NewtekOne Inc (NEWTP) 2025 Q4 法說會逐字稿

Thank you for standing by. Welcome to NewtekOne, Inc.'s, fourth-quarter 2025 earnings conference call.

(Operator Instructions)

I would now like to hand the call over to Barry Sloane, President and CEO. Please go ahead.

Thank you very much, operator. 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, 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 2 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 to, but are not limited, 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, Live Oak, 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, 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 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 principal over 10 to 25 years, not the 6-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 were added to the senior management team. Greg DeVany, Chief Credit Officer of the bank; Chris Lucas, Chief Compliance Officer of the Bank; Frank DeMaria, 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 was approximately $80 million, up 16.4%. Our revenue, total revenue as defined as the sum of net interest income and non-interest income, $284 million, up 10.6% over the 2024 number of $257 million.

We're very pleased with how we did. With all that, we can go right to the Q&A, just kidding.

Let's go to slide number 3. On slide number 3, 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. 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 if/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 4, 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. In 2023, when we acquired [National Bank of New York City] -- a $180 million total asset bank that today is approximately $1.4 billion, $1.5 billion, with the holdco consolidated assets $2.4 billion, $2.5 billion -- we have grown significantly.

But it's important to note that we have changed our financial structure. With that, you've had turnover of equity shareholders, as well. The holdco 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 5. 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. We believe this market is typically unfarmed, untapped. We offer our best-of-breed solutions to this customer base.

We're very excited about what we've been able to do in the first three years of operating the OCC-chartered bank. We're very excited about our future.

On slide number 6, we'll talk about the annual and quarterly highlights. The EPS for the quarter, $0.65, either basic or diluted, which aggregated up to a 2025 number: basic, $2.21; diluted, $2.18, up 12% and 11% over the 2024 results.

We're pleased to offer our 2026 guidance with a midrange 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 entrants into the market but began many years before we did.

The bullet point number 3 on slide number 6 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 21, we closed our largest securitization on 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 (inaudible).

This is what we have experienced well over two decades in making these types of loans, whether it has been in the 7(a) program or in the ALP program. We started originating these 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 securitizations.

We have a lot of ALP momentum growing and the credit quality metrics, overall, on the entire portfolio, on a consolidated basis, including the bank, including the old NSBF portfolio at 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 from 7.3% to 7.1% and to 6.9% for the fourth quarter of 2025.

Slide number 7. 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. These are the important ones because they are at a lower cost by $34 million in the quarter and $164 million for the year. So very, very nice growth.

Obviously, consumer deposits growing materially, as well, by $167 million in the 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, [Keyman Life], to Newtek Bank business lending clients. 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 up 33%. So we're very, very pleased about our efficiency ratio. At the bank, I believe the efficiency ratio is in the [40s]; I think 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. It should be approximately $20 million in 2025. We expect the NSBF loss will continue to materially decline throughout 2026.

On slide number 8, we talk about our tangible book value growth. I think it's real important to analyze. Obviously, we paid $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 9. 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 7(a) loans. We'll show that on the next slide.

The ALP 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. 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 7(a) loans, there is a structural similarity to the ALP loans. 10- to 25-year (inaudible) , 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. They could adjust up, based upon changes in rates. So we give the borrower flexibility in amortizing the principal over a longer period of time. 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 leans on business and, in many cases, personal assets and much stronger guarantors.

We're very pleased that in the January month, we brought our fourth ALP securitization to the market. 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. The total amount of nonperforming ALP loans, $27.6 million, on a current origination balance of $694 million. But total originations, I believe, was $820 million to $830 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 36 through 48. You could see we're big believers in diversification of geography and industry.

On slide number 11, the economics of the securitization is discussed further. On slide number 11, you could see that the gross spread before the 1% servicing fee on the last two deals was about [6.65] to [6.70]; net, about [5.65] to [5.70]. 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 spoint spread, set it, and forget it, clip the coupon.

You could see that, on slide number 12, these securitizations pay down very quickly. They pay down quickly because the excess servicing goes to pay down the senior bonds. 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 or the loans in the special purpose vehicle versus the amount of debt keeps growing. As matter of fact, on average, the book value should equal the fair value of these in approximately three to three-and-ahalf 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, grown 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. We've contributed $740 million of pre-tax income in 2025. We think it will be about $1.6 billion in 2026.

Payroll contributing $450,000 of pre-tax net income. We expect to generate $630,000. 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 NewtekOne'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 nonbank 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 3 points to 5 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 nonaccruals 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 $28.7 million the year prior. The accrued portfolio is down $88 million over the course of the last year. And 100% of NSBF 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 creditworthy aspects at the bank. You can see our delinquency, our currency ratio, the delinquency ratio is down precipitously, provision for credit losses are covering charge-offs, NPLs to total loans stabilizing and declining, all good metrics for NewtekOne and its shareholders.

With that, I would like to pass the baton to Frank DeMaria, 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 nonbank 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.

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 7(a) loans comprised roughly 60% of the held for investment book, while the allowance for credit losses related to the unguaranteed 7(a) 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. 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 Investor Day presentation a few weeks ago. We have maintained fairly stout regulatory capital ratios. 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 7(a) originations, $500 million of ALP or long amortizing C&I loan originations, $175 million of SBA 504 originations and $150 million of net growth in the combined C&I 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.

With that, I'll turn it back to Barry for the last few slides ahead of Q&A.

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 24 to 48 hours, and forget what the rate is, but you got to pay me back the principal in 6 to 24 months.

From a branding perspective, we disagree that being able to charge those high rates for quick money really provide great brand value. We do provide great brand value.

