Thank you for standing by, and welcome to NewtekOne, Inc. Fourth Quarter 2025 Earnings Conference Call. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. To remove yourself from the queue, you may press 11 again. I would now like to hand the call over to Barry Sloane, 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 DeMaria, 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 and navigate to the investor relations section. The PowerPoint presentation for today's event is available there. Now, I would 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 are happy to report the results of Q4 2025 and the annual achievements for 2025, including celebrating the three-year anniversary of NewtekOne owning and operating an OCC chartered bank. We are extremely pleased about the acquisition that was done in January 2023. It's a very interesting slide on '24, which actually names several competitors in the space, SoFi, Livov, Triumph, Northeast Bank, and Axos. 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 started to change direction. We will talk about that later in the presentation. We are also celebrating today opening up 9,000 new depository accounts and 34,000 active depository accounts. We are celebrating the technology that we have built, particularly our digital account opening and our lending operating systems, as well as the Newtek 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…

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 costs to service the loan, to help the customer, etcetera, etcetera. But here, you've got a 565 basis point spread. Set it and forget it. Clip the coupon, and you could see that on slide number 12, these securitizations pay down very quickly. And they pay down quickly because 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. And 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 nonbank lending subsidiaries, the payments business, which we've owned since 2002, growing materially contributed about $16.8 million of adjusted EBITDA in 2025, and forecasted to do $17.9 million in 2026. Our insurance agency is growing nicely, but particularly as it's been positioned with the bank and uses automatic processes to make insurance available to people that are borrowing money. And we've contributed $740,000 of pretax income in 2025. And we think it'll be about $1.06 million in 2026. Payroll contributing $450,000 of pretax net income. We expect to generate $6.30 million. We have high hopes and expectations for both of these businesses…

Thanks, Barry. The next seven slides will guide 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 nonbank lender NSPF 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…

Thank you, Frank. Slide number 24, which we talked about at the beginning of the presentation, this kind of represents a lot of what NewtekOne and Newtek Bank National Association are trying to do. We don't look like a community bank. We don't act like a community bank. We basically have built a financial institution to service our customers. Utilizing technology, we're able to provide a frictionless environment to exchange information, have customer service and business service specialists be on a camera, and be available on demand. We give our business clients the ability to send and receive money at the lowest cost with the greatest amount of data and the greatest amount of analytics to run their business. We actually give them loans that are valuable. Not I'll fund you in twenty-four to forty-eight hours. And forget what the rate is, but you gotta pay me back the principal in six to twenty-four months. From a branding perspective, we disagree that being able to charge those high rates for quick money really provides great brand value. We do provide great brand value. Yes. We have larger provisions. Yes. We have greater allowance for credit losses, cover the amount of losses that we'll achieve. We have accurately forecasted what our charge-offs are, what our losses are, and we have that reserve. And on top of that, we have ROAAs at the HoldCo of 2.7%, and ROTCEs at the HoldCo approximately 20%. So we're able to earn greater returns with greater margins on a net basis. We're an organization that manages credit risk, not avoids it. And when you look at the other organizations in the market that were also disruptors, some of them for consumer, some of them for online deposits, Axos. Almost five years on slide number four before the stock started to move higher. Now trades 11 times consensus. 207% of book value. Why about bank? Five years before the stock started to move. Trades at 13 times 2026 consensus, 164% of book, TFIN, six years before the stock started to move. Hope this doesn't take six years. It's trading at forty percent 2026 EPS. SoFi, two and a half to three-year period, sideways to low before the stock making a move. It just takes a while before investors get comfortable, get a feel for how the business works, test the model. You see it in Northeast Bank. You see it in LendingClub. These are all good markers for us. They're all technology-enabled banks that have been able to service their client base in similar ways to what we are. But we obviously got this positioning and expertise with SMBs, SMEs, and we refer to as independent business owners, a very viable and valuable demographic in the marketplace that we've developed this level of expertise over the course of two decades. And with that, we appreciate the opportunity to present our Q4 and annual results. And operator, we'd like to go to the Q&A.

Question. You will need to press 11 on your telephone. To remove yourself from the queue, you may press 11 again. My first question comes from the line of Tim Switzer of KBW. Question, please, Tim.

Hey. Good afternoon, guys. Thanks for taking my question.

Thank you, Tim. You too.

Yeah. Barry, you fooled me for a minute. Beginning, I thought I thought we're getting this question and answer session within a few in the first five minutes.

