we're gonna be getting are on the next deal, be closer to the five sixty eight.
So you could see once you put the business on and the loans go into securitization structure, there's no costs. So we're leveraging the infrastructure across the entire business line and putting these loans in. So there's not a transactional cost for deposits. So the cost of funding is greater in a securitization, but it's match funded. So you don't have to worry about interest rate risk. But look at that spread margin. If I was to go to a banker and say you can get 568 basis points, of spread that's after the servicing fee. And there's no cost associated with it. They would say, where do we sign up? Well, good news, we have it. It's our program.
We have a track record. We have alliance partners that are getting more and more familiar with the business. And we believe this will be a growth area for the company going forward. Slide number 14 gives the status of the three completed ALP securitizations. 2022 was gone. 2024 is on the books. 2025 dash one on the books. This will give you a feel for the original balances, the notes paid down, and whether we did this with a partner or not. By the way, the partners in the joint venture partners in the deal they invested side by side with us from first loss. So we do know where these valuations trade. And we mark them appropriately.
All this data is in our queues. It's a 14% yield. With a 15% frequency over the life of the pool and a 20% severity to get you to a 3% historical charge off. That's how we come up with our valuations. Slide number 15, Newtek Bank National Association credit quality. We think this is an important slide because it will show you that we're be as this portfolio is seasoning because mind you, we took over the bank. It was $180 million of total assets. Today, I think we're looking at about $1.4 billion of total assets. So we're building a new portfolio.
But as you're building a new portfolio, particularly in the types of loans that we do, these aren't car loans. These aren't residential mortgages. I mean, most of the seven a loans have these types of characteristics. So you do have a ramp of NPLs and charge off, but this is starting to level off. Most importantly, allowance for credit losses we believe will adequately cover the NPLs. So we're pleased with the performance. There's no surprises here. This performance is done according to the plan. So for those that were concerned that we're not gonna make it, I don't fully understand the marketplace here. We have people rooting for us. We have people rooting against us.
Reaganst this over, of course, twenty five years is not a good bet. We're very pleased with the management team, with the relationship we have with the regulatory authorities, with all of our providers and warehousing lines, securitization investors, we just came back from an ABSE's conference. We had 34 things in two days. We couldn't be more pleased with how the business itself is performing. Slide number six, the SBA seven a loan portfolio, Newtek Bank. The big issue here is there is a concentration in seven a. Particularly with respect with respect to the allowance for credit losses combining for 89%.
We believe that we're gonna begin to layer in more CRE more C and I, into the bank portfolio and that will level off. And we're very pleased about that initiative. And that is also according to plan. Slide number 17, we talked about NSPF. That is the old nonbank SBLC, Small Business Lending Corp, licensed nonbank SBA lender. Some of you may not know that when we acquired the bank, we were not able to put these assets into the bank because of the debt. These loans are sitting in securitizations. There are three securitizations right now that exist 2021, 2022, and 2024.
Although the 2021 is callable and will look to try to do something, with that cleanup call shortly. But this is the legacy nonbank subsidiary. Holding a portfolio in wind-down mode. No. The increase in nonaccruals from Q3 2024, this is declining. Extremely important. This is still increasing. But it's increasing at a lower rate. The aging of the portfolio these are seasoned loans. They are less likely to default. The accruing portfolio of 02/2015, is sitting at securitization with a $140 million of bonds against them. Nonaccruals of fair value, which will be liquidated over the next twelve to twenty-four months, $64 million that should get turned into cash. And be available for a bunch of things.
Dividends, share buybacks, paying off debt, and other things. NSBF equity, $156 million. Notice that the NSPF loans as a percentage of the total balance sheet of the consolidated balance sheet of NewtekOne is shrinking. Just Q3 2024 was 32%, Q3 2025 down to 16%. So this loss is declining materially. Once again, we talked about $28.7 million loss in 2024. Probably gonna come in at $18 to $20 million for this calendar year. And the performing loans are also paying down. So when they pay down, if they're in securitization, they pay off the debt. When they're outside of securitization, think we have about $55 million of those. That's canceled and pushed right to the subsidiary.
