NEWT

NewtekOne is a financial holding company built around Newtek Bank, an OCC-chartered branchless lender to SMBs whose earnings are dominated — per the MD&A's own words, 'the majority of our income is driven and influenced by noninterest income, specifically gains on sales and market value adjustments on loans.' On the numbers this is a good, cheap bank stock: FY2025 net income of $60.5M grew +19.0% YoY, diluted EPS of $2.18 grew +11.2%, ROE is a healthy 15.2%, and total assets/equity both compounded ~33-34% as the post-BDC bank scales deposits and its SBA 7(a) book. At $14.57 the stock trades at just 6.7x earnings and roughly 1.05x the $13.82 book value per share (equity $398M / 28.8M shares) — a modest multiple for a franchise earning mid-teens on equity and still growing double-digits. Dividends paid rose to $28.0M (+38.5%), a ~6.7% cash yield that pays you to wait.

The catch is earnings quality and structure, and it's why this is a conviction-3 buy rather than a table-pounder. Because income leans on gain-on-sale premiums (SBA guaranteed portions sold for 'premiums that have historically exceeded 10%') and fair-value marks on loans and servicing assets, reported profit is inherently lumpier and more model-dependent than a plain-vanilla spread lender's — and history shows it: net income swung from $84.1M (FY2021) down to $32.3M (FY2022) before recovering to today's $60.5M. Leverage is real at 5.90x liabilities/equity with $820M long-term debt (+15.8%), the company retains first-loss risk in its securitizations, and it self-flags that unguaranteed SBA 7(a) CECL reserves exceed 6%. FY2025 operating cash flow of -$579M looks alarming but is largely the mechanics of a gain-on-sale lender funding loans held for sale, not distress; still, share count rose 9.7%, diluting per-share growth.