I was ready to go.

That would have made everybody happy, but it was a half an hour. We're getting better, Tim. We're practicing.

Good work. So my first question is something in the press release. You mentioned that you increased deposit account openings by about 50% this quarter. And I know there's something you talked a little bit about on the Investor Day. But it just seems like a pretty sizable increase in one quarter. Could you maybe talk about what was driving that? And you know, what your expectations are going forward? Because it seems like there's some pretty good trends.

Thank you, Tim. Look. First of all, you know, we believe that the ability to access us digitally from your home in a frictionless manner for business deposits as well as consumer is important. And I think there's plenty of people that do it well for consumer. Little harder to do for business. Harder to acquire, harder to manage. And we've been blessed. We've gotten through three years of audits, and it's worked out well. I think that we've got very good margins in our business. I believe the NIM at the bank it's got a five handle on it. I gotta go dig it out here. I think it's Frank, what is it? Like, 5.3, 5.4?

Yeah. Five and four.

Right. So we're able to offer a generous rate and no fees, no asterisk, no way. So the rates are generous. Now some people say, oh my god. Those are really risky deposits. I think 78% of them are insured. The important part is they're at a market rate. Those people aren't going anywhere. So our portfolio can afford to pay that deposit base. I think that's a point of than one that is at zero. So we're paying a healthy rate. We don't see the attrition. Clients are sticking with us. They're not leaving. And we're getting more and more deposits. It's an interesting interest rate environment whether you think the Fed's gonna drop rates, The recent Fed meeting says they're gonna stick. So I think that's the fact that it's frictionless. The fact that our alliance partners are appreciating what we're doing, We're bringing on more alliance partners. And we're gonna continue to be able to grow deposits to fuel good loan growth.

Awesome. Okay. That yeah. That's good to hear. And if I'm looking at the noninterest income detail, here, gain on sale was maybe just a little bit light relative to what we had expected. It was flat quarter over quarter, but could you maybe talk about some of the trends there and what we should expect to next year given your guidance for about you know, a billion dollars of SBA originations?

Well, we do expect seven, eight business to pick up again. It was a bit of a shift. There's been a lot of changes in the SBA world. Some of these, I didn't expect to be as dramatic such as the citizenship issue, was dramatic. The inability to refinance MCA product is dramatic. Recently, I think this is gonna be somewhat helpful. The SBA is going away from the SBSS score. They know, we're waiting for some further guidance on this, but they're asking us to use our own scoring methodology. That SBS score will stick until the thirty-first. So I think that our volumes will do better. I think you've seen entities like BaitFirst get out of the business, a few others that I won't mention that seem to be having financial struggles that were of the fintech variety. One of the other changes, I think is important, is the SBA is clearly requiring forecasting of debt service coverage over time. And most of the competitors in the fintech space, these are technology companies that are not credit. Lay them off to other participants. They've gotta change their whole front-end intake. We don't. So I think we're better positioned competitively. We've always been a five c's of credit lender. We take liens. We spread financials. And our technology and our AI covers this. I think some of our competitors have gotta put that in place, scramble, do it rather quickly, and it's also untested.

Okay. Got it. That's really helpful. I have a few cleanup questions. If you can entertain me real quick. The first one is what were the net charge-offs for the bank subsidiary? I might have missed it, but I couldn't find it in the earning materials.

Right.

Frank, total charge-offs on all loans held for sale and investment at $12.31 was about 2.2%.

That's right. And at the bank, Tim, to answer your question was $8.2 million for the quarter and $23 million for the year.

Okay. Alright. That's helpful. And then are you able to provide the breakdown you guys have in the 10-Q for the gain on loans accounted for under the fair value? Are you able to give us kind of what portion of that was from the ALP loan? Versus the SBA loans.

So it'd say about go ahead, Baris. Yeah. You're talking about the unrealized gain between ALP and the 7(a)?

Yeah. What you guys report. It was 20 the combined number was $25.6 million this quarter.

Have that breakout, Frank?

Yeah. It was about 35% on the ALP with the remainder on the 7(a) that we're holding.

Okay. With a slight loss in the NSBF. Right?

Correct.

Okay. So I'm calculating NSBF with the $20 million loss for the full year. That's close to, like, a $67 million loss this quarter. So it stepped up a little bit.

That's right. That's correct.

Okay. Alright. That's all for me. Thank you, guys.

Thank you.

