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Item 9A. Controls and Procedures

2025-03-17 compared with 2024-04-01 · 1145 added, 957 removed, 1631 unchanged (56% of the section changed)

1 unchanged sentence

(a) Evaluation of Disclosure Controls and Procedures:

As of December 31, 2023 (the end of the period covered by this report), management evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act).

Based on the evaluation of our disclosure controls and procedures management concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2023, due to certain factors including identified material weaknesses.

A material weakness (as defined in Rule 12b-2 under the Exchange Act) is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will be presented or not detected on a timely basis.

Based on additional analysis and other procedures performed by management, management concluded that the Consolidated Financial Statements included in this report fairly present in all material respects the Company’s financial position, results of operations, capital position, and cash flows for the periods presented, in conformity with U.S.

See the discussion below under “Management’s Report on Internal Control Over Financial Reporting” for further information regarding the material weaknesses identified, as well as “NOTE 24—SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)” to our consolidated financial statements included in “Item 15.

Exhibits and Financial Statement Schedules” of this Form 10-K for further information regarding the 2023 prior period adjustments.

Our management, under the supervision and with the participation of the Chief Executive Officer (who is our principal executive officer) and Chief Financial Officer (who is our principal financial officer), evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of December 31, 2024.

The term "disclosure controls and procedures" means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2024, our disclosure controls and procedures were effective.

(b) Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”) and for performing an assessment of the effectiveness of ICFR as of December 31, 2023, as such term is defined in Exchange Act Rule 13a-15(f).

ICFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

The Company’s ICFR includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the Board ;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, ICFR may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our ICFR based upon the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework (2013).

Based on this assessment, management concluded that the Company did not maintain effective ICFR as of December 31, 2023, as a result of the material weaknesses described below.

Material Weaknesses in Internal Control Over Financial Reporting

The material weaknesses that were identified are as follows:

• Significant Unusual Transactions – As noted in Item 1.

Business, the Company completed the Acquisition and converted from a BDC to a financial holding company effective January 6, 2023, which caused a major restructuring within the Company, including a transition from being regulated under the 1940 Act and no longer qualifying for accounting treatment as an investment company, which resulted in a significant change in the Company’s accounting and financial reporting requirements for the year ended December 31, 2023.

Given the effect of the Acquisition on the Company’s accounting and reporting requirements, the Company expended considerable capital and resources and engaged a reputable, national public accounting firm to assist management with this transition.

Ultimately, the Company did not adequately or appropriately identify and assess changes and resulting risks that could significantly impact the system of internal control.

This material weakness impacted the consolidation of the control investments that occurred on January 6, 2023 and the three subsequent interim periods, specifically goodwill and intangibles, net deferred tax assets, income taxes receivable, income tax expense, additional paid in capital, non-interest income and expense, and EPS.

It also could affect all transaction cycles within the financial statements.

• SOX Governance Program – Further adding to the complexity of the significant unusual transactions, the Company’s previously unconsolidated portfolio companies became consolidated subsidiaries subject to the heightened standards of ICFR required by a SEC registrant under SOX 404 for the first time.

While the Company engaged a reputable, national public accounting firm to prepare for this transition and the Acquisition, as noted above, there were significant delays in the documentation of the internal control environment’s processes, resulting in inadequate and untimely identification of financial reporting risks and the associated identification of key controls.

This material weakness in our control environment impacted the overall effectiveness of our ICFR and also contributed to the Company adjusting its previously issued quarterly financial statements for 2023 as discussed in “NOTE 24—SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)” to our consolidated financial statements.

This material weakness could affect all transaction cycles within the financial statements.

• Knowledge, Skills, and Experience of Staff – Given the conversion to a financial holding company, the knowledge, skills, and experience of Company staff that comprised those with a financial reporting oversight role consisted of individuals with experience at a public investment company and/or BDC, in positions with less financial reporting oversight at public companies, and/or limited public accounting experience auditing public financial holding companies.

This impacted the overall effectiveness of the Company’s ICFR and also contributed to the Company adjusting its previously issued quarterly condensed financial statements for 2023, as discussed in “NOTE 24—SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)” to our consolidated financial statements.

This material weakness could affect all transaction cycles within the financial statements.

• Information Technology General Controls (ITGC) – In the course of completing the Company’s assessment of ICFR as of December 31, 2023, management identified a number of deficiencies related to the design and operating effectiveness of ITGCs for information systems that comprised part of the Company’s system of ICFR and are relevant to the preparation of the Company’s consolidated financial statements (such information technology systems are referred to as the “Affected IT Systems”).