Yes, we have larger provisions. Yes, we have greater allowance for credit losses, which 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.

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.

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 24, before the stock started to move higher, now trades 11 times consensus and 207% of book value.

Live Oak Bank, five years for the stock started to move, trades at 13 times 2026 consensus, 164% of book.

TFIN, six years for the stock started to move. I hope this doesn't take six years. It's trading at 40% 2026 EPS.

SoFi, two-and-a-half- to three-year period, sideways to lower 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 what 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.

With that, we appreciate the opportunity to present our Q4 and annual results. And operator, we'd like to go to the Q&A.

(Operator Instructions)

Tim Switzer, KBW.

Barry, you told me for a minute -- at the beginning, I thought we were getting this question-and-answer session in a few -- in the first five minutes. I was ready to go.

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

Sure. 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 it'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 what your expectations are going forward? Because it seems like there's some pretty good trends.

Thank you, Tim. Look, first of all, 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, a 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 has got a 5 handle on it. I got to go dig it out here. But I think it's -- Frank, was it like 5.3%, 5.4%??

Yes, 5.25%.

Right. So we're able to offer a generous rate and no fees, no asterisk, no waste. So the rates are generous. Now some people say, oh my God, those are really risky deposits. I think 78% of them are insured. And 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 more able deposit 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 is going to drop rates. The recent Fed meeting says they're going to 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 going to continue to be able to grow deposits to fuel good loan growth.

Awesome. Okay. Yes, that's good to hear. And if I'm looking at the noninterest income detail here, the 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 next year given your guidance for about $1 billion of SBA originations?

Well, we do expect the 7(a) 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 going to be somewhat helpful. The SBA is going away from the SBSS score. We're waiting for some further guidance on this, but they're asking us to use our own scoring methodology. That SBSS score will stick until 31. So I think that our volumes will do better.

I think you've seen entities like BayFirst 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, which 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.

They lay them off to other participants. They've got to change their whole front and end tech. We don't -- intake, we don't.

So I think we're better positioned competitively. We've always been a 5 Cs of credit lender. We take liens. We spread financials. And our technology and our AI covers this.

I think some of our competitors have got to put that in place, scramble and 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 can't find it in the earning materials.

Right. Frank, total charge-offs on all loans held for sale and investment at [December 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, $23 million.

Okay. Okay. All right. 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 loans versus the SBA loans?

So I'd say about -- go ahead, Barry.

You're talking about the unrealized gain between ALP and the 7(a)?

Yes. What you guys report, it was the combined number was $25.6 million this quarter.

Do you have that breakout, Frank?

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

Okay. With a slight loss in NSBF, right?

Correct.

Okay. So I'm calculating NSBF with a $20 million loss for the full year. That's close to like a $6 million, $7 million loss this quarter. So it stepped up a little bit?

That's right. That's correct, Tim.

Steve Moss, Raymond James.

Maybe just circling back to the SBA originations. I hear you in terms of the changes in the rules being a big disruptor. I know you had indicated and you kind of touched on it already, 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 6 or 12 months ago?

Yes. I think it's a good question, Steve. I think that the rate cuts of about 1.5% from the high has 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 kind of 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.

I'm 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, and the Fed is probably not going to do anything until you get a Chairman change. But overall, the confidence of businesses is good. People are spending money.

The stock market is making people feel good, people that have portfolios, which is a lot bigger number today than it was 40 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 kind of 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 should 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 can 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 and then they're exhausted and they go into the first quarter. I mean it happens every year.

It's our weakest quarter.

With 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 they make readily available and they grab it. 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 we're competing against because of the long am. We take longer. We're more thorough, but it's a better product for them.

And we -- by adding the ALP or what I refer to held-for-sale C&I or C&I long am, we're developing a reputation that 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 interest rate in the high single digits or low double digits, we're the place to come to and get that long-term patient capital.

So very bullish on ALP or what we're going to call C&I held for sale because it's going to go into a securitization.

And when people come to us, I mean, you can't -- I say there's always guards because you never know what sneaks in there. I don't think you can find SBA on our website. And we don't want to 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 am 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 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 continue to upgrade systems and make things more polished.

Just kind of curious 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, and there's always a push and pull on the expense line. I think that we're continuing to grow the business. We're putting expenses, particularly into business deposit functionality and gathering.

On a good note, I feel very good about the C-suite with the adds. The team is very much Newtek culture, Newtek. 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 next year in the expense line so it should be very comfortable for us.

Christopher Nolan, Ladenburg Thalmann & Company.

Looking at the forward guidance, it looks like the efficiency ratio is projected to total revenues percent -- expenses percentage of revenues, to stay pretty flat with current levels, 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 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 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 going to 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 $4.5 million 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 at 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. It looks like margin expansion, hopefully, will be the leverage there, if I heard you correctly.

Yes. It should be.

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 deposit the loan into a new tech deposit account for that client or something which is sort of helping goosing along the deposit growth?

Yes. So when you apply 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.

Okay. Great. And that generally is a low interest-bearing account. It's a core deposit account. Is that correct?

1%, yes.

Yes. So you're just basically -- that's going to be a driver for lower deposit costs. Okay. Good stuff.

And we 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, you move your money back and forth between savings and checking. How does that sound, Chris?

Sounds great.

[Dylan Hynes], B Riley Securities.

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 S business, I believe the NIM at the bank it's got a 5 handle on it. I got to go dig it out here. But I think it's -- Frank, what is it, like 5.3%, 5.4%?

Yes, 5.25%.

Right. So we're able to offer a generous rate and no fees, no asterisk no. 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 [1%] or prime plus [1.5%].

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.

We want to 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,

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.