What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-17 compared with 2024-04-01 · 423 added, 429 removed, 434 unchanged (66% of the section changed)

6 unchanged sentences

Executive Overview

We are a financial holding company owning a branchless OCC nationally chartered bank.

In 2023, we converted to a financial holding company from a BDC and a non-bank lender (see below).

Our target market is owners and prospective owners of SMBs and our services are offered online and in some cases delivered and fulfilled by our staff via video and voice calls.

We offer lending products, FDIC insured deposit products and services, payments processing, payroll services and insurance brokerage services.

We source our business through our alliance partner network and our marketing database, which is facilitated through our NewTracker® platform.

Our loan products include SBA 7(a), ALP, SBA 504, and traditional C&I and CRE bank loans.

Our deposit products primarily include consumer high yield savings accounts, high yield certificates of deposit, zero-fee business checking, and business money market accounts.

We offer business and financial solutions under the Newtek ® and NewtekOne ® brands to the independent business owner (SMB) market.

Our process to extend credit to borrowers begins with technology but finishes with credit committee approval.

We record CECL reserves on loans held for investment at amortized cost, which for unguaranteed SBA 7(a) loans exceeds 6%.

For SBA7(a) loans, we hold the unguaranteed portion and sell the portion guaranteed by the SBA for premiums that typically exceed 10%, depending on loan characteristics and market conditions.

Unlike traditional financial and bank holding companies, the majority of our income is driven and influenced by noninterest income, specifically gains on sales and market value adjustments on loans.

We sell certain loans servicing retained, in which case we record a servicing asset that increases our gain on sale and provides a stream of future income to the extent the loan balance continues to be outstanding.

We fund our activities at Newtek Bank primarily through the aforementioned deposit products.

We offer loans outside of our bank (primarily ALP loans) that are initially funded with lines of credit and hedged until a sufficient volume is attained at which time the loans are securitized.

We are required by law to hold risk retention in securitization transactions, and the majority of our interests in securitizations are designed to absorb first loss on the loans held in the securitization trusts.

Historically, we have participated in joint ventures as additional sources of funding and risk diversification for our ALP loans, and these joint ventures have also securitized their loans.

We have also continued to actively issue bonds in the public and private capital markets.

We are subject to the regulation and supervision of the Federal Reserve and the Federal Reserve Bank of Atlanta.

In addition Newtek Bank is regulated by the OCC and we are required to follow SBA rules and guidelines in the origination and servicing of our SBA loans.

Complying with this level of regulation requires investments in technology and process and personnel costs.

Conversion to a Financial Holding Company

As of January 6, 2023, we are a financial holding company that, together with our consolidated subsidiaries, provides a wide range of business and financial solutions under the NewtekOne ® brand to the independent business owner market.

As of January 6, 2023, we are a financial holding company 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.

Effective January 6, 2023, following authorization by our shareholders, we withdrew our previous election to be regulated as a BDC under the 1940 Act.

Prior to such time, we operated as a BDC under the 1940 Act.

Contemporaneously with withdrawing our election to be regulated as a BDC, 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 NBNYC’s shareholders all of the issued and outstanding stock of NBNYC.

NBNYC has been renamed Newtek Bank and has become our wholly owned bank subsidiary.

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).

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 under Subchapter M of the Code for federal income tax purposes and will no longer qualify for accounting treatment as an investment company.

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

In addition, as a result of commitments made to the Federal Reserve, we will divest or otherwise terminate the activities conducted by NTS, which includes SIDCO and EWS after a December 31, 2023 merger, within two years of becoming a financial holding company, subject to any extension of the two-year period.

We no longer qualify as a RIC under Subchapter M of the Code for federal income tax purposes and no longer qualify for accounting treatment as an investment company.

As a result, in addition to Newtek Bank and its consolidated subsidiary SBL, the following former portfolio companies and subsidiaries are consolidated non-bank subsidiaries in our financial statements as of December 31, 2024:

In addition, as a result of commitments made to the Federal Reserve, we divested of NTS on January 2, 2025, and, as a result, t he Company has reported NTS as Held for Sale as of December 31, 2024.

See “ Item 1A.

Risk Factors – Risks Related to Operating as a Financial Holding Company – We are subject to extensive regulation and supervision as a financial holding company, which may adversely affect our business .”

Risk Factors – Risks Related to Operation as a Financial Holding Company – We are subject to extensive regulation and supervision as a financial holding company, which may adversely affect our business.” See NOTE 9—ASSETS AND LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS HELD FOR SALE.

Effective January 13, 2023, we filed Articles of Amendment amending our Charter to change the name of the Company to “NewtekOne, Inc.”

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 was transitioned to Newtek Bank.

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 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, from the proceeds generated by NSBF’s SBA loan portfolio.

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

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

In addition, during the wind-down process, NSBF is subject to minimum capital requirements established by the SBA, 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 originated and sold by NSBF, from the proceeds generated by NSBF’s SBA loan portfolio.

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

Historical Business Regulation and Taxation

Prior to January 6, 2023, we operated as an internally managed non-diversified closed-end management investment company that elected to be regulated as a BDC under the 1940 Act.

As a BDC, under the 1940 Act, we were not permitted to acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets, and we were not permitted to issue senior securities unless the ratio of its total assets (less total liabilities other than indebtedness represented by senior securities) to its total indebtedness represented by senior securities plus preferred stock, if any, was at least 150%.

As a BDC under the 1940 Act we were not permitted to acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets, and we were not permitted to issue senior securities unless the ratio of our total assets (less total liabilities other than indebtedness represented by senior securities) to our total indebtedness represented by senior securities plus preferred stock, if any, was at least 150%.

As of December 31 2022, our asset coverage was 169%.

Although we are no longer regulated as a BDC, certain covenants in our outstanding 2024 and 2026 Notes require us to maintain an asset coverage of at least 150% as long as the 2024 and 2026 Notes are outstanding.

Although we are no longer regulated as a BDC, certain covenants in our outstanding 2026 Notes require us to maintain an asset coverage of at least 150% as long as the 2026 Notes are outstanding.

See “Item 1A.

Risk Factors – Risks Related to Our Notes – We are subject to 150% asset coverage requirements due to covenants contained in the indentures under which the 2024 and 2026 Notes were issued”.

Risk Factors – Risks Related to our Outstanding Indebtedness – We are subject to 150% asset coverage requirements due to covenants contained in certain of our outstanding debt.”

Additionally, prior to January 6, 2023, due to our status as a BDC, we elected to be treated as a RIC for U.S.

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The Company and its subsidiaries no longer qualify as a RIC for U.S.

federal income tax purposes and will file a consolidated U.S.

federal income tax purposes and filed a consolidated U.S.

federal income tax return beginning with the 2023 fiscal year.

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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.

When combining Newtek Bank and NSBF, the Company ranked as the third largest SBA 7(a) lender based on dollar volume of loans approved as of September 30, 2023, which is the SBA's fiscal year.

Currently, Newtek Bank is ranked as the largest SBA 7(a) lender based on dollar volume of loans approved.

Historically, NSBF structured its loans so that it could both sell the government guaranteed portions of SBA 7(a) loans and securitize the unguaranteed portions.

This structure generally allowed NSBF to recover its capital and earn excess capital on each loan, typically within a year.

NSBF is in the process of winding down its operations and in April 2023 transitioned SBA 7(a) loan originations to Newtek Bank.

NSBF will continue to own the 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 pursuant to the Wind-down Agreement and as described further above.

Additionally, we and our subsidiaries have historically provided a wide range of business and financial solutions to independent business owner relationships, including Business Lending, which includes SBA 7(a) loans, SBA 504 loans and our alternative lending program loans (formerly referred to as nonconforming conventional loans), Electronic Payment Processing, Managed Technology Solutions (Cloud Computing), Technology Consulting, eCommerce, Accounts Receivable and Inventory Financing, personal and commercial lines Insurance Services, Web Services, Data Backup, Storage and Retrieval, and Payroll and Benefits Solutions to independent business owner relationships nationwide across all industries.

Pursuant to the Wind-down Agreement described above, in April 2023 NSBF transitioned its SBA 7(a) loan originations to Newtek Bank and is in the process of winding down its operations and will continue to own the 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.

Additionally, we and our subsidiaries have historically provided a wide range of business and financial solutions to independent business owner relationships, including Business Lending, which includes SBA 7(a) loans, SBA 504 loans and our ALP loans, Electronic Payment Processing, Managed Technology Solutions, Accounts Receivable and Inventory Financing, personal and commercial lines Insurance Services, and Payroll and Benefits Solutions to independent business owner relationships nationwide across all industries.

With the divestiture of NTS, we will no longer provide Managed Technology Solutions to our clients, however, we anticipate referring our clients to IPM for its offering of Managed Technology Solutions, and earning a finders fee pursuant to a referral promotion agreement.

We support the operations of our subsidiaries by providing access to our proprietary and patented technology platform, including NewTracker ® , our patented prospect management software.

We have historically defined SMBs as companies having revenues of $1 million to $100 million, and we have generally estimated the SMB market to be over 33 million businesses in the United States.

We have historically made loans and provided business and financial solutions to the SMB market through NSBF and our controlled

portfolio companies (now subsidiaries).

In addition, the Company has begun to rollout the Newtek Advantage®, the One Dashboard for All of Your Business Needs®, which provides independent business owners with instant access to a team of NewtekOne business and financial solutions experts in the areas of Business Lending, Electronic Payment Processing, Managed Technology Solutions, personal and commercial lines Insurance Services and Payroll and Benefits Solutions.

Moreover, we believe that the Newtek Advantage can provide our independent business owner clients with analytics on their businesses, as well as transactional capabilities that other organizations do not presently offer.

We have historically defined independent business owners (SMBs) as companies having revenues of $1 million to $100 million, and we have generally estimated the SMB market to be over 34 million businesses in the United States.

We have historically made loans and provided business and financial solutions to the SMB market through NSBF and our controlled portfolio companies (now subsidiaries).

In addition, we have begun to offer the Newtek Advantage ® , the One Dashboard for All of Your Business Needs ® , which provides independent business owners with instant access to a team of NewtekOne business and financial solutions experts in the areas of Business Lending, Electronic Payment Processing, personal and commercial lines Insurance Services and Payroll and Benefits Solutions.

Moreover, we believe 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 PMT clients to make payroll directly from the Newtek Advantage business portal.

Following the Acquisition, there can be no assurance regarding our continued lending prospects or operations as a financial holding company.

See “Item 1A.

Risk Factors – Risks Related to Operating as a Financial Holding Company – We have a limited operating history as a financial holding company.”

Our common shares are currently listed on the Nasdaq Global Market under the symbol “NEWT”.

Newtek Bank is a national bank and nationally licensed SBA lender under the federal Section 7(a) loan program, and originates, sells and services SBA 7(a) loans.

Newtek Bank is a national bank and nationally licensed SBA lender under the SBA 7(a) Program, and originates, sells and services SBA 7(a) loans.

Newtek Bank has been granted PLP status and is authorized to place SBA guarantees on loans without seeking prior SBA review and approval.

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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” and “Item 1A.

Risk Factors - Risks Related to SBA Lending - A governmental failure to fund the SBA could adversely affect NSBF’s and Newtek Bank’s SBA 7(a) loan originations and our results of operations.”

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.” and “Item 1A.

Risk Factors - Risks Related to SBA Lending - A governmental failure to fund the SBA could adversely affect Newtek Bank’s SBA 7(a) loan originations and our results of operations.”

Economic Developments

We have observed and continue to observe supply chain interruptions, significant labor and resource shortages, commodity inflation, rising interest rates, unrelated bank failures and declines in depositor confidence in certain types of depository institutions.

Additionally geopolitical events, such as trade disruptions, the ongoing war between Russia and Ukraine, the Israel conflict with Hamas, rising tensions in Asia, and elements of economic and financial market instability in the United States, the United Kingdom, the European Union and China have led to increased economic uncertainty.

We have observed and continue to observe commodity inflation, rising interest rates, unrelated bank failures and declines in depositor confidence in certain types of depository institutions.

Additionally geopolitical events, such as trade disruptions, tariffs, the ongoing war between Russia and Ukraine, conflict in the Middle East, rising tensions in Asia, and elements of political, economic and financial market instability in the United States, the United Kingdom, the European Union and China have led to increased economic uncertainty.

One or more of these factors may contribute to increased market volatility, may have long term effects in the United States and worldwide financial markets, and may cause economic uncertainties or deterioration in the United States and worldwide.

Additionally, in the event that the U.S.

economy enters into a protracted recession, it is possible that the businesses and industries in which our customers operate and to which we lend to could experience deterioration, which could ultimately lead to difficulty in meeting debt service requirements and an increase in defaults.

While we are not seeing signs of an overall, broad deterioration in our operating results at this time, there can be no assurance that the performance of certain of our subsidiaries and our current and prospective borrowers will not be negatively impacted by economic conditions, which could have a negative impact on our future results.

In addition, concerns have arisen with respect to the financial condition of a number of banking organizations in the United States, in particular those with exposure to certain types of depositors, large portfolios of investment securities and exposures to commercial real estate.

