What changed in this filing

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Item 1. Business

2025-03-17 compared with 2024-04-01 · 283 added, 226 removed, 663 unchanged (43% of the section changed)

We are a financial holding company subject to the regulation and supervision of the Federal Reserve and the Federal Reserve Bank of Atlanta that, together with our consolidated subsidiaries, provides a wide range of business and financial solutions under the Newtek ® and NewtekOne ® brands to the independent business owner (SMB) market.

Prior to January 6, 2023 and during the entirety of the 2022 fiscal year, we operated as an internally managed non-diversified closed-end management investment company that was regulated as a BDC under the 1940 Act, and was treated as a RIC under the Code for U.S.

federal income tax purposes.

On January 6, 2023, we completed the Acquisition of NBNYC, a national bank regulated and supervised by the OCC, pursuant to which we acquired from the NBNYC shareholders all of the issued and outstanding stock of NBNYC.

NBNYC has been renamed Newtek Bank, National Association (“Newtek Bank”) and has become a wholly owned subsidiary of the Company.

In connection with the completion of the Acquisition, we contributed to Newtek Bank $31 million of cash and two of our subsidiaries, NBL and SBL (subsequently, NBL was merged into SBL).

Upon the consummation of the Acquisition, Newtek Bank entered into an operating agreement with the OCC concerning certain matters including capital, liquidity and concentration limits, and memorializing the business plan submitted to the OCC.

In addition, on January 6, 2023, we filed with the SEC a Form N-54C, Notification of Withdrawal of Election to be Subject to the 1940 Act, following approval from our shareholders, and ceased to be a BDC.

As a result of the Acquisition, we are now a financial holding company subject to the regulation and supervision of the Federal Reserve and the Federal Reserve Bank of Atlanta.

We no longer qualify as a RIC for federal income tax purposes and no longer qualify for accounting treatment as an investment company.

We are a financial holding company that is a leading business and financial solutions provider to independent business owners/SMBs.

We define independent business owners (SMBs) as companies having revenues of $1.0 million to $100.0 million, and we estimate the SMB market to be over 33 million businesses in the U.S.

as of March 2023, according to the SBA.

NewtekOne and its subsidiaries provide independent business owners (SMBs) with the following Newtek® branded business and financial solutions:

Newtek Bank, Newtek Lending, Newtek Payments, Newtek Insurance, Newtek Payroll and Newtek Technology.

We have an established and reliable platform that is not limited by client size, industry type, or location.

As a result, we believe we have a strong and diversified client base across the United States and across a variety of different industries.

In addition, we have developed a financial and technology based business model that enables us to acquire and process our independent business owner clients in a very cost effective manner.

This capability is supported in large part by NewTracker®, our patented prospect management technology software, which is similar to, but we believe better suited for our needs than, the system popularized by Salesforce.com and similar providers.

In addition, we have recently launched the Newtek Advantage TM (patent pending) dashboard, for our depository and non-depository clients.

The Newtek Advantage offers NewtekOne’s clients a single online dashboard to access all of NewtekOne’s business and financial solutions.

The Newtek Advantage allows NewtekOne clients to easily interact with NewtekOne subject matter experts in the areas of Banking, Lending, Payments, Technology, Payroll and Insurance.

We believe the Newtek Advantage will enable us to grow core retail deposits and provide an advantage to our existing and new clients.

We believe that NewtekOne’s technology and business model distinguishes us from our competitors.

As a result of the Acquisition and the Company’s filing with the SEC a Form N-54C, Notification of Withdrawal of Election to be Subject to the 1940 Act, the Company is now a financial holding company subject to the regulation and supervision of the Federal Reserve and the Federal Reserve Bank of Atlanta.

The Company no longer qualifies as a regulated investment company for federal income tax purposes and no longer qualifies for accounting treatment as an investment company.

As a result, in addition to Newtek Bank and its consolidated subsidiary, SBL, the following NewtekOne portfolio companies and subsidiaries are now consolidated non-bank subsidiaries in the Company’s financial statements:

Newtek Merchant Solutions, LLC (NMS);

Mobil Money, LLC;

See “Executive Overview - Conversion to a Financial Holding Company.

In addition to our bank subsidiary, Newtek Bank and its consolidated subsidiary, SBL, the following are our consolidated non-bank direct and indirect subsidiaries:

Newtek Small Business Finance, LLC (NSBF);

Newtek Merchant Solutions, LLC (NMS) and its subsidiary Mobil Money, LLC;

CDS Business Services, Inc.

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Titanium Asset Management LLC (TAM);

Newtek Business Services Holdco 6, Inc (Holdco 6);

Newtek ALP Holdings;

Newtek Commercial Lending, Inc.

Newtek Technology Solutions, Inc.

(NTS), which includes the former entities SIDCO and EWS that were merged into NTS on December 31, 2023 and POS on Cloud, LLC, d/b/a Newtek Payment Systems (POS).

In addition, as a result of commitments made to the Federal Reserve, the Company will divest or otherwise terminate the activities conducted by NTS by January 6, 2025, subject to any extension of this date.

Moreover, on April 13, 2023, the Company, NSBF and the SBA entered into an agreement in connection with NSBF’s and Newtek Bank’s participation in the SBA 7(a) loan program (the "Wind-down Agreement").

(NTS) and POS on Cloud, LLC, d/b/a Newtek Payment Systems (POS).

As a result of commitments made to the Federal Reserve, the Company divested of NTS on January 2, 2025, by selling NTS to Paltalk, Inc.

(“Paltalk”), now known as Intelligent Protection Management Corp.

See “ NOTE 25—SUBSEQUENT EVENTS ” .

As a result of our conversion to a financial holding company, comparisons to December 31, 2022 include adjustments made to reconcile prior investment company accounting to the current financial holding company accounting requirements.

(See NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION)

NewtekOne is a Technology Enabled Financial Holding Company Offering Business and Financials Solutions to its

NewTracker is our primary tool for acquiring business referrals without traditional bankers, bank branches, brokers or business development officers.

We have an established and reliable platform that is not limited by client size, industry type, or location.

As a result, we believe we have a strong and diversified client base across the United States and across a variety of different industries.

In addition, we have developed a financial and technology based business model that enables us to acquire and process our independent business owner clients in a cost effective manner.

In 2003, we began instituting and developing our strategy of acquiring clients primarily through alliance-based relationships and managing customer inquiry through our patented NewTracker system.

We have hundreds of alliance partners signed up to Referral Promotion Agreements or BizExec Agreements, where the alliance partner can receive a referral fee once the referral generates an account opening, which can include but is not limited to a loan, merchant account, payroll account, insurance policy, technological solution, or bank account.

Through our NewTracker platform, we have historically received hundreds of unique referrals a day from alliance partners which include large commercial banks, community banks, credit unions, trade associations, accounting firms, law firms, and small business client aggregators.

We process these referrals using non-traditional bankers that we refer to as Business Service Specialists (“BSS”).

By utilizing NewTracker, we provide complete transparency to our alliance partners who can track and view the processing of their referral through the close of the transaction, whether it is a loan, the opening of a merchant processing account or payroll account, or an insurance policy.

In addition, we leverage software with to extract, process and exchange information from borrowers and businesses in need of a business or financial solution.

In addition, our strategy and platform for client acquisition without the expense of bank branches, traditional bankers, brokers, or business development officers, enables Newtek Bank to operate at efficiency ratios that are typically and traditionally lower than Newtek Bank’s competitors in the banking industry.

Our platform also allows us to track the efficiency of our staff by analyzing, among other things, customer connect rates, close rates, and the number of transactions that each BSS can process with a client daily, weekly, monthly and quarterly.

Additionally, through NewTracker we maintain a database of what products have been offered to potential clients even if a deal is not closed.

That information allows us to revisit that referral over the course of time and continue to solicit business targeting independent business owners as we continue to develop new best in class business and financial solutions.

We regularly contact current and prospective clients in our database through email, videos and outbound calling efforts, and we are in the early stages of a digital and social media campaign.

By connecting with clients in our database regularly and consistently, on camera and with educational videos, webinars, and podcasts, we believe we have developed an efficient way to grow our sales and marketing plan and improve Newtek ® brand awareness and recognition.

Newtek Advantage ®

In addition, we have begun to offer the Newtek Advantage ® (patent pending), the One Dashboard for All of Your Business Needs ® , which we believe is a differentiating business tool that business owners can use in one or more areas of their core business operations.

For example, the Newtek Advantage provides independent business owners with instant access to a team of NewtekOne business and financial solutions experts, who are available on camera 24/7/365 (with the ability to share videos, presentations, and analytical data), in the areas of Business Lending, Electronic Payment Processing, personal and commercial lines Insurance Services and Payroll and Benefits Solutions.

Moreover, the Newtek Advantage provides our independent business owner clients with analytics on their businesses, as well as transactional capabilities, including free unlimited document storage, free real-time updated traffic analytics, free real-time credit card processing and chargeback batch information for merchant solutions clients and the ability for our Newtek Payroll (PMT) clients to make payroll directly from the Newtek Advantage business portal.

In addition, we recently announced that the Newtek Advantage now integrates with Intuit QuickBooks®, providing independent business owners with a real-time snapshot into their finances.

We believe the Newtek Advantage can, among other things, enable Newtek Bank to grow core business transactional deposits, and provide our existing and new clients with an “advantage” in successfully running their businesses.

We believe that our NewTracker and Newtek Advantage technological innovations supports our business strategy of being a true technology enable financial holding company, without branches, traditional bankers, brokers or business development officers.

We believe that our technology and business platform distinguishes us from our competitors.

NewtekOne’s Business and Financial Solutions Ecosystem

NewtekOne and its subsidiaries provide independent business owners with the following Newtek® branded business and financial solutions:

Newtek Banking, Newtek Lending, Newtek Payments, Newtek Insurance and Newtek Payroll.

In addition, since the divestiture of NTS to IPM, we offer our our clients the Technology Solutions (Cloud Computing, Data Backup, Storage and Retrieval, IT Consulting and Web Services) provided by Intelligent Protection Management Corp.

(IPM.com) (formerly known as NTS).

Newtek Banking

We have centralized our Newtek Lending Platform within Newtek Bank, our commercial bank, except for our ALP lending business, discussed herein.

Newtek Bank originates, services and sells SBA 7(a) loans in a similar manner to NSBF’s historic business model and originates and services SBA 504 loans, C&I loans (including ABL), and owner occupied CRE and investor CRE loans.

Prior to the Acquisition of Newtek Bank, our SBA 7(a) lending operations were conducted by NSBF, our SBA licensed non-bank lender.

The Company’s business plan prepared in connection with the Acquisition provided for all SBA 7(a) loan originations to be transitioned to Newtek Bank and for NSBF to cease originations of SBA 7(a) loans.

Pursuant to the Wind-down Agreement, NSBF has begun to wind-down its operations and NSBF’s SBA 7(a) pipeline of new loans was transitioned to Newtek Bank during the second quarter of 2023.

