NewtekOne’s Bank-Like Pivot: Trading Gain-on-Sale for NII and a Higher Multiple

The SBA lending machine is moving loans and deposits into its national bank, betting that a more traditional spread model will re-rate the stock—even if it hurts near-term EPS.

NEWT · Earnings Call · 2026-08-06

A Strategic U-Turn

NewtekOne (NEWT) has long been a top SBA 7(a) lender, but the second-quarter 2026 call made it clear that the company is deliberately morphing into something more bank-like. CEO Barry Sloane opened by stressing that more activity is being moved into Newtek Bank, N.A., including the entire C&I LA program and, increasingly, the retention of guaranteed SBA loans on the balance sheet rather than selling them for immediate gain-on-sale income.

Yes, so I think that organizations that do not have our ROAA, ROTCE, and business model that is, I wouldn't say focused, but drives a lot of gain-on-sale income, but basically have net interest income and net margins that they view as more long-term and more stable, has entered into our thinking that we're going to continue to do both.
Barry R. Sloane, President and CEO · 2026-08-06

This pivot is a direct response to the market’s persistent discount: NEWT trades at ~4.9x trailing earnings and 0.8x book value, while traditional banks with similar returns command 9–11x. Sloane argues that by shifting to net interest income (NII) and using cheap deposits to fund loans, the company can eventually earn a bank multiple. But the transition is not costless – management explicitly warned that headline EPS will be dampened over the next couple of quarters as gain-on-sale revenue gives way to spread income, and they have pulled near-term guidance while they “crunch the numbers.”

NII as the New Engine

NII is already ramping: second-quarter 2025 NII was $16.2M, and second-quarter 2026 came in at $25M – a 54% jump. CFO Frank DeMaria attributed the compression in holdco NIM to the shifting of operations into the bank, which now benefits from a 5.4% NIM and a deposit base that is 81% insured and digitally acquired. The bank’s ROAA and ROTCE remain eye-catching, and Sloane emphasized that the cost of deposits has been “flattish” even as the bank grows. Net Interest Income is now the core earnings driver, and that is exactly what Sloane wants investors to focus on. However, the market is not yet convinced. The stock is down ~19.5% from its mid-July peak (per the 90-day tape), and the recent guidance reevaluation has created uncertainty. Sloane is candid about the trade-off: “I'm going to say, a 45-day window, give or take, maybe 60. We have to do a lot of calculation. We've shifted a lot of things around.” — Barry R. Sloane, President and CEO · 2026-08-06

Credit and the SBA Dance

Credit remains a key concern for skeptics. Nonperforming loans rose sequentially, largely due to the company’s decision to aggressively Government Guaranteed loan buybacks – repurchasing defaulted guaranteed portions from the secondary market to maintain a strong partnership with the SBA. Sloane defended this as a deliberate strategy to manage the relationship, and he pointed to the $15M Simad Holdings loan as an example where collateral covers the exposure and full recovery is expected. The company’s ACL coverage on unguaranteed 7(a) loans sits at 8.56%, a level that management believes is appropriate given the portfolio’s loss characteristics. The shift to holding more loans on the balance sheet is coupled with a move into higher-quality C&I short-term and CRE credits, which should gradually reduce the concentration in unguaranteed 7(a) balances. This diversification is central to Sloane’s vision of a more “bank-like” loan book.

Technology as an Unpriced Option

Underlying everything is NewtekOne’s tech stack: real time payments, the NewTracker referral system, and the Newtek Advantage portal. Sloane teased that “opportunities in the pipeline” exist to white-label this technology to larger institutions, which could open a new revenue stream. He notes that the company can acquire deposits and customers without traditional banker branches, and that this “chartered bank” model is something the industry is slowly moving toward. Yet the market has yet to assign any meaningful value to this optionality. In prior quarters, management already signaled this trajectory. In Q1 2026, Sloane said: “I think the growth of loans is going to be in the bank. I do not think you are going to see any loan origination at the holding company whatsoever.” — Barry R. Sloane, President, CEO, and Founder · 2026-04-30 And in Q4 2025, he highlighted the deposit-gathering machine: “First of all, you know, 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.” — Barry R. Sloane, Chief Executive Officer · 2026-01-29

The Valuation Case

At 0.8x book and 4.9x earnings, the market is pricing NewtekOne as a confused hybrid. But the company’s financials show a business that is growing revenue 228% over four years, with improving efficiency – the Efficiency Ratio dropped to 44.3% in Q1 2026. If the pivot to NII succeeds and the loan book becomes more diversified, the multiple could re-rate. The risk is that near-term EPS suffers, and credit losses could rise as the portfolio seasons. For now, NewtekOne is a story of a company trading short-term gain-on-sale income for a potentially higher valuation – a high-stakes bet that its technology and digital deposit franchise will eventually be recognized. The next 45–60 days, when management updates guidance, will be the first test.