On March 10, 2023 Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation and the Federal Deposit Insurance Corporation was appointed receiver of Silicon Valley Bank.

On March 11, 2023, Signature Bank was similarly closed and placed into receivership and concurrently the Federal Reserve Board announced it will make available additional funding to eligible depository institutions to assist eligible banking organizations with potential liquidity needs.

Subsequently, First Republic Bank entered FDIC receivership and its assets were sold to JPMorgan Chase Bank, N.A.

While the Company’s business, balance sheet and depositor profile differ substantially from banking institutions that are the focus of the greatest scrutiny, the operating environment and public trading prices of financial services sector securities can be highly correlated, in particular in times of stress, which may adversely affect the trading price of the Company’s common stock and potentially its results of operations.

For the fiscal year ended December 31, 2023, we generated income in the form of interest, net gains on sale of the guaranteed portions of SBA 7(a) loans originated, dividends, electronic payment processing income, technology and IT support income, servicing income, and other fee income generated by loan originations and by our subsidiaries.

economy enters into a protracted recession, it is possible that the businesses and industries in which we and our customers operate and to which we lend to could experience deterioration, which could ultimately lead to difficulty in meeting debt service requirements and an increase in defaults.

While we are not seeing signs of an overall, broad deterioration in the economy at this time, there can be no assurance that the performance of certain of our subsidiaries and our current and prospective borrowers will not be negatively impacted by economic conditions, which could have a negative impact on our future results.

For the fiscal year ended December 31, 2024, we generated income in the form of interest, net gains on the sales of loans originated (which primarily include sales of SBA 7(a) and ALP loans) and related servicing assets on such sales, dividends, electronic payment processing income, technology and IT support income, servicing income, and other fee income generated by loan originations and by our subsidiaries.

We originated loans that typically have terms of 10 to 25 years and bear interest at prime plus a margin.

In some instances, we received payments on our loans based on scheduled amortization of the outstanding balances.

In addition, we received repayments of some of our loans

prior to their scheduled maturity date.

In addition, we received repayments of some of our loans prior to their scheduled maturity date.

The frequency or volume of these repayments fluctuated significantly from period to period.

Our portfolio activity for the fiscal year ended December 31, 2024, also reflects the proceeds of sales of guaranteed portions of SBA 7(a) loans we originated.

In addition, we received servicing income related to the guaranteed portions of SBA 7(a) loans which we originated and sold into the secondary market.

These recurring fees were earned daily and recorded when earned.

In addition, we generated revenue in the form of loan packaging, loan prepayment, legal and late fees.

We recorded such fees related to loans as other income.

In addition, we received servicing income related to the guaranteed portions of SBA 7(a) loans which we originated and sold into the secondary market as well as on the portfolios of ALP loans owned and then securitized by NCL JV and TSO JV.

These recurring fees are are outlined in servicing agreements and were recorded when earned.

In addition, we generated revenue in the form of loan origination fees (packaging and legal fees) as well as loan prepayment and late fees.

We recorded such fees related to loans held for sale as other income.

Distributions of earnings from our joint ventures were evaluated to determine if the distribution was income, return of capital or realized gain.

We recognized realized gains or losses on loans based on the difference between the net proceeds from the disposition and the cost basis of the loan without regard to unrealized gains or losses previously recognized.

We recorded current period changes in fair value of loans and assets that were measured at fair value as a component of the net change in unrealized appreciation (depreciation) on the loans or se rvicing assets, as appropriate, in the consolidated statements of operations.

For the fiscal year ended December 31, 2023, our primary operating expenses were salaries and benefits, interest expense including interest on deposits, electronic payment processing expense, technology services expenses, origination and servicing and other general and administrative costs, such as professional fees, marketing, referral fees, servicing costs and rent.

The Company’s Alternative Lending Program (Non-Conforming Conventional Commercial Loan Program)

We recognized realized gains or losses on loans based on the difference between (1) the net proceeds from the disposition and any servicing assets recognized and (2) the cost basis of the loan without regard to unrealized gains or losses previously recognized.

For the fiscal year ended December 31, 2024, our primary operating expenses were salaries and benefits, interest expense including interest on deposits, electronic payment processing expense, technology services expense, loan origination and servicing expenses, and other general and administrative costs, such as professional fees, marketing, referral fees, servicing costs and rent.

The Company’s Alternative Lending Program (ALP)

The Company has originated loans under its ALP since 2019.

These loans have terms between 10 and 25 years, bear fixed interest rates that reset every five years, and have prepayment penalties.

The criteria evaluated in underwriting ALP loans and the terms of these loans have been generally consistent over the ALP’s existence.

Prior to July 1, 2024, the Company originated ALP loans with the intent to sell the loans to a JV.

While the Company continues to source JV partners to participate in this program, during the third quarter of 2024, we made the decision to originate with the intent to securitize ALP loans with our subsidiary Newtek ALP Holdings as the originator and sponsor.

The Company could also originate ALP loans designated as HFI.

The Company does not expect any significant changes to the underwriting or terms of loans in its ALP.

In 2019, we launched a 50/50 joint venture, NCL JV, between NCL, a wholly-owned subsidiary of Newtek, and Conventional Lending TCP Holding, LLC, a wholly-owned, indirect subsidiary of BlackRock TCP Capital Corp.

(Nasdaq:TCPC).

NCL JV provided non-conforming conventional commercial and industrial term loans to U.S.

NCL JV provided ALP loans to U.S.

middle-market companies and small businesses.

NCL JV ceased funding new loans during 2020.

On January 28, 2022, NCL JV closed a conventional commercial loan securitization with the sale of $56.3 million 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 conventional commercial business loans, including loans secured by liens on commercial or residential mortgaged properties, originated by NCL JV and NBL.

On January 28, 2022, NCL JV closed an ALP loan securitization with the sale of $56.3 million 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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NCL and TSO II each committed to contribute an equal share of equity funding to the TSO JV and each have equal voting rights on all material matters.

The TSO JV intends to deploy capital over the course of time with additional leverage supported by a warehouse line of credit for the purpose of investing in non-conforming conventional commercial and industrial term loans made to middle-market companies as well as small businesses.

The TSO JV intends to deploy capital over the course of time with additional leverage supported by a warehouse line of credit for the purpose of investing in ALP loans made to middle-market companies as well as small businesses.

TSO JV began making investments in ALP loans during the fourth quarter of 2022 and o n July 23, 2024, closed a securitization backed by Company originated 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 Class A and Class B Notes received Morningstar DBRS ratings of “A (sf)” and “BBB (high) (sf),” respectively.

TSO JV ceased investing in new ALP loans in July 2024.

Refer to NOTE 4—INVESTMENTS for selected financial information and a schedule of investments of TSO JV as of December 31, 2024.

Results of Operations for the years ended December 31, 2023 and 2022

Set forth below is a comparison of the results of operations for the years ended December 31, 2023 and 2022, during which years the Company operated as both a financial holding company and a BDC.

For a comparison of the results of operations for the years ended December 31, 2022 and 2021, see the Company's Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 15, 2023.

Discussion and Analysis of Financial Condition

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December 31, 2023

The changes in the financial statement line items from December 31, 2022 to December 31, 2023 are impacted by the Company’s transition to a financial holding company.

Controlled investments have been removed from the balance sheet and replaced with the consolidated assets, liabilities and profits and losses of the former portfolio companies, as well as the addition of Newtek Bank subsequent to the January 6, 2023 acquisition of NBNYC.

Total assets at December 31, 2024 were $2.1 billion, an increase of $630.4 million, or 44.1%, compared to total assets of $1.4 billion at December 31, 2023.

As of December 31, 2024, the Company held the assets and liabilities of NTS for sale.

Refer to NOTE 9—ASSETS AND LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS HELD FOR SALE.

December 31, 2024 December 31, 2023 Change

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Loans held for sale

Loans held for sale, at fair value increased $99.7 million during the year ended December 31, 2023, while loans held for sale, at LCM increased $56.6 million during the same period.

The overall increase was primarily the result of the consolidation of entities that were previously controlled portfolio companies that hold loans, as well as new loan originations, during 2023.

Loans HFS, at fair value increased $253.4 million during the year ended December 31, 2024.

The overall increase was primarily the result of new loan originations during 2024, net of sales, in the amount of $181.1 million for ALP loans and $72.3 million in SBA loans.

December 31, 2024 December 31, 2023 Change

SBA, at fair value $ 159,788 $ 87,510 $ 72,278

ALP, at fair value 212,498 31,357 181,141

Total $ 372,286 $ 118,867 $ 253,419

Loans HFS, at LCM increased $2.2 million during the same period.

The overall increase was primarily the result of new loan originations during 2024, net of sales.

December 31, 2024 December 31, 2023 Change

SBA 504 First Lien $ 36,783 $ 39,565 $ (2,782)

SBA 504 Second Lien 8,203 5,741 2,462

SBA 7(a) — 64 (64)

SBA 7(a) Partials 13,817 11,237 2,580

Loans HFS, at LCM 58,803 56,607 2,196

Loans held for investment

At Fair value:

Loans held for investment, at fair value was $469.8 million at December 31, 2023 compared to $505.3 million at December 31, 2022.

Loans HFI, at fair value was $369.7 million at December 31, 2024 compared to $469.8 million at December 31, 2023.

The balance consists primarily of SBA 7(a) loans as well as $6.7 million of loans that the Company owns 100% as a result of originating the loan and subsequently repurchasing the guaranteed portion from the SBA.

As discussed above, as of January 6, 2023, the Company operates as a financial holding company.

Prior to that, we operated as a BDC.

As a result of the required accounting methodology changes, we prospectively adjusted the treatment of certain loans originated by NSBF between the held for investment and held for sale categories, resulting in the decrease from December 31, 2022 to December 31, 2023.

As previously discussed, NSBF ceased originating loans during 2023, resulting in the decrease in the balance of loans held for investment from December 31, 2023 to December 31, 2024, primarily due to the principal payments of existing loans held by NSBF.

At Amortized Cost:

Loans held for investment, at amortized cost consists of Newtek Bank loans acquired as part of the Acquisition as well as new originations in 2023, which contributed to a net increase of $336.3 million in loans.

Loans HFI, at amortized cost consists of loans originated at or purchased by Newtek Bank.

The $285.3 million increase in loans HFI, at amortized cost is the result of an increase in originations for the year ended December 31, 2024 over 2023.

Credit Quality:

The following table presents an analysis of loans held for investment with credit metrics, including a breakdown by days aged:

Credit Quality Ratios December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023

The following table presents an analysis of loans HFI with credit metrics, including a breakdown by days aged:

Credit Quality Ratios December 31, 2024 December 31, 2023

At Amortized Cost

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Nonaccrual loans 24,341 3.9 % 5,373 1.6 %

Total, at amortized cost

$ 620,370 100.0 % $ 335,912 100.0 %

Deferred fees and costs

Total, at amortized cost, net of deferred fees and costs

$ 621,651 $ 336,305

Allowance for credit losses $ (30,233) 4.9 % $ (12,574) 3.7 %

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Current $ 251,616 68.1 % $ 385,172 81.9 %

Past Due 31-89 Days $ 36,455 7.8 % $ 29,743 6.0 % $ 24,530 4.8 % $ 42,197 7.9 %

Past Due 31-89 Days and accruing 41,558 11.2 % 36,455 7.8 %

Past Due 90-119 Days and accruing 9,268 2.5 % — — %

Past Due 120 and more Days and accruing — — % — — %

Nonaccrual loans 67,304 18.2 % 48,174 10.3 %

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Total Nonperforming Assets $ 95,409 4.6 % $ 54,657 3.8 %

Other Statistics

All Loans HFI 90 days past due still accruing interest $ — — % $ — — % $ — — % $ — — %

Commercial real estate exposure

The Company’s loan portfolio consists of loans to SMBs.

The Company’s Loans HFI at amortized cost and Loans HFS at LCM include a total of $194.0 million of loans backed by commercial real estate (CRE) and considered non-owner occupied as of December 31, 2023.

The Company’s loan portfolio consists of loans to independent business owners (SMBs).

The Company’s Loans HFI at amortized cost and Loans HFS at LCM include a total of $299.1 million of loans, including unfunded commitments, backed by CRE and considered non-owner occupied as of December 31, 2024.

The average loan-to-value for this CRE portfolio was 57.9%.