During this wind-down process, NSBF will continue to own the SBA 7(a) loans and PPP Loans currently in its SBA loan portfolio to maturity, liquidation, charge-off or (subject to SBA’s prior written approval) sale or transfer.

SBL will service and liquidate NSBF’s SBA loan portfolio, including processing forgiveness and loan reviews for PPP Loans, pursuant to an SBA approved lender service provider agreement.

In addition, during the wind-down process, NSBF will be subject to minimum capital requirements established by the SBA, be required to continue to maintain certain amounts of restricted cash available to meet any obligations to the SBA, have restrictions on its ability to make dividends and distributions to the Company, and remain liable to the SBA for post-purchase denials and repairs on the guaranteed portions of SBA 7(a) loans originated and sold by NSBF.

To that end, on April 13, 2023, the Company, NSBF and the SBA entered into an agreement to, among other things, transition NSBF’s SBA 7(a) pipeline of new loans to Newtek Bank and wind-down NSBF’s operations (the "Wind-down Agreement").

NSBF is in the process of winding-down its operations and will continue to own the SBA 7(a) loans and PPP Loans currently in its SBA loan portfolio to maturity, liquidation, charge-off or (subject to SBA’s prior written approval) sale or transfer.

Newtek Bank’s subsidiary SBL now services and liquidates NSBF’s SBA loan portfolio, including processing forgiveness and loan reviews for PPP Loans, pursuant to an SBA approved lender service provider agreement.

In addition, during the wind-down process, NSBF is subject to minimum capital requirements established by the SBA, is required to continue to maintain certain amounts of restricted cash available to meet any obligations to the SBA, has restrictions on its ability to make dividends and distributions to the Company, and remains liable to the SBA for post-purchase denials and repairs on the guaranteed portions of SBA 7(a) loans previously originated and sold by NSBF.

The Company has guaranteed NSBF’s obligations to the SBA and has funded a $10.0 million account at Newtek Bank to secure these potential obligations.

On January 17, 2023, the Company changed its name from Newtek Business Services Corp.

to NewtekOne, Inc.

NewtekOne’s Business and Financial Solutions Ecosystem

Newtek Lending

In addition, Newtek Bank offers depository services and solutions.

Newtek Bank’s commercial banking clients can take advantage of our full offerings of business and financial solutions via the Newtek Advantage business portal.

Newtek Bank's Business and Financial Solutions Include:

SBA 7(a) Lending

Our Newtek Lending platform, which generates a material portion of our revenues, includes loans originated under the federal Section 7(a) loan program, i.e., SBA 7(a) loans.

The SBA is an independent government agency that facilitates one of the nation’s largest sources of SMB financing by providing credit guarantees for its loan programs.

SBA 7(a) loans are partially guaranteed by the SBA, with SBA guarantees typically ranging between 50% and 90% of the principal and interest due.

Under the SBA’s 7(a) lending program, a bank, such Newtek Bank, or a nonbank lender licensed by the SBA (such as NSBF) underwrites a loan between $5,000 and $5.0 million for a variety of general business purposes based on the SBA’s loan program requirements.

The recoveries and expenses on the unguaranteed portions of these loans are shared pari passu between the SBA and the lender, which substantially reduces the loss severity on the unguaranteed portion of a loan for SBA 7(a) loan investors.

Newtek Bank’s Lending platform, which generates a material portion of our revenues, includes loans originated under the federal Section 7(a) loan program (“SBA 7(a) Program”), i.e., SBA 7(a) loans.

The SBA is an independent government agency that facilitates one of the nation’s largest sources of financing to independent business owners of SMBs by providing credit guarantees for its loan programs.

SBA 7(a) loans are partially guaranteed by the SBA, with SBA guarantees typically ranging between 50% and 90% of the principal and interest due on SBA 7(a) loans.

Under the SBA 7(a) program, a bank, such as Newtek Bank, or a nonbank lender licensed by the SBA, such as NSBF, underwrites a loan between $5,000 and $5.0 million for a variety of general business purposes based on the SBA’s loan program requirements.

Receipts of principal and interest (and in situations involving default recoveries and expenses) on a SBA 7(a) loan are shared pari passu between the SBA and the lender, which substantially can reduce the loss severity on the unguaranteed portion of a loan held by the originators of SBA 7(a) loans.

SBA 7(a) loans are typically between ten and 25 years in maturity and bear interest at the prime rate plus a spread from 1.50% to 6.50%.

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Since the guaranteed portions of SBA 7(a) loans carry the full faith and credit of the U.S.

government, lenders may, and frequently do, sell the guaranteed portion of SBA 7(a) loans in the capital markets, hold the unguaranteed portion and retain all loan servicing rights.

government, lenders may, and frequently do, sell the guaranteed portion of SBA 7(a) loans (subject to certain conditions) in the capital markets, hold the unguaranteed portion and retain all loan servicing rights.

As of February 10, 2025, Newtek Bank was the largest SBA 7(a) lender in the U.S.

by dollar loan approval volume, approving over $1 billion of SBA 7(a) during the first 4.5 months of the SBA’s fiscal year 2025 according to SBA.gov statistics.

From 2012 through December 31, 2022, our subsidiary NSBF, was consistently the largest non-bank SBA 7(a) lender in the U.S.

based on dollar volume of loan approvals, and, as of December 31, 2022, was the third largest SBA 7(a) lender in the United States.

As of December 31, 2023 (the SBA’s first quarter of their fiscal year), when combining the loan approvals of Newtek Bank and NSBF, we are the nation’s largest SBA 7(a) lender.

As of December 31, 2024 (the SBA’s first quarter of fiscal year 2025), Newtek Bank is the nation’s largest SBA 7(a) lender.

Newtek Bank received PLP status in April 2023, a designation whereby the SBA authorizes the most experienced SBA lenders to place SBA guarantees on loans without seeking prior SBA review and approval.

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All new SBA 7(a) loan originations were transitioned to Newtek Bank in April 2023.

NewtekOne has a dedicated Senior Lending Team (as defined below) that is now supporting Newtek Bank, which originates and services SBA 7(a) loans to qualifying independent business owners and follows the NewtekOne SBA 7(a) loan business model.

Prior to the Newtek Bank Acquisition, our SBA 7(a) business model was to:

originate SBA 7(a) loans, sell the guaranteed portions of the SBA 7(a) loans, typically within thirty to forty-five days of origination, and retain the unguaranteed portion until accumulating sufficient loans for investment or securitization.

NewtekOne has a dedicated Senior Lending Team (as defined below) that is now supporting Newtek Bank’s origination and servicing of SBA 7(a) loans to qualifying independent business owners.

Our SBA 7(a) business model is to originate SBA 7(a) loans, sell the guaranteed portions of the SBA 7(a) loans, typically within thirty to forty-five days of origination, and retain the unguaranteed portions.

Historically, NSBF would accumulate sufficient unguaranteed portions of SBA 7(a) loans for securitization.

In a securitization, the unguaranteed portions of SBA 7(a) loans are transferred to a special purpose vehicle (a “Trust”), which in turn issues notes against the Trust’s assets in private placements.

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Securitization notes have an expected maturity of approximately five years, and the Trust is dissolved when the securitization notes are paid in full, either at or prior to maturity.

NSBF has completed thirteen (13) securitizations.

Newtek Bank will continue the SBA 7(a) business model utilizing the NewtekOne Senior Lending Team, and Newtek Bank may determine to engage in securitization transactions in the future.

NSBF, which is in the process of winding-down its operations, will continue to manage and service its portfolio of guaranteed and unguaranteed SBA 7(a) loans pursuant to a lender servicer provider agreement with SBL.

We believe our more than twenty years of experience as one of the largest SBA 7(a) lenders, provides us with a distinct competitive advantage over other lenders that have not overcome these significant barriers-to-entry in our primary loan market.

We originated $814.4 million of SBA 7(a) loans during 2023 and $775.6 million of SBA 7(a) loans during 2022.

We believe that we will continue to be introduced to a variety of high-quality investment opportunities through our existing loan sourcing channels and our subsidiaries’ relationships with their clients.

We have a dedicated capital markets team that sells the guaranteed portions of our SBA 7(a) loans shortly after origination and we retain the unguaranteed portions, Historically, NSBF sold SBA guaranteed portions of SBA 7(a) loans at premiums ranging from 106% to 123% of par value, and any portion of the premium that is above 110% of par value is shared equally between NSBF and the SBA.

However, there is no guarantee that Newtek Bank will be able to continue to earn premiums of 106% to 123% on future sales of the guaranteed portions of SBA 7(a) loans or will be able to maintain PLP status.

See “Item 1A.

Risk Factors - Risks Related to SBA Lending - We have specific risks associated with SBA loans.”

In addition, NSBF typically retained the unguaranteed portions of SBA 7(a) until accumulating sufficient loans for a securitization.

Through NSBF’s securitization program, which began in December 2010, NSBF successfully completed 13 securitization transactions of the unguaranteed portions of SBA 7(a) loans with Standard & Poor’s AA or A ratings and advance rates as high as 83.5% of par value.

NSBF completed eleven (11) securitizations with Standard & Poor’s AA or A ratings and advance rates as high as 83.5% of par value.

NSBF’s last securitization occurred in June 2023, when it sold (and we increased our secured borrowings by) $103.9 million of Unguaranteed SBA 7(a) Loan-Backed Notes, Series 2023-1, consisting of $84.3 million of Class A Notes and $19.6 million Class B Notes, rated “A-” and “BBB-”, respectively, by S&P Global, Inc.

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In addition, Newtek Bank may determine to retain the government guaranteed portions of SBA 7(a) loans for longer periods, pending deployment of excess capital.

We believe our more than twenty years of experience as one of the largest SBA 7(a) lenders, provides us with a distinct competitive advantage over other lenders that have not overcome significant barriers-to-entry into our primary loan market.

We originated $943.0 million of SBA 7(a) loans during 2024 and $814.4 million of SBA 7(a) loans during 2023.

We believe that we will continue to be introduced to a variety of high-quality lending opportunities through our existing loan sourcing channels and our subsidiaries’ relationships with their clients.

We have a dedicated capital markets team that sells the guaranteed portions of our SBA 7(a) loans shortly after origination, and we retain the unguaranteed portions.

Historically, we have sold SBA guaranteed portions of SBA 7(a) loans at premiums.

See MD&A “Net Gains on Sales of Loans.” Any portion of the premium that is above 110% of par value is shared equally between us and the SBA.

However, there is no guarantee that Newtek Bank will be able to continue to earn premiums within our historical range, or will be able to maintain PLP status.

See “Item 1A.

Risk Factors - Risks Related to SBA Lending - We have specific risks associated with our secondary market sales of the guaranteed portions of SBA loans.”

We have focused on making smaller SBA 7(a) loans, approximately $1.0 million or less, in order to maintain a diversified pool of loans that are dispersed both geographically and among industries, with a goal of limiting our exposure to regional and industry-specific economic downturns.