Our next question comes from the line of Steve Moss of Raymond James. Please go ahead, Steve.

Good afternoon, guys.

Steve.

Just circling back to the SBA originations. You know, I hear you in terms of the changes in the rules being a big disruptor. I know you'd indicated and kind of touched on it, Dare. This call in terms of, like, the challenges a lot of businesses faced. Kind of what are you seeing for business confidence and business activity these days versus maybe six or twelve months ago?

Yeah. I think it's a good question, Steve. I think that the rate cuts of about one and a half percent from the high have been helpful. But it is absolutely 100% k-shaped economy, haves and have-nots. And businesses servicing the lower end of the market are as a customer. They're struggling. And businesses that are serving the middle market or the upper end are doing well. So you really you know, you kinda need to pick your spots here. I think we're all hoping that in 2026, productivity kicks in. And, therefore, the inflation numbers push things down. Not sure we're seeing that, to be honest with you, Steve. We're seeing commodity prices going high. I think oil picked up today. The Fed's probably not gonna do anything until you get a chairman change. But overall, the confidence of businesses is good. Spending money. The stock market is making people feel good, people that have portfolios, which is a lot bigger number today than it was forty years ago. So I think business confidence is pretty good. Businesses are willing to invest. Particularly in technology to make their business more efficient and reduce their expenses.

Okay. Great. And then maybe just on the AOP originations, just kinda curious you had another good quarter here. Do you expect that kind of continued cadence throughout the year or a step up from these levels? Or do we maybe think about some weakness here in the first quarter?

The first quarter is always a tough quarter for lending, and I can't explain why the first quarter is always great in the fourth quarter. First quarter is weak in the fourth quarter is great. I mean, I could tell you the industry reason is people blow out their loans at the end of the year, and people borrow at the end of the year, then they're exhausted. And go into the first quarter. I mean, it happens every year. It's our weakest quarter. Respect to ALP loans, I think it's important to note business owners don't come to us for a 7(a) or an ALP. They come to us for a loan, which is why these daily debit MCA players make a lot of loans because people go to them for the money. Whether it's costing them a 30 or 50 or a 70, they make the money and make it readily available, and they grab it. What we do is we try to actually give them a good product. We lower the payment. It's massively different than for loans that are in that that we're competing against because of the long amp. We take longer. We're more thorough, but it's a better product for them. And by adding the ALP or the hell what I refer to, health for sale C&I, or C&I long m. We're developing a reputation. And if you're a business owner, and you want a loan that's not MCA or daily debit, which dominates this industry, and you want a low payment because you have an interest rate in the high single digits or low double digits, we're the place to come to. To get that long-term patient capital. So very bullish on ALP or what we're gonna call C&I held for sale because it's gonna go into a securitization. And when people come to us, I mean, you can't I say there's always guard because you never know what sneaks in there. I don't think you could find SBA on our website. And we don't wanna be known as the SBA lender. It was obviously with our history, it's one of the few things that we did. But we make all kinds of loans to businesses. Including shorter-end loans with a full covenant package, balloons, and short repayments, which are more traditional, for borrowers that insist on having a lower rate. Right.

Okay. That's helpful. And then in terms of, you know, the expense side here of the equation, just kind of curious, you guys did do a good job on expenses there. I hear you in terms of, you know, continuing to upgrade systems and make things more polished. Just kinda curious, you know, how you're thinking about investments and maybe that cadence of expenses here.

It's an interesting question, Steve, because I've had a lot of conversation with expenses and expense control. There's always a push and pull on the expense line. I think that we're continuing to grow the business. Putting expenses particularly into business deposit functionality and gathering. On a good note, I feel very good about the C suite. With the ads. The team is very much new tech culture, new tech eyes. So I think that's pretty rock solid and pretty steady. I would like to add some executives in the biz dev area to help grow the business. And to help Andrew Kaplan, our chief strategy officer, who's done a fabulous job for us. But I don't think you'll see explosive expenses. Expense growth. I think we're in good step. Obviously, if you look at our revenue growth versus the expense line, I think we had a good year last year. We have a lot reserved for, you know, for next year in the expense line. So it should be very comfortable for us.

Got you. I appreciate all that color there, and I'll step back here in the queue. Thank you very much.

Thank you, Steve.

Thank you. Our next question comes from the line of Christopher Nolan of Ladenburg Thalmann and Company. Your question, please. Christopher.

