NewtekOne, Inc. Q1 FY2026 Earnings Call

Good day, and thank you for standing by. Welcome to the NewtekOne, Inc. first quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during your session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Barry R. Sloane, president and CEO. Please go ahead.

Thank you very much, and welcome to our Q1 2026 financial results conference call. My name is Barry R. Sloane, president, CEO, and founder of NewtekOne, Inc. Also presenting today is Frank DeMaria, chief financial officer of NEWT, the financial holding company that is publicly traded, and Frank is also chief financial officer of Newtek Bank National Association. For those who want to follow today's presentation along, please go to newtekone.com. Go to the investor relations section and the presentation section. Appreciate everyone's attending today. Given that this is our 25th year as a publicly traded company, and our 13th quarter reporting as a bank holding company after acquiring National Bank of New York City, we have accomplished quite a lot from $180 million of total assets in National Bank of New York City to over $2 billion. The financial holding company is approximately $2.9 billion of assets, and the bank has over $2 billion of deposits, up from $140 million at the time we acquired it approximately three and a quarter years ago. We want to make sure in today's presentation one of the biggest concerns people have, particularly in the current volatile market, is credit quality. I want to point everyone towards slide 21, where we can demonstrate that the bank clearly has stabilized credit. Nonperforming loans are down as a percentage when you typically take out the government guaranteed for both the numerator and the denominator. With that said, let us go to slide number two under forward-looking statements. Let us absorb that. And then let us go to slide number three. Important always to note: when you look at NewtekOne, Inc., our purpose and mission has not changed since we were founded in 1998 at 120 West 18th Street, Apartment 4B, with three founders. The focus of NewtekOne, Inc. is to provide small to medium-sized businesses, small to medium-sized enterprises, and business owners all across the United States financial and business solutions that are state of the art. We help our clients become more successful by growing their revenues, reducing their expense, and reducing their risk. I think more importantly, we are very much involved in the concept of real-time payments. We will talk about that quite a bit today: moving money, and giving businesses the analytics that they really desire and require apart from what they typically get from the top four large financial institutions in the United States, regional banks, and community banks. On slide number four, how do we do this? NewtekOne, Inc. uses technology to tackle its mission statement. I think it is important to point out that although we have taken many different sizes and shapes as a publicly traded company, we started off as a 1933 Act company, converted in November 2011 to a 1940s Act BDC company, and then converted back into a financial holding company. We acquired National Bank of New York City primarily for the purpose of improving our client experiences historically. We believe that by using technology, we have solved the three primary challenges that the banking industry needs to overcome to be able to help the customer base. One, the high cost of infrastructure with too many branches and expensive traditional bankers. We are branchless and do not rely on traditional branch infrastructure. If you take a look at the efficiency ratio at Newtek Bank National Association, this particular quarter it was 40%. Two, insufficient lending margins from riskless loans — we think this industry segment generally is avoiding risk rather than managing it, and there is very little margin in that business. Frankly, if competitors are not able to acquire deposits materially below the risk-free rate, there is not a lot of margin. Lastly, from a deposit perspective, basically taking in deposits with zero interest paid or noninterest-bearing deposits and charging excessive fees for the business client is not in the domain of NewtekOne, Inc. or Newtek Bank National Association. We have an extremely attractive platform that pays business clients 1% on checking, 3.5% on business savings, and a true no-asterisk zero-fee bank account. Important to note, we are a major adopter of real-time payments. We can announce today that we now have FedNow for receiving payments for our client base. We have been approved by the Federal Reserve's FedNow program and the Clearing House RTP. So we are fully approved, this is live, and we are able to benefit our clients today with real-time payments appearing in their accounts. On slide number five, these are things I think many of you are already aware of in terms of our structure. NewtekOne, Inc. is considered a bank holding company regulated by the Federal Reserve Board of Governors. Newtek Bank National Association, which used to be called National Bank of New York City, is a depository offering great solutions, real-time payments, and is the lender to the business community. Through the holding company's investment in Newtek Merchant Solutions, we provide payment processing solutions, payroll solutions, and insurance solutions that support independent business owners all across the United States. We utilize our own proprietary and patented technological solutions to acquire customers cost-effectively. We receive 600 to 800 unique business referrals a day through our NewTracker trademark client acquisition tool, and we give customers the Newtek Advantage, a far advanced business portal to help them manage the business, move money on a real-time basis, and get the types of historic data and analytics that they deserve. NewtekOne, Inc. provides a full menu of best-in-class on-demand business and financial solutions to independent business owners. Importantly, we do not leave clients to just software. We have staff over 300 that are available on demand on camera. So, in addition to great software and technology delivered frictionlessly, they can also get somebody on camera when they need them. On slide number six, we talk about our target market. The relevance of our target market — the SMB, SME, or independent business owner market — is quite large and lucrative. It is estimated that there are 36 million independent business owners in the United States that identify themselves in this category. According to the U.S. Chamber of Commerce, it is 43% of U.S. GDP. Frankly, we have been tremendously supportive of this particular asset class. And according to the SBA, we have stabilized and supported over 110 thousand jobs over the