Specifically, as of December 31, 2023, the Company’s loan portfolio consisted of 4,879 loans originated across 50 states in 77 different industries as defined by the North American Industry Classification System (“NAICS”).

Specifically, as of December 31, 2024, the Company’s SBA 7(a) loan portfolio consisted of 6,968 loans originated across 50 states in 81 different industries as defined by the North American Industry Classification System (“NAICS”).

As discussed below, in addition to SBA 7(a) lending, our Newtek Lending Platform includes the following loan products originated by Newtek Bank:

SBA 504 loans, C&I loans (including ABL and owner occupied commercial real estate (CRE) and investor CRE).

In addition, our alternative lending program loans (formerly referred to as non-conforming conventional loans) are originated by NewtekOne nonbank subsidiaries and joint ventures.

Commercial Banking – Newtek Bank

We have centralized our Newtek Lending Platform within Newtek Bank (except for our alternative lending program business, discussed herein), our commercial bank.

As discussed above, Newtek Bank is originating, servicing and selling SBA 7(a) loans in a similar manner to NSBF’s historic business model and is originating and servicing SBA 504 loans, C&I loans (including ABL and owner occupied CRE and investor CRE).

In addition, we offer depository services and solutions through Newtek Bank.

Our commercial banking clients can take advantage of our full offerings via the Newtek Advantage dashboard.

Newtek Bank's business lines include:

SBA 504 loans, investor commercial real estate (CRE) and C&I loans (including ABL and owner occupied CRE);

and as discussed below, ALP loans (formerly referred to as non-conforming conventional loans) originated by our non-bank lender Newtek ALP Holdings and our joint ventures;

and SBA 504 loans originated by Newtek ALP Holdings.

SBA 504 Lending

Newtek Bank originates SBA 504 loans which provide long-term fixed rate financing for major fixed assets such as real estate or equipment.

The maximum loan amount for a SBA 504 loan is $5.5 million.

Newtek Bank originates SBA 504 loans which provide long-term fixed rate financing for major fixed assets such as real estate (including construction) or equipment.

The maximum loan amount for a SBA 504 loan is typically not more than $5.5 million.

C&I Lending, CRE Lending and ABL Lending

The Newtek Lending Platform also includes C&I Lending, which includes ABL and owner occupied CRE and investor CRE.

Newtek Bank will continue to provide C&I loans and CRE loans to its commercial customers and will originate ABL loans.

Prior to the Acquisition, our subsidiary, NBC, provided receivables financing, inventory financing and health care receivables financing to independent business owners through the sale of their trade receivables or the financing of their inventories.

NBC has ceased originating new ABL loans and will manage its current portfolio in runoff mode.

Newtek Bank also originates C&I loans to its commercial customers, which includes ABL loans and owner occupied CRE and investor CRE loans.

Third Party Loan Servicing and Loan Origination Services

SBL, a former NewtekOne portfolio company which is now a subsidiary of Newtek Bank, provides our affiliates, subsidiaries and third-parties, including banks, credit unions and government agencies, including the FDIC, with loan servicing for SBA and non-SBA loans.

In addition, SBL provides our affiliates, subsidiaries and third-parties with outsourced solutions for the entire SBA loan origination process, including credit analysis, structuring and eligibility, packaging, closing compliance and servicing.

For example, SBL originates and services loans under our alternative lending program for our Holdco 6 subsidiary and our joint ventures (see below).

Alternative Lending Program

On May 20, 2019, the Company and its joint venture partner launched Newtek Conventional Lending, LLC (NCL JV) to provide our alternative lending program loans (formerly known as non-conforming conventional commercial and industrial term loans) to U.S.

SBL, Newtek Bank’s subsidiary, provides our affiliates, subsidiaries and third-parties, including banks, credit unions and government agencies, including the FDIC, with loan servicing for SBA and non-SBA loans.

In addition, SBL provides our affiliates, subsidiaries and third-parties with outsourced solutions for the entire loan origination process, including credit analysis, structuring and eligibility, packaging, closing compliance and servicing.

For example, SBL originates and services ALP and 504 loans for our Newtek ALP Holdings subsidiary and ALP loans for our joint ventures (see below).

Deposits and Depository Services

We are focused on growing and retaining a stable deposit base and deepening relationships with Newtek Bank’s current and prospective deposit customers by leveraging Newtek Bank’s customer-direct, easy-to-use, digital account opening platform.

Newtek Bank is a digital direct bank with no branch network that obtains retail deposits directly from customers.

Following the Acquisition of Newtek Bank and its $137 million deposit portfolio, we launched our High Yield Savings and Retail CD product offerings in March and April of 2023.

Since that time, we have grown Newtek Bank’s deposit base rapidly and have offered competitive market rates using an account opening process that is straightforward with limited interaction.

In December of 2023 we launched our Business Checking product offering and were successful in growing Newtek Bank’s business banking deposit base, which helped us surpass $1 billion in deposits as of December 31, 2024.

Newtek Bank has maintained strong customer acquisition and retention rates and expects to continue to drive growth in retail and business banking deposits.

Additionally, we implemented a suite of software solutions that facilitates gathering and servicing deposits from our existing and prospective independent business owner clients, further diversifying our client base.

We supplement Newtek Bank’s customer deposit base with a series of wholesale funding options, which consist of product offerings to community banks and credit unions, as well as fundings in the brokered CD market.

Refer to NOTE 11—DEPOSITS for a breakdown of deposits and deposit growth.

Newtek ALP Holdings

The mission of the Newtek alternative lending program (ALP) is to generally provide access to capital to independent business owners that may not have qualified under the SBA 7(a) Program due to issues of program eligibility, loan size or a loan maturity that exceeds SBA guidelines.

ALP Loans (defined below) are intended for independent business owners who prefer 10-25 year amortizing loans with no balloon payments and no loan covenants, and who are willing to provide personal guarantees, liens on business and personal assets and pay higher interest rates.

ALP loans are funding by us at origination utilizing a combination of capital contributions from our financial holding company and warehouse lines of credit from unaffiliated third party financial institutions through NBL SPV I, II and III, LLC.

ALP loans are typically sold individually or securitized after reaching a necessary size on our balance sheet.

As described below, we have sold individual loans to joint ventures to in order to free up funds to originate new ALP loans and to share in the risk and rewards of our ALP loans.

The loans are typically transferred with servicing retained.

On May 20, 2019, the Company and its joint venture partner launched Newtek Conventional Lending, LLC (NCL JV) to provide our ALP loans (formerly referred to as non-conforming conventional commercial and industrial term loans) to U.S.

middle-market companies and small businesses.

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(NCL) a wholly-owned subsidiary of NewtekOne, and Conventional Lending TCP Holding, LLC, a wholly-owned, indirect subsidiary of BlackRock TCP Capital Corp.

NCL JV ceased funding new alternative lending program loans during 2020.

On January 28, 2022, NCL JV closed a securitization with the sale of $56.3 million of Class A Notes, NCL Business Loan Trust 2022-1, Business Loan-Backed Notes, Series 2022-1, secured by a segregated asset pool consisting primarily of NCL JV’s portfolio of alternative lending program loans, including loans secured by liens on commercial or residential mortgaged properties, originated by NCL JV and NBL.

NCL JV ceased funding new ALP loans during 2020.

On January 28, 2022, NCL JV closed a securitization with the sale of $56.3 million of Class A Notes, NCL Business Loan Trust 2022-1, Business Loan-Backed Notes, Series 2022-1, secured by a segregated asset pool consisting primarily of NCL JV’s portfolio of ALP loans, including loans secured by liens on commercial or residential mortgaged properties, originated by NCL JV and NBL.

The Notes were rated “A” (sf) by DBRS Morningstar.

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The proceeds of the securitization were used, in part, to repay a Deutsche Bank credit facility and return capital to the NCL JV partners.

On August 5, 2022, NewtekOne launched its second joint venture to invest in alternative lending program loans.

On August 5, 2022, NewtekOne launched its second joint venture to invest in ALP loans.

Newtek-TSO II Conventional Credit Partners, LP (Newtek-TSO JV).

NCL and TSO II entered into a joint venture, Newtek-TSO JV, governed by the Amended and Restated Limited Partnership Agreement for the Newtek-TSO JV.

NCL and TSO II each committed to contribute an equal share of equity funding to the Newtek-TSO JV and each will have equal voting rights on all material matters.

Newtek-TSO JV intends to deploy capital over the course of time with additional leverage supported by a warehouse line of credit.

The intended purpose of Newtek-TSO JV is to invest in alternative lending program loans made to middle-market companies as well as independent business owners.

Newtek-TSO JV began making investments during the fourth quarter of 2022.

Deposits and Depository Services

We are focused on growing and retaining a stable deposit base and deepening relationships with our current and prospective deposit customers by leveraging our customer-direct, easy-to-use, digital account opening platform.

Newtek Bank is a digital direct bank with no branch network that obtains retail deposits directly from customers.

Following the Acquisition of NBNYC and its $137 million deposit portfolio, we launched our High Yield Savings and Retail CD product offerings in March and April of 2023.

Since that time, we have grown our deposit base rapidly and have offered competitive market rates using an accounting opening process that is straightforward with limited interaction.

Newtek Bank has maintained strong customer acquisition and retention rates and expects to continue to drive growth in retail deposits.

Additionally, during 2023 we implemented a suite of software solutions that will facilitate gathering and servicing deposits from our existing and prospective independent business owner clients, diversifying our client base.

We supplement our customer deposit base with a series of wholesale funding options, which consist of product offerings to community banks and credit unions, as well as fundings in the brokered CD market.

At December 31, 2023, Newtek Bank had $519 million of total deposits, which grew approximately $382 million, or 279%, following the Acquisition.

The total number of retail deposit customers at December 31, 2023 that opened accounts through our digital opening process during 2023 was over 7,500.

NCL and TSO II each committed to contribute an equal share of equity funding to the Newtek-TSO JV with each having equal voting rights on all material matters.

Newtek-TSO JV deployed capital with additional leverage supported by a warehouse line of credit.

From the fourth quarter of 2022 through the third quarter of 2024, Newtek-TSO JV made investments in ALP loans originated by Newtek ALP Holdings to middle-market companies as well as independent business owners.

On July 23, 2024, Newtek- TSO JV closed a securitization backed by ALP loans, selling $137.2 million of Class A Notes and $17.2 million of Class B Notes (collectively, the “TSO Notes”) issued by NALP Business Loan Trust 2024-1.

The TSO Notes were backed by $190.5 million of collateral consisting of ALP loans originated by Newtek ALP Holdings.

The Class A and Class B Notes received Morningstar DBRS ratings of “A (sf)” and “BBB (high) (sf),” respectively.

Newtek Payments

NewtekOne’s business and financial solutions ecosystem also includes its Newtek Payments businesses, which includes NewtekOne’s subsidiaries Newtek Merchant Solutions, LLC (NMS), Mobil Money, LLC (Mobil Money) and POS on Cloud, LLC, d/b/a Newtek Payment Systems (POS).