These deficiencies in the design and operating effectiveness of the controls involved logical access and program change management that are intended to ensure that access to financial applications and data are adequately restricted to appropriate personnel, and that changes affecting the financial applications and underlying account records are identified, authorized, tested and implemented appropriately.

The material weakness was due to system limitations as a result to the age of the technology, which resulted in management’s inability to generate details of configuration, changes, and settings to evidence the operating effectiveness of ITGCs.

Management has concluded that deficiencies in ITGC logical access and related program change management, including controls intended to ensure that access rights are compatible with job duties (segregation of duties) and to test changes to relevant information systems, existed and therefore represented a material weakness.

This material weakness could affect all transaction cycles within the financial statements.

• Management Review Controls – Management identified deficiencies due to the design and operating effectiveness of management review controls, including documentation and the level of precision.

The deficiencies related to control gaps, unmitigated risks, untimely review, insufficient documentation, improper testing procedures, and inconsistent performance frequency of certain controls.

This includes ITGCs that did not operate effectively due to insufficient management review controls related to the precision of the review, completeness and accuracy and insufficient evidence of report lists, and the parameters used to generate such report lists.

The Company did not sufficiently document and deploy appropriate control activities through policies that establish what is expected and in procedures that put policies into action which resulted in a material weakness.

This material weakness could affect all transaction cycles within the financial statements.

• Completeness and Accuracy of Information Produced by the Entity (“IPE”) – Management identified deficiencies due to a lack of available and reliable IPE, including multiple control gaps.

The control gaps are related to reports extracted from Affected IT Systems that were not verified for completeness and accuracy.

These deficiencies related to untimely review, insufficient documentation, improper testing procedures, and ineffective design of certain controls.

Management did not sufficiently select and develop IPE control activities that contribute to the mitigation of risks to achieve the reduction of risk to acceptable levels which resulted in a material weakness.

This material weakness could affect all transaction cycles within the financial statements.

• NTS System Conversion – NTS’s system of record for webhosting revenue was converted during the first quarter of 2023 and certain changes made to the sunsetting system and the newly implemented system to which it was converted were not tested and approved in a separate environment prior to being placed into production, which is a program change management ITGC.

As it specifically relates to this system conversion, the deficiencies in the aforementioned change management controls resulted in this material weakness as management did not develop sufficient general control activities over technology to support the achievement of the conversion’s objectives.

This material weakness impacted other assets, retained earnings, technology services expense, and technology and IT support income.

• NTS Revenue Cycle – Multiple controls over revenue recognition at NTS were not designed and implemented appropriately and/or did not operate effectively.

As it specifically relates to this deficiency, there was excessive turnover in the NTS controller role which led to the deficiencies in design, implementation, and operating effectiveness of the controls.

Management did not consistently retain individuals in that financial reporting oversight role resulting in a material weakness This material weakness impacted other assets, retained earnings, technology services expense, and technology and IT support income.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

Internal control over financial reporting is a process designed by, or under the supervision of, a company’s principal executive and principal financial officers, or persons performing similar functions, and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

It includes those policies and procedures that:

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of a company;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of a company are being made only in accordance with authorizations of management and directors of the company;

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company's assets that could have a material effect on the financial statements.

Our management conducted an assessment, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, under the oversight of our Board of Directors, of the effectiveness of our internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this evaluation, our management concluded that our internal control over financial reporting (“ICFR”) was effective at December 31, 2024.

Remediation of Previously Reported Material Weaknesses

As disclosed in Part II - Item 9A.

of the Company's Annual Report on Form 10-K for the year ended December 31, 2023, management identified material weaknesses in ICFR related to Significant Unusual Transactions, SOX Governance, Knowledge, Skills, and Experience of Staff, Information Technology General Controls, Management Review Controls, Completeness and Accuracy of Information Produced by the Entity, NTS System Conversion, and NTS Revenue Cycle.

Throughout the year ended December 31, 2024, our management executed upon its previously disclosed remediation plan, which was executed with elevated supervision and oversight of the Audit Committee.

• Significant Unusual Transactions – this material weakness relates to the acquisition of National Bank of New York City and the resulting conversion to a financial holding company.

This material weakness was remediated as controls were designed and implemented where the Chief Accounting Officer reviews with the identification, accounting, and disclosure of Significant Unusual Transactions;

more specifically these controls addressed the accounting for goodwill and intangibles, net deferred tax assets, income taxes receivable, income tax expense, additional paid in capital, non-interest income and expense, and EPS.

• SOX Governance Program – this material weakness relates to the compliance and heightened standards required of an SEC registrant under SOX 404.