last five years, the second highest amongst all SBA lenders. The independent business owner is a huge economic demographic that, frankly, the existing industry has taken advantage of by basically taking their deposits and not really providing attractive lending solutions that enable them to grow their business or move money on a real-time basis. It is important to point out that in recent SBA data, NewtekOne, Inc. is the largest SBA lender by units and is top two or three by loan volume. Also important to note that even though the bank's balance sheet is a little over $2.1 billion, when we make an SBA loan 75% is government guaranteed. We typically sell it. So even though the bank is $2 billion, when you look at the government guarantees and the fact that we are servicing them, it is a much bigger infrastructure. Over our history, if we kept all the government guarantees on the balance sheet rather than selling them, it would be approximately $4 billion of total assets. On slide number seven, we are going to focus on the really attractive quarter that we just reported — a really good start to 2026. EPS of $0.43, beating Street consensus by about a penny. Reflected 1,923% growth over Q1 2025 basic and diluted EPS and was within our $0.37 to $0.47 guidance range. We want to reconfirm our 2026 guidance of $2.35 at the midpoint and establish a $2.60 midpoint for 2027. The current Street consensus for 2027 is in the range of $2.35 to $2.50 from several analysts, blending to $2.43. Also, for those that follow our stock closely, you are familiar we have done a very nice job in growing book value and tangible book value. Book value per share ended Q1 2026 at $12.35. Tangible book at $11.84. Started at a tangible book of $6.92 in Q1 2023, which is substantial growth over time. It is the technological advancements that are supporting a record number of originated loans and tremendous year-over-year growth. In the fourth quarter in 2026, we originated 961 loan units, a 40% year-over-year increase, with 500 loan units alone originated in March versus 287. In dollar terms, $391 million of loans versus March 2025. March's momentum continued in April with approximately 10% year-over-year growth. In addition, we captured operating leverage. Q1 2026 operating expenses increased just over 7.5% year-over-year on asset growth of 35% and a return on average assets of 1.96%, which is very favorable to the industry. The first quarter is clearly our weakest from an earnings perspective. I think it is important to note that using technology on a loan under $350,000, we are using AI to read tax returns, read lease agreements, read operating agreements, as well as alternative valuation methods. By being able to do this, we can fund small business loans quite quickly. As a matter of fact, we have the seven-day loan. Once the loan application is completed, we can fund that application under $350,000 within seven days. Slide number eight, deposit growth, extremely important for banks. We have two consecutive quarters of a record number of deposit accounts. We ended Q1 2026 with 37 thousand deposit accounts, more than doubling year-over-year. In 13 quarters, we have grown deposits from $142 million to $1.9 billion. Business deposits, which come in at a lower cost, increased quarter-over-quarter and year-over-year by $37 million and $173 million, respectively. Consumer deposits also climbed quarter-over-quarter and year-over-year by $392 million and $668 million. Since the acquisition of Newtek Bank in 2023, 54% of our lending clients have opened a business deposit account. Since February 2024, when we initiated T Man Life to Newtek Bank business lending clients, 25% of those clients have purchased T Man Life on an automatic, frictionless basis where they apply once and they can get a bank account and T Man Life. They can currently get flood insurance. In the very near future, we will also offer property and casualty — all automated, one app, frictionless, and getting clients their funds as quickly as possible for those who qualify. We just started in January originating C&I Long Am loans, nicknamed C&I LA. We used to call them ALP loans. These are being originated at the bank. The C&I LA originations approximated $85.7 million versus $68.5 million in the same quarter a year earlier. We are now funding these with bank deposits whereas historically in 2025 and earlier we funded them at the holding company with warehouse facilities. The cost of those facilities was approximately SOFR plus 3.25%. But the bigger benefit has been funding with bank deposits. We have historically securitized C&I LA loans on a regular basis and we may do so from the bank's balance sheet. Let us take an example: a $500 million portfolio historically was originated at the holding company with a 70% advance rate from a street warehouse line. We just paid two of those down to zero — one from Capital One, one from Deutsche Bank — which had a 30% equity haircut. So on $500 million worth of loans, you needed $150 million of capital from the holding company. Once you securitize with a 15% owner certificate to give you an 85% advance rate, an 85% advance rate on $500 million of collateral is $425 million advance, leaving $75 million owner certificate. All would have to be contributed from the holding company. In the event that we securitize off the bank's balance sheet, it is dramatically less. You are funding it with core deposits at approximately a 10-to-1 leverage. Much more efficient and much more profitable. On slide number nine, tangible book value per share — one of my favorite slides. If you look at this slide, it is a little dizzying. $6.92 in Q1 2023. It is currently $11.84. Frank DeMaria will talk about where we think we will be at the end of the year; it will be approximately $13.50. And on top of that, you look at the dividends that we paid: $2.43 of cumulative common dividends declared, $4.92 of tangible book value growth since the conversion. We have delivered $7.35 of value to shareholders, more than double the Q1 tangible value of $6.92, which we are proud of. On slide number 10, we touched upon the technological advances that are supporting increased loan volume. Those advances have also helped with deposit growth. We had tremendous unit and dollar growth in the first quarter. We discussed the seven-day business loan and our AI that is used for smaller balance loans to read tax returns, important to spreading financials and calculating debt service coverage. Some competitors in the marketplace that have been scoring some of these loans cannot do it. Their technology creates friction. We have had several competitors report problems with their fintech originators that are not able to deliver the solution. Not a problem for NewtekOne, Inc. or Newtek