NMS markets credit and debit card processing services, check approval services, processing equipment, and software.

NewtekOne’s business and financial solutions ecosystem also includes its Newtek Payments businesses, which includes our subsidiaries Newtek Merchant Solutions, LLC (NMS), Mobil Money, LLC (Mobil Money, an NMS subsidiary) and POS on Cloud, LLC, d/b/a Newtek Payment Systems (POS).

NMS markets credit and debit card processing services, check approval services, ACH services, processing equipment, and software.

NMS utilizes a multi-pronged sales approach of both direct and indirect sales.

NMS’ primary sales efforts focus on direct sales through our Your Business Solutions Company® brand.

Their indirect sales channels consist of alliance partners, principally financial institutions (banks, credit unions, insurance companies and other related businesses), and independent sales agents across the United States.

These referring organizations and associations are typically paid a percentage of the processing

revenue derived from the respective merchants that they successfully refer to NMS.

NMS’ primary sales efforts focus on direct sales through our Newtek ® and Your Business Solutions Company ® brands.

Our indirect sales channels consist of alliance partners, principally financial institutions (banks, credit unions, insurance companies and other related businesses), and independent sales agents across the United States.

These referring organizations and associations are typically paid a percentage of the processing revenue derived from the respective merchants that they successfully refer to NMS.

In 2024, NMS processed merchant transactions with sales volumes of $5.3 billion.

We believe NMS has a number of competitive advantages which we believe will enable it to effectively compete in this market.

We believe NMS has a number of competitive advantages which we believe will enable it to continue to effectively compete in this market.

• focus on non-traditional business generation:

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• marketing and selling the latest in point-of-sale technology hardware and offers processing related cyber-security services.

NMS maintains its principal customer service and sales support offices in Lake Success, New York.

NMS maintains its principal customer service and sales support offices in our Lake Success, New York office.

NMS’s personnel assist merchants with initial installation of equipment and on-going service, as well as any other special processing needs that they may have.

NMS’ development and growth is focused on selling NMS’ services to internally generated referrals, merchant referrals identified by Newtek alliance partners and by independent sales representatives.

NMS’ development and growth is focused on selling NMS’ services to internally generated referrals, merchant referrals identified by NewtekOne alliance partners and by independent sales representatives.

We believe NMS is different than most electronic payment processing companies who acquire their clients primarily through independent sales agents.

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NMS’ business model allows it to own the customer as well as the stream of residual payments, as opposed to models which rely more heavily on independent sales agents.

Mobil Money provides payment processing for a merchant portfolio of taxi cabs and related licensed payment processing software.

POS is a majority owned subsidiary of NewtekOne which provides a cloud based Point of Sale system for a variety of restaurant, retail, assisted living, parks and golf course businesses, which provides not only payments and purchase technology solutions, but also inventory, customer management, reporting, employee time clock, table and menu layouts, and ecommerce solutions as the central operating system for an independent business owner.

Newtek Insurance

Newtek Insurance Agency (NIA), is a wholly-owned subsidiary which is a retail and wholesale brokerage insurance agency licensed in all 50 states, specializing in the sale of commercial and health/benefits lines insurance products to independent business owners, as well as the sale of various personal lines of insurance.

Newtek Payroll

PMTWorks Payroll, LLC d/b/a Newtek Payroll and Benefits Solutions (PMT), is a wholly-owned subsidiary which offers an array of industry standard and competitively priced payroll management, and related payment and tax reporting services to independent business owners.

Mobil Money, a subsidiary of NMS, generates revenues from providing payment processing for a merchant portfolio of taxi cabs and related licensed payment processing software.

POS is a majority owned subsidiary which sells its cloud based Point of Sale system for a variety of restaurant, retail, assisted living, parks and golf course businesses.

POS’ Point of Sale system provides not only payments and purchase technology solutions, but also inventory, customer management, accounting integrations, reporting, employee time clock, table and menu layouts, and e-commerce solutions as the central operating system for an independent business owner.

Newtek Technology

Newtek Technology Solutions, Inc.

(NTS) is a wholly-owned subsidiary that provides website hosting, dedicated server hosting, cloud hosting, web design and development, internet marketing, ecommerce, data storage, backup and disaster recovery, and other related services including consulting and implementing technology solutions for enterprise and commercial clients across the U.S.

as well as SMBs.

On December 31, 2023, SIDCO and EWS were merged into NTS.

As a result of commitments made to the Federal Reserve, the Company will divest or otherwise terminate the activities conducted by NTS by January 6, 2025, subject to any extension of this date.

Newtek Branding

We have developed our branded line of business products and financial solutions to offer a full service suite of business and financial solutions for independent business owners in the United States.

As disclosed in subsequent events herein, on January 2, 2025 the Company completed its previously disclosed divestiture of Newtek Technology Solutions, Inc.

(NTS), its wholly-owned subsidiary that provides website hosting, dedicated server hosting, cloud hosting, web design and development, internet marketing, e-commerce, data storage, backup and disaster recovery, and other related services including consulting and implementing technology solutions for enterprise and commercial clients across the U.S.

as well as SMBs, to IPM, formerly known as Paltalk .

NewtekOne intends to continue to offer its clients the Technology Solutions (Cloud Computing, Data Backup, Storage and Retrieval, IT Consulting and Web Services) provided by IPM on a referral fee basis.

Refer to “ NOTE 25—SUBSEQUENT EVENTS ” .

Newtek Payroll, Insurance, and Other

We are focused on PMT customers being a source for the generation of depository accounts for Newtek Bank, which we believe can provide Newtek Bank with business deposits that are not only sticky, but also would allow us to improve the client experience from being able to make payroll directly from the Newtek Advantage.

Newtek Insurance Agency (NIA), a wholly-owned subsidiary, is a retail and wholesale brokerage insurance agency licensed in all 50 states, specializing in the sale of commercial and health/benefits lines insurance products to independent business owners, as well as the sale of various personal lines of insurance.

NIA has recently experienced success in the area of technological innovation, whereby NIA is now able to provide key man life insurance on our loan products without requiring a medical exam or the client filling out lengthy applications NIA is able to accomplish this by automatically transferring data from loan applications to populate an insurance application.

We anticipate further automating the sale of property and casualty insurance on lending opportunities.

In addition, our subsidiary TAM provides inbound and outbound calling services to all of our affiliates.

TAM’s client success and service specialists answer all inbound communications to our 1-800 lines and connect with our clients who visit www.newtekone.com through video and digital chat.

TAM has two primary initiatives:

(1) telemarketing into our existing database of NewtekOne referrals for the purpose of introducing our business and financial solutions, and (2) monitoring and improving client experience and ensuring any client issues or complaints are tracked and resolved.

We are focused on growing this unit over time and improving its productivity in selling our business and financial solutions directly to our client database and creating warm referrals for our BSS in each vertical.

We require that TAM’s client success and service specialists, as well as our BSS teams in each of our businesses, appear on camera on all client interactions, either utilizing our licensed Glia technology or our phone system.

Our strategy of not using traditional bankers, brokers, business development officers or physical branches, and in their stead, using our client success and service specialists and BSS who are based in the United States and using a NewtekOne backdrop on camera to give all clients the experience with a live human being they can see and talk to 24/7/365.

Newtek ® and NewtekOne ® Branding

We have developed our branded line of business and financial solutions to offer a full service suite of business and financial solutions for independent business owners in the United States.

We reach potential customers through our integrated multi-channel approach featuring direct, indirect and direct outbound solicitation efforts.

We continue to utilize and grow our primary marketing channel of strategic alliance partners as well as a direct marketing strategy to independent business owner customers through our “go to market” brand, Your Business Solutions Company ® and One Solution for All Your Business Needs ® .

Through our web presence, www.newtekone.com , we believe we are establishing ourselves as a preferred “go-to” provider for independent business owner financial and business solutions offered by NewtekOne ® and its subsidiaries, including Newtek Bank ® .

Through our web presence, www.newtekone.com and newtekbank.com , we believe we are establishing ourselves as a preferred “go-to” provider for independent business owner financial and business solutions offered by NewtekOne ® and its subsidiaries, including Newtek Bank ® .

We believe that our patented NewTracker ® system provides for transparency between NewtekOne and referring parties and has been material in our ability to obtain referrals from a wide variety of sources.

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Additional referrals are obtained from individual professionals in geographic markets that have signed up to provide referrals and earn commissions through our BizExec and TechExec Programs.

In addition, we believe that the Newtek Advantage TM dashboard, which patent is pending, is designed to be a management tool for our business clientele that can make their businesses more successful and that our clients can depend on.

The Newtek Advantage allows clients to access the entire suite of the NewtekOne business and financial solutions, and provide clients analytics, relationships and transactional capability that other banks do not offer.

We believe the Newtek Advantage is unique because each of our clients will be assigned a NewtekOne relationship manager and specialist in each Newtek business line, and allow our clients to go into the Newtek Advantage and communicate via video or chat with a NewtekOne business line specialist.

In addition, we believe that the Newtek Advantage ® dashboard, which patent is pending, is designed to be a management tool for our business clientele that can make their businesses more successful and that our clients can depend on.

Market Opportunity

We believe that the limited amount of capital and financial products available to independent business owners, coupled with the desire of these businesses for flexible and partnership-oriented sources of capital and other financial products, creates an attractive environment for us to further expand our business and financial products ecosystem and overall brand.

We believe the following factors will continue to provide us with opportunities to grow and deliver attractive returns to shareholders.

We believe the following factors can continue to provide us with opportunities to grow and deliver attractive returns to shareholders.

The independent business owner SMB market represents a large, underserved market.

We estimate the independent business owner/SMB market to include over 33 million businesses in the United States.

According to a 2024 Small Business Profile published by the SBA,the U.S.

independent business owner/SMB market includes 34.8 million businesses.

We believe that SMBs, most of which are privately-held, are relatively underserved by traditional capital providers such as commercial banks, finance companies, hedge funds and collateralized loan obligation funds.

Further, we believe that such businesses generally possess conservative capital structures with significant enterprise value cushions, as compared to larger companies with more financing options.

While the largest originators of SBA 7(a) loans have traditionally been regional and national banks, from 2012 through 2022, our subsidiary NSBF was consistently the largest non-bank originator of SBA 7(a) loans.

When combining the loan approval volume of Newtek Bank and NSBF, we ranked as the largest SBA 7(a) lender based on dollar volume of loan approvals as of December 31, 2023, which is the SBA’s first fiscal quarter.

As a result, we believe we are well positioned to provide financing to the types of independent business owners that we have historically targeted and we have the technology and infrastructure in place presently to do it cost effectively in all 50 states and across many industries.

Newtek Bank now ranks as the largest SBA 7(a) lender based on dollar volume of loan approvals as of December 31, 2024, which is the SBA’s first fiscal quarter.

