NewtekOne, Inc.

Thank you for standing by, and welcome to NewTek One, Inc.' 's fourth quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. I would now like to hand the call over to Barry Sloan, President and CEO. Please go ahead.

Thank you very much, Operator, and welcome everyone to the fourth quarter 2025 Financial Results Conference Call. Joining me today on the call is Frank DiMaria, Executive Vice President and Chief Financial Officer of NewTekOne. For those of you that would like to follow the presentation online, go to NewTekOne.com, go to the Investor Relations section, and the PowerPoint presentation for today's event is being held there. I'd now like to ask everybody to go to slide number two of that presentation and note the forward-looking statements. To begin our presentation today, we're happy to report the results of Q4 2025 and the annual achievements for 2025, including two but are not limited to celebrating the three-year anniversary of NewTekOne owning and operating an OCC chartered bank. We're extremely pleased about the acquisition that was done in January of 2023. There's a very interesting slide on 24, which actually names several competitors in the space, SoFi, Libo, Triumph, Northeast Bank, and Axos. And if you take a look at those charts, you'll see how their stock price action moved over the first several years of their operation. and then it started to change direction. We'll talk about that later in the presentation. We're also celebrating today opening up 9,000 new depository accounts and 34,000 active depository accounts. We're celebrating the technology that we have built, particularly our digital account opening and our lending operating systems, as well as the new tech advantage. All of these off-balance sheet technological innovations are really important to serving our clients and being able to offer a true technology-enabled financial institution for independent business owners all across the United States to work with. We are celebrating our leading status as a lender to independent businesses. We refer to our lending programs as an adult loan, loans that have repayment of principal over 10 to 25 years, not the six-month to 24-month paybacks with 30% to 80% interest charges or effective yields to the customer. Lower monthly payments, patient capital makes these loans exceptionally affordable to our clients. We're celebrating many new hires that went that were added to the senior management team. Greg Devaney, chief credit officer of the bank. Chris Lucas, chief compliance officer of the bank. Frank DiMaria, chief financial officer of the bank. Andrew Kaplan, Chief Strategy Officer of NewTekOne, our holding company. We're also celebrating record earnings and revenue growth. I'd like to report that as a financial holding company, net income before taxes for 2025 is approximately $80 million of 16.4%. And our revenue, total revenue, is defined as a sum of net interest income and non-interest income, $284 million of 10.6%. over the 2024 number of $257 million. We're very pleased with how we did. With all that, I guess we can go right to the Q&A. Just kidding. Let's go to slide number three. So on slide number three, we particularly and historically have talked about the company's focus, which has been on the independent business owner, on SMBs, It's extremely important that the marketplace understands that this is our demographic. It is an underserved demographic and it's been NewTek's primary focus from its inception as a private company in 1998 and a publicly traded company in September of 2000. We believe we have better loans with long amortizations and more flexibility. We believe we have a better banking product with absolutely zero fee No asterisks, no ifs, ands, no buts. Better payroll solutions that are integrated in our bank account with a dedicated concierge person that you can get on camera. Our insurance agency offers a frictionless opportunity for our clients to access all forms of insurance, both personal and business. Going to slide number four, we talk about our financial structure and product solutions. Obviously, in our history, in 2000 to 2014 we're a 1933 act company in 2014 of november we converted to a bdc and in 2023 when we acquired national bank of new york city a 180 million dollar total asset bank that today is approximately 1.4 1.5 billion with the whole co consolidated assets 2.4 2.5 billion we have grown significantly but it's important to note that we have changed our financial structure, and with that, you've had turnover of equity shareholders as well. The hold code is regulated by the Federal Reserve. The bank is regulated by the OCC. We utilize proprietary and patented advanced technological solutions to acquire customers cost effectively and to manage our business. We have a full menu best in class on demand business and financial solutions to independent business owners. Our trademark, no branches, no traditional bankers, no brokers, no BDOs. Very cost-effective way to service our customers on demand. Let's go to slide number five. We talk about our target market. At the end of the day, the SBA defines this as 36 million businesses in the United States, 43% of non-farm GDP, and we believe this market is typically un-farmed, untapped, and we offer our best-of-breed solutions to this customer base and we're very excited about what we've been able to do in the first three years of operating um the OCC chartered bank and we're very excited about our future on