The table below presents a detail of the loans considered non-owner occupied CRE that are not carried at fair value:

As of December 31, 2023

HFI at Amortized Cost, net of deferred fees and costs

Loans not backed by CRE $ 203,405 $ — $ 203,405

Loans backed by CRE

132,900 56,607 189,507

The table below presents detail of the loans considered non-owner occupied CRE that are not carried at fair value:

December 31, 2024 December 31, 2023

HFI at amortized cost, net of deferred fees and costs HFS at LCM Total LTV

by CRE type HFI at amortized cost, net of deferred fees and costs HFS at LCM Total LTV

Loans not backed by NOO CRE $ 429,820 $ — $ 429,820 $ 172,502 $ — $ 172,502

Loans backed by NOO CRE 191,831 58,804 250,635 163,803 56,607 220,410

Total loans $ 621,651 $ 58,804 $ 680,455 $ 336,305 $ 56,607 $ 392,912

Loans backed by CRE by type:

Loans backed by NOO CRE by type:

Retail $ 45,594 $ — $ 45,594 51.4 % $ 40,400 $ — $ 40,400 49.7 %

7 unchanged sentences

Other 13,158 — 13,158 61.5 % 3,500 — 3,500 52.8 %

Total Loans backed by CRE

$ 132,900 $ 56,607 $ 189,507 60.3 %

Unfunded commitments backed by CRE:

Total NOO CRE $ 191,831 $ 58,804 $ 250,635 57.9 % $ 163,803 $ 56,607 $ 220,410 60.3 %

Unfunded Commitments

Construction and land development 1

$ — $ 48,402 $ 48,402 $ — $ 4,493 $ 4,493

Total CRE Exposure

Hotel — 13 13 — — —

Multifamily — — — — — —

Total unfunded commitments — 48,415 48,415 — 4,493 4,493

Total CRE Loans

$ 191,831 $ 107,219 $ 299,050 $ 163,803 $ 61,100 $ 224,903

1 Construction land development includes first and second lien loans.

The LTD on first lien is generally 65%.

Second liens are typically taken out by the SBA following project completion.

1 Construction and land development includes SBA 504 first and second lien loans.

The LTV on first lien is generally 65%.

Second liens are typically taken out by the SBA following project completion and occupancy by the borrower.

The LTV calculated is based on total exposure.

Goodwill and Intangibles

December 31, 2023

Goodwill Intangible Assets Total

NBNYC acquisition $ 271 $ 843 $ 1,114

The table below presents detail of the Company’s Goodwill and intangibles:

December 31, 2024 December 31, 2023

Goodwill Intangible Assets Total Goodwill Intangible Assets Total

Banking segment

$ 271 $ 667 $ 938 $ 271 $ 843 $ 1,114

Payments segment

3 unchanged sentences

Total $ 14,085 $ 667 $ 14,752 $ 25,885 $ 4,235 $ 30,120

The Company did not have any goodwill or intangibles as of December 31, 2022, prior to the Acquisition.

The $30.1 million increase in goodwill and intangible assets consists of $1.1 million relating to the Acquisition of Newtek Bank itself, as well as $13.8 million and $15.2 million from the payments and technology segments, respectively, due to the consolidation of previously unconsolidated portfolio companies that include goodwill and intangibles, such as customer lists and trade names, due to the Company’s reorganization related to the Acquisition.

1 As of December 31, 2024, the assets of the Technology segment are classified as held-for-sale.

See NOTE 9—ASSETS AND LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS HELD FOR SALE for more information.

The change in goodwill and intangible assets for the Payments segment and NBNYC acquisition relates to amortization of intangible assets during the year ended December 31, 2024.

Settlement Receivable

Settlement receivables increased $62.2 million compared to December 31, 2022.

Settlement receivables were $52.5 million as of December 31, 2024, a decrease of $9.8 million compared to December 31, 2023.

The settlement receivable arises from the guaranteed portions of SBA 7(a) loans that were traded in the period but did not settle during the current period end and the cash was not received from the purchasing broker during the current period;

the amount varies depending on loan origination volume and timing of sales at quarter end.

Total liabilities at December 31, 2023, were $1.2 billion, an increase of $556.9 million, or 89.3%, compared to total liabilities of $623.5 million at December 31, 2022.

Total deposits were $463.5 million at December 31, 2023, consisting of $10.1 million in non-interest bearing deposits and $453.5 million in interest bearing deposits.

The Company did not have any deposits as of December 31, 2022, prior to the Acquisition.

Total liabilities at December 31, 2024, were $1.8 billion, an increase of $583.2 million, or 49.4%, compared to total liabilities of $1.2 billion at December 31, 2023.

Total deposits were $973.1 million at December 31, 2024, consisting of $11.1 million in non-interest bearing deposits and $961.9 million in interest bearing deposits, a $508.6 million increase from the balance as of December 31, 2023.

As of December 31, 2024 and 2023, insured deposits represent 80.3% and 76.3%, respectively.

Increases in deposits were primarily driven by deposit gathering efforts in Consumer High Yield Savings accounts and six-month Certificates of Deposit to fund future balance sheet growth and increase liquidity levels at Newtek Bank.

Borrowings Outstanding

December 31, 2024 December 31, 2023 Change

Capital One Lines of Credit:

Capital One line of credit - guaranteed 1

$ — $ 10,500 $ (10,500)

Capital One line of credit - unguaranteed 1

— 45,385 (45,385)

Total Capital One

— 55,885 (55,885)

Other Bank Borrowings 2 :

Webster NMS Note 36,628 — 36,628

Bank Borrowings 1 :

NMS Webster Note $ 32,688 $ 36,628 $ (3,940)

SPV I Capital One Facility 21,192 16,080 5,112

2 unchanged sentences

FHLB Advances 2

15,330 23,184 (7,854)

Total Lines of Credit 146,257 82,948 63,309

Parent Company Notes due 2024, 2025, 2026, and 2028 2 :

Parent Company Notes 1 :

2024 Notes 3 (5.75%)

8 unchanged sentences

49,944 — 49,944

Total 2024, 2025, 2026, and 2028 Notes

2028 Notes (8.00%)

38,726 38,378 348

Notes Payable - Securitization Trusts 2

2029 Notes (8.50%)

69,622 — 69,622

Notes Payable - Related Parties

2029 Notes (8.625%)

72,662 — 72,662

Total Parent Company Notes

375,149 269,062 106,087

Notes Payable - Securitization Trusts 1

186,635 292,112 (105,477)

Total $ 708,041 $ 644,122 $ 63,919

(1) On October 2, 2023, the Company paid off and terminated the NSBF Capital One facility for both guaranteed and unguaranteed loans.

Total combined commitments of the guaranteed and unguaranteed lines of credit were $150.0 million at December 31, 2022.

1 Net of deferred financing costs.

2 At December 31, 2024 and December 31, 2023, the carrying amount of Newtek Bank’s FHLB borrowings includes a $0.04 million and $0.2 million purchase accounting adjustment, respectively.

3 On August 1, 2024, the 2024 Notes matured.

4 Effective December 11, 2024, the Company entered into Note Amendment and Exchange Agreements (the “Agreements”) with each of the holders of the 2025 8.125% Notes, pursuant to which the Company and the holders of the 2025 8.125% Notes agreed to exchange the 2025 8.125% Notes for the 2027 8.125% Notes, effecting amendments solely to (i) extend the February 1, 2025 maturity date of the 2025 8.125% Notes to the new maturity date of February 1, 2027 (the “New Maturity Date”) and (ii) provide that the 2027 8.125% Notes will be redeemable in whole, but not in part, at any time, at the option of the Company, from November 1, 2026 to the New Maturity Date, at a redemption price of 100% of the outstanding principal amount being redeemed plus any accrued but unpaid interest, to but excluding the redemption date.

Borrowings were $708.0 million at December 31, 2024, compared to $644.1 million at December 31, 2023.

This increase was primarily due to an additional $13.0 million of notes payable-securitization trusts, including the 2023 securitization, consolidating $82.9 million of bank borrowings from newly consolidating entities, $49.4 million of newly issued 2025 8.125% Notes, and $38.4 million of newly issued 2028 Notes.

These increases were partially offset by a $55.9 million reduction on our Capital One lines of credit, and the elimination in consolidation of a prior year related party note payable.

This increase was primarily due to a $69.6 million issuance of the 2029 8.50% Notes and a $72.7 million issuance of the 2029 8.625% Notes, as well as additional borrowings of $5.1 million, $47.2 million, and $22.8 million on the SPV I, II and III facilities, respectively.

These increases were partially offset by a $105.5 million reduction in the notes payable on securitization trusts, a $38.1 million redemption of the 2024 5.75% Notes, and $7.9 million in maturities of of FHLB advances.

Deferred Taxes

In connection with the Company’s conversion to a financial holding company during the first quarter of 2023, the $19.2 million in net deferred tax liabilities as of December 31, 2022, stemming from the Company’s valuation of its investments in former portfolio companies through net unrealized gains and losses were removed.

Upon consolidating the assets and liabilities of the portfolio companies, the deferred tax assets and liabilities representing the cumulative timing differences between book and tax were recorded, to the extent such assets or liabilities give rise to taxable income or expense in future periods.

The Company also recognized deferred tax assets on net operating loss (NOL) carryforwards upon consolidation.

The deferred tax liability, net, represents the cumulative timing differences between book and tax to the extent such assets or liabilities give rise to taxable income or expense in future periods.

Within this balance is the deferred tax asset on net operating loss (NOL) carryforwards not expected to be utilized in the current year.

The Company evaluated all NOLs for a valuation allowance and determined that none were required.

Results of Operations

Comparison of the years ended December 31, 2023 and 2022

For the year ended December 31, 2023, the Company reported net income of $47.33 million, or $1.89 per basic and $1.88 per diluted share, compared to net income of $32.31 million, or $1.34 per basic and diluted share, for the year ended December 31, 2022, respectively.

The increase in net income was attributable to the following items:

Set forth below is a comparison of the results of operations for the years ended December 31, 2024 and 2023.

For a comparison of the results of operations for the years ended December 31, 2023 and 2022, during which years the Company operated as both a financial holding company and a BDC, see the Company's Form 10-K for the year ended December 31, 2023, as filed with the SEC on April 1, 2024.

For the year ended December 31, 2024, the Company reported net income of $50.9 million, or $1.97 per basic and $1.96 per diluted share, compared to net income of $47.3 million, or $1.89 per basic and $1.88 per diluted share, for the year ended December 31, 2023.

The net increase in net income before taxes was partially offset by the non-recurring nature of the income tax benefit on the realization of deferred tax assets in 2023 when the Company converted to an FHC.

Below is a summary of changes in the components of Net income:

Year Ended December 31,

4 unchanged sentences

Net income before taxes 68,692 45,373 23,319

Income tax (benefit)/expense (1,956) 6,464 (8,420)

Income tax expense/(benefit) 17,839 (1,956) 19,795

Net income $ 50,853 $ 47,329 $ 3,524

Net Interest Income

Year Ended December 31,

2023 2022 Change

Interest income

Debt securities available-for-sale $ 1,518 $ — $ 1,518

Loans and fees on loans 84,001 35,696 48,305

Interest from affiliates — 2,921 (2,921)

Other interest earning assets 8,854 — 8,854

Total interest income 94,373 38,617 55,756

Interest expense

Deposits 15,849 — 15,849

Notes and securitizations 40,217 21,780 18,437

Bank and FHLB borrowings 11,673 3,998 7,675

Notes payable related party — 547 (547)

Total interest expense 67,739 26,325 41,414

Net interest income 26,634 12,292 14,342

Provision for credit losses 11,704 — 11,704

Net interest income after provision for credit losses

$ 14,930 $ 12,292 $ 2,638

Interest Income

Loans and fees on loans:

The $48.3 million increase in interest income on the Company’s loan portfolio was attributable to an increase in interest rates as well as the average outstanding accrual portfolio of loans held for investment increasing to $552.3 million from $482.6 million for the years ended December 31, 2023 and 2022, respectively.

The increase in the average outstanding accrual loan portfolio resulted from the origination of new SBA 7(a) loans period over period as well as the increase in our loan portfolio due to the Acquisition, coupled with an increase in our total commercial loan originations in 2023 compared to 2022.

Other interest earning assets:

The $8.9 million increase in interest income from other interest earnings assets was attributable to rising interest rates on cash and due from banks as well as interest bearing deposits in banks subsequent to the Acquisition that resulted in Newtek Bank earning interest on Federal Reserve Bank cash deposits.

Interest Expense

The following is a summary of interest expense by facility for the years ended December 31, 2023 and 2022:

December 31, 2023 December 31, 2022 Change

$ 15,849 $ — $ 15,849

Notes and securitizations:

Notes payable - Securitization Trusts 23,469 10,641 12,828

2,421 2,424 (3)

2025 6.85% Notes 2

2025 5.00% Notes 1,757 1,294 463

2025 8.125% Notes 3

4,335 — 4,335

2026 Notes 7,043 7,042 1

1,192 — 1,192

Bank and FHLB Borrowings:

Bank notes payable 10,995 3,998 6,997

FHLB Advances 678 — 678

Notes payable - related party

Total interest expense $ 67,739 $ 26,325 $ 41,414

(1) Includes the interest-bearing deposit liabilities of NYNBC acquired on January 6, 2023, and the deposits added by Newtek Bank during the year ended December 31, 2023

(2) On May 2, 2022, the Company redeemed all $15.0 million in aggregate principal amount of the 2025 6.85% Notes at 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon from February 28, 2022 through, but excluding, the redemption date.

(3) On January 23, 2023, the Company completed a private placement offering of $50.0 million aggregate principal amount of 8.125% notes due 2025.

The Notes will mature on February 1, 2025.

The Notes bear interest at a rate of 8.125% per year, payable semiannually on February 1 and August 1 each year, commencing on August 1, 2023.

(4) On August 31, 2023, the Company completed a public offering of $40.0 million aggregate principal amount of 8.00% notes due 2028.