Bank. We have been using five C's of credit in our entire history. We apply that to the $350,000 loans to get liens, appraisals, read operating agreements, and lease agreements. Importantly, when you compare our business loans — which are structured to amortize over 10 to 25 years with no balloon payments — these are commercially viable rates. Compared to merchant cash advance or daily debit type loans, we can create monthly payments that are 7% lower for a borrower experienced with alternative financing options that are structured with shorter maturities. Our business model, whether it is 7(a), C&I LA, or loans that go into the bank, has been long-amortizing since 2003. We have that expertise. Our loans give the borrower flexibility: no covenants, ability to distribute income, borrow more without asking, or do an acquisition. In exchange, we get a personal guarantee, liens on business assets, and in many cases personal assets. We have the knowledge and experience making loans over two decades to have a very good feel for frequency and severity. We know these businesses and markets and how to manage these loans to get greater net returns after provisions and allowance for credit losses, which are almost 5%. Very strong risk management within Newtek Bank. Now, when you add technology, there is no need for a business owner to borrow from an MCA or a daily debit lender; they might wait a couple of more days, but they get a long-term loan with manageable monthly payments. Those technological advances also support our digital account opening and deposit growth on slide number 11. The graphs are attractive: we have grown business deposits, total deposits, and depository accounts. These are insured deposits — 78% insured. These deposits are stable. You are not going to have a Silicon Valley Bank-type problem because the customers do not have millions or tens or hundreds of millions of dollars concentrated. We are happy about paying market rates of interest and getting good margins on our loans. Net of write-offs, it is a solid business model. Slide number 12 covers our nonbank lender, held over from the days when we did not own a bank. Newtek Small Business Finance is winding down. This portfolio experienced what we consider the great financial crisis for small business where rates went up 3% to 5% in a short period and inflation made it difficult for businesses. Net increases in nonaccruals are shrinking, the accruing portfolio is shrinking, nonaccruals at fair value are shrinking, and outstanding securitization notes are down to $113 million. Loans in the securitizations have all cash flow being used to pay down the debt. Once you hit the cleanup call — there are three securitizations left, and we started with 13 — we expect to hit cleanup calls in the next six to 24 months, probably on all three. Then those loans and the monthly P&I flow through, and we can use that cash flow for other activities at the holding company. On a consolidated basis, NSBF was 21% in 2025 and 13% on 03/31/2026, so it continues to shrink. The remaining portfolio is fairly seasoned with a weighted average life of about 66 months, so we think we are through the worst part of the curve. We appreciate the opportunity to participate in the program as a nonbank lender, and we have been participating as a bank lender for about three years. Slide 13, the C&I LA program, is extremely additive. The average loan size on C&I LA is about $4 million to $5 million, so on 100 units you have $400 million to $500 million. To do $1 billion of 7(a) loans, you almost have to do 3,000 units. The ability to grow with our pipeline in a quality manner exists without reaching for bad credits. The C&I LA program is not a 7(a) type program with a 7(a) borrower — the borrowers are seasoned. You will see these are very strong credits. This will help us diversify. At March, the 7(a) portfolio in the bank was about 41% of the total portfolio, so diversification is an important part of risk management. We plan on doing more CRE at the bank, more short A/M C&I, and more of the C&I LA program which has great margins; we have developed six to seven years of expertise in it. The size of the loans is important and will enable us to grow the balance sheet in a better quality manner. In January 2026, we successfully launched our fourth C&I LA securitization. There was $295 million of securitized notes sold by $342 million of loans. It was our 17th securitization in our history. The deal was 10 times oversubscribed with 32 institutions purchasing the notes. Slide number 14: these businesses on a weighted average basis have been around for about 10 years. Weighted average LTV is 47%. Weighted average debt service coverage is over three. If you give an entrepreneur the flexibility of avoiding intrusive covenants while they personally guarantee and lien all business assets and some personal assets, this is a good loan program. We have repositioned the value of early amortizing a C&I loan, of putting a three-year or five-year balloon payment on a loan, and of requiring certain financials 45 days after quarter end. I would rather look into their bank account, see cash flows, who they are paying, and revenue coming into their account than rely solely on financial statements. That is the advantage of being technologically on top of this business. We limit state and industry concentrations; diversification remains key. This program has stronger credit than 7(a) with good margins and we have expertise in it. Slide number 15 shows how successful we have been in this marketplace. A recent deal, 2026-1: the gross spread before servicing was 6.6% on the collateral vs. the yield on the securities. Net of the servicing fee, 5.66%. Securitization interest expense is higher than bank deposits and it is match funded, which is important — you get duration benefit. Think about a 5.66% spread after servicing. If you could give a bank that spread with no cost to run the bank — no FDIC insurance, no branches, no bankers — you put the loans in a special purpose vehicle, clip the coupon, service the loans, and pay bondholders. That is a winning business. Valuations on the owner certificates are slightly over two to one on the value, and spreads are attractive relative to cash flow. That is a business we love and have a track record in. Slide number 16: look at the active securitizations. The first one is already paid off. Look at the 2024 deal and how the overcollateralization grows because excess cash flow pays down senior notes. OC went from $36.2 million to $50 million, showing that book value will ultimately get to fair value in about three to three and a half years because excess cash flow hyperamortizes the bonds. I would now like to turn the rest of the presentation over to Frank DeMaria.