As a result, we believe we are well positioned to continue to provide financing to the types of independent business owners that we have historically targeted and we have the technology and infrastructure in place presently to do it cost effectively in all 50 states and across many industries.

Increased demand for comprehensive, business-critical SMB solutions .

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To make necessary changes and adequately address these needs, we believe that companies are focusing on their core competencies and utilizing cost-effective outsourced solutions to improve productivity, lower costs and manage operations more efficiently.

We provide critical business solutions such as electronic payment processing, managed IT solutions, personal and commercial insurance services and full-service payroll and benefit solutions, receivables financing, funding of SBA 504 loans, which provide financing of fixed assets such as real estate or equipment, and non-conforming (non-SBA) commercial loans.

We provide critical business solutions such as electronic payment processing, personal and commercial insurance services and full-service payroll and benefit solutions, receivables financing, funding of SBA 504 loans, which provide financing of fixed assets such as real estate or equipment, and ALP loans.

We believe that each of these market segments are underserved for independent business owners and since we are able to provide comprehensive financial and business solutions under one (the Newtek) platform, we believe that we are well positioned to continue to realize growth from these product offerings.

Most importantly our pledge and goal is to enhance our clients’ business and through our solutions make them more successful.

Competitive Advantages

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Senior Lending Team and Executive Officers.

The key members of our Senior Lending Team, many of whom have worked together for more than ten years, each have over 25 years of experience in finance-related fields.

These lending professionals have worked together to screen opportunities, underwrite new loans and investments and manage a portfolio of loans and investments in SMBs through two recessions, a credit crunch, the dot-com boom and bust and a historic, leverage-fueled asset valuation bubble and the COVID-19 pandemic.

We rely on our Senior Lending Team and executive officers, some of whom have worked together for more than twenty years and have decades of experience in finance-related fields.

These professionals have screened opportunities, underwritten new loans and investments and managed a portfolios of SMB loans through two recessions, a credit crunch, the dot-com boom and bust, a historic, leverage-fueled asset valuation bubble, and the COVID-19 pandemic.

Each member brings a complementary component to a team well-rounded in finance, accounting, operations, strategy, business law and executive management.

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Our executive officers have significant experience in our fields of operations.

Business Model Enables Attractive Risk-Weighted Return on Investment in SBA 7(a) Lending.

Our SBA 7(a) loans are structured so as to permit rapid sale of the U.S.

government guaranteed portions, often within weeks of origination, and the unguaranteed portions have been successfully securitized, with the securitization notes being sold, usually within a year of loan origination.

Business Model Enables Attractive Risk-Adjusted Returns on Investment in SBA 7(a) Lending.

Our SBA 7(a) loans are structured so as to permit the rapid sale of the U.S.

government guaranteed portions, often within weeks of origination.

Newtek Bank has determined to retain the unguaranteed portions of SBA 7(a) loans funded through its consumer and retail deposit bases.

Selling the guaranteed portion provides Newtek Bank the ability to efficiently manage its balance sheet and returns, by reducing the funding needed for future originations and recording premiums that typically provide revenue that have more than offset the provision for credit losses on the retained unguaranteed portion.

Historically, the unguaranteed portions have been successfully securitized, with the securitization notes being sold, usually within a year of loan origination.

Newtek Bank may seek to securitize or otherwise finance these loans in the future.

The return of principal and premium may result in an advantageous risk-weighted return on our original investment in each loan.

Newtek Bank has determined to retain the unguaranteed portions of SBA 7(a) loans, but may seek to securitize or otherwise finance these loans in the future.

State of the Art Technology.

Our patented NewTracker® software enables us to board an SMB customer, process the application or inquiry, assemble necessary documents, complete the transaction and create a daily reporting system that is sufficiently unique as to receive a U.S.

Our patented NewTracker® software enables us to acquire an SMB customer cost effectively, process the application or inquiry, assemble necessary documents, complete the transaction and create a daily reporting system that is sufficiently unique as to receive a U.S.

NewTracker® enables us to identify a transaction, similar to a merchandise barcode or the customer management system used by SalesForce.com, then process a business transaction and generate internal reports used by management and external reports for strategic referral partners.

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NewTracker® has been applied to all of the business and financial solutions we offer directly or through our subsidiaries.

In addition, the Newtek Advantage ® , the One Dashboard for All of Your Business Needs ® , provides independent business owners with, among other things, a business tool they can use in one or more areas of their core business operations.

including instant access to a team of NewtekOne business and financial solutions experts all of NewtekOne’s business and financial solutions.

Established Direct Origination Platform with Extensive Deal Sourcing Infrastructure.

We have established a direct loan origination pipeline for opportunities without the necessity for financial institutions or brokers as well as broad marketing channels that we believe allow for highly selective underwriting.

We believe the combination of our brand, our portal, our patented NewTracker® technology, and our web presence as Your Business Solutions Company® have created an extensive deal sourcing infrastructure.

We believe the combination of our alliance relationships, brand, portal, patented NewTracker® technology, and brand presence as Your Business Solutions Company® have created an extensive deal sourcing infrastructure.

Although we pay fees for loan originations that are referred to us by our alliance partners, our lending team works directly with the borrower to assemble and underwrite loans.

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As a result, we believe that our unique national origination platform allows us to originate attractive credits at a low cost.

During 2023 and 2022 we funded $814.4 million and $775.6 million, respectively, of SBA 7(a) loans.

We anticipate that our principal source of loan origination opportunities will continue to be in the same types of independent business owners to which we currently provide financing.

We anticipate that our principal loan origination and other business opportunities will continue to be the same types of independent business owners to which we currently provide financing.

Our executive officers and Senior Lending Team also seek to leverage our extensive network of additional referral sources, including law firms, accounting firms, financial, operational and strategic consultants and financial institutions, with whom we have closed opportunities.

We believe our current infrastructure and expansive relationships will continue to enable us to review a significant amount of direct (or non-brokered) business opportunities.

Flexible, Customized Business and Financial Solutions for Seasoned, Independent Business Owners.

While Newtek Bank’s primary focus will be to expand its lending activities by providing SBA 7(a) loans to independent business owners, we also seek to offer independent business owners a variety of attractive financial solutions, as well as cost effective and efficient business solutions, to meet their capital needs through Newtek Bank and our nonbank subsidiaries.

In particular, we offer larger loans, between $5.0 million and $15.0 million, greater than loans available with the SBA guarantee, but with a higher interest rate to compensate for the increased risk.

Flexible, Customized Financial Solutions for Seasoned, Independent Business Owners.

While Newtek Bank’s primary focus will be to expand its lending activities by providing a full suite of commercial loans to independent business owners, we also seek to offer independent business owners a variety of attractive financial solutions, as well as cost effective and efficient business solutions, to meet their capital needs through Newtek Bank and our nonbank subsidiaries.

In particular, we offer larger loans, between $5.0 million and $15.0 million and in some cases through our nonbank subsidiaries, greater than loans available with the SBA guarantee, but with a higher interest rate to compensate for the increased risk.

Unlike many of our competitors, we believe we have the business finance ecosystem that allows us to provide a complete package of business and financial solutions for independent business owners, which allows for cross-selling opportunities and improved client retention.

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• significant experience in management;

• credit worthy owners who provide a personal guarantee for our investment;

• show a strong balance sheet to collateralize our investments;

• show sufficient cash flow to be able to service the payments on our investments comfortably.

• credit worthy owners who must provide a personal guarantee that are joint and several for every 20% owner for our loans;

• show a strong balance sheet to collateralize our loans;

• show sufficient cash flow to be able to service the payments on our loans comfortably.

Although we may make loans to start-up businesses, we generally seek to avoid lending to high-risk, early-stage enterprises that are only beginning to develop their market share or build their management and operational infrastructure with limited collateral.

These types of loans comprise a small percentage of our loan originations.

Disciplined Underwriting Policies and Rigorous Portfolio Management .

We pursue rigorous due diligence of all prospective loans originated through our Business Lending Platform.

Our Senior Lending Team has developed what we believe to be an extensive underwriting due diligence process, which includes a review of the operational, financial, legal and industry performance and outlook for the prospective investment, including quantitative and qualitative stress tests, review of industry data and when necessary, consultation with outside experts regarding the creditworthiness of the borrower.

Our Senior Lending Team has developed what we believe to be an extensive underwriting due diligence process, which includes a review of the operational, financial, legal, industry and performance and outlook for the prospective loan, including quantitative and qualitative stress tests and review of industry data.

We acquire appraisals on CRE, residential real estate, equipment, and business valuations to assist in underwriting a loan and credit decisioning.

These processes continue during the portfolio monitoring process, when we will conduct field examinations, when appropriate, review all compliance certificates and covenants and regularly assess the financial and business conditions and prospects of our borrowers.

In addition, SBL, an S&P rated servicer, is a third-party servicer for commercial, SBA 7(a) and other government guaranteed investments, whose exceptional servicing capabilities with compact timelines for loan resolutions and dispositions has attracted various third-party portfolios to SBL.

SBL services the loans funded by Newtek Bank, Holdco 6, NSBF and our joint ventures, and provides loan origination and closing services to our joint ventures and affiliates.

In addition, Newtek Bank’s subsidiary SBL, an S&P rated servicer, is a third-party servicer for commercial, SBA 7(a) and other government guaranteed loans, whose exceptional servicing capabilities with compact timelines for loan resolutions and dispositions has attracted various third-party portfolios to SBL for servicing.

SBL services the loans funded by Newtek Bank, Newtek ALP Holdings, NSBF, our joint ventures and loans held in our securitization trusts, and provides loan origination and closing services to our joint ventures and affiliates.

Prior Business Development Company History

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Although we maintained our status as a BDC and a RIC through the entirety of our 2022 fiscal and tax years, upon completing the Acquisition, we filed with the SEC Form N-54C, Notification of Withdrawal of Election to be Subject to the 1940 Act, and ceased to be a BDC.

As a result, we are no longer subject to regulation as a BDC under the 1940 Act, and no longer qualify for tax treatment as a RIC under the Code.

As a result, as of January 2023 we ceased to be subject to regulation as a BDC under the 1940 Act, and no longer qualified for tax treatment as a RIC under the Code.

Regulation and Supervision

financial services and banking industry is highly regulated.

The bank regulatory regime is intended primarily for the protection of customers, the public, the financial system and the DIF, rather than our stockholders or creditors.

The bank regulatory regime is intended primarily for the protection of customers, the public, the financial system and the DIF, support of the community and economic development, rather than our stockholders or creditors.

The legal and regulatory regime affects virtually all aspects of our operations.

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Changes are difficult to predict and could have significant effects on our business.

See “Item 1A Risk Factors - Risks Related to Operating as a Financial Holding Company - The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations.”

See “Item 1A.

Risk Factors - Risks Related to Operation as a Financial Holding Company - The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations.”

The material regulatory requirements that are applicable to us and our subsidiaries are summarized below.

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We are subject to regulation and supervision by multiple regulatory bodies.

