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NEW YORK--(BUSINESS WIRE)--
KBRA publishes the senior unsecured debt rating of BBB-, the subordinated debt rating of BB+, and the short-term debt rating of K3 for NewtekOne, Inc. (NASDAQ: NEWT) (“Newtek” or “the company”).Additionally, KBRA publishes the deposit and senior unsecured debt ratings of BBB, the subordinated debt rating of BBB-, and the short-term deposit and debt ratings of K3 for lead bank subsidiary, Newtek Bank, N.A. (“the bank”). The Outlook for all long-term ratings is Stable. These ratings were assigned on an unpublished basis on May 14, 2026.
Concurrently, KBRA assigns a rating of BBB- to Newtek's $50 million of 8.125% senior unsecured notes maturing February 2029.
Key Credit Considerations
Newtek’s ratings are principally driven by strong current and expected earnings performance, reflective of appropriate loan pricing relative to customer credit risk, reasonable gain-on-sale margins on SBA products, solid fee revenue to the company’s payments processing business, and the company’s efficient operation which is supported by high use of technology in the underwriting and portfolio management. Consolidated earnings, measured by ROA, have ranged between ~2.0% and ~3.5% since becoming a financial holding company, which is higher than rated peers. More recently, management has begun to shift its balance sheet strategy toward retaining a greater proportion of government-guaranteed SBA 7(a) loans and moving additional lending activities into Newtek Bank. This represents an evolution from the company's historical emphasis on loan sales and associated gain-on-sale revenue toward generating a larger proportion of earnings through recurring net interest income. While KBRA views the potential for a more predictable earnings stream favorably, retaining additional loans could pressure near-term profitability as foregone gains on sale are replaced by interest income recognized over time.
Ratings also reflect Newtek’s robust consolidated CET1 at ~18% and additional loss absorbing capital via its allowance for credit losses (ACL) at ~2.8% of loans. That said, we believe capital and ACL levels reflect the company’s small-and-medium sized business (SMB) banking loan mix which tends to generate higher-than-peer credit losses through the cycle. As such, we expect loss absorbing capital to continue to be managed well-above our rated BHC universe median. Further, we note that capital levels at the bank are much lower (CET1 ~11.5% at 2Q26) given the lack of legacy exposures. This meaningful difference in capital structure and investment in nonbank subsidiaries creates double leverage at the parent of nearly 200% which constrains the company’s rating in the near-to-medium term. Given the aforementioned evolution in balance sheet strategy, there will be greater demand for bank-level capital going forward. That said, we expect Newtek and the bank to continue to manage capital well-above peers over the long-term.
As noted, Newtek’s credit quality, measured both by nonperforming assets (NPAs) relative to loans and OREO and net charge-offs (NCOs), tends to skew higher than industry norms due to its inherent business model as well as its legacy loan exposures which are weaker in nature. NPAs were in the 9% range at the holding company at 2Q26 as legacy loans continue to be resolved. At the bank, where most originations are housed now, credit quality is better but still relatively weaker than peers with NPAs ~3%-4% and NCOs ~2%.
Newtek’s funding and liquidity profile reflects its corporate and strategic evolution from a nonbank lender funded primarily through wholesale capital markets, including senior unsecured debt and securitizations, to a deposit-funded banking organization. The company has increased bank deposits to $2 billion+ since its conversion to a bank, driven by strong penetration within its small business customer base as well as attractive savings rates offered to consumer depositors. On a consolidated basis, Newtek has historically relied on wholesale funding sources, most notably securitizations. The company has issued 17 securitizations over its operating history. Going forward, C&I long amortization loans will be originated through the bank, funded with deposits, which are expected to continue growing, and then securitized from the bank. Management believes this approach is operationally simpler and more economically attractive. While we view the increased use of core deposit funding as positive for creditors, we would also want to observe execution of this revised securitization strategy over time before reflecting it in Newtek’s ratings.
Rating Sensitivities
Positive rating momentum could develop over time as the company’s business model, in its current form, matures, resulting in profitability that continues to outpace the industry as a whole. Positive rating action could also occur as holding company double leverage comes down and converges with our rated peer average while the consolidated CET1 level remains appropriate relative to Newtek’s risk profile. Credit quality deterioration that causes earnings to lag historical levels or that results in capitals levels declining could pressure ratings.
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A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
About KBRA
Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.
CET1, or Common Equity Tier 1, is a measure of a bank's core financial strength, representing its most reliable and high-quality capital, primarily made up of shareholders' equity like common stock. It acts like a financial safety buffer, helping the bank absorb losses and stay stable during economic downturns. For investors, a strong CET1 ratio indicates a bank's resilience and overall health.
allowance for credit losses (acl)financial
Allowance for credit losses (ACL) is an accounting reserve banks and lenders set aside to cover loans and other receivables that may not be repaid. Think of it as a cushion or rainy-day fund that reduces reported assets to reflect expected losses; when the cushion grows, it can signal rising borrower trouble or more conservative accounting, and when it shrinks, it may boost reported profits and capital. Investors watch ACL to judge a lender’s risk exposure, earnings quality, and capital strength.
double leveragefinancial
Double leverage is a structure in which debt financing occurs at more than one level of a corporate group — typically the parent (or holding) company borrows money and also the operating subsidiary borrows. The effect is that the group’s consolidated debt exposure is amplified because the parent uses its borrowed funds to buy shares or make capital injections in the subsidiary while the subsidiary itself carries debt; this can raise the group’s overall leverage above the leverage visible on any single entity’s balance sheet. Consequence: it increases total financial risk across the group and can make regulatory or capital ratios at one level look healthier than consolidated leverage would indicate.
nonperforming assets (npas)financial
Loans, advances or other assets held by a lender that are not generating the expected income because borrowers have stopped making scheduled payments or the lender otherwise cannot recover interest or principal; regulators and banks commonly classify a loan as a nonperforming asset when payments are overdue for a specified period (often 90 days) or when collateral has been repossessed and recovery is uncertain. NPAs can include nonpaying loans, interest accrued but unpaid, and certain repossessed or foreclosed assets, and their recognition typically triggers higher provisioning, stricter supervision, and possible restructuring or write-downs by the lender.
net charge-offs (ncos)financial
Net charge-offs (NCOs) are the amount of loans and other credit assets a lender writes off as uncollectible during a reporting period, minus any cash recoveries on previously charged-off accounts. They measure realized credit losses (a flow number) rather than provisioning or the stock of problem loans, and are recorded when the lender determines repayment is unlikely and removes the receivable from its balance sheet; recoveries from collections on those accounts reduce the reported net charge-offs.
securitizationsfinancial
Securitizations are transactions that bundle similar financial assets—like mortgages, car loans, or credit-card receivables—and convert them into tradable securities that investors can buy. Think of it as pooling many small loans into one package and selling slices of that package; this changes who bears the credit risk, creates different return and risk levels, and can improve liquidity. Investors care because securitizations determine potential income, the level of default risk tied to the underlying loans, and how easily those investments can be bought or sold.