And we do believe the nonaccrual inflows in the portfolio they've decelerated for five consecutive months, we're pleased about that as well. Slide number 18. Operating leverage being captured. This is all about the efficiency ratio. Declines were sixty one point eight. 56.3 and that's at the holdco. At the bank, I think we're at 46 or 47%. We're pleased with that as well. This is all while total assets are growing, revenues are growing, but operating expenses are not growing. As higher rate. Slide number 19 talks about the subsidiaries.
Our payment processing business, we expect to contribute and we also 16 and a half million of pretax income in 2025. are looking for greater contribution from a deposit perspective have some of that data going into the next quarter. Insurance policies, 10 policies in 2025, it's up 34%. Year over year. That's the total cumulative policies and we expect the insurance agency to contribute about $800,000 of pretax. The payroll business contributing about $600,000 of pretax, payroll clients, $8.60, but there's 20,000 employees. That we're doing payroll for. And that business is growing nicely. All these three things are great complement to a depository, and they should be part of the total treasury management system.
Which we have through the Newtek Advantage. So we all believe that these business lines should continue to contribute growth in business deposits and bring in sticky, more attractive deposits. One last item, we will be launching a new offering, not a new product, but a new offering, a NewtekOne triple play. Which will give a customer an unsecured line of credit for up to $10,000 provided they are credit approved. Any merchant account or a payroll account. So you get a line of credit, you get a bank account, and a merchant payroll account. All at the same time. Newtek Ones Triple Play. Last slide, number 20. We talked about this.
The capital that we raised in this particular I'd say, recent quarter, and Patriot Financial, we appreciate their investment exchanging $20 million of the series a convertible and an additional $10 million cash investment for shares. And those shares are locked up for twenty-four months, Patriot sits on the board of the bank. They have a pretty good bird's eye view. We really appreciate a sophisticated institutional bank investor having faith in our organization. Second, we issued $50 million of fixed reset noncumulative preferred federal stock. $50 million at issuance, and we also refinanced the merchant business, Newtek Merchant Solutions, through Goldman Sachs alternatives, $95 million financing solution.
Took out, I believe, it was about a little over $30 million of financing. That gives us plenty of cash capital going into 2026. To be able to pay off our unsecured debt of any WTZs, and other obligations in the future. We are very well positioned going into 2026. And with that, operator, I'd like to turn this over to Q&A where I'll have my CFOs and my hope to answer any questions we might have from investors. Or analysts.
Operator: Thank you. So at this time, we will conduct the question and answer session. As a reminder to ask and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Tim Switzer of KBW. Your line is now open.
Timothy Jeffrey Switzer: Hey, good afternoon. Thanks for taking my question. First one I have is just on credit trends real quick. Could you guys update us on what you're seeing in the market? There's obviously been some disruption and a bit of a credit cycle, and curious, are there any certain areas where you're seeing more pressure in terms of like industry or geographies relative to others?
Barry Sloane: Yeah. So, Tim, I think regarding credit trends, we do believe this is an economy of haves and have nots. I think that's kind of been the case for a while, and I think we've experienced quite a bit of stress and strain and uncertainty in the small business community. With rates spiking up, obviously, we're starting to get that rate relief. We appreciate the drop in rates today. As well as the inflation pressures. We are staying away from the volatile businesses and volatile industries where they are commodity-based. Anything that relates to oil and gas, transportation is a difficult category. And clearly agriculture. So anything that's related to those particular industries, we're staying away from.
The consumer side is still pretty strong. As long as we have an equity market, and a home real estate market where values are holding or appreciating, think that spend will continue. And we do believe that our portfolio primarily driven by the seasoning, is flattening out. Mind you, we've been a lender in this space for over twenty-five years. So we know it well. We've seen it in high rates, low rates. Inflation, deflation. We have a pretty good feel for it. We also get a very good sense from our portfolio of customers and payment processing and payroll and things of that nature. So we have a very good cross-section of credit. And see, what's working, what's not.
Timothy Jeffrey Switzer: K. That's helpful. And then there's no slides on updated guidance this quarter. Are you still confident in the previous guide for $0.65 to $0.80 for Q4?