The Notes will mature on September 1, 2028.

The Notes bear interest at a rate of 8.00% per year, payable quarterly on March 1, June 1, September 1, and December 1 each year, commencing on December 1, 2023.

The increase in interest expense period over period is primarily from additional interest expense on the Notes payable - Securitization Trusts of $12.8 million, Bank notes payable of $7.0 million, 2025 8.125% Notes of $4.3 million, and 2028 8.00% Notes of $1.2 million related to an increase in the average outstanding balance and interest rates period over period, as well as the consolidation of additional subsidiaries associated with the Company’s withdrawal of its election to be treated as a BDC, which added $82.9 million in additional borrowings to the Company’s balance sheet as of December 31, 2023.

The Company also completed a securitization in June 2023, resulting in an additional $93.8 million of borrowings as of December 31, 2023.

Additionally, in conjunction with the Acquisition and transition to a financial holding company, the Company now holds deposit liabilities with interest-bearing deposits contributing to the increase in interest expense at December 31, 2023 of $15.8 million.

Provision for Credit Losses

The provision for loan and lease credit losses represents the amount necessary to be charged against the current period’s earnings to maintain the ACL on loans at a level that the Company believes is appropriate in relation to the estimated losses inherent in the loan portfolio.

For the year ended December 31, 2023, there was a provision for loan credit losses of $11.7 million.

There was no provision for credit losses for the same period in 2022 due to the change in accounting methodology related to the conversion to a financial holding company.

Net Interest Income and Margin

3 unchanged sentences

Loan fees are included in interest income on loans.

For the year ended December 31, 2023

Average Balance Interest Average Yield / Rate

Year Ended December 31,

Average Balance Interest Average Yield / Rate Average Balance Interest Average Yield / Rate

Interest-earning assets:

9 unchanged sentences

Demand $ 51,759 $ 461 0.89 % $ 23,973 $ 31 0.13 %

Savings, Super NOW 143,589 7,187 5.01

Savings and NOW 273,640 13,803 5.04 143,589 7,187 5.01

Money Market 27,471 1,141 4.15 22,083 1,052 4.76

10 unchanged sentences

Ratio of average interest-earning assets to average interest bearing liabilities 111.55 % 108.68 %

In response to market conditions and consistent with its business plan, Newtek Bank has been focused on increasing its liquidity position by raising additional deposits and maintaining a significant portion of its liquidity in the form of cash held at the Federal Reserve, approximately $346 million as of December 31, 2024, as opposed to long-term investments.

In addition, Newtek Bank management continues to closely monitor market conditions with a focus on its asset liability management policies, as well as closely monitoring, among other things, capital levels, to ensure compliance with regulatory guidelines and the OCC Operating Agreement.

The increase in the average balance of loans HFS was attributable to originations of SBA 504 and ALP loans, and the increase in the average outstanding accrual loan portfolio resulted from the origination of new SBA 7(a) loans period over period.

Rate/Volume Analysis

4 unchanged sentences

For purposes of this table, increases or decreases attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.

For the year ended December 31, 2023

Year Ended December 31,

Increase (Decrease) Due to

Rate Volume 1

Rate Volume Total

Interest income:

6 unchanged sentences

Demand 390 40 430

Savings, Super NOW — 7,187 7,187

Savings and NOW (4,190) 10,805 6,615

Money Market (259) 348 89

3 unchanged sentences

Net interest income $ (4,840) $ 18,511 $ 13,671

(1) Includes income and expense associated with the Acquisition of NBNYC on January 6, 2023, and the associated withdrawal of the election to be treated as a BDC.

Provision for Credit Losses

For the year ended December 31, 2024 and 2023, there was a provision for credit losses of $26.2 million and $11.7 million, respectively.

The increase was due to increases in net charge-offs, specific reserves on impaired loans, and balances of loans held for investment at amortized cost, across all products but specifically SBA 7(a) loans.

Noninterest Income

2 unchanged sentences

Dividend income $ 1,519 $ 1,757 $ (238) (13.5) %

Loan servicing asset revaluation (3,549) (10,095) 6,546 64.8

Net loss on loan servicing assets (12,665) (4,282) (8,383) 195.8

Servicing income 20,087 18,289 1,798 9.8

5 unchanged sentences

Total noninterest income $ 217,312 $ 176,772 $ 40,540 22.9 %

Dividend Income

For the year ended December 31, 2022, dividend income was mainly dependent on the earnings of our joint ventures.

On January 6, 2023, the Company completed the previously announced Acquisition and converted to a financial holding company.

See NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION.

The controlled portfolio companies have become consolidating subsidiaries of the Company in 2023 and therefore, under the new organizational structure, their profits and losses are consolidated within the statement of operations instead of in the form of dividend income going forward.

Loan Servicing Asset Revaluation

Net Loss on Loan Servicing Assets

The Company accounts for servicing assets in accordance with ASC Topic 860-50 - Transfers and Servicing - Servicing Assets and Liabilities.

The Company and Newtek Bank earn servicing fees from the guaranteed portions of SBA 7(a) loans they originate and sell.

The Company earns servicing fees from the guaranteed portions of SBA 7(a) loans it originates and sells and from servicing the ALP portfolios of NCL JV and TSO JV.

Servicing assets for loans originated by the Company’s nonbank subsidiaries are measured at FV at each reporting date and the Company reports changes in the FV of servicing assets in earnings in the period in which the changes occur.

The valuation model for servicing assets incorporates assumptions including, but not limited to, servicing costs, discount rate, prepayment rate, and default rate.

Considerable judgement is required to estimate the fair value of servicing assets and, as such, these assets are classified as Level 3 in our fair value hierarchy.

Considerable judgment is required to estimate the fair value of servicing assets and, as such, these assets are classified as Level 3 in our fair value hierarchy.

Servicing assets for loans originated by Newtek Bank are measured at LCM and amortized based on their estimated life, and impairment is recorded to the extent the amortized cost exceeds the asset’s FV.

The increase in loan servicing asset revaluation is due to the increase in the total portfolio of investments for which we earn servicing income period over period.

Servicing Income, Net of Amortization

Net loss on loan servicing assets is shown net of amortization expense.

The larger loss in Net loss on loan servicing assets is due to the decrease in NSBF’s total portfolio of loans during the wind-down.

A sensitivity analysis of the loan servicing assets at fair value to adverse changes in significant assumptions as of December 31, 2024 and December 31, 2023 is as follows:

December 31, 2024 December 31, 2023

Discount factor

Effect on fair value of a 100 basis point adverse change $ (831) $ (1,050)

Effect on fair value of a 200 basis point adverse change (1,604) (2,028)

Cumulative prepayment rate

Effect on fair value of a 100 basis point adverse change $ (85) $ (141)

Effect on fair value of a 500 basis point adverse change (423) (706)

Average cumulative default rate

Effect on fair value of a 100 basis point adverse change $ (72) $ (149)

Effect on fair value of a 500 basis point adverse change (358) (744)

The sensitivity analysis presents the hypothetical effect on fair value of the servicing assets due to the change in significant assumptions.

Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value is not linear.

Additionally, the sensitivity analysis shocks each significant assumption individually, while keeping all other assumptions unchanged.

In practice, changes in one assumption generally impact other assumptions, which could increase or lessen the effect of the change.

Servicing Income

The increase in servicing income was related to an increase of $167.6 million in the average total loan portfolio for which we earn servicing income period over period.

Net Gains on Sales of Loans

Net gains on sales of loans for the years ended December 31, 2023 and 2022 were $50.7 million and $56.9 million, respectively.

Net gains on sales of loans for the year ended December 31, 2024 and 2023 were as follows:

December 31, 2024 December 31, 2023

Realized gains recognized on sale of SBA loans $ 74,617 $ 73,530

Realized losses recognized on sale of SBA loans

Gains recognized on sales of loans

$ 100,422 $ 75,350

Losses recognized on sales of loans

(3,239) (23,883)

Net gains on sales of loans

3 unchanged sentences

# of Loans $ Amount

SBA loans originated 1,812 $ 814,406 1,215 $ 775,572

SBA guaranteed loans sold 1,723 607,560 1,132 630,028

SBA 7(a) loans originated

2,427 $ 943,024 1,812 $ 814,406

SBA 7(a) guaranteed loans sold

2,041 694,750 1,723 607,560

Average sale price as a percent of principal balance 1

2 unchanged sentences

The realized gains recognized above reflect amounts net of split with the SBA.

For the year ended December 31, 2023, the average sale price as a percent of principal balance was 110.20% compared to 109.71% for the prior period.

The modest increase in sales prices in 2023 resulted from an improved yield profile of the SBA 7(a) loans in comparison to other short term government guaranteed investment alternatives.

The reduction in overall net gains on sales of loans resulted from lower volumes of sales compared to the prior year.

During the wind-down of NSBF’s operations, NSBF will be required to continue to own its 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.

In addition, NSBF will be required to continue to service and liquidate its SBA Loan Portfolio, including processing forgiveness and loan reviews for PPP Loans pursuant to an SBA approved lender service provider agreement with SBL.

For the year ended December 31, 2024, the average sale price on SBA 7(a) loans as a percent of principal balance was 110.97% compared to 110.20% for the prior period.

The increase in sales prices in 2024 resulted from higher demand.

The increase in overall net gains on sales of loans resulted from higher volumes of sales compared to the prior year at better market premiums than the prior year and the expectation of lower interest rates which would slow prepay speeds.

The table below provides selected statistics on the historical net premiums on sales of guaranteed portions of SBA 7(a) loans realized by NewtekOne:

SBA 7(a) Sales Price as Percent of Principal Balance (%)

High Low Median

2022 109.71 % 115.77 % 106.11 % 110.16 %

2023 110.20 % 114.04 % 106.00 % 110.42 %

2024 110.97 % 114.80 % 107.18 % 111.19 %

Weighted Average

110.32 % 115.77 % 106.00 % 110.87 %

During the wind-down of NSBF’s operations, NSBF is required to continue to own its 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.

In addition, 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 with SBL.

The Company will continue to measure NSBF’s SBA 7(a) loan portfolio at fair value until the portfolio is completely runoff.

The Company will report both realized and unrealized gains and losses relating to the fair value adjustments on the legacy NSBF SBA 7(a) portfolio.

Net Gain (Loss) on Loans Accounted for under the Fair Value Option

Net gains (losses) on loans accounted for under the fair value option amounted to $18.0 million and $(26.5) million for the year ended December 31, 2023 and 2022, respectively.

Net Gain (Loss) on Loans under the Fair Value Option

Net gain (loss) on loans accounted for under the fair value option for the year ended December 31, 2024 and 2023 were as follows:

For the year ended

4 unchanged sentences

Net Gain (Loss) on Loans Accounted for Under the Fair Value Option $ 5,200 $ 18,008 $ (12,808)

Net gain (loss) on loans accounted for under the fair value option relates to guaranteed portions of SBA loans made which the Company sells into a secondary market.

Unrealized appreciation of SBA guaranteed investments represents the fair value adjustment of guaranteed portions of loans which have not yet been sold.

Unrealized depreciation represents the reversal of unrealized appreciation when the guaranteed portions of the SBA 7(a) loans are sold.

The amount of the unrealized appreciation (depreciation) is determined by the quantity of guaranteed loans held for sale at quarter end, as well as the change in secondary market pricing conditions.

During the year ended December 31, 2023, there was an increase in the gain-on-sale pricing as compared to the prior period.

Technology and IT Support Income and Electronic Payment Processing Income

In connection with the Acquisition and the withdrawal of the election to be treated as a BDC, noninterest income for the year ended December 31, 2023, included technology and IT support income, as well as electronic payment processing income the Company generated in the ordinary course of business.

Net unrealized gain (loss) on loans accounted for under the fair value option relates to the guaranteed portions of SBA loans made which the Company sells into a secondary market, the unguaranteed portions of SBA loans made which the Company holds, SBA 504 loans that are held for sale, and ALP loans that are held for sale.

This gain (loss) represents the fair value adjustment of loans .

The amount of the unrealized gain (loss) is determined by the quantity of loans held for sale at quarter end, the change in secondary market pricing conditions, and the valuation of the loans that are not held for sale.

During the year ended December 31, 2024, the Company recorded unrealized losses on SBA 7(a) unguaranteed loans accounted for under the fair value option as the portfolio paid down.

During the year ended December 31, 2023, the Company originated $158.5 million of SBA 7(a) loans and elected the fair value option on those loans, which led to increased gains.

The $27.1 million increase in gain on loans accounted for under the fair value option from SBA 504 and Non-SBA loans is primarily volume driven from an increase in ALP and 504 originations.

Technology and IT Support Income

Technology and IT support income decreased by $5.3 million from $24.9 million for the year ended December 31, 2023 to $19.6 million for the year ended December 31, 2024.

The overall decrease was due to a decrease in web hosting and IT support revenue.

Other Noninterest Income

For the year ended December 31, 2024 and 2023, other noninterest income was related primarily to loan origination fees (legal and packaging) on loans sold or carried at fair value.

Other items that contributed to the increase included prepayment and late fees earned from SBA 7(a) loans.

