NewTekOne (NEWT) Q4 2025: Deposit Accounts Surge 50%, Unlocking Lower-Cost Funding Path
NewTekOne’s surge in deposit account openings and efficiency gains signal a maturing digital-first banking model for SMBs. The company’s transition from legacy lending to a technology-enabled, deposit-driven platform is showing operational leverage, margin resilience, and improved credit stability. Management’s 2026 outlook leans on further deposit growth, ALP loan momentum, and continued cost discipline to unlock EPS expansion, but legacy portfolio runoff and sector headwinds remain watchpoints.
Summary
- Deposit Growth Acceleration: Digital onboarding drove a record 9,000 new accounts, fueling lower-cost funding and business lending capacity.
- Efficiency Ratio Improvement: Operating leverage from technology investments reduced the Holdco efficiency ratio to 58.3%.
- Legacy Runoff Stabilizing: NSBF losses and non-performing loans continue to decline, supporting improved credit outlook.
Performance Analysis
NewTekOne delivered double-digit revenue growth and record pre-tax earnings, underpinned by strong deposit inflows and disciplined cost control. Total revenue climbed to $284 million, up 10.6% year-over-year, as the company’s digital-first banking model gained traction with small and independent business owners. Net income before taxes reached approximately $80 million, reflecting both top-line growth and margin expansion. The Holdco’s efficiency ratio improved to 58.3%, down from 63.2% last year, on the back of 33% asset growth against just 2% operating expense growth.
Deposit growth was a standout, with 9,000 new accounts in Q4— a 50% sequential increase—driven by frictionless digital onboarding and cross-sell to lending clients. Business deposits, a key funding source for loan growth, rose $34 million for the quarter and $164 million for the year, while consumer deposits expanded by $167 million in Q4. The ALP, alternative loan program, continued to deliver high-margin, long-duration C&I loans, with the latest securitization ten times oversubscribed. Meanwhile, the legacy NSBF, non-bank SBA lending portfolio, continued to run off, with losses declining from $28.7 million to $20 million and non-performing loans dropping for the second consecutive quarter.
- Digital Deposit Engine: Automated account opening tied to lending fueled record deposit growth and stickier client relationships.
- Margin Resilience: Net interest margin at the bank held above 5.4%, supported by competitive deposit rates and disciplined loan pricing.
- ALP Loan Scale: Securitizations generated strong investor demand, with robust credit metrics and overcollateralization.
Credit quality metrics stabilized, with non-performing loans declining to 6.9% and charge-offs contained, while the allowance for credit losses remained robust at over 5% of the unguaranteed portfolio. The company’s multi-pronged strategy—combining payments, insurance, payroll, and lending—continued to drive deposit penetration and cross-sell opportunities.
Executive Commentary
"We're extremely pleased about the acquisition that was done in January of 2023. We're 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."
Barry Sloan, President and Chief Executive Officer
"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."
Frank DiMaria, Executive Vice President and Chief Financial Officer
Strategic Positioning
1. Digital-First Banking Model for SMBs
NewTekOne’s core strategy is to serve independent business owners and SMBs, a segment it calls “underserved” by traditional banks. The company leverages proprietary technology to deliver frictionless account opening, integrated payroll, insurance, and lending—all digitally and without physical branches. This model enables cost-effective customer acquisition and deeper client relationships, as evidenced by the high rate of lending clients opening deposit accounts and the “triple play” product bundle (merchant services, payroll, line of credit, and bank account).
2. ALP Loan Engine and Securitization Platform
The alternative loan program (ALP) is a central growth lever, providing long-amortization, high-margin C&I loans that are originated for sale into joint ventures or securitizations. These loans offer borrowers flexible terms and lower payments, while NewTekOne benefits from strong spreads, call protection, and rapid paydown of senior bonds. The most recent ALP securitization was ten times oversubscribed, with 32 institutions participating, including ten new investors—demonstrating growing market confidence in the platform.
3. Operating Leverage from Technology Investment
Technology-driven operating leverage has become a defining feature, with the company’s infrastructure supporting rapid balance sheet growth without proportional increases in expense. The efficiency ratio improvement (from 63% to 58% at Holdco, and 47% at the bank) reflects this scalability. Management emphasizes that its tech stack is designed for a much larger organization, positioning the company for continued asset and revenue growth with modest incremental cost.