slide number six we'll talk about the annual and quarterly highlights the EPS for the quarter 65 cents either basic or diluted which aggregated up to a 2025 number basic 2.21 cents diluted $2.18 of 12 and 11% over the 2024 results. We're pleased to offer our 2026 guidance with a mid-range of $2.35. Quite interesting at a $14 stock price handle what our multiple is compared to some of those other competitors in the marketplace that I would also call technology-enabled banks with a disruptive business plan and new entrance into the market, but began many years before we did. The bullet point number three on slide number six is important, tangible book value. We've been able to materially grow our tangible book value, which ended the year 2025 at $12.19. When we began, I think it was approximately $6.92. In addition, we've also paid a dividend during that period of time, which we'll talk about in a future slide. 2026 got off to a great start. On January 21st, we closed our largest securitization, or what we refer to as alternative loan program, also known as C&I loans held for sale, or C&I LA, meaning longer amortization. These are basically business loans with long AMs. And this is what we have experienced well over two decades in making these types of loans, whether it was been in a 7 program, or in the ALP program when we started originating loans in 2018 and 2019. The deal that we kicked off in 2026 was 10 times oversubscribed, 38 institutions subscribing, 32 institutions purchasing notes after we repriced after the IPT, and really pleased that 10 of the 32 purchasing institutions were new to our securizations. We have a lot of ALP momentum growing, and the credit quality matrix Overall, on the entire portfolio, on a consolidated basis, including the bank, including the old NSBF portfolio with the holding company and all loans, as we have indicated in prior press releases, seems to have stabilized. NPLs have declined for two consecutive quarters, the 7.3, the 7.1, and the 6.9% for the fourth quarter of 2025. Slide number seven. We talked about this a little while earlier, and that's deposit growth. I remember one of the things in acquiring the bank, people said, how are you going to grow deposits? Well, with our alliance partners and relationships, 9,000 deposit accounts in the fourth quarter, surpassing our previous record. Business deposits increased, and these are the important ones because they're at a lower cost, like $34 million in a quarter and $164 million for the year. So very, very nice growth. Obviously consumer deposits growing materially as well by 167 million and a quarter, 293 million for the year. We have a nice big deposit base going into the first quarter to be able to deploy in business loans. Since the acquisition of NewTek Bank, roughly 50% of NewTek's bank business lending clients have opened up a business deposit account. In addition, We started initiating the offering of life insurance, key man life, to NewTek Bank business lending clients, and 25% of borrowers have now purchased life insurance through the NewTek agency. We continue to capture operating leverage. The efficiency ratio at the Holdco was declined from 63.2 to 58.3, with assets of 33%. So we're very, very pleased about our efficiency ratio. At the bank, I believe the efficiency ratio is in the 40s, approximately 47%. Our return on average assets for the calendar year, 2.78% at the holding company. Also important to note, the earnings headwinds, which we'll talk about this a little deeper in a further slide, from our NSBF lending subsidiary continue to decline. We had a $28.7 million loss in 2024, and it should be approximately $20 million in 2025. And we expect the NSBF loss will continue to materially decline throughout 2026. On slide number eight, we talk about our tangible book value growth. I think it's real important to analyze. Obviously, we pay $2.24 of dividends during our period of time as a bank holding company, although we don't look like a bank holding company, and we don't look like a lot of the other community banks that we're compared to. and a $4.76 share of tangible book value since conversion. So we're very, very pleased at how we've been able to deliver value to shareholders through growth in tangible book value and dividends. Slide number nine. We talked about the alternative loan program. We'll drill down a little deeper here. I think it's important to note, and I have been asked by several investors, the credit quality for ALP loans is much stronger than the 7a loans we'll show we'll show that on the next slide and the aop loans are originated with the intention to sell them into a joint venture or securitizations they have great margins on them they have prepay penalties so they last for a longer period of time so the spread that we get on them is enjoyed by the benefit of our shareholders and our earnings i think it's important to note that similar to 7a loans there is a structural similarity to the AOP loans. 