As a bank holding company electing financial holding company status, the Company is subject to the BHCA and is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the Federal Reserve.

As a bank holding company electing financial holding company status, the Company is subject to certain banking laws and regulations, including under the Bank Holding Company Act of 1956 (“BHCA”), and to ongoing and comprehensive supervision, regulation, examination and enforcement by the Federal Reserve.

The Federal Reserve’s jurisdiction also extends to any company that is directly or indirectly controlled by a bank holding company.

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Each quarterly special assessment is equal to 3.36 basis points (0.0336%) of the amount of an institution’s estimated uninsured deposits that exceeded $5 billion as of December 31, 2023.

As of December 31, 2023, Newtek Bank’s estimated amount of uninsured deposits was $66.5 million and therefore, Newtek Bank is not required to pay any amount of the special assessment.

For all quarterly periods from December 31, 2023 through December 31, 2024, Newtek Bank’s estimated amount of uninsured deposits did not exceed $5.0 billion and therefore, Newtek Bank is not required to pay any amount of the special assessment.

We are subject to the disclosure and regulatory requirements of the Securities Act and the Exchange Act, both as administered by the SEC.

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We will continue to monitor our compliance with all future listing standards that are approved by the SEC and will take actions necessary to ensure that we are in compliance therewith.

See “Item 1A.

Broad Powers to Ensure Safety and Soundness

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Thus, there is no guarantee that a particular proposal by us would receive the required regulatory approvals.

The Community Reinvestment Act (CRA), enacted in 1977, requires the Federal Reserve and other federal banking regulators to encourage financial institutions to help meet the credit needs of the communities in which they do business, including low- and moderate-income (LMI) neighborhoods.

The CRA requires federal banking regulators, in their review of certain applications by banking organizations, to take into account the applicant’s record in helping meet the credit needs of its community, including low- and moderate-income neighborhoods.

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We are continuing to evaluate the potential impact of the new rule to our business, financial condition and results of operations, which cannot be predicted at this time.

Company as Source of Strength for Newtek Bank

See “Item 1A.

The Company as a Source of Strength for Newtek Bank

Federal law and Federal Reserve policy require that a bank holding company serve as a source of financial and managerial strength for any FDIC-insured depository institution that it controls.

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Federal Home Loan Bank System

Newtek Bank is a member of the FHLB, which consists of 11 regional Federal Home Loan Banks.

Newtek Bank is a member of the Federal Home Loan Bank System (“FHLB”), which consists of 11 regional Federal Home Loan Banks.

The FHLB provides a central credit facility primarily for member institutions.

Newtek Bank, as a member of the FHLB of Atlanta, is required to acquire and hold shares of capital stock in the FHLB.

Newtek Bank is in compliance with this requirement with an investment in FHLB capital stock of $168,400.00 as of December 31, 2023.

Newtek Bank is in compliance with this requirement with an investment in FHLB capital stock of $463 thousand as of December 31, 2024.

Consumer Protection

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These laws relate to, among other things, the content and adequacy of disclosures, pricing and fees, fair lending, anti-discrimination, privacy, cybersecurity, usury, mortgages and housing finance, lending to service members, escheatment, debt collection, loan servicing, collateral secured lending, and unfair, deceptive or abusive acts or practices.

The CFPB is generally responsible for rulemaking with respect to certain federal laws related to the provision of financial products and services to consumers.

The Consumer Financial Protection Bureau (“CFPB”) is generally responsible for rulemaking with respect to certain federal laws related to the provision of financial products and services to consumers.

In addition, the CFPB has examination and primary enforcement authority with respect to federal consumer financial protection laws with respect to banking organizations with assets of $10 billion or more.

Newtek Bank has assets less than $10 billion;

As of December 31, 2024, Newtek Bank has assets less than $10 billion;

therefore, we are not currently subject to the examination and enforcement jurisdiction of the CFPB.

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If we fail to comply with these laws and regulations, we may be subject to significant penalties, judgments, other monetary or injunctive remedies, lawsuits (including putative class action lawsuits and actions by state and local attorneys general or other officials), customer rescission rights, supervisory or enforcement actions, and civil or criminal liability.

See “Item 1A.

Anti-Money Laundering, Sanctions and Financial Crime

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We are also subject to laws and regulatory requirements related to information technology and cybersecurity.

For example, the FFIEC, which is a council comprised of the primary federal banking regulators, has issued guidance and supervisory expectations for banking organizations with respect to information technology and cybersecurity.

For example, the Federal Financial Institutions Examination Council's (“ FFIEC”), which is a council comprised of the primary federal banking regulators, has issued guidance and supervisory expectations for banking organizations with respect to information technology and cybersecurity.

In addition, the SEC recently enacted rules, effective as of December 18, 2023, requiring public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on annual basis material information regarding their cybersecurity risk management, strategy and governance.

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The Sarbanes-Oxley Act generally prohibits loans by public companies to their executive officers and directors.

However, there is a specific exception for loans by financial institutions, such as Newtek Bank, to its executive officers and directors that are made in compliance with federal

banking laws.

However, there is a specific exception for loans by financial institutions, such as Newtek Bank, to its executive officers and directors that are made in compliance with federal banking laws.

Acquisition of a Significant Interest in the Company

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The determination whether a party “controls” a depository institution or its holding company for purposes of these laws is based on applicable regulations and all of the facts and circumstances surrounding the investment.

See “Item 1A Risk Factors - Risks Related to Operating as a Financial Holding Company - Federal law may discourage certain acquisitions of our common stock which could have a material adverse effect on our shareholders.”

See “Item 1A.

Risk Factors - Risks Related to Operation as a Financial Holding Company - Federal law may discourage certain acquisitions of our common stock which could have a material adverse effect on our shareholders.”

Effect on Economic Environment

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Although we conduct stress tests to measure and prepare for the impact of potential changes in monetary policy, we cannot predict with certainty the nature of future monetary policies and the effect of such policies on our business and earnings.

NSBF’s Regulation as a Small Business Lending Company and the Transition of SBA 7(a) Lending to Newtek Bank

Our wholly-owned subsidiary, NSBF, is licensed by the SBA as an SBLC that originated loans through the SBA 7(a) Program.

As a result of the Acquisition, all SBA 7(a) loan originations were transitioned to Newtek Bank in April 2023, and NSBF ceased the origination of SBA 7(a) loans, relinquished its PLP status and is winding-down its operations.

SBA Oversight and Regulation of NSBF’s and Newtek Bank’s participation in the SBA 7(a) Program

NewtekOne’s subsidiaries (NSBF beginning in 2003 and Newtek Bank since 2023) have been originating loans under the SBA 7(a) Program for 22 years.

By making SBA 7(a) guaranteed loans or 504 loans, SBA lenders automatically agree to the terms, conditions, and remedies in SBA Loan Program Requirements, as promulgated or issued from time to time.

SBA Lenders further agree that a violation of SBA Loan Program Requirements constitutes default under their respective agreements with SBA.

An SBA lender may be subject to an enforcement action for any number of grounds, including:

(i) a failure to maintain eligibility requirements for specific SBA programs and delegated authorities, including but not limited to:

SBA 7(a) Program and PLP;

(ii) failure to comply materially with any requirement imposed by SBA Loan Program Requirements;

or (iii) not performing underwriting, closing, disbursing, servicing, liquidation, litigation or other actions in a commercially reasonable and prudent manner for SBA 7(a) or 504 loans, respectively, as applicable.

Newtek Bank is licensed by the SBA to originate and service loans pursuant to section 7(a) of the Small Business Act (the SBA 7(a) Program).

As a result of the Acquisition, all SBA 7(a) loan originations were transitioned from NSBF to Newtek Bank in April 2023, and NSBF ceased the origination of SBA 7(a) loans, relinquished its PLP status and is winding-down its operations.

During this wind-down process, NSBF is required to continue to own the SBA 7(a) loans and PPP Loans in its SBA loan portfolio to maturity, liquidation, charge-off, or (subject to SBA’s prior written approval) sale or transfer.

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In addition, PLP lenders are expected to handle servicing and liquidation of all of their SBA loans with limited involvement of SBA.

If Newtek Bank fails to maintain PLP status, it would have a material adverse impact on Newtek Bank’s ability to originate SBA 7(a) loans at NSBF’s historic levels.

An SBA lender’s PLP status is renewed by the SBA on an annual basis, or more frequently at the SBA’s discretion.

If Newtek Bank fails to maintain PLP status, it would have a material adverse impact on Newtek Bank’s ability to originate SBA 7(a) loans at its current levels.

See “Item 1A.

Risk Factors - Risks Related to SBA Lending - There can be no guarantee that Newtek Bank and NSBF will be able to maintain their SBA 7(a) lending licenses.”

Pursuant to the SBA’s regulations, the SBA is released from liability on its guaranty of an SBA 7(a) loan and may, in its sole discretion, refuse to honor a guaranty purchase request in full or in part, or recover all or part of the funds already paid in connection with a guaranty purchase, if the lender failed to comply materially with a SBA Loan Program Requirement;

Risk Factors - Risks Related to SBA Lending - There can be no guarantee that Newtek Bank will be able to maintain its SBA 7(a) lending license and PLP status.”

Participation in the SBA Secondary Market

In addition, the SBA regulates an SBA lender’s, including Newtek Bank’s, participation in the secondary market for sales of the guaranteed portions of SBA 7(a) loans.

The SBA secondary market consists of the sale of certificates, representing either a fractional undivided interest in some or all of the guaranteed portion of an individual SBA 7(a) guaranteed loan or a fractional undivided interest in a pool consisting of the SBA guaranteed portions of a number of SBA 7(a) guaranteed loans.

For example, when a lender such as Newtek Bank sells the guaranteed portion of a SBA 7(a) loan in the secondary market, the lender must perform all necessary servicing and liquidation actions for such loan even after SBA has purchased the guaranteed portion of such loan from a purchaser of a guaranteed portion, i.e., a registered holder.

In the event that SBA purchases a guaranteed portion of such a loan from the registered holder, the lender must provide SBA with a loan status report within 15 business days of such purchase.

This report typically includes, but is not limited to, a status report on the borrower and current condition of the collateral, plans for any type of loan workout or loan restructuring, existing liquidation activities including the sale of loan collateral, or the status of ongoing foreclosure proceedings.

Moreover, the lender is required to provide documentation that SBA deems sufficient to be able to review the lender’s administration of the SBA 7(a) loan under the SBA Loan Program Requirements.

Newtek Bank’s failure to provide sufficient documentation may constitute a material failure to comply with SBA Loan Program Requirements, and may lead to initiation of an action for recovery from Newtek Bank of all or some of the moneys SBA paid to a registered holder on a guarantee.

SBA will also evaluate Newtek Bank’s continued participation in the secondary market and may restrict further sale of guaranteed portions into the secondary market until SBA determines that Newtek Bank has provided sufficient documentation for purchases or demonstrates compliance with any requirement imposed by SBA Loan Program Requirements.

failed to make, close, service or liquidate the loan in a prudent manner;

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In certain instances, the SBA may refuse to honor a guaranty purchase request in full (referred to by the SBA as a “denial”) or in part (referred to by the SBA as a “repair”), or recover all or part of the funds already paid in connection with a guaranty purchase.

