NewtekOne's Deposit Surge Masks Slowing SBA Lending Growth
Event summary
- NewtekOne reported 1Q26 EPS of $0.43, a 19.4% increase YoY.
- Business deposits grew 66% YoY to $1.9 billion, while consumer deposits increased 88% YoY.
- SBA 7(a) loan origination decreased from $213 million in 1Q25 to $202 million in 1Q26, with $96 million sold.
- The company retired $95 million of fixed-rate senior unsecured notes.
The big picture
NewtekOne's strong deposit growth highlights the success of its digital-first banking strategy, but the slowdown in SBA lending raises questions about its ability to diversify its loan portfolio and maintain revenue momentum. The company's shift to funding C&I LA loans through deposits represents a significant operational change, potentially reducing funding costs but also increasing reliance on deposit stability. The overall picture suggests a transition from a primarily SBA-focused lender to a broader, technology-enabled financial institution, but execution risk remains a key factor.
What we're watching
- Lending Diversification
- The shift towards C&I LA Loans and away from SBA 7(a) loans, while boosting margins, could expose NewtekOne to higher credit risk if broader economic conditions deteriorate.
- Deposit Retention
- The sustainability of Newtek Bank’s deposit growth, fueled by competitive interest rates and the Newtek Advantage® portal, will be critical to funding future loan growth and maintaining profitability.
- Efficiency Gains
- The impact of AI-driven process improvements on loan origination volumes and operating efficiency needs to be sustained to justify the initial investment and drive long-term profitability.
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