Barry Sloane: That's a good question, Tim. I would say this. Right now, we have a government shutdown. And if the government gets open within two weeks, I wouldn't see any dramatic changes. But then again, I can't bet on that. This is a pretty volatile uncertain. So we don't have a reason to pull the guidance. But hopefully, people invest in us, not necessarily on what happens in the fourth quarter. But from a standpoint of the business model, looking at book and things of that nature. But just to be totally fair, we can't live by the previous guidance given the basis of the government shutdown.
Timothy Jeffrey Switzer: Yeah. That's fair enough. Can you maybe elaborate on, you know, I think you're still able to originate or at least process some loans that have already been approved before the SBA shutdown. Can you maybe explain that? And then maybe provide a timeline on what's kind of the deadline on when your originations and ability to sell loans would actually start to be more challenged, if the shutdown lasted, you know, say, to, like, Thanksgiving or something.
Barry Sloane: Sure. So given that we've been doing this for a long period of time, September, you start to cover your portfolio. So you can estimate what's gonna be closing throughout the month of October. Maybe even in November. Although you can't get a guarantee number, we are still taking in applications. And there is also a provision in the SBA's SOP that allows you to bridge a borrower through a period of time and then roll it into a seven a loan. So it's very hard to predict whether this will affect us or not affect us. But we do know the ways to be able to get through these shutdowns.
Over, you know, more than two decades, we've experienced this, and we have all the tools. And we currently are providing bridge financing. To borrowers to enable to fund them into a bridge that will get taken out with a seven a loan.
Timothy Jeffrey Switzer: Okay. I got it. And then, the last question I have is, can you provide the tier one in total capital risk-based ratios for the holding company? I don't believe I saw that in the release or slide deck.
Frank DeMaria: Yeah. Currently, Tim, we're looking at about 12 and a half percent on leverage at the holding company. And just shy of six being at the for total risk-based cap.
Timothy Jeffrey Switzer: Okay. Thank you.
Barry Sloane: Alright. Thank you.
Operator: Our next question comes from the line of Crispin Love of Piper Sandler. Your line is now open.
Crispin Elliot Love: Just first, just following up on the shutdown. Barry, did you pull PLP numbers ahead of the shutdown in September for potential SBA seven a loans in your pipeline? And if so, kind of what type of volume could you do from those polls in the fourth quarter?
Barry Sloane: Don't have the second number. But we did pull product and know, that's pretty much covering loans that we had going forward that probably fund about forty-five days from the time we get the POP number. So, I mean, we're probably covered for half the quarter. But I also wanna point out, Crispin, that if you look at our mix of loans, it's changing. AOP, we've done more CRE. We've done more C and I. So you know, this is one of these times where I don't really wanna predict what Chuck Schumer is gonna do. Or Trump or John Thune or Mike Johnson. So it's a when I say it's a tough time, this is temporary.
This too shall pass. It's only a quarter. I know we're all focused on the next quarter, and that's we do when we look at these things. But this too shall pass. And frankly, it's made it difficult, and a lot of people have dropped out of the seven a space. Because of the changes in the SBA program. So know, we're sorry for other people's misfortune, but you know, we've been able to weather these storms over time. We'll be here for many years and many quarters after this one.
Crispin Elliot Love: Okay. Great. Thanks, Barry. And then just on the $29 million on loans under the fair value option that revenue line item in the quarter. Can you just discuss some of the key drivers there? What you might expect on a go-forward basis as it can be fairly volatile, especially with the large securitization coming in the fourth quarter?
Frank DeMaria: Yeah. Crispin, you're spot on. We're ramping up for the next securitization as you saw on that slide. We're looking at somewhere between $325 million and $350 million in capital. So a lot of that this quarter is related to that. And similar to what you saw last quarter, you will see kind of that, I'll call it, that slip, in the fair value line as we close the securitization and pull the residual onto the balance sheet. So you'll see that again, as you alluded to, the next quarter. But most of that is related to the originations and backing the inventory for the securitization.
And then to Barry's point, you know, some additional seven a guarantees that holding a little bit longer for, you know, for sale and, obviously, with the shutdown. But we plan to, you know, continue to sell those once the government reopens.