Thanks, Barry. Slide 18 highlights our consolidated profitability metrics, of which there are two primary takeaways. One, our measures of profitability continue to be very strong, with the first quarter return on average assets just below 2% and a return on tangible common equity approaching 15%. And two, profitability is improving with notable step-ups over the 2025 first quarter. I would like to reiterate that there is an element of seasonality to the business with the first quarter typically being our weakest. Slide 19 focuses on trends specifically at Newtek Bank. Note the pickup in returns on average assets, equity, and tangible common equity, and the improvement in the efficiency ratio, all of which are influenced by moving the origination and funding of longer amortizing C&I loans to our bank subsidiary. We also show margin trends on this slide. Due to the exceptional deposit growth in the first quarter, the bank experienced a meaningful shift in its quarter-over-quarter earning asset mix, leading to net interest margin compression. However, the absolute dollar balance of net interest income continues to increase. Also, as Barry noted, significant loan production occurred in the second half of the quarter, which should bode well for net interest income and the bank's NIM in the second quarter. Loan and deposit growth remained very healthy, and we saw a decline in delinquencies and NPLs excluding government guaranteed loans. The next slide shows the geography of our loan production on the NewtekOne, Inc. balance sheet. With the shift of C&I LA loan originations into the bank, the first quarter securitization that moved loans off balance sheet, and the ongoing wind down of the NSBF portfolio, loans at Newtek Bank now comprise 83% of total loans, up from 65% for year-end 2025 and 57% for 2024. Slide 21 walks through credit trends at Newtek Bank, which highlight the following: one, delinquencies were down for a third quarter in a row; two, the ratio of NPLs to loans excluding government guaranteed loans was down for a fourth consecutive quarter; three, provisioning continues to cover net charge-offs; and four, as expected, net charge-offs have picked up as the loan portfolio has seasoned. That seasoning was anticipated and captured by our CECL calculation that called for building our allowance for credit losses as we grew the loan portfolio almost from scratch after acquiring the bank. Slide 22 covers Newtek Bank's held-for-investment loan portfolio. The held-for-investment portfolio increased roughly 10% in the first quarter with solid contributions from all three components: traditional CRE, traditional C&I, and unguaranteed SBA 7(a) loans. Unguaranteed portions of SBA 7(a) loans comprise roughly 59% of the held-for-investment book, down slightly quarter-over-quarter from 60%. The allowance for credit losses related to the unguaranteed 7(a) portfolio continues to make up a bulk of the bank's ACL. Slide 23 depicts how our strong asset growth is supported by healthy capital ratios, with leverage being above 13%, CET1 over 15.5%, Tier 1 capital above 18%, and total capital approaching 19.5%. Lastly, on slide 24, we have reaffirmed the EPS and origination guidance for 2026 and, as Barry noted, laid out an EPS range for 2027 to give market participants an early read on future trends. And with that, I will turn it back to Barry.