The Company originated 2,427 of SBA 7(a) loans compared to 1,812 loans for the year ended December 31, 2024 and 2023, respectively.

The increase also includes $10.7 million of unrealized gains on joint ventures and other non-control investments for the year ended December 31, 2024 compared to $3.2 million in the prior period.

Non-Interest Expense

1 unchanged sentence

2024 2023 Amount Percent

Salaries and employee benefits expense $ 77,931 $ 65,708 $ 12,223 18.6 %

Technology services expense 12,261 14,272 (2,011) (14.1)

Electronic payment processing expense 19,878 18,327 1,551 8.5

Salaries and employee benefits expense 65,708 20,186 45,522 225.5

Professional services expense 15,813 13,077 2,736 20.9

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Other general and administrative costs 21,272 22,357 (1,085) (4.9)

Total other expense $ 146,329 $ 66,395 $ 79,934 120.4 %

Salaries and Benefits

The increase in salaries and benefits was primarily attributable to the change in reporting associated with the Acquisition and the withdrawal of the election for the Company to be treated as a BDC on January 6, 2023.

As such, the salaries and benefits of entities that were not previously consolidated are now included in the Company’s expense for the year ended December 31, 2023.

Technology Services Expenses

In connection with the Acquisition and the withdrawal of the election to be treated as a BDC, noninterest expense for the year ended December 31, 2023, includes technology services expenses that the Company incurred in the ordinary course of business.

Expenses for the year ended December 31, 2023, consist of expenses associated with web hosting and IT support of $14.3 million.

Electronic Payment Processing Expenses

In connection with the Acquisition and the withdrawal of the election to be treated as a BDC, noninterest expense for the year ended December 31, 2023 includes electronic payment processing expenses the Company incurred in the ordinary course of business.

Expenses for the year ended December 31, 2023 consists of electronic payment processing costs of $18.3 million.

Professional Fees

The increase in professional fees period over period is primarily attributable to the addition of the newly consolidated subsidiaries and entities due to the withdrawal of the election to be treated as a BDC, which amounted to $4.6 million for the year ended December 31, 2023.

Total noninterest expense $ 162,709 $ 146,329 $ 16,380 11.2 %

Salaries and Employee Benefits Expense

The increase in salaries and employee benefits was primarily attributable to an increase in entity headcount from 528 employees at December 31, 2023 to 591 employees at December 31, 2024.

Also contributing to the increase were merit increases for existing employees that went into effect in the first quarter of 2024 as well as increased benefits costs, primarily higher medical and other insurance costs.

Technology Services Expense

The $2.0 million decrease in technology services expenses for the year ended December 31, 2024 corresponded with the $5.3 million decrease in technology and IT support income.

Professional Services Expense

The increase in professional services expense period over period is primarily attributable to costs associated with the NTS disposition that occurred on January 2, 2025.

Refer to “Subsequent Events - Sale of NTS.”

Other Loan Origination and Maintenance Expense

Origination and loan processing expenses during the year ended December 31, 2023, was $9.4 million compared to $30.7 million for the year ended December 31, 2022.

The decrease was due to the consolidation of the affiliated servicing company during the year, resulting in the elimination of the intercompany expenses.

Other General and Administrative Costs

The increase in other general and administrative costs of $14.7 million is primarily due to the Acquisition, as $14.7 million in additional expense is included in the current year from the additional entities now being consolidated after the withdrawal of the BDC election, partially offset by the elimination of intercompany expenses between the newly consolidated entities and those previously reported as a BDC.

Other loan origination and maintenance expenses during the year ended December 31, 2024, was $13.8 million compared to $9.4 million for the year ended December 31, 2023 due to a larger dollar volume and count of loan originations in 2024 compared to 2023.

Depreciation and Amortization

The decrease in depreciation and amortization period over period is primarily attributable to the full amortization of intangible assets during the second half of 2023, which resulted in less amortization in 2024 compared to the prior year.

Results of Segment Operations

The Company has four reportable segments Banking, Technology, NSBF, and Payments.

The Company has five reportable segments Banking, Alternative Lending, Technology, NSBF, and Payments.

A description of each segment and the methodologies used to measure financial performance is described in NOTE 22—SEGMENTS in the accompanying Notes to the Consolidated Financial Statements.

Net income (loss) by operating segment is presented below:

For the year ended December 31, 2023

Year Ended 2024/2023 Increase/(Decrease)

December 31, 2024 December 31, 2023 Amount Percent

Banking $ 51,997 $ 28,127 $ 23,870 85 %

Alternative Lending 59,724 13,958 45,766 328 %

Technology 86 1,367 (1,281) (94) %

NSBF (28,684) 17,061 (45,745) (268) %

Payments 16,199 12,154 4,045 33 %

Other (11,380)

Corporate & Other 5,612 50,465 (44,853) (89) %

Eliminations (54,081) (75,803) 21,722 (29) %

Consolidated net income $ 50,853 $ 47,329 $ 3,524 7 %

Banking - The banking segment includes Newtek Bank as well as its consolidated subsidiary SBL.

The financial results include the origination and servicing of SBA 504 loans, C&I loans, CRE loans and ABL loans.

In addition, the bank offers depository services.

The results include $17.7 million of net interest income.

Technology - Technology (NTS) 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.

The segment contributed $31.7 million of noninterest income and $29.9 million of noninterest expense.

As a result of commitments made to the Federal Reserve, the Company will divest or otherwise terminate the activities conducted by NTS (SIDCO and EWS were merged into NTS on December 31, 2023), within two years of becoming a financial holding company, subject to any extension of the two-year period.

NSBF - Relates to NSBF’s legacy portfolio of SBA 7(a) loans held outside Newtek Bank.

During the year ended December 31, 2023, NSBF originated $158.5 million in SBA 7(a) loans.

The results include $24.0 million of net interest income.

Payments - Payments, which includes NMS, POS and Mobil Money, contributed $12.2 million to consolidated net income.

Within those results are $46.4 million of noninterest income resulting from marketing credit and debit card processing services, check approval services, processing equipment, and software.

The net income also included $31.6 million of noninterest expense.

Corporate and Other - Represents operations not considered to be reportable segments and/or general operating expenses of the Company, and includes the parent company, other non-bank subsidiaries including NIA, PMT, non-bank lending, including Holdco 6 and our joint ventures, and elimination adjustments to reconcile the results of the operating segments to the consolidated financial statements prepared in conformity with GAAP.

The banking segment includes Newtek Bank as well as its consolidated subsidiary SBL.

The financial results include the origination, sale, and servicing of SBA 7(a) loans, SBA 504 loans, C&I loans, CRE loans and ABL loans.

In addition, Newtek Bank offers depository services.

The results include $39.7 million of net interest income during the year ended December 31, 2024 compared to $17.7 million of net interest income during the year ended December 31, 2023.

During 2024, the majority of loans were funded by Newtek Bank compared to 2023, when all SBA 7(a) loans were funded by NSBF until it went into wind-down on April 13, 2023.

Alternative Lending

Alternative Lending includes Newtek ALP Holdings (NALH) and its subsidiaries.

The Company has originated loans under its Alternative Lending Program since 2019.

Prior to July 1, 2024, the Company originated ALP loans with the intent to sell to a JV.

While the Company continues to source JV partners to participate in this program, during the third quarter of 2024, the Company made the decision to originate with the intent to securitize ALP loans with our subsidiary Newtek ALP Holdings as the originator and sponsor without a joint venture partner.

The Company could also originate ALP loans designated as HFI.

Technology (NTS) 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 a result of commitments made to the Federal Reserve, the Company divested of NTS on January 2, 2025, and will cease to be a reportable segment.

See “NOTE 25—SUBSEQUENT EVENTS - Sale of NTS.”

NSBF includes NSBF’s legacy portfolio of SBA 7(a) loans held outside Newtek Bank.

The decrease in net income is due to the wind-down of NSBF’s operations.

Payments includes NMS, POS and Mobil Money.

Within the segment’s results are $48.9 million of noninterest income for the year ended December 31, 2024 resulting from marketing credit and debit card processing services, check approval services, processing equipment, and software, compared to $46.4 million during the year ended December 31, 2023.

The net income also included $32.0 million and $31.6 million of noninterest expense for the year ended December 31, 2024 and 2023, respectively.

Corporate and Other

Corporate and Other represents operations not considered to be reportable segments and/or general operating expenses of the Company, and includes the parent company, other non-bank subsidiaries including NIA, PMT, and elimination adjustments to reconcile the results of the operating segments to the consolidated financial statements prepared in conformity with GAAP.

Liquidity and Capital Resources

Our liquidity and capital resources are derived from our Notes payable - related parties, 2024 Notes, 2025 5.00% Notes, 2025 8.125% Notes, 2026 Notes, 2028 Notes, securitization transactions and cash flows from operations, including investment sales and repayments, and income earned.

In the year ended December 31, 2023, our primary use of funds from operations included originations of loans and payments of fees and other operating expenses we incurred.

We may raise additional equity or debt capital through both registered offerings off of a shelf registration, including “at-the-market”, or ATM, and private offerings of securities.

Our liquidity and capital resources are derived from our deposits, parent company notes, securitization transactions and earnings and cash flows from operations, including loan sales and repayments.

In the year ended December 31, 2024, our primary use of funds from operations included originations of loans and payments of fees, interest, and other operating expenses we incurred.

We may raise additional equity or debt capital through both registered offerings off of a shelf registration, including “at-the-market” (ATM), and private offerings of securities.

On January 27, 2023, the Company submitted a Form S-3 with the SEC in order to commence the process of re-establishing an effective shelf registration statement.

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On November 17, 2023, the Company entered into the 2023 ATM Equity Distribution Agreement.

The 2023 ATM Equity Distribution Agreement, as amended, provided that the Company may offer and sell up to 3,000,000 shares of common stock from time to time through the placement agents.

The 2023 ATM Equity Distribution Agreement provides that the Company may offer and sell up to 3,000,000 shares of Common Stock from time to time through the placement agents.

On November 1, 2024, the Company’s Board of Directors approved a new stock repurchase program granting the Company authority to repurchase up to 1.0 million shares of Company common stock during the next twelve months.

Regulatory Capital

The Company strives to maintain prudent capital levels to absorb risk and maximizing returns to shareholders.

NewtekOne and Newtek Bank are primarily constrained by the Total Capital and Leverage ratios given the mix of assets vis a vie capital.

Capital amounts and ratios for NewtekOne, Inc.

as of December 31, 2023 are presented in the table below:

The Company and Newtek Bank are primarily constrained by the Total Capital and Leverage ratios given the mix of assets vis-a-vis capital.

Capital amounts and ratios for the Company as of December 31, 2024 and 2023 are presented in the table below:

For Capital Adequacy Purposes 1

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Total Capital (to Risk-Weighted Assets) 268,887 19.7 % 109,320 8.0 % N/A N/A

NewtekOne, Inc.

- December 31, 2023

Tier 1 Capital (to Average Assets) $ 180,829 13.6 % $ 53,363 4.0 % N/A N/A

Common Equity Tier 1 (to Risk-Weighted Assets) 180,829 16.2 % 50,153 4.5 % N/A N/A

Tier 1 Capital (to Risk-Weighted Assets) 180,829 16.2 % 66,870 6.0 % N/A N/A

Total Capital (to Risk-Weighted Assets) 213,141 19.1 % 89,160 8.0 % N/A N/A

1 Exclusive of the capital conservation buffer of 2.5% of risk-weighted assets.

Capital amounts and ratios for Newtek Bank as of December 31, 2023, are presented in the table below.

As of December 31, 2023, Newtek Bank was categorized as “well-capitalized” under the prompt corrective action measures and met the capital conservation buffer requirements.

Capital amounts and ratios for Newtek Bank as of December 31, 2024, and 2023 are presented in the table below.

As of December 31, 2024 and 2023, Newtek Bank was categorized as “well-capitalized” under the prompt corrective action measures and met the capital conservation buffer requirements.

For Capital Adequacy Purposes 1

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Total Capital (to Risk-Weighted Assets) 130,924 15.4 % 67,824 8.0 % 84,779 10.0 %

Newtek Bank - December 31, 2023

Tier 1 Capital (to Average Assets) $ 99,253 16.6 % 23,893 4.0 % $ 29,866 5.0 %

Common Equity Tier 1 (to Risk-Weighted Assets) 99,253 21.5 % 20,787 4.5 % 30,026 6.5 %

Tier 1 Capital (to Risk-Weighted Assets) 99,253 21.5 % 27,716 6.0 % 36,955 8.0 %

Total Capital (to Risk-Weighted Assets) 105,105 22.8 % 36,954 8.0 % 46,193 10.0 %

1 Exclusive of the capital conservation buffer of 2.5% of risk-weighted assets.

Public Offerings

Equity ATM Program

On June 25, 2020, the Company entered into the 2020 ATM Equity Distribution Agreement.

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The Company paid the placement agents $1.4 million in compensation.

The ATM program was suspended as of January 6, 2023.

The Company’s shelf registration statement on Form S-3 was declared effective by the SEC on July 27, 2023.

On November 17, 2023, the Company entered into the 2023 ATM Equity Distribution Agreement.