This material weakness was remediated as management established a SOX Governance Program including policies and procedures, along with a management level SOX Steering Committee.

• Knowledge, Skills, and Experience of staff – this material weakness relates to the experience of company staff being comprised of individuals without the requisite public company and ICFR experience.

This Material Weakness was remediated as management engaged an external consulting firm to test the design and operating effectiveness of ICFR and key hires were made throughout the control environment including six Certified Public Accountants with ICFR experience.

• Information Technology General Controls / NTS System Conversion – this material weakness relates to deficiencies identified in all aspects of ITGC including logical access and change management.

These Material Weaknesses were remediated as management updated and enhanced the IT policies and relevant internal controls to consider and address ITGCs including access security and change management;

limited elevated access profiles in financially relevant IT systems and software to appropriate personnel;

developed and enhanced access administration controls over provisioning, deprovisioning, and user access reviews;

and enhanced the design of controls over change management and IT operations controls.

• Management Review Controls – this material weakness relates to deficiencies in the design and operating effectiveness of management review controls including documentation and level of precision.

This material weakness was remediated by redesigning the existing ICFR to enhance management’s documentation supporting all elements of management’s review and the precision in which the controls are designed to operate and provided training to control owners and relevant personnel to understand the components of a management review control and documentation expectations.

• Completeness and Accuracy of Information Produced by the Entity (“IPE”) – this material weakness specifically relates to control gaps identified related to the completeness and accuracy of system reports utilized in the execution of key controls.

This material weakness was remediated by redesigning existing ICFR to enhance management’s control steps to ascertain the completeness and accuracy of IPE when utilized in the execution of a key control.

Further, training was provided to control owners and relevant personnel to understand the concept of IPE and documentation requirements for the completeness and accuracy of system reports.

• NTS Revenue Cycle – this material weakness relates to controls over revenue recognition.

This material weakness was remediated by redesigning the existing ICFR related to the existence and accuracy of material revenue streams generated from NTS, as well as revenue recognition in accordance with ASC 606.

More specifically, these controls covered other assets, retained earnings, technology services expense, and technology and IT support income.

Based upon testing of the design and operating effectiveness of the re-designed control environment during the year ended December 31, 2024, management found them to be designed and operating effectively.

As a result, management has concluded that the material weaknesses in ICFR have been remediated as of December 31, 2024.

Changes in Internal Control Over Financial Reporting

Other than the remediation of the material weaknesses described above, there were no changes in our ICFR (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our ICFR.

Limitations on Effectiveness of Controls and Procedures

Because of its inherent limitations, management does not expect that our disclosure controls and procedures or our ICFR will prevent or detect all error and fraud.

Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

RSM US LLP, our independent registered public accounting firm, has issued an audit report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, as stated in its report, which is included under “ITEM 8.

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this annual report on Form 10-K, which is consistent with management’s report on ICFR as set forth above.

(d) Changes in Internal Control over Financial Reporting.

Except as described below under “Remediation Process,” there were no changes in the Company’s ICFR (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during our most recently completed fiscal quarter, that have materially affected, or are reasonably likely to materially affect, the Company’s ICFR.

Remediation Process

While certain actions have been taken to enhance the Company’s ICFR relating to the material weaknesses identified as of the date of this report, we are still in the process of implementing our comprehensive remediation plan.

Accordingly, the previously identified material weaknesses cannot be considered remediated until each control has been appropriately designed, has operated for a sufficient period of time, and until management has concluded, through testing, that the control is operating effectively.

Following the identification of the material weaknesses described above, with the oversight of the Audit Committee, we commenced a process to remediate the underlying causes of those material weaknesses, enhance the control environment and strengthen our ICFR.

The initial steps that the Company has taken to-date, and will continue to take, with respect to remediation of the material weaknesses identified are summarized below:

• The hiring of senior financial management and additional qualified finance and accounting resources, including:

◦ The hiring of a Chief Financial Officer in May 2023 with significant financial holding company experience and prior experience as a Chief Accounting Officer of a financial holding company, who was appointed to and is serving as the Company’s Principal Financial Officer as of April 1, 2024;

◦ The appointment of a new Chief Accounting Officer with significant financial holding company experience and prior experience as a Chief Accounting Officer of a bank holding company who is serving as the Company’s Principal Accounting Officer as of April 1, 2024;

◦ The hiring and appointment of a Chief Risk Officer with significant financial holding company experience and prior experience as a Chief Audit Executive of a bank holding company who began employment on April 1, 2024;

◦ The recent and anticipated hiring of additional qualified finance and accounting resources, as well as providing appropriate training to the relevant current and/or prospective control owners.