Crispin Elliot Love: Okay. Perfect. And then, yeah, just last point on I just wanna make something about the guidance, correctly. So you're not pulling the guidance, but not affirming the prior guide? Is it really just more of a timing issue whether that gain on sale revenue has been in four Q1 q, or beyond? Rather than anything more than that.
Barry Sloane: Can't comment on it. It's very difficult to forecast, and I really can't comment on it. This time. I mean, the one thing I could tell you know what, stock price with a 10 or 11 handle, does it really make a difference?
Crispin Elliot Love: You don't have to answer that, but that's my view.
Barry Sloane: No. Fair enough. I appreciate it, Barry. Thank you.
Operator: Thank you. Our next question comes from the line of Steve Moss of Raymond James. Your line is now open.
Stephen M. Moss: Good afternoon. Barry, maybe just you know, maybe on the SBA program from a higher level or just the business activity, just kinda curious, you know, what's your sense of customer demand or customer confidence? You know, I realized maybe the closure of the SBA makes it a little hard to get a read, but just kinda curious how you're feeling about the potential pipeline if you know, or potential activity within the space you want.
Barry Sloane: Steve, I think it's a great question, and it's you know, pointed to this particular market, which right now as we know, there are lenders that are leaving this space, and it is harder to do loans. I think when I was asked this question, last quarter and there was discussion about the changes that the agency had made whether it would affect originations or not, I didn't believe that it would. It has. It's in a tougher market. To do loans one particular area has to do with merchant cash advance and not being able to refinance a merchant cash advance loan.
And the second area has to do with anybody in the ownership chain, even if it's 1%, that cannot prove that their US citizen can't get an SBA loan. And I think you'd be surprised at the amount of participants that would apply that can't do it. Now we've also got customers that are coming to us that insist that they're citizens. They have the documented proof, but the database isn't saying that they are. So you can't make a loan. I will also tell you we've got people that were approving for financing. And due to the uncertainty in the marketplace, and tariffs, things of that nature, they're not taking it.
So I would just say that on a going forward basis, it's gonna be a much harder business to do business. We feel good about it. We feel good about our position in the market from a long-term perspective. But I think that where it was a very effervescent year from 10/01/2024 to 09/30/2025, I think you're gonna see some different numbers this in this kit this coming government fiscal year. From all originators. We finished off last year second to Live Oak Bank from SBA statistics. But I think that whole top 20 is gonna shake up quite a bit. We like the business.
We've been in it long period of time, we think it's a great program and a great product.
Stephen M. Moss: Okay. Great. Appreciate all that color there. And then the other thing I noticed was you're talking about diversifying the bank balance sheet here, adding more C and I and CRE. Just kind of curious, you know, what does that look like in the future, you know, the type of loan you're thinking about adding? Could some of the ALP loans end up on the bank balance sheet? Just any color there would be great.
Barry Sloane: Yeah. So Steve, I think that you know, diversification is extremely important. And there's a real lot of good opportunities for us in straight C and I line of credit. Type lending, and CRE type lending. One of the things we're gonna I'm gonna suggest to my team, I think we're gonna look to do an analyst day sometime in December or very early in January right after the New Year. And be able to reforecast out and give the analyst community investors some better guidance on a going forward basis.
But I think that when you look at total loan originations across ALP, CRA, C and I, line of credit, clearly, where historically, we were very much well known as an SBA seven a lender. It's the furthest thing from the truth. And we like the program. We think it's great, but it's gonna be part of a diversified approach. To really developing that franchise in the SMB marketplace. But I think SBA we're right now you know, the uninsured balance sheet it's probably, you know, 44 to 45. Not including what is going on at MSPF.
We would like that to come down a little bit, and we clearly wanna grow the alternative on program business dramatically from where it is today. It's very profitable. Credits are bigger. Customers are bigger. And the returns equal the seven a business.
Stephen M. Moss: Okay. And maybe on that point, just I was gonna go with my next question is on the app, sir. Business here. You know, it's clearly a big securitization coming. Is this kinda like what you expect to be more normal run rate in future securitizations? Kind of in this $300 million plus range? And maybe do we see more than two a year?