Thank you, Frank. Before we go to Q&A, I want to point out just a few more quick items for emphasis. Net interest margin for the business, once we do a securitization, particularly in C&I LA, typically declines. So please consider valuing our organization on a year-over-year basis. To give an example, we have about $383.19 million of cash at the Fed. That is a bit of a drag on interest income. Why do we have that much cash at the Fed? We had the opportunity to get deposits, and we are very constructive on our loan platform going forward and will use it. That may hurt in the near term, but on a long-term basis, it should work out well. If you develop foresight and put C&I LA loans down at the bank, you will start to get nice interest spreads, margins, and diversification, and improved credit metrics. Also, the ability to grow the business is stronger with C&I LA average loan sizes of $4 million to $5 million. The efficiency ratio at the bank is indicative of more activity at the bank, which is our goal. We intend to grow methodically. Often I am asked if we can grow faster. The answer is we do not want to grow any faster. We are growing fast enough, but we want controlled growth, managing risk and staying to our knitting. From the results of this quarter and three years and a quarter of operating the bank, we are hitting our stride in a good spot. So with that, operator, I would like to open this up to Q&A. Thank you.

At this time, we will conduct the question-and-answer session. As a reminder, to ask a question you will need to press star 11 on your telephone and wait for your hand to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Timothy Switzer of KBW. Your line is open.

Good afternoon. How are you guys doing?

Good, Tim. How are you?

Good. Thanks for taking my questions. My first one — you just kind of touched on it, Barry, but on balance sheet growth: quite a bit of growth in the loan book this quarter, excluding the securitization here, drove assets a bit higher. Does that change the trajectory of loan growth going forward, or what should we be expecting?

I think the growth of loans is going to be in the bank. I do not think you will see any loan origination at the holding company. The holding company will continue to house Merchant Solutions. It is conceivable we might put payroll down into the bank. That makes it easier to do same-day payroll: if a business wants to make money available on Monday, they could pay their employees on Monday, same-day payroll. It is easier to do that if the payroll business is in the bank. I think you will see the same type of historic growth — I will use the term low double-digit — and greater diversification. You will see improved credit metrics because we will be putting on many more of these C&I LA loans, which are better credits, down in the bank, and we will do so with good margins.

Okay. Got it. Very clear. And then a similar question on the deposit side: tremendous growth there. Your loan-to-deposit ratio is now very low. Is that going to normalize at all, or are you going to maintain this liquidity?