The 2023 ATM Equity Distribution Agreement, as amended, provides that the Company may offer and sell up to three million shares of common stock from time to time through the placement agents.

The Company may, subject to market conditions, engage in activity under the current ATM program.

On August 31, 2023, the Company completed a registered offering of $40.0 million in aggregate principal amount of its 8.00% 2028 Notes, which includes the underwriters’ exercise of the option granted by the Company to purchase an additional $5.0 million in aggregate principal amount of the 2028 Notes.

The 2023 ATM Equity Distribution Agreement provides that the Company may offer and sell up to 3.0 million shares of Common Stock from time to time through the placement agents under the ATM Program.

The Company may, subject to market conditions, continue to engage in activity under the Equity ATM Program.

The following table summarizes the total shares sold and net proceeds received under the 2020 and 2023 ATM Equity Distribution Agreement:

2020 ATM Program

Year Ended December 31, 2024 Year Ended December 31, 2023 Year Ended December 31, 2022

Shares sold — — 107

Net weighted average price per share $ — $ — $ 19.12

Net proceeds $ — $ — $ 2,054

2023 ATM Program

Year Ended December 31, 2024 Year Ended December 31, 2023 Year Ended December 31, 2022

Shares sold 1,100 — —

Net weighted average price per share $ 12.56 $ — $ —

Net proceeds $ 13,818 $ — $ —

Placement agent fees paid

Stock Repurchase Program

The actual timing and amount of any repurchases under the plan will be determined by the Company in its discretion, and will depend on a number of factors, including market conditions, applicable legal requirements, the Company's capital needs and whether there is a better alternative use of capital.

The Company has no obligation to repurchase any amount of its common stock under its new stock repurchase program.

The following table summarizes the total shares repurchased and net proceeds received under the stock repurchase program:

Year Ended December 31, 2024 Year Ended December 31, 2023 Year Ended December 31, 2022

Shares repurchased

Net weighted average price per share $ 13.35 $ — $ —

Net proceeds $ 402 $ — $ —

On May 30, 2024, the Company completed a registered offering of $71.9 million in aggregate principal amount of its 2029 8.50% Notes, which includes the underwriters’ exercise of the option granted by the Company to purchase an additional $9.4 million in aggregate principal amount of the 2029 8.50% Notes.

The Company received $69.6 million in proceeds, before expenses, from the sale of the 2029 8.50% Notes.

The Company intends to use the net proceeds from the sale of the Notes for general corporate purposes.

The 2029 8.50% Notes bear interest at a rate of 8.50% per year payable quarterly on March 1, June 1, September 1 and December 1 of each year, commencing on September 1, 2024, and trade on the Nasdaq Global Market under the trading symbol “NEWTG.” At December 31, 2024, the Company was in compliance with all covenants related to the 2029 8.50% Notes.

On September 16, 2024, the Company completed a registered offering of $75.0 million aggregate principal amount of 2029 8.625% Notes.

The 2029 8.625% Notes will mature on October 15, 2029.

The Company received $72.8 million in proceeds, before expenses, from the sale of the 2029 8.625% Notes.

Theses Notes bear interest at a rate of 8.625% per year, payable quarterly on January 15, April 15, July 15, and October 15 each year, commencing on January 15, 2025.

, and trade on the Nasdaq Global Market under the trading symbol “NEWTH.” At December 31, 2024, the Company was in compliance with all covenants related to the 2029 8.625% Notes.

On August 31, 2023, the Company completed a registered offering of $40.0 million in aggregate principal amount of its 8.00% 2028 Notes.

The Company received $38.0 million in proceeds, before expenses, from the sale of the 2028 Notes.

The 2028 Notes bear interest at a rate of 8.00% per year payable quarterly on March 1, June 1, September 1 and December 1 of each year, commencing on December 1, 2023, and trade on the Nasdaq Global Market under the trading symbol “NEWTI.” At December 31, 2024, the Company was in compliance with all covenants related to the 2028 Notes.

In January 2021, the Company and the Trustee entered into the Seventh Supplemental Indenture to the Base Indenture between the Company and the Trustee, relating to the Company’s issuance, offer and sale of $115.0 million aggregate principal amount of 5.50% 2026 Notes, including $15.0 million in aggregate principal amount sold pursuant to a fully-exercised overallotment option.

In January 2021, the Company completed a registered offering of $115.0 million aggregate principal amount of 5.50% 2026 Notes.

The sale of the 2026 Notes generated proceeds of approximately $111.3 million, net of underwriter's fees and expenses.

The 2026 Notes are the Company’s direct unsecured obligations and rank:

(i) pari passu with the Company’s other outstanding and future unsecured indebtedness;

(ii) senior to any of the Company’s future indebtedness that expressly provides it is subordinated to the 2026 Notes;

(iii) effectively subordinated to all the Company’s existing and future secured indebtedness (including indebtedness that is initially unsecured to which the Company subsequently grants security), to the extent of the value of the assets securing such indebtedness;

and (iv) structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries.

The 2026 Notes will mature on February 1, 2026 and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after February 1, 2022, upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price equal to the following amounts, plus accrued and unpaid interest to, but excluding, the redemption date:

(1) 100% of the principal amount of the 2026 Notes to be redeemed plus (2) the sum of the present value of the scheduled payments of interest (exclusive of accrued and unpaid interest to the date of redemption) on the 2026 Notes to be redeemed from the redemption date until February 1, 2023, discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) using the applicable Treasury Rate plus 50 basis points;

provided, however, that if the Company redeems any 2026 Notes on or after February 1, 2023 (the date falling three years prior to the maturity date of the 2026 Notes), the redemption price for the 2026 Notes will be equal to 100%

of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.

The 2026 Notes will mature on February 1, 2026 and may be redeemed in whole or in part at any time or from time to time at the Company’s option upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.

The 2026 Notes bear interest at a rate of 5.50% per year payable quarterly on February 1, May 1, August 1 and November 1 of each year, commencing on May 1, 2021, and trade on the Nasdaq Global Market under the trading symbol “NEWTZ.” At December 31, 2024, the Company was in compliance with all covenants related to the 2026 Notes.

In July 2019, the Company and the Trustee entered into the Fourth Supplemental Indenture to the Base Indenture between the Company and the Trustee, relating to the Company’s issuance, offer and sale of $55.0 million aggregate principal amount of 5.75% 2024 Notes.

The Company granted an overallotment option of up to $8.25 million in aggregate principal amount of the 2024 Notes.

The sale of the 2024 Notes generated proceeds of approximately $53.2 million, net of underwriter's fees and expenses.

In July 2019 the underwriters exercised their option to purchase $8.25 million in aggregate principal amount of 2024 Notes for an additional $8.0 million in net proceeds.

The 2024 Notes are the Company’s direct unsecured obligations and rank:

The 2029, 2028 and 2026 Notes are the Company’s direct unsecured obligations and rank:

(i) pari passu with the Company’s other outstanding and future unsecured indebtedness;

(ii) senior to any of the Company’s future indebtedness that expressly provides it is subordinated to the 2024 Notes;

(ii) senior to any of the Company’s future indebtedness that expressly provides it is subordinated to these Notes;

and (iv) structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries.

The 2024 Notes will mature on August 1, 2024 and may be redeemed in whole or in part at the Company’s option at any time or from time to time on or after August 1, 2021, at a redemption price of 100% of the outstanding principal amount thereof plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to but not including the date fixed for redemption.

The 2024 Notes bear interest at a rate of 5.75% per year payable quarterly on February 1, May 1, August 1, and November 1 of each year, commencing on November 1, 2019, and trade on the Nasdaq Global Market under the trading symbol “NEWTL.” At December 31, 2023, the Company was in compliance with all covenants related to the 2024 Notes.

On February 16, 2021 and May 20, 2021, the Company issued an additional $5.0 million and $10.0 million in aggregate principal amount of its 2024 Notes, respectively.

The new 2024 Notes are treated as a single series with the prior 2024 Notes and have the same terms as the prior 2024 Notes.

The existing 2024 Notes have the same CUSIP number and are fungible and rank equally with the prior 2024 Notes.

On December 29, 2021, the Company redeemed $40.0 million in aggregate principal amount of the $78.25 million of principal amount of 2024 Notes outstanding at 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon from November 1, 2021 through, but excluding, the redemption date.

As of December 31, 2023, the outstanding principal balance of the 2024 Notes was $38.25 million.

The Base Indenture, and each supplemental indenture thereto, contains certain covenants.

and (iv) structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries.The Base Indenture, and each supplemental indenture thereto, contains certain covenants.

The Base Indenture provides for customary events of default and further provides that the Trustee or the holders of 25% in aggregate principal amount of the outstanding Notes may declare such Notes immediately due and payable upon the occurrence of any event of default after expiration of any applicable grace period.

Each supplemental indenture (except for the Tenth Supplemental Indenture) includes covenants requiring the Company to comply with (regardless of whether it is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) of the 1940 Act as modified by Section 61(a) of the 1940 Act (or any successor provisions), to comply with (regardless of whether it is subject to) the restrictions on dividends, distributions and purchase of capital stock set forth in Section 18(a)(1)(B) of the 1940 Act as modified by Section 61(a) of the 1940 Act and to provide financial information to the holders of the Notes and the Trustee if the Company should no longer be subject to the reporting requirements under the Exchange Act.

These covenants are subject to important limitations and exceptions that are described in the Base Indenture, as supplemented by each supplemental indenture thereto.

These covenants currently apply to the 2024 and 2026 Notes.

In addition, the supplemental indentures for the 2026 Notes include covenants requiring the Company to comply with (regardless of whether it is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) of the 1940 Act as modified by Section 61(a) of the 1940 Act (or any successor provisions), to comply with (regardless of whether it is subject to) the restrictions on dividends, distributions and purchase of capital stock set forth in Section 18(a)(1)(B) of the 1940 Act as modified by Section 61(a) of the 1940 Act and to provide financial information to the holders of the 2026 Notes and the Trustee if the Company should no longer be subject to the reporting requirements under the Exchange Act (“BDC Covenants”).

These covenants are subject to important limitations and exceptions that are described in the Base Indenture, as supplemented by the supplemental indentures.

At December 31, 2024, the Company was in compliance with all covenants related to the Notes.

2025 Notes (Private Placements)

In July 2019, the Company completed a registered offering of $63.25 million aggregate principal amount of 5.75% 2024 Notes.

On February 16, 2021 and May 20, 2021, the Company issued an additional $5.0 million and $10.0 million in aggregate principal amount of the 2024 Notes, respectively.

The 2024 Notes traded on the Nasdaq Global Market under the trading symbol “NEWTL” until the 2024 Notes matured on August 1, 2024.

Private Placements

On November 27, 2020, the Company and Trustee entered into the Fifth Supplemental Indenture to the Base Indenture between the Company and the Trustee, relating to the issuance, offer and sale of $5.0 million aggregate principal amount of its 2025 6.85% Notes.

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The net proceeds from the sale of the notes were approximately $4.8 million, after deducting structuring fees and estimated offering expenses, each payable by the Company.

The Company exercised its option to issue up to $10.0 million of additional 2025 6.85% Notes to the purchaser, and issued $10.0 million in additional 2025 6.85%

Notes to the purchaser in an exempt offering in January 2021.

The Company exercised its option to issue up to $10.0 million of additional 2025 6.85% Notes to the purchaser, and issued $10.0 million in additional 2025 6.85% Notes to the purchaser in an exempt offering in January 2021.

On March 31, 2022, the Company caused notices to be issued to the holder of its 2025 6.85% Notes regarding the Company’s exercise of its option to redeem all $15.0 million in aggregate principal amount of the Notes on May 2, 2022.

The Notes were redeemed on May 2, 2022 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon from February 28, 2022 through, but excluding, May 2, 2022.

On March 31, 2022, the Company completed a private placement of $15.0 million aggregate principal amount of its 5.00% notes due 2025 (2025 5.00% Notes).

The offering was consummated pursuant to the terms of a purchase agreement dated March 31, 2022 among the Company and an accredited investor, which provided for the 2025 5.00% Notes to be issued to the purchaser in a transaction that relied on Section 4(a)(2) of the Securities Act to be exempt from registration under the Securities Act.

The net proceeds from the sale of the notes were approximately $14.5 million, after deducting structuring fees and estimated offering expenses, each payable by the Company.

The Company intends to use the net proceeds from the sale of the notes to fund investments in debt and equity in accordance with its investment objectives and strategies.

The 2025 5.00% Notes are the Company’s direct unsecured obligations and rank:

(i) pari passu with the Company’s other outstanding and future unsecured indebtedness;

(ii) senior to any of the Company’s future indebtedness that expressly provides it is subordinated to the 2025 5.00% Notes;

and (iv) structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries.

Under the purchase agreement, the Company also issued an additional $15.0 million in aggregate principal amount of the 2025 5.0% Notes to the purchaser on May 2, 2022.

The 2025 5.00% Notes were issued under the Base Indenture and the Tenth Supplemental Indenture, dated as of March 31, 2022.

The 2025 5.00% Notes will mature on March 31, 2025, and under the terms of the Indenture, the Notes are redeemable at any time, at the option of the Company, at a redemption price of 100% of the outstanding principal amount thereof.