Hey, guys. Thank you for taking my questions. Looking at the forward guidance, it looks like the efficiency ratio is projected to, you know, total revenues percent expenses percentage of revenues. To the state, pretty flat with current level, 55% to 56%. Assuming that's true, what do you see as the leverage for EPS growth in 2026?

Well, Chris, I hope I beat that expense line. But, you know, we've got that out there. I see the big leverage in continuing to grow business deposits from payroll from merchant services, to lower that cost of funds so that, you know, the dollars that we're spending to build out more inexpensive deposits will give us a lower reoccurring liability cost going forward. In addition, the ALP loans or the C&I loans held for sale, they're bigger and they're larger. I won't say they're easier to do, but we're seeing more flow there. So it's gonna be easier to get volume from my mouth to God's ears in that particular space and grow it. Versus the SBA business where the average loan size is, call it, $400,000. The average loan size in ALP is, you know, $4.5 to $5 million. So that's, I think, where we see the leverage. Now the other thing that's important is there's leverage and expense ratio with the bank and at the HoldCo. Look. We need to continue to watch the expense line. I am hopeful that we beat the expense line. This year versus what's projected, but I appreciate you pointing that out.

Okay. Great. That's it looks like margin expansion hopefully, will be the leverage there if I heard you correctly.

Should be on a

And I guess as a follow-up and congratulations on the deposit growth because I know that's something that you guys were aiming for for a long time. Have you guys put in some sort of new mechanism where you know, you deposit the loan into a new tech deposit account for that client or something which, you know, is sort of, you know, helping goosing along the deposit growth?

Yeah. So when you applied for a loan, the data used to apply for the loan automatically populates the application for a bank deposit, which goes through KYC AML BSA Group, so that the deposit account is approved without a separate application. But using the data that we get from a loan. So that's made that a lot more automatic, and we are going forward. And it's been this way, I think, for about six or seven months. We are requiring the borrowers to make the loan payments out of that Newtek account.

Oh, okay. Great. And that generally is a low interest-bearing account. It's a core deposit account. So correct? The 1%. Yeah. So you're just basic that's gonna be a driver for lower deposit cost. Okay. Yeah. And we got that that that increase the utilization. So if my staff is listening, and hopefully they are, they've got to diligently talk to customers and explain that this is, we think, one of the best accounts out there with zero fee for ACH, zero fee for wire. Higher cost, move your money back and forth between savings and checking. How's that sound, Chris?

Sounds great. Okay. Thanks, Barry. Future for me. Thank you. Appreciate it. Bye.

Thank you. Again, to ask a question, please press 11 on your telephone. Again, that's 11 on your telephone to ask a question. Our next question comes from the line of Dylan Hines of B. Riley Securities. Your line is open, Dylan.

Hey. Thanks for taking the question. I was wondering could you share your perspective on how Newtek's SBA loans are performing versus the many others in the SBA sector that don't have your underwriting and other business services offerings that create better long-term customer relationships.

I appreciate it. I think if you go to sba.gov, what you'll basically see is that, you know, our five-year and ten-year charge-off rates are about industry average. And that's kinda where we'd like to be. Right in that particular right in that particular bucket. I mean, number one, it fulfills our mission of making loans to business owners all over the United States, whether they're big loans or small loans and whatever whether it's a woman or a man or a people with green or yellow, whatever they are. So we put the product out there. We're very quick to prequalify the customer. And then take in all that other information. So I would say we're average. I think now if you look at our margins, they typically dwarf some of our big competitors in the space. So I would strongly suggest that you look at our margins versus some of our competitors with respect to ROAA, ROTCE, and gain on sale. Once again, we believe that being able to put the loan out, treat the customer well, you can get a full margin loan. You don't have to be prime plus one or prime plus one and a half.

Got it. Thanks for the color. Thank you.

I would now like to turn the conference back to Barry Sloane for closing remarks. Sir?

Well, we appreciate that, and we appreciate the questions. And we're appreciative of the hard work the team has done to make this better and more concise. We look forward to being able to continue to drive results in 2026 with the growth rates that we had in 2025. We've got some challenges, but good momentum at our back, and we wanna follow in the footsteps of other disruptors in this industry. But within our category of serving, SMEs, SMBs, and independent business owners because it's pretty untapped, and we've got a two-decade head start on most of the players in the space. So we thank everybody for attending and look forward to reporting in 2026.

This concludes today's conference call. Thank you for participating. You may now disconnect.