• Improving the design, operation, and monitoring of control activities and procedures to address ICFR requirements, including:

◦ Improvements to the financial reporting process and control activities, including strengthening reconciliation controls;

◦ The expansion of the responsibilities of the Company’s third-party internal audit provider;

◦ The continuing evaluation of the Company’s third-party vendors whose role is the facilitation of the timely documentation and related evaluation of the design and operating effectiveness of IFCR under SOX 404 and commensurate with the complexity of a well-diversified financial holding company who actively participates in the capital markets.

• Improving the design, operating effectiveness, and documentation of management review controls and controls designed to verify the completeness and accuracy of data and IPE used in financial reporting.

These activities include the development of new management review controls, training, and education for process owners on audit requirements, and the creation of review templates to properly document evidence of management review in addition to building a data governance framework for data used in financial reporting.

• Implementing a new ERP system, along with other technology, that interfaces with other internal systems and are designed to ensure only authorized individuals can access certain modules and perform certain duties based on their role and responsibilities.

Detailed processes and automated controls are maintained in the systems in an effort to ensure all control activities conform with our risk and control matrix, and to limit manual intervention and the risk of human error.

• Implementing new financial reporting software with (i) greater preventative controls that address completeness and accuracy of information produced by the Company and (ii) data connections that are directly tied to source systems and are explicitly linked to the future data governance framework.

• Management has been actively engaged in the implementation of a remediation plan designed to ensure that controls contributing to remediation of our ITGC material weakness are designed appropriately and will operate effectively, which include but are not limited to the following:

◦ Enhancing information technology governance policies and procedures;

◦ Designing and implementing control activities and procedures around user and administrator access and program change management;

◦ Procuring and implementing technology to facilitate change management and logical access to systems;

◦ Hiring of additional qualified information technology resources and providing appropriate t training to the relevant control owners.

The status of our remediation plan is being, and will continue to be, reported by management to the Audit Committee on a regular basis.

In addition, management has assigned executive owners to oversee the remedial changes to the overall design of the Company’s internal control environment and to address the root causes of our material weaknesses.

As management continues to evaluate and strive to improve the Company’s ICFR, management may take additional measures to address these control deficiencies or modify the previously disclosed remediation plan.

While management intends to resolve all of the material weaknesses, no assurance can be provided that these remediation efforts will be successful, that the Company’s internal controls over financial reporting will be effective as a result of these efforts by any particular date, nor is it certain whether additional actions will be required.

The Company’s independent registered public accounting firm, RSM US LLP, has issued an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, as stated in its report, which appears below under the heading “Report of Independent Registered Public Accounting Firm.”

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of NewtekOne Inc.

Opinion on the Internal Control Over Financial Reporting

We have audited NewtekOne Inc.

and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial condition of the Company as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes to the consolidated financial statements and our report dated March 17, 2025, expressed an unqualified opinion.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

/s/ RSM US LLP

Hartford, Connecticut

March 17, 2025

OTHER INFORMATION.

Trading Arrangements

On June 16, 2023 , Salvatore Mulia , a member of our Board , entered into a written plan for the sale of an aggregate 9,000 shares of common stock.

The plan is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act.

The plan commenced on September 21, 2023 and terminates on September 22, 2024.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

2 unchanged sentences

The information required by Item 10 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2025 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission not later than 120 days following the end of our fiscal year.

We have adopted an insider trading policy governing the purchase, sale and/or other disposition of our securities by our directors, officers and employees and other covered persons, as well as the Company itself, that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations and Nasdaq listing standards, as applicable.

A copy of our insider trading policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.

EXECUTIVE COMPENSATION

The information required by Item 11 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2025 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission not later than 120 days following the end of our fiscal year.

In November 2023, the Company adopted a Clawback Policy in accordance with Section 10D of the Exchange Act and Rule 10D-1 promulgated thereunder.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

29 unchanged sentences

333-224976, filed July 29, 2019).

Form of Global Note with respect to the 5.75% Notes due 2024 (Incorporated by reference to Exhibit d.8 to Newtek’s Post-Effective Amendment No.

Form of Global Note with respect to the 5.75% Notes due 2024 (Incorporated by reference to Exhibit d.

9 to Newtek’s Post-Effective Amendment No.

7 to its Registration Statement on Form N-2, No.

15 unchanged sentences

333-191499) filed on November 3, 2014, and incorporated by reference herein).