In the event of a repair or denial, liability on the guaranty, in whole or in part, would be transferred to NSBF or

Newtek Bank as the originator of the loan, as the case may be.

Even though NSBF has ceased originating new SBA 7(a) loans, it has retained and may be exposed to repair and denial liability to the SBA for SBA 7(a) loans in NSBF’s portfolio.

In the event of a repair or denial, liability on the guaranty, in whole or in part, would be transferred to Newtek Bank or NSBF as the originator of the loan, as the case may be.

Even though NSBF has ceased originating new SBA 7(a) loans, it has retained and may be exposed to repair and denial liability to the SBA for the SBA 7(a) loans in NSBF’s portfolio.

The incurrence of repairs and denials while NSBF is no longer generating income from the sales of guaranteed portions of SBA 7(a) loans can have a material negative impact on our financial results and liquidity.

In addition, changes in SBA regulations and economic factors may adversely impact NSBF’s or Newtek Bank’s repair and denial rates.

See “Item 1A.

Risk Factors - Risks Related to SBA Lending - NSBF and Newtek Bank, our wholly-owned subsidiaries, are subject to regulation by the SBA, which has specific risks.”

In addition, changes in SBA regulations and economic factors may adversely impact Newtek Bank’s or NSBF’s repair and denial rates.

In connection with NSBF’s 2018 examination by the SBA, NSBF entered into a voluntary agreement with the SBA pursuant to NSBF’s commitment to operate under the SBA Loan Program Requirements.

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The rule was scheduled to take effect on August 29, 2023, and would have required compliance by October 1, 2024, April 1, 2025, or January 1, 2026, depending on the number of covered small business loans that a covered lender originates.

On July 31, 2023, the U.S.

District Court for the Southern District of Texas enjoined the CFPB from implementing and enforcing the rule with respect to American Bankers Association members, which includes the Company, pending the U.S.

Supreme Court’s consideration of the constitutionality of the CFPB’s funding structure in a separate case.

The U.S Court of Appeals for the Fifth Circuit has stayed enforcement of this rule against the parties to the litigation, and in addition, the CFPB initially requested a 90-day pause for review by the new administration.

Under the new administration, the CFPB has suspended almost all CFPB operations, including rulemaking, enforcement actions and public communications, and directed CFPB counsel to seek pauses in ongoing litigation.

We continue to monitor the potential impacts.

Lending Activities

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See “Item 1A.

Risk Factors – Risks Relating to Our Business and Structure.”

Risk Factors – Risks Related to Our Business and Structure.”

Lending Opportunity Characteristics

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Customer and Supplier Diversification.

We expect to lend to businesses with sufficiently diverse customer and supplier bases.

We seek to lend to businesses with sufficiently diverse customer and supplier bases.

We believe these businesses will be better able to endure industry consolidation, economic contraction and increased competition than those that are not sufficiently diversified.

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We believe that concentration issues can be evaluated and, in some instances (whether due to supplier or customer product or platform diversification, the existence and quality of long-term agreements with such customers or suppliers or other select factors), mitigated, thus presenting a superior risk-weighted pricing scenario.

We target our loans made through our business finance ecosystem under the SBA 7(a) program, to produce generally, a coupon rate of prime plus 3.0% to 6.50% which enables us to generate rapid sales of the guaranteed portions of SBA 7(a) loans in the secondary market, which have historically produced gains and a yield on investment in excess of 30%.

Collateral and Sources of Repayment.

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All SBA 7(a) loans are made with personal guarantees from any owner(s) of 20% or more of the business’ equity.

As of December 31, 2023, substantially all of our SBA 7(a) loans at fair value consisted of loans that were secured by first or second priority liens on the assets of the business.

As of December 31, 2024, substantially all of our SBA 7(a) loans consisted of loans that were secured by first or second priority liens on the assets of the business.

In all categories we are a business lender and the business, not the collateral, at underwriting must be the primary source of repayment.

All loans must cash flow on a historic or a projected basis if a SBA 7(a) loan, 504 loan, or ALP loan.

• First Lien Loans.

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SBA 504 loans, C&I loans (including ABL and owner occupied CRE and investor CRE).

In addition, our alternative lending program loans (formerly referred to as non-conforming conventional loans) are originated by NewtekOne nonbank subsidiaries and joint ventures.

In addition, our ALP loans (formerly referred to as non-conforming conventional loans) are originated by Newtek ALP Holdings, our non-bank subsidiary, and have been originated or acquired by our joint ventures.

SBA 504 loans provide long-term fixed rate financing for major fixed assets such as real estate or equipment.

The maximum loan amount for a SBA 504 loan is $5.5 million.

The maximum loan amount for a SBA 504 loan is typically not more than $5.5 million.

C&I Lending, CRE Lending and ABL.

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Equity Investments to Expand or Enhance the NewtekOne Business and Financial Solutions Ecosystem

While the vast majority of our lending opportunities have been structured as loans, we have in the past and expect in the future to make selective equity investments primarily as either strategic investments to enhance the integrated operating platform or, to a lesser degree, under the Capco programs.

Historically, for investments in our subsidiaries, we focused more on tailoring them to the long-term growth needs of the companies than to immediate return.

Our objective with these companies was to foster the development of the businesses as a part of the integrated operational platform of serving the independent business owner market, so we may have sought to reduce the burden on these companies to enable them to grow faster than they would otherwise as another means of supporting their development and that of the integrated whole.

In Capco investments, we have made debt investments in conjunction with being granted equity in the company in the same class of security as the business owner receives upon funding.

We have generally sought to structure our equity investments to provide us with minority rights provisions and event-driven put rights.

Under state-created Capco programs, states provide a Capco with tax credits generally equal to the amount of funds the Capco raises from insurance company investors.

The Capcos then issue the tax credits to its investors — a process which is designed to reduce the Capco’s investors’ state tax liabilities.

In exchange for receiving the tax credits, the Capco is obligated to invest the funds raised in certain qualified businesses, which generally are defined by statute to include only businesses that meet certain criteria.

If a Capco fails to comply with the performance requirements of each state’s different Capco program, the tax credits are subject to forfeiture.

Under state law, a Capco that has invested in qualified businesses an amount equal to 100% of its initial certified capital is able to decertify (i.e., terminate its status as a Capco) and no longer be subject to any state Capco regulation.

Our Capcos have historically invested in SMBs.

We have de-emphasized our Capco business and do not anticipate creating any new Capcos.

As the Capcos reach 100% investment we will seek to decertify them as Capcos, liquidate their remaining assets and thereby reduce their operational costs, particularly the legal and accounting costs associated with compliance.

Thirteen of our original eighteen Capcos have reached this stage and been de-certified and liquidated.

See “RISKS RELATED TO OUR CAPCO BUSINESS.”

Loan Origination Process

The following discussion relates to the Company’s loan origination selection process in connection with SBA 7(a) lending.

For more information, see “Item 7— Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The members of our Senior Lending Team and our executive officers are responsible for all aspects of our loan origination selection process.

For more information, see “Item 7.

— Management's Discussion and Analysis of Financial Condition and Results of Operations.” The members of our Senior Lending Team and our executive officers are responsible for all aspects of our loan origination selection process.

The discussion below describes our procedures.

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We believe we have developed a reputation as a knowledgeable and reliable source of capital, providing value-added advice, prompt processing, and management and operations support to our clients.

We market our business and financial solutions through referrals from our alliance partners such as Stifel Bank, Axiom Bank, Credit Union National Association, ENT Federal Credit Union, Legacy Bank, Morgan Stanley Smith Barney, Flagstar Bank, Raymond James, Randolph Brooks Federal Credit Union, UBS, Meineke Dealers Purchasing Cooperative, Regions Bank, Hartford Insurance, Bank United, US Century Bank, Anderson Capital Advisors, Transworld Business Advisors, Army Navy Federal Credit Union, Teachers Federal Credit Union, Spire Federal Credit Union, Aamco, 1800 Accountants, and True Value Company, among others using our patented NewTracker® referral system as well as direct referrals from our web presence, www.newtekone.com .

We market our business and financial solutions through referrals from our alliance partners such as Stifel Bank, Credit Union National Association, ENT Federal Credit Union, Legacy Bank, Morgan Stanley Smith Barney, Flagstar Bank, Raymond James, Randolph Brooks Federal Credit Union, UBS, Meineke Dealers Purchasing Cooperative, Regions Bank, Hartford Insurance, Bank United, US Century Bank, Anderson Capital Advisors, Transworld Business Advisors, Army Navy Federal Credit Union, Teachers Federal Credit Union, Aamco, 1800 Accountants, Henry Schein, Stearns Bank, California Coast Credit Union, and True Value Company, among others using our patented NewTracker® referral system as well as direct referrals from our web presence, www.newtekone.com .

The patent for our NewTracker® referral system is a software application patent covering the systems and methods for tracking, reporting and performing processing activities and transactions in association with referral data and related information for a variety of product and service offerings in a business-to-business environment providing further for security and transparency between referring parties.

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Newtek Bank originates (and prior to January 6, 2023, for 20 years NSBF originated) loans under the SBA 7(a) Program (authorized by section 7(a) of the Small Business Act, 15 U.S.C.

636(a)), in accordance with our credit and underwriting policy, which incorporates by reference the applicable regulations and the SBA Standard Operating Procedures, Lender and Development Company Loan Program (“SOP 50 10 and 50 57”) (collectively, “SBA Loan Program Requirements”) as they relate to the financing and servicing of such loans.

Following the Acquisition, NBSF continues to service its current portfolio of SBA 7(a) loans via a lender servicer provider agreement with SBL, and new SBA 7(a) loan originations are being made by Newtek Bank.

636(a)), in accordance with our credit and underwriting policy, which incorporates by reference the applicable regulations and the SBA Standard Operating Procedures, Lender and Development Company Loan Program (collectively, “SBA Loan Program Requirements”) as they relate to the financing and servicing of such loans.

Following the Acquisition, NBSF continues to service its current portfolio of SBA 7(a) loans via a lender service provider agreement with SBL, and new SBA 7(a) loan originations are being made by Newtek Bank.

However, there can be no guarantee that Newtek Bank and NSBF will be able to maintain their SBA 7(a) lending licenses.

See “Risk Factors - Risks Related to SBA Lending - There can be no guarantee that Newtek Bank and NSBF will be able to maintain their SBA 7(a) lending licenses.”

During the initial application process for a loan originated under the SBA 7(a) Program, a NewtekOne business service specialist assists and guides the applicant through the application process, beginning with the submission of an online form through our customized loan portal.

During the initial application process for a loan originated under the SBA 7(a) Program, a NewtekOne business service specialist (BSS) assists and guides the applicant through the application process, beginning with the submission of an online form through our customized loan portal.