Barry Sloane: Quick question. I'd like to keep it at two a year, and the goal would be to get those numbers bigger. This is the first time we've ever done two ALP securitizations in the same calendar year. So I'd like to do two a year get the numbers bigger, bigger pools are better. There's more diversification. You get better receptivity from investors. So yeah, we I definitely appreciate the question and would like to do bigger deals. You know, it's an average loan size of 4 and a half to $5 million. So not a lot of credits. I mean, we'll do 25 to 2,700 credits now. It's just doing another 200 credits.
You know, it takes it takes a lot of effort to do a million dollar loan. Takes about the same amount of effort to do that bigger loan.
Stephen M. Moss: Right. Okay. That's helpful. And then in terms of know, you touched on your three-year anniversary here coming up in January. You know, kinda curious as to what potential flexibility we may see or we should expect after that three-year anniversary. If any.
Barry Sloane: It's a good question, Steve. I think you'll see you know, from a flexible standpoint, I think you'll see the business model all the things that we talked about, but I think you'll see my from my mouth to God's ears, better execution on the deposit side, better execution on the AOP side, in terms of more volume. But no real no change in the product mix, which is important. But I think you'll see I think you'll see a bank and a bank holding company that maybe you're more familiar with in analyzing the metrics. Than what you've seen to date? That's our goal. To just be able to provide more information, better information.
We're hopeful that we provide an additional information in this deck that will give people a better insight in terms of what we're doing. We wanna be at as transparent as we possibly can.
Stephen M. Moss: Definitely was a lot of information in this deck. I'm still trying to digest it. Maybe put it this way, with the three-year anniversary, you're 12 and a half percent leverage right now. You know, would you go down to, like, a nine or 10% type number in the next two or three years.
Barry Sloane: I think we do plan on using the balance sheet a little bit more and using more leverage, so I appreciate the question. It's not gonna be dramatic, but I think, you know, what's important, I think, Adu, yourself, investors, regulators, you know, they wanna make sure that we had the capability, the management team, the system, the software, the policy, in place. To be able to manage the business and manage the growth. We clearly had people that said to me, you can't grow this fast. You can't do what you're doing. Well, we're still here. And our plans are intact. As I've stated in many calls, we're on plan.
We're on plan with NPLs, with capital, with we're on plan. So with our three-year anniversary here, we're looking to continue to grow and hopefully get better recognition from the markets for what we've been able to do so far. So, yeah, I appreciate you focusing in on that time frame. Because it is important to us.
Stephen M. Moss: Okay. I appreciate all the color here, Barry. Thank you very much.
Barry Sloane: Thank you, Steve.
Operator: Thank you. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. Our next question comes from the line of Hal Goch of B. Riley Securities. Your line is now open.
Hal Goch: Hey, Barry. Thanks for taking the time. You mentioned on the call, and it's kind of a sector question, that some SBA lenders are leaving the market. And I was wondering if you could give us a little color on that. Why that is? And you have been taking share, I wanted to get your feel on the long-term outlook. For SBA lenders. Your ability to increase share. And the other question is just on the ALP side. Government shutdown isn't holding up the ALP program. Right? So correct me if I'm wrong, but then if it isn't, like, any can you give us a little color on originations for the first three, you know, three quarters of the year?
Or the fourth, third quarter and your outlook there if you can because that isn't being impacted. Thank you.
Barry Sloane: Sure. I appreciate it. So I mean, this is public information, May 1. Which was a top 20 lender. Pushed out of the market. I think their business went to an entity called Binesco. There were one of the SBA changes relating to limited underwriting score in Go. I think they dropped the cut from, like, 500 to three fifty. So a lot of competitors entered the space after PPP that were basically technology providers. And they really didn't provide the fulsome lending that's required in my opinion, a regulated environment. So, I mean, that's the only name that I could openly talk about in the public market because it's out there.
But we are familiar with several other lenders right now that basically have got to cut back. You know, we hear this and see this. From the interviewing process. With people coming to us, expressing reservations about what they're doing going forward. This does not affect the AOP business at all. And I think just from a volume standpoint for us, we might have a little bit of a degradation in the next quarter or two. In seven a volume, but we believe we'll be able to deliver good numbers from a market multiple standpoint and we'll be able to make it up. From an AOP perspective, we were targeting I think, between $350 to $400 million in AOP loans.