The Notes were redeemed on May 2, 2022 for 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon from February 28, 2022 through, but excluding, May 2, 2022.

On January 23, 2023, we completed a private placement offering of $50.0 million aggregate principal amount of 8.125% notes due 2025.

The net proceeds from the sale of the notes were approximately $48.94 million after deducting estimated offering expenses payable by the Company.

The Company intends to use the net proceeds from the sale of the Notes for general corporate purposes, including payment of expenses incurred in connection with the issuance of the notes and other working capital purposes.

The Notes will mature on February 1, 2025.

The Notes bear interest at a rate of 8.125% per year payable semiannually on February 1 and August 1 each year, commencing on August 1, 2023.

The Notes were scheduled to mature on February 1, 2025.

Effective December 11, 2024, the Company entered into Note Amendment and Exchange Agreements (the “Agreements”) with each of the holders of the 2025 8.125% Notes, pursuant to which the Company and the holders of the 2025 8.125% Notes agreed to exchange the 2025 8.125% Notes for the 2027 8.125% Notes, effecting amendments solely to (i) extend the February 1, 2025 maturity date of the 2025 8.125% Notes to the new maturity date of February 1, 2027 (the “New Maturity Date”) and (ii) provide that the 2027 8.125% Notes will be redeemable in whole, but not in part, at any time, at the option of the Company, from November 1, 2026 to the New Maturity Date, at a redemption price of 100% of the outstanding principal amount being redeemed plus any accrued but unpaid interest, to but excluding the redemption date.The Notes bear interest at a rate of 8.125% per year payable semiannually on February 1 and August 1 each year, commencing on August 1, 2023.

NSBF Capital One Facility

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NSBF ceased originating new loans in April 2023.

On May 7, 2020, NSBF amended the facility to, among other things, extend the maturity date on which the credit facility converted into a term loan for a period of three years to May 7, 2023, with the term loan maturing on May 7, 2025.

The NSBF Capital One facility was paid off and terminated in October of 2023.

SPV I, II, and III Facilities

The Company’s indirect subsidiaries SPV I, II, and III maintain credit facilities with third party lenders.

SPV I has a Capital One facility with maximum borrowings of $ 60.0 million.

The lender’s commitments terminate in May 2025, with all amounts due under the SPV I Facility maturing in November 2025.

At December 31, 2024, total principal owed by SPV I was $ 21.3 million.

SPV II has a Deutsche Bank facility with maximum borrowings $ 120.0 million.

The Deutsche Bank Facility matures in December 2027.

At December 31, 2024, total principal owed by SPV II was $ 54.8 million.

SPV III has a One Florida Bank facility with maximum borrowings of $ 30.0 million.

The One Florida Bank Facility matures in May 2025.

At December 31, 2024, total principal owed by SPV III was $ 23.1 million.

NMS Webster Bank Facility

NMS has a term loan facility with Webster Bank with an aggregate principal amount up to $ 54.9 million.

The Webster Facility matures in November 2027.

At December 31, 2024, total principal outstanding was $ 32.7 million.

Securitization Transactions

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The Class A and Class B notes bear interest at an average rate of 30-day average compounded SOFR plus 3.24% across both classes.

NSBF has the right to call the 2023-1 Class A and B notes at such time as the sum of the principal amount of the Class A Notes and the Class B Notes is less than or equal to 20.00% of the sum of the principal amount of the Class A Notes and Class B Notes as of the closing date of the transaction, with the prior written consent of the SBA.

In September 2022, NSBF completed its twelfth securitization which resulted in the transfer of $116.2 million of unguaranteed portions of SBA loans to the 2022-1 Trust.

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The Class A and Class B notes bear interest at an average rate of 30-day average compounded SOFR plus 2.97% across both classes.

NSBF has the right to call the 2021-1 Class A and B notes at such time as the sum of the principal amount of the Class A Notes and the Class B Notes is less than or equal to 20.00% of the sum of the principal amount of the Class A Notes and Class B Notes as of the closing date of the transaction, with the prior written consent of the SBA.

In December 2021, NSBF completed its eleventh securitization which resulted in the transfer of $103.4 million of unguaranteed portions of SBA loans to the 2021-1 Trust.

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The Class A and Class B notes bear interest at an average rate of adjusted SOFR plus 1.83% across both classes.

In October, 2024, the 2019-1 Trust was terminated as a result of NSBF purchasing the 2019-1 Trust assets, with the 2019-1 Trust’s noteholders receiving the redemption price.

In November 2018, NSBF completed its ninth securitization which resulted in the transfer of $108.6 million of unguaranteed portions of SBA loans to the 2018-1 Trust.

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The Class A and Class B notes received an “A” and “BBB-” rating by S&P, respectively, and the final maturity date of the notes is February 2044.

In October, 2024, the 2018-1 Trust was terminated as a result of NSBF purchasing the 2018-1 Trust assets, with the 2018-1 Trust’s noteholders receiving the redemption price.

In December 2017, NSBF completed its eighth securitization which resulted in the transfer of $76.2 million of unguaranteed portions of SBA loans to the 2017-1 Trust.

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Availability as of

December 31, 2023

December 31, 2024 December 31, 2023

Unrestricted cash $ 6,941 $ 15,398

Lines of credit at other commercial banks 1

60,903 40,418

Interest bearing deposits in banks

346,207 137,689

FHLB borrowing availability 1

39,780 61,947

Lines of credit at other financial institutions 30,000 10,000

Total liquidity sources $ 483,831 $ 265,452

Restricted cash of $30.9 million as of December 31, 2023.

The largest component is $12.4 million of restricted cash held by NSBF, which includes reserves in the event payments are insufficient to cover interest and/or principal with respect to

securitizations and loan principal and interest collected which are due to loan participants.

An additional $11.2 million of restricted cash is held by NewtekOne, which includes $10.0 million in an account to fund certain of NSBF’s potential obligations to the SBA pursuant to the Wind-down Agreement in which the Company is a guarantor.

1 Availability as of December 31, 2024 and 2023 is based on collateral pledged as of that date.

The Company has restricted cash of $28.2 million as of December 31, 2024.

NSBF holds $8.2 million of the Company’s restricted cash, which includes reserves in the event payments are insufficient to cover interest and/or principal with respect to securitizations and loan principal and interest collected which are due to loan participants.

In addition, the Company has $10.0 million in a restricted cash account to fund certain of NSBF’s potential obligations to the SBA pursuant to the Wind-down Agreement.

of which the Company is a guarantor.

The majority of the Company’s remaining restricted cash is related to payroll processing by PMT, our subsidiary.

The Company generated and used cash as follows:

Year Ended December 31, 2023 Year Ended December 31, 2022

Year Ended December 31, 2024 Year Ended

December 31, 2023

Net cash used in operating activities $ (153,014) $ (169,219)

1 unchanged sentence

Net cash provided by financing activities 560,897 344,974

Net increase (decrease) in cash and restricted cash 3,520 (61,254)

Net increase in cash and restricted cash 198,832 3,520

Cash and restricted cash—beginning of period (Note 2) 184,006 125,606

Consolidation of cash and restricted cash from controlled investments and business combinations, net of cash paid 54,880 —

Consolidation/(deconsolidation) of cash and restricted cash from controlled investments related to business combinations and dispositions, net of cash paid (1,464) 54,880

Cash and restricted cash—end of period (Note 2) $ 381,374 $ 184,006

During the year ended December 31, 2023, operating activities used cash of $169.2 million, consisting primarily of (i) $783.0 million of loans held for sale;

(ii) an $11.8 million decrease in due to participants which arises when loan payments are received in the current period but not processed in time to have funds remitted to the participant during the current period;

the amount varies depending on payment volume and timing at quarter end;

(iii) a $62.2 million increase in broker receivables which arise from the guaranteed portions of SBA 7(a) loans that were traded in the period but did not settle during the current period end and the cash was not received from the purchasing broker during the current period;

the amount varies depending on loan origination volume and timing of sales at quarter end;

and (iv) $14.6 million in contributions to non-consolidating joint ventures.

These uses of cash were offset by (i) $695.5 million of proceeds from the sale of loans and (ii) $12.2 million of principal payments received from loans held for sale.

Cash used by investing activities primarily comprised $27.2 million used to purchase available-for-sale securities and $169.0 million in the net increase in loans held for investment, at cost, partially offset by a $29.3 million in the net decrease in loans held for investment, at fair value.

Net cash provided by financing activities was $345.0 million consisting primarily of a (i) $19.5 million issuance of preferred stock, (ii) $324.7 million net increase in deposits;

(iii) $103.9 million of issuances of securitization trusts;

(iv) $50.0 million of issuances of the 2025 8.125% Notes and (v) $40.0 million of issuances of the 2028 8.00% Notes.

These sources of cash were offset by (i) $90.8 million of principal payments related to securitization notes payable and $78.7 million of net payments under our bank notes payable.

In association with the January 6, 2023 Acquisition and election to withdraw the Company’s status as a BDC, the Company’s newly consolidated subsidiaries’ cash was added to the balance sheet of the Company for the year ended December 31, 2023.

During the year ended December 31, 2024, operating activities used cash of $153.0 million, consisting primarily of $1.1 billion of funding loans held for sale.

This use of cash was offset by (i) $817.9 million of proceeds from the sale of loans;

and (ii) $140.0 million from the sale of loans from affiliates.

Cash used by investing activities was $209.1 million primarily comprised (i) $278.5 million in the net increase in loans held for investment, at cost and (ii) $25.7 million in contributions to joint ventures and other non-control investments and (iii) $33.0 million in purchases of available-for-sale securities.

These uses were partially offset by (i) a $66.8 million net decrease in loans held for investment, at fair value (ii) $20.3 million in returns of capital from joint ventures and other non-control investments and (iii) $41.5 million in maturities of available-for-sale securities.

Net cash provided by financing activities was $560.9 million consisting primarily of a (i) $508.6 million net increase in deposits;

(ii) $71.9 million of net proceeds from the 2029 8.50% Notes;

(iii) $75.0 million of net proceeds from the 2029 8.625% Notes, and (iv) $71.6 million net borrowings on bank notes payable.

These sources of cash were offset by (i) $107.0 million of principal payments related to securitization notes payable (ii) $38.3 million redemption of the 2024 Notes, and (iii) $20.3 million of dividends paid.

Contractual Obligations

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Parent Company Notes:

Notes due 2024 38,250 38,250 — — — — —

Notes due 2025 80,000 — 80,000 — — — —

Notes due 2026 115,000 — — 115,000 — — —

Notes due 2028 40,000 — — — — 40,000 —

2025 5.00% Notes 30,000 30,000 — — — —

2026 Notes 115,000 — 115,000 — — —

50,000 — — 50,000 — —

2028 Notes 40,000 — — — 40,000 —

2029 8.625% Notes 75,000 — — — — 75,000 —

2029 8.50% Notes 71,875 — — — — 71,875 —

Employment Agreements 902 902 — — — — —

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1 Guaranteed by the parent company

2 Effective December 11, 2024, the Company entered into the Agreements with each of the holders of the 2025 8.125% Notes, pursuant to which the Company and the holders of the 2025 8.125% Notes agreed to exchange the 2025 8.125% Notes for the 2027 8.125% Notes, effecting amendments solely to (i) extend the February 1, 2025 maturity date of the 2025 8.125% Notes to the new maturity date of February 1, 2027 (the “New Maturity Date”) and (ii) provide that the 2027 8.125% Notes will be redeemable in whole, but not in part, at any time, at the option of the Company, from November 1, 2026 to the New Maturity Date, at a redemption price of 100% of the outstanding principal amount being redeemed plus any accrued but unpaid interest, to but excluding the redemption date.

Unfunded Commitments

At December 31, 2023, the Company had $125.4 million of unfunded commitments consisting of $20.4 million in connection with its SBA 7(a) loans, $81.0 million in connection with its SBA 504 loans, $13.1 million in connection with its alternative lending program loans, and $10.9 million relating to commercial and industrial loans.

At December 31, 2024, the Company had $107.1 million of unfunded commitments consisting of $25.0 million in connection with its SBA 7(a) loans, $72.6 million in connection with its SBA 504 loans, and $9.5 million relating to commercial and industrial loans.

The Company funds these commitments from the same sources it uses to fund its other loan commitments.

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We have identified the following items as critical accounting policies for the fiscal year ended December 31, 2024.

Fair Value Measurements

For the fiscal year ended December 31, 2023, we valued instruments for which market quotations are readily available at their market quotations.

However, a readily available market value did not exist for many of the instruments in our portfolio, and we valued these instruments at fair value as determined in good faith by our management under our valuation policy and process.

We may have sought pricing information with respect to certain of our instruments from pricing services or brokers or dealers in order to value such instruments.

We also employed independent third party valuation firms for certain of our instruments for which there is not a readily available market value.

Due to the inherent uncertainty of determining the fair value of our instruments that do not have a readily available market value, the fair value of the instruments may differ significantly from the values that would have been used had a readily available market value existed for such instruments and may differ materially from values that may ultimately be received or settled.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price).