The online loan processing system collects required information and ensures that all necessary forms are provided to the applicant and filled out.

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A loan request from an applicant who has declared bankruptcy within the ten years preceding the loan application will require special consideration.

A thorough review of the facts

behind the bankruptcy and impact on creditors will be undertaken in determining whether the principal has demonstrated the necessary willingness and ability to repay debts.

A thorough review of the facts behind the bankruptcy and impact on creditors will be undertaken in determining whether the principal has demonstrated the necessary willingness and ability to repay debts.

In addition, we will examine whether the applicant and its principals and guarantors have abided by the laws of their community.

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Valuation factors are applied as follows:

• Commercial real estate — 75%

• Residential real estate — 85%

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Newtek Bank’s policy regarding the use of real estate appraisals and environmental reports is intended to provide for a secure, orderly and independent process for the ordering, receipt and approval of independent valuation and environmental reports.

Commercial real estate appraisals are required on all primary collateral prior to the loan closing.

CRE appraisals are required on all primary collateral prior to the loan closing.

In general, appraisals will be required as follows:

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• The appraiser must be either State-licensed or State-certified (except when the property’s estimated value is over $1,000,000, when the appraiser must be State-certified) and the appraisal report must conform to Uniform Standards of Professional Appraisal Practice (USPAP);

• Appraisal reviews are required for all commercial real estate with an appraised value of $500,000 or more conducted by a licensed/certified and independent MAI appraiser.

• Appraisal reviews are required for all CRE with an appraised value of $500,000 or more conducted by a licensed/certified and independent MAI appraiser.

An environmental investigation is performed of all commercial properties upon which a security interest such as a mortgage, deed of trust, or leasehold deed of trust is offered as security for a loan or debenture when SBA loan proceeds are used to acquire, refinance, or improve the real estate.

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Sales of Guaranteed Portions of SBA 7(a) Loans in the Secondary Market

We have a dedicated capital markets team that sells the guaranteed portions of Newtek Bank’s SBA 7(a) loans shortly after origination and Newtek Bank retains the unguaranteed portions, Historically, NSBF sold SBA guaranteed portions of SBA 7(a) loans at premiums ranging from 106% to 123% of par value.

Any portion of the premium that is above 110% of par value is shared equally with the SBA.

However, there is no guarantee that Newtek Bank will be able to continue to earn premiums on future sales of the guaranteed portions of SBA 7(a) loans or will be able to maintain PLP status.

See “Item 1A.

Risk Factors - Risks Related to SBA Lending - We have specific risks associated with SBA loans.”

We compete for SBA 7(a) and other SMB loans with other financial institutions and various nonbank lenders, as well as other sources of funding.

Risk Factors - Risks Related to SBA Lending - We have specific risks associated with our secondary market sales of the guaranteed portions of SBA loans.”

We compete for SBA 7(a) and other SMB commercial loans with other financial institutions and various nonbank lenders, as well as other sources of funding.

Additionally, competition for investment opportunities has emerged among alternative investment vehicles, such as collateralized loan obligations, some of which are sponsored by other alternative asset investors, as these entities have begun to focus on making investments in SMBs.

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None of the markets in which we compete are dominated by a small number of companies that could materially alter the terms of the competition.

Our electronic payment processing subsidiaries compete with entities including Fiserv, Global Payments, Worldpay, Elavon, First National Bank of Omaha and Paymentech, L.P.

Our managed technology solutions subsidiaries competes with 1&1, Hosting.com, Discount ASP, Maxum ASP, GoDaddy®, Yahoo!®, BlueHost®, iPowerWeb®, Amazon Web Services®, Microsoft® Azure, Google®, and RackSpace among others.

Our electronic payment processing subsidiaries compete with entities including Fiserv, Global Payments, Worldpay, Elavon, and Paymentech, L.P.

Our business finance ecosystem competes with regional and national banks and non-bank lenders.

Other companies, including Intuit®, are bundling electronic payment processing, web hosting and payroll services similar to ours in offerings that compete in the same SMB market.

Other companies, including Intuit®, are bundling electronic payment processing and payroll services similar to ours in offerings that compete in the same SMB market.

In addition, Newtek Bank competes with national banks, regional banks and digital banks to acquire and retain deposits.

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Deposit costs are based on multiple factors that impact businesses and consumers and can diverge from observed market indices (e.g.

Prime or SOFR).

US Treasuries, Prime or SOFR).

To the extent deposit costs increase without a corresponding increase in the Prime rate, our profitability and net interest margins can be negatively impacted.

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• high quality customer service 24/7/365 across all business lines, with a focus primarily on absolute customer service and;

• a telephonic interview process, as opposed to requiring handwritten or data-typing processes, which allows us to offer high levels of customer service and satisfaction, particularly for independent business owner who do not get this service from our competitors.

• a telephonic and video interview process, as opposed to requiring handwritten or data-typing processes, which allows us to offer high levels of customer service and satisfaction, particularly for independent business owner who do not get this service from our competitors.

Human Capital including Senior Lending Team and Executive Officers

The long-term success of our Company depends on our people.

Our team comprises experienced lending professionals, executive officers and treasury, finance, risk management, administrative support, IT and human resources professionals.

The key members of our senior lending team (“Senior Lending Team”), many of whom have worked together for more than ten years, each have over 25 years of experience in finance-related fields.

These investment professionals have worked together to screen opportunities, underwrite new loans and manage a portfolio of loans made to independent business owner through two recessions, a credit crunch, the dot-com boom and bust and a historic, leverage-fueled asset valuation bubble and the COVID-19 pandemic.

Our team comprises experienced lending professionals, executive officers and treasury, finance, risk management, administrative support and human resources professionals.

The key members of our senior lending team (“Senior Lending Team”), many of whom have worked together for more than ten years, have over 25 years of experience in finance-related fields.

These professionals have worked together to screen opportunities, underwrite new loans and manage a portfolio of loans made to independent business owner through two recessions, a credit crunch, the dot-com boom and bust, a leverage-fueled asset valuation bubble, and the COVID-19 pandemic.

Each member brings a complementary component to a team well-rounded in lending, finance, accounting, operations, strategy, business law and executive management.

Our executive officers also oversees our subsidiaries and, to the extent that we may make additional equity investments in the future, the executive officers will also have primary responsibility for the identification, screening, review and completion of such investments.

Our executive officers also oversee our subsidiaries and, to the extent that we may make additional equity investments in the future, the executive officers will also have primary responsibility for the identification, screening, review and completion of such investments.

We do not expect to focus our resources on investing in additional stand-alone equity investments, but may elect to do so from time to time on an opportunistic basis, if such opportunities arise.

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We aim to provide a safe environment at work.

During the COVID-19 pandemic, the safety of our employees, clients, customers, and vendors was at the forefront of our decisions regarding a remote work policy.

As a result, we made our offices accessible to those who preferred to work in the office and also supported a remote work environment.

We have continued to support remote work as an option.

We maintain and support a remote work policy as an option for our employees.

In addition to protecting the physical safety of our employees, we seek to promote a safe environment that is free of harassment or bullying.

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SBA Regulation of SBA 7(a) Lenders

Our wholly-owned subsidiary, NSBF, is licensed by the SBA as an SBLC that originated loans through the SBA 7(a) Program.

Newtek Bank is licensed by the SBA to make loans under the SBA 7(a) Program and our wholly-owned subsidiary, NSBF, is licensed by the SBA as an SBLC that originated loans through the SBA 7(a) Program.

NSBF is currently winding down its operations and is no longer originating new SBA 7(a) loans, but remains subject to SBA regulation during its wind-down process.

(See Wind-down Agreement below.) Newtek Bank is licensed to make loans under the SBA 7(a) Program.

(See Wind-down Agreement below.)

The SBA generally reduces risks to lenders by guaranteeing major portions of qualified loans made to small businesses.

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See “Item 1A.

Risk Factors - Risks Related to SBA Lending - There can be no guarantee that Newtek Bank and NSBF will be able to maintain their SBA 7(a) lending licenses.”

Pursuant to the SBA’s regulations, the SBA is released from liability on its guaranty of a 7(a) loan and may, in its sole discretion, refuse to honor a guaranty purchase request in full or in part, or recover all or part of the funds already paid in connection with a guaranty purchase, if the lender failed to comply materially with an SBA Loan Program Requirement;

Risk Factors - Risks Related to SBA Lending - There can be no guarantee that Newtek Bank will be able to maintain its SBA 7(a) lending license and PLP status.”

Pursuant to the SBA’s regulations, the SBA is released from liability on its guaranty of a SBA 7(a) loan and may, in its sole discretion, refuse to honor a guaranty purchase request in full or in part, or recover from the lender all or part of the funds already paid in connection with a guaranty purchase, if the lender failed to comply materially with an SBA Loan Program Requirement;

failed to make, close, service or liquidate the loan in a prudent manner;

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See “Item 1A.

Risk Factors - Risks Related to SBA Lending - We have specific risks associated with SBA loans.”

On April 13, 2023, the Company, NSBF and the SBA entered into the Wind-down Agreement, pursuant to which NSBF has begun to wind-down its operations and NSBF’s SBA 7(a) pipeline of new loans were transitioned to Newtek Bank.

SBL will service and liquidate NSBF’s SBA loan portfolio pursuant to an SBA approved lender service provider agreement.

Risk Factors - Risks Related to SBA Lending - We have specific risks associated with our secondary market sales of the guaranteed portions of SBA loans.”

On April 13, 2023, the Company, NSBF and the SBA entered into the Wind-down Agreement, pursuant to which NSBF has been winding-down its operations and NSBF’s SBA 7(a) pipeline of new loans were transitioned to Newtek Bank.

During this wind-down process, NSBF continues to own the SBA 7(a) loans and PPP Loans currently in its SBA loan portfolio to maturity, liquidation, charge-off or (subject to SBA’s prior written approval) sale or transfer.

SBL is servicing and liquidating NSBF’s SBA loan portfolio pursuant to an SBA approved lender service provider agreement.

The Company has guaranteed certain of NSBF’s obligations to the SBA.

Taxation as a Financial Holding Company

As a BDC, prior to our conversion on January 6, 2023 to a financial holding company, for any taxable year in which we qualified as a RIC and satisfied the Annual Distribution Requirement, we generally were not be subject to U.S.

Prior to our conversion on January 6, 2023 to a financial holding company from a BDC, for any taxable year in which we qualified as a RIC and satisfied the Annual Distribution Requirement, we generally were not be subject to U.S.

federal income tax on the portion of our income we distributed to our stockholders.

In order to comply with these requirements, we maintained a dividend policy of making quarterly distributions in an amount that approximated 90 - 100% of the Company's annual taxable income.

For 2023, the Company and its subsidiaries will no longer qualify as a RIC and will file a consolidated U.S.

Beginning with 2023, the Company and its subsidiaries no longer qualify as a RIC and files a consolidated U.S.

federal income tax return.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business