For this calendar year. And I believe that's what we'll hit. We hope to do materially more than that next. I don't have a number on that, but if I had to come up with a number, I would say $500 to $600 million, but I haven't really cleared that with my boss, Pete Downs, the president. And COO of the bank. He's the boss in that area.
Hal Goch: Okay. And if I could ask one follow-up, it seems like, you know, the loan the LTVs on the LP loans are quite good. Right? And you know, what are the pressure on the collateral taking for those loans, if you could?
Barry Sloane: Yep. One of the things Howard, will do is DBRS is the rating agency, and they put out a nice presale agreement. I'll make sure that we can get you a copy of those so you can get a description of what the loans look like, how they're underwritten, anybody that wants that. Please let myself or Bryce Row know. I'm sure DBRS would be happy to provide that. What goes into it is these are businesses that do have a business valuation, so we get a business appraisal. About 65% of our loans typically have commercial real estate liens behind them. If there's not a commercial real estate lien, we're looking at intellectual property.
We're looking at machinery, equipment, inventory. And most importantly, personal guarantees. So every 20% equity owner or greater must personally guarantee it. So in many cases, we're getting things like marketable securities, real estate assets. It could be residences. It could be investment in real estate property to all go into that LTV.
Hal Goch: Excellent. Thank you. The reason why these borrowers subscribe to these types of loans is because of the long amortization. You're basically giving them equity. Because they get to keep the principal for longer periods of time. And the flexibility in the covenants. Which we think I'll take a personal guarantee and lean on personal assets over a covenant that you're dealing with forty-five days in arrears after the fact.
Barry Sloane: Yeah. Excellent. K. Thank you, Barry.
Operator: Thank you. Our next question comes from the line of Christopher Nolan of Ladenburg Thalmann and Company. Your line is now open.
Christopher Nolan: Hey, Barry. Barry, what's your thoughts on increasing the dividend?
Barry Sloane: Good question, but always a tough one. We obviously have one of the best dividend-paying stocks in the market. As a shareholder, I'm a participant in that. I love the dividends. I would say, to be frank with you, we're not getting a tremendous amount of value for its dividend or the increase. I would say and this is not my decision. It's the board's decision who has to declare it I would say you know, if there was a choice of a or b and there's a choice c, which is do nothing, by the way. But if there was a choice a or b, we'd probably be more inclined to buy stock back than increase the dividend.
But we also might wind up with c, which is do nothing. But I think to answer your question, I would just say it's possible but unlikely that we'll increase the dividend in the near term.
Christopher Nolan: Got it. Great. I guess, you know, the capital ratios look awfully healthy, and, you know, kudos to you guys. Do you guys sort of get a nudge from regulators, whatever, to pad your capital ratios a little bit just because of the unconventional business model?
Barry Sloane: I would have thought that would have been the case. But the answer is no. You know, they know, they typically don't tell you what to do. They tell you what you can't do. So, no, no nothing along those lines. Although, be frank with you, that was a management decision. That we made during I guess, what I'll refer to as our maiden you know, voyage currently. So we're comfortable with it. We wanted to demonstrate to the market we're well capitalized. We've got generous allowance for credit losses. We know how to run a bank.
We've you know, as a nonbanker that's CEO of a bank, so I guess I am a banker now, we brought in really experienced people across the board. In every single area. And I think that's been good. Then not everybody works out. I've been asked if we're gonna have changes and all that stuff. And look, if I was to say, no. I'm not gonna change anybody in my management team, out, they lose their incentive. To work hard and deliver the results. So we're gonna continue to work on building this platform together, upgrading it, and I hand it all off to the management team of the company for delivering these results. They've done a terrific job.
And we do plan on using the balance sheet more. Utilizing more of the capital going forward.
Christopher Nolan: Final question. You guys sort of seem I mean, you have you have an unusual business model. It's highly profitable when it works properly. But you guys see well, while you're a technology bank, you sort of have one foot in technology. One foot in traditional banking. And, you know, when you start looking at models like LendingTree, which are much more focused on the user interface, mobile, and everything else less so on the back end, but you guys have the back end down.