On one side, I have banks that were holding cash at the Fed at low yields, and on the other side, we know we have the liquidity to make loans going forward. I think having $390 million is a bit excessive; we do not need all of it. But we will always keep appropriate liquidity at the bank. We have waiting lists of people for deposits. If you look at Trustpilot, we have high customer satisfaction ratings, which reflects strong customer service — hats off to Jen Merritt and the Wilmington Group. It is not just rate; we service customers well. With real-time payments — and we have a real real-time payments offering, not just ACH — we now have FedNow and Clearing House RTP. At some point, we might use stablecoin for moving money, but not for deposits. We will stay out of that traffic and give people the ability to move money quicker using third-party solutions. Using the Newtek Advantage portal for analytics, quicker payroll, merchant money in accounts the same day, and better visibility — these are all benefits that will drive more business deposits over time. These things take time, and we are early adopters of technology and will continue to evolve.

Our next question comes from Christopher Nolan of Ladenburg Thalmann & Company. Your line is open.

Hey, guys. Frank, what was the lower loan yields due to again, please?

The blended loan yields are around 7.25%. The decrease quarter-over-quarter is mainly driven by the ALP (C&I LA) loans going off balance sheet at the beginning of the quarter. With significant production occurring in the second half of the quarter, on an average basis we did not get full credit for that given that loans moved into the securitization earlier in the quarter. You should see yields normalize as we get into the second quarter and start getting the benefit of those loans being on balance sheet for the full quarter.

Okay. So it is timing issues for the late loans, right? It is timing, but it is also a recharacterization because the coupon did not go away — it is just in a securitization and you receive income from the owner certificate. Does that make sense?

Yes, it is both timing and a recharacterization. The coupon on the collateral remains; it has just been recharacterized as spread versus being booked directly as loan yield when the loans are on balance sheet.

Noted. I will catch up with you later to go through the details.

Thank you. Second question: the leverage ratio — you guys are growing and capital ratios are moving. I know you mentioned you are not going to chase growth for growth's sake, but is it now more a balancing act where you moderate growth and securitizations because you are approaching capitalization constraints?

It is hard to look at us quarter-to-quarter. With about $383.19 million of cash at the Fed, and loans moved to securitizations, people should not penalize us for doing solid capital management. As we place loans into the bank and originate more, you will see a marked jump in both capitalization and income of the bank. We are not stretching or overusing capital. This will gravitate back up and fluctuate as we move loans on and off balance sheet.

To clarify, the leverage ratio at the holding company is 13.1%.

Our next question comes from Harold Goetsch at B. Riley Securities. Your line is open.

Hey. Thank you, and terrific quarter, guys. Well done. I have a question on the seven-day loan. Is there any data on how much of the loans were from that program in the first quarter, if any? And if not, is this a competitive advantage to have a tech-led stack that allows you to convert your funnel at a better rate, giving a better user experience to the borrower? Thoughts?

Hal, we do not have it broken out specifically, but if you look at loan volume in March when we announced the seven-day loan, there was a sharp jump. We also indicated being up 10% on total loans in April 2026 versus April 2025, which we think could be a continuing trend. We believe we will continue to make more loans at double-digit rates without stretching for credit.

Okay. My next question: could you go over the before-and-after example about securitizations again, where previously there was a 70% advance and a 30% equity stake and now transitioning to a model requiring substantially less equity capital? Could you go over some numbers again?

Sure. Use a $100 million portfolio as an example. If done at the holding company with a 70% warehouse line advance, you would need $30 million of equity during accumulation. When you securitize, you typically issue rated bonds and an owner certificate of around 15%, meaning $15 million required from the holding company and financed permanently. That is a capital requirement. If you do it in the bank, you finance activity with deposits at roughly 3.6% to 3.7% and fund $100 million with deposits. There is capital against it, but the funding is far more efficient with deposits than with warehouse lines requiring large equity contributions at the holding company. It is a major benefit with less need to pull in capital at the holding company.

Okay. I appreciate you taking my question. Thank you.

Our next question comes from Stephen M. Moss of Raymond James. Your line is now open.

Good afternoon.

Hey, Steve.

Barry, Frank, maybe start off on your cost of funds here going forward and how getting rid of the lines where you were parking the C&I LA loans seems like a meaningful cost savings. With several hundred million dollars in average balances, net interest income should be taking a decent step up as the year goes on. How are you thinking about that?

When you say 'step up,' what specifically do you mean?

Just that you are funding them with deposits at, call it, 4%, whereas earlier you were funding those loans at SOFR plus 3.25% — call it 7% — plus an equity haircut. So it seems that is very beneficial.