10 to 25 year AMs, no balloons, they're typically fixed for five years with a spread over the five year treasury curve of approximately 950 basis points at origination. And then they adjust, they're floored at that initial rate and they can adjust up based upon changes of rates. So we give the borrower flexibility in amortizing the principal over a longer period of time, so we're basically giving them equity. We give them flexibility on distributions. We give them flexibility on borrowing. We give them flexibility on doing acquisitions, but that trade off is for joint and several personal guarantees for every 20% equity owner or greater and liens on business. And in many cases, personal assets and much stronger guarantors. Um, we were very pleased that in the January month, we brought our fourth ALP securitization. to the market, and as I mentioned, it was extremely successful. On slide number 10, you can get a feel for the matrix, or what the underlying loans look like in these securitizations. So, the total amount of non-performing ALP loans, 27.6 million, on a current origination balance of 694 million, but total originations, I believe, is 820 to 800. and $30 million. So we've actually had low levels of non-performers and very low levels of charge-offs. I believe total charge-offs are about $6 million to date. Weighted average LTV at origination, 48%. Debt service coverage, 3.3%. Very high coupon, very high spread. Now, the spread is important because the spread is protected with the call protection of 5% prepays through 36 months and 3% in month 33. 36 through 48. You can see we're big believers in diversification of geography and industry. On slide number 11, the economics of this securitization is discussed further. On slide number 11, you can see that the gross spread before the 1% servicing fee on the last two deals was about 665 to 670 net about 565 to 570. Now, these are match-funded in a securitization. I should say match-funded by the durations. Important to note that although the liability arguably is more expensive than in a deposit gathering sense, it is match-funded for term, and there's no cost from a depository perspective. Obviously, take deposits in a bank, you've got a lot of different cost to service the loan, to help the customer, et cetera, et cetera. But here, you've got a 565 basis point spread. Set it and forget it. Clip the coupon. And you can see that on slide number 12, these securitizations pay down very quickly. And they pay down quickly because of the excess servicing goes to pay down the senior bonds. And the overcollateralization that you see On slide 12, on 2026-1, 2025-1, 2024-1, happens rather quickly. As that's happening, what's occurring is the book value where the loans in the special purpose vehicle versus the amount of debt keeps growing. Matter of fact, on average, the book value should equal the fair value of these in approximately three to three and a half years. Extremely important when it comes to being comfortable with our valuations. Slide number 13, our non-bank lending subsidiaries, the payments business, which we've owned since 2002, growing materially, contributed about $16.8 million of adjusted EBITDA in 2025, and is forecasted to do $17.9 million in 2026. Our insurance agency is growing nicely, particularly as it's been positioned with the bank and uses automatic processes to make insurance available to people that are borrowing money. and um we've contributed 740 million dollars of pre-tax income in 2025 and we think it'll be about one six in 2026. payroll contributing 450 000 of pre-tax net income we expect to generate 630. we have high hopes and expectations for both of these businesses as they are particularly payroll and payments connected to the bank account all of new tech one's business lines have and should continue to contribute growth to business deposits. We've talked about the new triple play offering, which includes merchant, payroll, line of credit, and a bank account. We're continuing to polish up this offering, enhance the client experience, one application, three approvals. Slide number 14, NewTek Small Business Finance is the legacy non-bank SBA lender that's got the uninsured loan participations that are sitting in securitizations. and are paying down. The remaining loans are from the tougher vintages of 21, 22, and 23, and had tremendous stress as rates went up three to five points during that period of time. So in addition to having their debt service almost double, we all know that during that prior administration's period, we had a lot of inflation, labor costs going higher, insurance costs going higher, Rent going higher. So this is a fairly stressed portfolio. However, we have reported that we see stabilization in credits, both at the holdco and in the bank. Non-accruals at fair value, you can see on slide 14, leveling off. Net increase in non-accruals ticked up a little bit, but still a fairly low number. Notes issued in securitizations, only $127 million left. Those notes are capturing the cash flow until they get paid off. So we look forward to eliminating those notes as the loans pay off. The loans that were in the NSBF portfolio not too long ago represented 32% of the total balance sheet. It's now down to 13. So as we said earlier, the loss declined in NSBF to approximately 20 million from 20.7 the year prior. The accrued portfolio is down $88 million over the course of the last year. And 100% of NASBF loans are now aged 33 months or more, so they're through the top part of the default curve. Also on slide number 15, we talk about some of the credit-worthy aspects at the bank. You can see our delinquency or currency ratio. The delinquency ratio is down precipitously. Chart provision for credit losses. are covering charge-offs, NPLs to total loans, stabilizing and declining, all good metrics for NewTek One and its shareholders. With that, I would like to pass the baton to Frank DiMaria, our CFO, who will go over some financial performance metrics for the company.