Is that the direction we should see the model that you've evolving, or what are your thoughts on because it does your stock price values help if you start becoming a fintech, which actually has a bank behind it.
Barry Sloane: Mhmm. Yeah. So I love the question, Chris. I thank you for it. I first of all, I'm gonna put the names aside for the moment. But I look at organizations that are trading at pretty substantial multiples like a lending club. Or Live Oak or SoFi. And some SoFi is a little bit different, but some of these companies for the first several years, they flatlined. They didn't move. Until the market got comfortable with their model and then what they were doing and developed a better understanding. And then all of a sudden, it started jumping because some people don't feel the multiples match up or make any sense.
But when you think of LendingClub, they're prime I mean, they do small business lending, but it's not a huge number. Look like a company like Inova, which doesn't currently own a depository. It's trading at a multiple in the teens. And you look at our multiple. So I think that there's not a lot different than they're doing what we're doing relative to the returns on equity, returns on asset I just think this is a familiarity issue. But I will tell you, that the people that I meet with who spend the time and put the work in they like what we're doing. If you look at our shareholder base, according to Nasdaq, it's 52%. Of institutional.
I'm pretty confident that number is more like 65 or 70. So, you know, if you play around with the math, there's 10 million shares in the float, and there's 2.5 million shares short. Something just doesn't make a lot of sense here. But that's for other people to figure out. I mean, there are people that like the stock here. And there are people that obviously that don't like it because there's a big share there's a big share short. We'll figure this out. But in the meantime, we're building a great business. We got 22,000 digital depository accounts, 10,000 lending customers, 20,000 employees that we do payroll for. We move money quickly, efficiently, at lower cost.
Someone's gotta like what we're doing here. That's why at the beginning of my presentation, I said, please focus on the business. Do you like this business? If you like the business, you should like the stock.
Christopher Nolan: Okay. Thanks for the answer, Barry.
Barry Sloane: Thank you, Chris.
Operator: Thank you. Next question comes from the line of Ivan Jimenez of Greenholder. Your line is now open.
Ivan Jimenez: Hello, Barry. Thanks for the question. Hey, Adam. My question relates I just wanna understand the math right. You have $1.2 billion in assets. Am I correct? At the bank?
Barry Sloane: At the bank, it's $1.4 billion, I believe. At the holdco, it's 2.4 approximately.
Ivan Jimenez: Alright. And you started with t. Pardon me? Yeah. That's the market cap. You started with 3?
Barry Sloane: With 3?
Ivan Jimenez: You started with $300 million. Am I correct?
Barry Sloane: The National Bank in New York City was $180 million in total assets when we bought it approximately.
Ivan Jimenez: So in essence, your model has gone from a BDC that we used to have to raise money every quarter or whatever whenever you needed money. To basically depository. So that's your primary source of funds now. Am I correct?
Barry Sloane: Yes. It is. That's where
Ivan Jimenez: Of which 78% of that is guaranteed deposits. So these are deposits of less than the FDIC rate. Am I correct? So you don't have this risk of pullout.
Barry Sloane: Yeah. We have a deposit base in I think is about $1.2 billion. We still do have other liabilities, but more and more of the liabilities are gonna come from deposit gathering. We're gonna look to grow the balance sheet and the earnings of the bank.
Ivan Jimenez: Okay. That's that was my question. I just wanna make sure that I heard the numbers right. Thank you.
Barry Sloane: No. The growth the growth numbers are numbers that do not exist obviously, it's on a low basis. These are numbers that don't exist in the banking business. I read research reports. People are growing their deposits and loans by, like, one or two or 3%. There's, like, this is fantastic. It's great growth, and I'm kinda scratching my head going. Hey. What about me?
Ivan Jimenez: That's precisely correct. I just want the numbers I just wanna make sure that I heard right. Because to me, to numbers were important for me to model what I'm doing. Thank you.
Operator: Thank you. I am showing no further questions at this time. I would now like to turn it back to Barry for closing remarks.
Barry Sloane: I wanna thank everybody for attending. I really appreciate the work the analysts have done and the great questions, thoughtful. Insightful, forward-thinking both for us and the industry. And Bryce and I are always available along with Frank and Scott to be helpful and answer any questions you might have. So thank you very much.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.