Correct. That is the benefit. The program is about six and a half to seven years old, we have four securitizations, and have improved our internal capabilities to manage risk, which is why it is now funded at the bank.

So trying to put it this way: as I think about your funding, could NII peak around, say, $24 million to $25 million before your next securitization, or are those numbers too large?

Frank, I'll let you take that — that is above my pay grade.

I think $24 million is a bit high. You are right that we will see a benefit from the spread because of reduced cost of funds, and we will see a noticeable step up quarter over quarter, but we are not projecting that high a level on NII.

When do you think the next securitization will be? You generally want them larger; any updated thoughts as collateral accumulates on balance sheet?

We are hoping for a fourth-quarter event, and we would like the collateral pool to be $400 million to $500 million.

One last question: you have been a good barometer of the SBA market. What are you seeing in terms of borrower confidence and activity given the recent changes?

I was at the National Association of Government Guaranteed Lenders in Orlando recently. There have been several regulatory changes: for instance, 100% of owners must be U.S. citizens, which reduced volume by an estimated 10% to 20% last year. Refinancing merchant cash advances or daily debit loans when the funds are used to purchase receivables is no longer permitted in some contexts. On the positive side, our seven-day loan and other product innovations are valuable because many MCA or daily debit borrowers are actually credits that would last five to ten years for good credits. Based on the math, MCA lenders can still make money, but our solutions offer borrowers long-term, amortizing alternatives that are far less expensive monthly. We believe we will get back to prior volumes. 2025 was a challenging year for 7(a), and some fintechs that were not properly underwriting or spreading financials are struggling. That creates a competitive advantage for us. The business has gotten harder, but we are well positioned to remain a leader in the space.

Okay. Appreciate the color. I will step back. Thank you very much.

Our next question comes from Ken Billingsley of Compassport Point Research and Trading. Your line is open.

Hi. Good afternoon.

Hi, Ken. Good afternoon.

Welcome to our call. Good to have you.

One question: it sounds like you are looking at a fourth-quarter event for the next securitization with a trigger pool of $400 million to $500 million. Would that all be coming out of the bank?

Yes.

My second question: I saw growth in the number of loans. Are loan sizes shrinking quarter-over-quarter? If so, is that underwriting or market conditions?

In the SBA bucket, loan sizes are trending smaller as we do more commercial and industrial short-term loans and commercial real estate loans in that middle bucket. The C&I LA loans will be larger in size. Over two decades of managing Newtek, I have learned that diversification in credit aspects and loan sizes serves us well. We are spreading across sizes rather than shifting only smaller or larger, which should serve us well. Pete Downs and I work closely on loan committee to manage state and industry concentrations and balance the portfolio. Risk-adjusted returns are where they should be.

I appreciate you taking my question. Thank you.

Our next question comes from Timothy Switzer of KBW. Your line is open.

Hey, guys. I did not see it in the materials. What was the SBA gain-on-sale premium this quarter? And how have pricing dynamics changed with the market disruptions you mentioned? What is the trajectory of premiums going forward?

Tim, the market is maintaining pricing; we are seeing prices around $1.10 to $1.50, plus or minus. On supply and demand, reduced supply has held prices up. I do not see prices declining materially. Pricing is more influenced by prepayment rates than by small rate moves. Prepayment trends drive valuation, not simply rates moving higher or lower. We saw rates move significantly over an 18- to 24-month period previously; currently rates have moved around 50 basis points. We expect prices to be in reasonable shape and not see a big decline given current supply dynamics.

We saw the price in that range, and our net gain on sale for the quarter was about $26.7 million, driven mainly by 7(a) sales with some final floor sales included.

Got it. And percent of your production that is floating versus fixed — is it pretty much all floating?

One hundred percent floating.

Okay. One last one: your new business deposits — great growth. What is the average account size and what do spending patterns look like in those accounts?

On the consumer side, average deposit account sizes are around $10,000. Business accounts average closer to $200,000 to $250,000. Consumer balances tend to be relatively small and stable; business accounts are larger and more active.

I am showing no further questions at this time. I would now like to turn it back to Barry R. Sloane for closing remarks.

Alright. Thank you, everyone. Appreciate your attendance and great questions. Glad to be able to wrap it up in an hour. We look forward to delivering great results for the second quarter as well. Thank you.

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.