Thanks, Barry. The next seven slides will dive into the details of the highlights that Barry touched on. Turning to slide 17, we have our financial highlights for 2025. We are particularly proud that we're able to concurrently generate balance sheet growth, earnings growth, efficiency, and strong profitability while maintaining healthy capital ratios, all while our non-bank lender, NSBF, continues to run off. Slide 18 runs through NewTek Bank's highlights, which paint a similar picture of balance sheet growth, earnings growth, efficiency, and profitability. Important to note the overall downward trend in our cost of deposits as we continue to see a shift in the deposit mix with the growth in business deposits throughout the year. And while our ACL to loans held for investment coverage ratio remains healthy, we are starting to see a leveling as we've built the ACL over the last three years and start to see the bank's portfolio begin to season. On the next slide, NewTek's deposit story continues to be a good one. We're growing both business and consumer deposits and offering what we believe to be tremendous value to both consumer and business depositors. As I briefly mentioned, the cost of deposits at NewTek Bank declined roughly 16 basis points sequentially, coinciding with lower market rates. As Barry mentioned earlier and as noted on this slide, we're finding success in lending clients opening bank accounts with roughly half of the borrowers opening at least one bank account since we acquired the bank in early 2023. We expect that penetration rate to grow over time. We also believe we're creating sticky deposit relationships given our competitive market rates on deposits, our integrated business portal, and our insured deposit rate, which currently sits at 74%. Shifting to NewTek Bank's held for investment portfolio on slide 20. The held for investment portfolio increased roughly 44% in 2025, with the portfolio mix largely unchanged throughout the year. Unguaranteed portions of SBA 7A loans comprise roughly 60% of the held for investment book, while the allowance for credit losses related to the unguaranteed 7A portfolio makes up the bulk of the bank's ACL, which resulted in the previously mentioned coverage ratio of just over 5% at the end of the year. On the next slide, we show the operating leverage continues to be a meaningful contributor to our financial performance. We have consistently stated that our technological and operational infrastructure was designed to support a much larger balance sheet and organization, and we continue to deliver on those statements. Annual operating expenses were up just 2% in 2025 against 33% growth in assets, which supported that year-over-year decline in efficiency ratio from 63% to 58%. We included the next slide in our Invest Today presentation a few weeks ago. We have maintained fairly stout regulatory capital ratios, and we've grown the balance sheet, strategically layering in capital along the way. I'll conclude my portion of today's discussion with NewTek's financial projections for 2026 on slide 23. Relative to diluted EPS of $2.18 for 2025, we have established an EPS guidance range of $2.15 to $2.55 for 2026 with a midpoint of $2.35. Estimates incorporate $1 billion of SBA 7A originations, $500 million of ALP or long amortizing CNI loan originations, $175 million of SBA 504 originations, and $150 million of net growth in the combined CNI and CRE portfolios. Projected originations and net growth reflect step-ups from 2025 levels. We've included a quarterly EPS view for 2026, which reflects the recently closed NALP 2026-1 transaction in the first quarter, and a projection for a second securitization this year in the fourth quarter. And with that, I'll turn it back to Barry for the last few slides ahead of Q&A.