4. Legacy Portfolio Runoff and Credit Stabilization
The runoff of the legacy NSBF SBA lending book is a key risk mitigation and capital redeployment story. The portfolio, once 32% of the balance sheet, is now down to 13%, with non-performing loans and losses declining. 100% of NSBF loans are now aged 33 months or more, past the most vulnerable period for defaults. This runoff is freeing up capital and management bandwidth for higher-return, lower-risk new business lines.
5. Deposit Mix Shift and Funding Cost Control
Business deposit growth is intentionally prioritized, as these accounts are lower cost and more stable than consumer deposits. The company’s automated onboarding and requirement for loan payments to be made from NewTek accounts are increasing penetration and stickiness, while the cost of deposits declined by 16 basis points sequentially. This shift is expected to drive further margin improvement and funding reliability.
Key Considerations
NewTekOne’s Q4 demonstrates the maturing of its digital-first, technology-enabled banking model, but the transition from legacy lending and the evolving competitive landscape require close attention. The company’s focus on operating leverage, deposit-driven funding, and scalable cross-sell is positioning it for differentiated growth, but execution on credit, origination, and expense control will determine the pace and sustainability of value creation.
Key Considerations:
- Deposit Stickiness and Cost: Sustained growth in business deposits is lowering funding costs and increasing lending capacity, but retention and rate sensitivity must be monitored as market rates evolve.
- ALP Loan Quality and Securitization Demand: Investor appetite for ALP securitizations and continued strong credit performance are critical to maintaining spreads and capital efficiency.
- Legacy Portfolio Drag: The NSBF runoff is reducing losses, but residual credit risk and capital consumption remain until the portfolio is fully resolved.
- Expense Discipline vs. Growth Investment: Management’s ability to contain expenses while investing in product and business development will be tested as the company scales.
Risks
Legacy portfolio credit risk, particularly from the NSBF book, remains a watchpoint until full runoff is achieved. Deposit growth momentum could face headwinds if market rates shift or digital competitors intensify. ALP loan performance and securitization market appetite are sensitive to macro conditions and credit cycles. Regulatory changes, especially in SBA lending criteria, could impact origination volumes and underwriting standards.
Forward Outlook
For Q1 2026, NewTekOne expects:
- Continued deposit account growth, leveraging digital onboarding and alliance partnerships.
- ALP and SBA loan origination volumes to build after typical seasonal Q1 softness.
For full-year 2026, management provided guidance:
- EPS range of $2.15 to $2.55, midpoint $2.35, reflecting step-ups in SBA 7A, ALP, and 504 originations.
Management emphasized the following:
- Further improvement in efficiency ratio and operating leverage as balance sheet grows.
- Ongoing reduction in NSBF losses and non-performing loans, freeing up capital for new lending.
Takeaways
NewTekOne’s Q4 marks a pivotal step in the company’s evolution from a legacy SBA lender to a digitally enabled, deposit-driven financial platform for SMBs. Deposit growth, cost discipline, and scalable technology are converging to deliver improved margins and credit stability, while the legacy portfolio runoff is nearing completion.
- Deposit-Driven Model: Automated digital onboarding and cross-sell are driving stickier, lower-cost business deposits, powering loan growth and margin resilience.
- ALP Securitization Momentum: Strong investor demand and robust credit metrics in the ALP program are unlocking scalable, high-margin loan origination.
- Legacy Drag Diminishing: NSBF losses and non-performing loans are declining, freeing capital and management focus for growth initiatives.
Conclusion
NewTekOne’s operational and strategic transformation is yielding tangible results in deposit growth, margin expansion, and credit stabilization. The company’s digital-first, technology-enabled approach is building a scalable platform for SMB banking, but continued vigilance on credit, funding costs, and competitive dynamics will be essential to sustain momentum in 2026 and beyond.
Industry Read-Through
NewTekOne’s success highlights the growing viability of digital-first, technology-enabled banking models for SMBs, particularly as traditional banks struggle with branch-heavy cost structures and slower digital adoption. The company’s ability to automate deposit onboarding, cross-sell financial services, and securitize long-duration C&I loans provides a template for next-generation banking platforms targeting underserved business segments. For peers and investors, the quarter underscores the importance of operating leverage, deposit mix management, and scalable lending platforms in a rising-rate, margin-sensitive environment. The runoff of legacy portfolios and pivot to tech-enabled models is likely to accelerate sector consolidation and competitive repositioning.