Valuation of Loans at Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

In determining fair value, management used various valuation approaches.

ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels for disclosure purposes.

The fair value hierarchy gives the highest priority (Level 1) to quoted prices in active markets for identical assets or liabilities and gives the lowest priority to unobservable inputs (Level 3).

The levels of the fair value hierarchy are as follows:

Level 1 Quoted prices in active markets for identical assets or liabilities.

Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as certain U.S.

Treasury, other U.S.

Government and agency mortgage-backed debt securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

This category generally includes certain U.S.

Government and agency mortgage-backed debt securities, derivative contracts and loans held-for-sale.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

This category generally includes certain private equity investments, retained residual interests in securitizations, residential mortgage servicing assets, warrant liabilities, joint ventures, guaranteed loans held at fair value, and highly structured or long-term derivative contracts.

Valuation of Instruments

Level 1 assets and liabilities were valued using quoted market prices.

Level 2 assets and liabilities were valued using market consensus prices that are corroborated by observable market data and quoted market prices for similar assets and liabilities.

Level 3 assets and liabilities were valued at fair value as determined in good faith by the Board, based on input of management, the audit committee and independent valuation firms that were engaged at the direction of the Board to assist in the valuation of certain portfolio investments without a readily available market quotation at least once during a trailing twelve-month period under a valuation policy and a consistently applied valuation process.

For certain investments, the Company generally calculated the fair value of the investment primarily based on the NAV of the entity and adjusted the fair value for other factors that would affect the fair value of the investment.

The Company used this valuation approach for its investment in its joint ventures.

Due to the inherent uncertainty of determining the fair value of Level 3 investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be received or settled.

Further, such investments are generally subject to legal and other restrictions or otherwise are less liquid than publicly traded instruments.

If the Company were required to liquidate a portfolio investment in a forced or liquidation sale, the Company may realize significantly less than the value at which such investment had previously been recorded.

The Company’s investments are subject to market risk.

Market risk is the potential for changes in the value due to market changes.

Market risk is directly impacted by the volatility and liquidity in the markets in which the investments are traded.

See NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION under the heading “Fair Value Measurements” and NOTE 9—FAIR VALUE MEASUREMENTS for a detailed discussion of determining fair value, including pricing validation processes.

We believe our portfolio as of December 31, 2023 and December 31, 2022 approximates fair value as of those dates based on the markets in which we operate and other conditions in existence on those reporting dates.

As of January 6, 2023, 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 and therefore, we no longer fair value the investments in our portfolio companies.

During this wind-down of NSBF’s operations, NSBF will be required to continue to own its 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.

In addition, NSBF will be required to continue to service and liquidate its SBA Loan Portfolio, including processing forgiveness and loan reviews for PPP Loans, pursuant to an SBA approved lender service provider agreement with SBL.

The Company will continue to measure NSBF’s SBA 7(a) loan portfolio at fair value until the portfolio is completely runoff.

The Company reports both realized and unrealized gains and losses relating to the fair value adjustments on the legacy NSBF SBA 7(a) portfolio.

We consider our loans HFI, at fair value and HFS, at fair value to be Level 3 within the fair value hierarchy as described in Note 10.

Determining the fair value of the Level 3 loans held for sale and loans held for investment, which are measured at fair value requires management to make significant judgments about the valuation methodologies and inputs and assumptions used in the fair value calculation, including, but not limited to, historical credit losses, discounts for lack of marketability, underlying cash flows, and the impact of economic conditions.

On a quarterly basis, management determines the fair values of the retained unguaranteed portions of SBA 7(a) loans HFI, and unrealized changes in FV are recognized in the income statement.

The loans within this portfolio were originated by NSBF.

NSBF ceased originating new loans in April 2023 when all new SBA 7(a) loan originations were transitioned to Newtek Bank.

(See Historical Business Regulation and Taxation, for a discussion of the wind-down of NSBF’s operations.)

The Company originated SBA 504 loans HFS prior to the Acquisition through its nonbank subsidiaries.

SBA 504 loans HFS held at NALH are accounted for under the FV option.

Additionally, the existing government guaranteed portion of SBA 7(a) loans held at NSBF and certain SBA 504 loans held at Newtek Bank are also HFS at FV.

The Company also originates ALP loans (formerly referred to as our nonconforming conventional loans), which are either HFS or HFI, via its nonbank subsidiary.

ALP loans are carried at FV.

ALP loans are held at NALH, NCL JV, and TSO JV and are also accounted for under the FV option.

Allowance for Credit Losses

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The reserve for unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit.

However, a liability is not recognized for commitments unconditionally cancellable by the Company.

However, a liability is not recognized for commitments

unconditionally cancellable by the Company.

The reserve for unfunded commitments is determined by estimating future draws and applying the expected loss rates on those draws.

11 unchanged sentences

A charge off should be made within 90 days if a full analysis confirms the deficiency cannot be covered via additional collateral or resources of the borrower or guarantors.

Nonaccrual Loans

As a general rule, the Company does not accrue interest, amortize deferred net loan fees or costs, or accrete discount on any loan (1) which is maintained on a cash basis because of deterioration in the financial condition of the borrower, (2) for which payment in full of principal or interest is not expected, or (3) upon which principal or interest has been in default for a period of 90 days or more unless the asset is both well secured and in the process of collection.

A loan is “well secured” if it is secured (1) by collateral in the form of liens on or pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt (including accrued interest) in full, or (2) by the guarantee of a financially responsible party.

A loan is “in the process of collection” if collection of the asset is proceeding in due course either (1) through legal action, including judgement enforcement procedures, or (2) in appropriate circumstances, through collections efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status in the near future.

A non-accrual loan may be restored to accrual status when (1) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest, or (2) when it otherwise becomes well secured in the process of collection.

If any interest payments received while the asset was in nonaccrual status were applied to reduce the recorded investment in, or the amortized cost basis of, the asset, as applicable, the application of these payments to the asset’s recorded investment or amortize cost basis, as applicable should not be reversed (and interest income should not be credited) when the asset is returned to accrual status.

Valuation of Servicing Assets

For the fiscal year ended December 31, 2024, the Company accounted for servicing assets in accordance with ASC Topic 860-50 - Transfers and Servicing - Servicing Assets and Liabilities.

The Company and Newtek Bank earn servicing fees from the guaranteed portions of SBA 7(a) loans they originate and sell.

The Company and Newtek Bank earn servicing fees primarily from the guaranteed portions of SBA 7(a) loans and to a lesser extent ALP and SBA 504 loans they originate and sell.

The valuation model for servicing assets incorporates assumptions including, but not limited to, servicing costs, discount rate, prepayment rate, and default rate.

Considerable judgement is required to estimate the fair value of servicing assets and as such these assets are classified as Level 3 in our fair value hierarchy.

Considerable judgment is required to estimate the fair value of servicing assets and as such these assets are classified as Level 3 in our fair value hierarchy.

Servicing assets for loans originated by Newtek Bank are measured at LCM and amortized based on their estimated life and impairment is recorded to the extent the amortized cost exceeds the asset’s FV.

Income Recognition

For the fiscal year ended December 31, 2023, management reviewed all loans that became 90 days or more past due on principal or interest or when there was reasonable doubt that principal or interest would be collected for possible placement on management’s designation of non-accrual status.

Interest receivable was analyzed regularly and reserved against when deemed uncollectible.

Interest payments received on non-accrual loans were recognized as income or applied to principal depending upon management’s judgment regarding collectability.

Non-accrual loans were restored to accrual status when past due principal and interest was paid and, in management’s judgment, were likely to remain current, although there may have been exceptions to this general rule if the loan had sufficient collateral value and was in the process of collection.

In addition, under the PPP that began in the second quarter of 2020, the SBA reimbursed the Company for originating loans.

Such SBA reimbursements are included as interest income on PPP loans.

Such fees are accounted for under ASC-310 Receivables and deferred until the loan was sold to one of our Participants.

Income earned in connection with the PPP should not be viewed as recurring.

NSBF funded the balance of its PPP loans by the end of July 2021.

NSBF has redeployed the resources used to generate PPP loans to the origination of SBA 7(a) loans.

For the fiscal year ended December 31, 2023, we received servicing income related to the guaranteed portions of SBA loan investments which we sell into the secondary market.

These recurring fees were earned and recorded daily.

Servicing income was earned for the full term of the loan or until the loan is repaid.

For the fiscal year ended December 31, 2023, we received a variety of fees from borrowers in the ordinary course of conducting our business, including packaging fees, legal fees, late fees and prepayment fees.

All other income was recorded when earned.

For the fiscal year ended December 31, 2023, distributions of earnings from our joint ventures were evaluated to determine if the distribution is income, return of capital or realized gain.

Following our conversion to a financial holding company, we generate income in the form of interest, servicing and other fee income on the loans we and Newtek Bank originate.

In addition, our portfolio companies have become consolidating subsidiaries of NewtekOne in 2023 and therefore, under the new organizational structure, their income is consolidated within the statement of operations going forward along with our joint ventures.

With the inclusion of NMS, NIA, PMT, and NTS, we now report Technology and IT Support Income and Electronic Payment Processing Income on our consolidated statements of income, and we include insurance commissions income and payroll processing income within Other Noninterest Income.

Determination of Provision for Income Taxes and Related Accounts

Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid.

We are subject to income taxes in the United States.

We file income tax returns in approximately 47 jurisdictions:

federal, state, and local.

The laws and regulations of each jurisdiction are complex and may be subject to different interpretations.

Significant judgments and estimates are required in determining consolidated income tax expense for each jurisdiction.

Our interpretations of tax laws are subject to audits by various jurisdictions.

Potential difference in the interpretation or changes in the tax laws may result in additional accrual of income tax expense or benefit, which could be material to our reported results.

We consistently monitor new and reassess existing tax laws for changes and adjust our tax estimates accordingly.

Our provision for income taxes is comprised of current and deferred income taxes.

Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense.

In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent results of operations.

In projecting future taxable income, we begin with historical results adjusted for changes in accounting policies and incorporate assumptions about the amount of future state, federal, and foreign pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies.

These assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses.

In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss).

At least annually, we consider existing evidence, both positive and negative, that could impact our view with regard to future realization of deferred tax assets.

We currently hold deferred tax asset attributes related to net operating tax loss carryforwards.

We perform regular assessments to determine whether our tax attributes are realizable.

As of December 31, 2023, we continue to believe it is more likely than not that the benefit for certain state net operating loss carryforwards will not be realized.

For additional information regarding our provision for income taxes, refer to NOTE 21—INCOME TAXES.

Recently Adopted Accounting Pronouncements and New Accounting Standards

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The Company manages risk of exposure to credit losses under these commitments by subjecting them to credit approval and monitoring procedures.

The Company assesses the credit risk associated with certain commitments to extend credit and establishes a liability for probable credit losses.

Further information related to financial instruments can be found in Note 14 (Commitments and Contingencies) of the Company’s audited consolidated financial statements included in Item 8 of this Form 10-K.

The Company assesses the credit risk associated with certain commitments to extend credit and establishes a liability for credit losses.

Further information related to financial instruments can be found in NOTE 15—COMMITMENTS AND CONTINGENCIES.

Recent Developments

The Company performed a review of events subsequent to the balance sheet date through the date the financial statements were issued and determined that there were no such events requiring recognition or disclosure in the financial statements.

On January 2, 2025, the Company completed the previously announced sale of its wholly owned subsidiary NTS to Paltalk, Inc.

(the “NTS Sale”), pursuant to the Agreement and Plan of Merger (the “Agreement”), dated as of August 11, 2024, by and among Paltalk, PALT Merger Sub 1, Inc., PALT Merger Sub 2, LLC, NTS and the Company.

Paltalk, Inc.

was subsequently renamed Intelligent Protection Management Corp.

(“IPM”) (Nasdaq:

As previously disclosed, in connection with the Company’s acquisition of Newtek Bank and transition to a financial holding company, the Company made a commitment to the Board of Governors of the Federal Reserve System to divest or terminate the activities of NTS.

Under the terms of the Agreement, at the closing of the NTS Sale, IPM acquired NTS for a combination of $4.0 million in cash, subject to certain purchase price adjustments (the “Cash Consideration”), and 4.0 million shares of a newly created series of IPM non-voting preferred stock, the Series A Non-Voting Common Equivalent Stock (the “Preferred Stock”) (the “Stock Consideration” and together with the Cash Consideration, the “Closing Consideration”).

Upon the occurrence of certain specified transfers of the Preferred Stock, each share of Preferred Stock will automatically convert into one share of common stock of IPM, subject to certain anti-dilution adjustments.

In addition to the Closing Consideration, the Company may be entitled to receive an earn-out amount of up to $5.0 million, payable in cash, Preferred Stock, or a combination thereof (as determined in IPM’s discretion), based on IPM's achievement of certain cumulative average Adjusted EBITDA thresholds for the 2025 and 2026 fiscal years.

Pursuant to the Agreement, following the closing of the NTS Sale, the Company is entitled to appoint one representative to the IPM board of directors.

The Company will account for our investment in IPM under ASC 321 beginning in the first quarter of 2025.

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 7. Management’s Discussion and Analysis