Guaranty, dated as of February 28, 2011, by and between Newtek Business Services, Inc.

and Sterling National Bank (Incorporated herein by reference to Exhibit 10.10.2 to Newtek Business Services, Inc.’s Current Report on Form 8-K (File No.

001-16123), filed March 3, 2011).

Fourth Amended and Restated Loan and Security Agreement, dated as of May 11, 2017, by and among Newtek Small Business Finance, LLC, Capital One, National Association and UBS Bank USA as Lenders, and Capital One, National Association as Administrative Agent, Sole Bookrunner and Sole Lead Arranger (Incorporated by reference herein to Exhibit 10.1 to Newtek’s Current Report on Form 8-K, filed May 16, 2017).

Second Amended and Restated Guaranty of Payment and Performance, dated as of May 11, 2017, delivered by Newtek Business Services Corp.

in favor of Capital One, National Association, in its capacity as administrative agent, and the Lenders under the Fourth Amended and Restated Loan and Security Agreement (incorporated by reference herein to Exhibit 10.2 to Newtek’s Current Report on Form 8-K, filed May 16, 2017).

Revolving Credit and Security Agreement, dated as of July 31, 2018, by and among Newtek Business Lending, LLC and Capital One, National Association (Incorporated by reference to Exhibit k.4 to Post-Effective Amendment No.

2 to Newtek’s Registration Statement on Form N-2, No.

333-224976, filed August 31, 2018).

Guaranty of Payment and Performance, dated as of July 31, 2018, by and among Newtek and Capital One, National Association (Incorporated by reference to Exhibit k.5 to Post-Effective Amendment No.

2 to Newtek’s Registration Statement on Form N-2, No.

333-224976, filed August 31, 2018).

Omnibus Amendment No.

3 to Loan Documents, dated as of September 13, 2019, by and among Newtek Small Business Finance, LLC, Capital One, National Association and UBS Bank USA as Lenders, and Capital One, National Association as Administrative Agent filed herewith.

Amended and Restated Form of Custody Agreement dated as of October 30, 2015 by and between Newtek Business Services Corp.

Bank National Association (Incorporated herein by reference to Exhibit 99.1 to Newtek Business Services Corp.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 (File No.

814-01035) filed on November 5, 2015.

Membership Purchase Agreement, dated July 23, 2015, by and among Newtek Business Services Corp., Newtek Business Services Holdco1, Inc., Premier Payments LLC and Jeffrey Rubin (Incorporated herein by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K (File No.

814-01035), filed on July 29, 2015).

Omnibus Amendment No.

2 to Loan Documents, dated as of June 24, 2019, by and among Newtek Small Business Finance, LLC, and UBS Bank USA, as lender, and Capital One, National Association as Administrative Agent (Incorporated by reference to Exhibit 10.1 to Newtek’s Current Report on Form 8-K, filed June 24, 2019).

Credit Agreement dated November 8, 2018, by and among Universal Processing Services of Wisconsin LLC and Premier Payments LLC, and the several banks and other parties from time to time parties thereto as lenders and Webster Bank, National Association.

(Incorporated by reference herein to Exhibit k.6 to Newtek’s Post-Effective Amendment No.

3 to its Registration Statement on Form N-2, No.

333-224976, filed December 14, 2018).

Parent Guaranty Agreement, dated November 8, 2018, by and among the Company and Webster Bank, National Association.

(Incorporated by reference herein to Exhibit k.7 to Newtek’s Post-Effective Amendment No.

3 to its Registration Statement on Form N-2, No.

333-224976, filed December 14, 2018).

Limited Liability Agreement, dated as of November 27, 2018, by and between Newtek Commercial Lending, Inc.

and Conventional Lending TCP Holdings LLC (Incorporated by reference to Exhibit 10.1 to Newtek’s Current Report on Form 8-K filed November 29, 2018).

Omnibus Amendment No.

4 to Loan Documents, dated as of May 7, 2020, by and among Newtek Small Business Finance, LLC, Capital One, National Association and UBS Bank USA as Lenders and Capital One, National Association as Administrative Agent (incorporated by reference to Exhibit 10.1 to Newtek’s Current Report on Form 8-K, filed May 11, 2020).

Stock Purchase Agreement by and among Newtek Business Services Corp.

7 unchanged sentences

333-212679), filed July 26, 2016).

Form of Restricted Stock Award Agreement - 2015 Stock Incentive Plan, filed herewith.

Form of Restricted Stock Award Agreement - 2015 Stock Incentive Plan (incorporated by reference to Exhibit 10.19 to Newtek ’ s Annual Report on Form 10-K for the year ended December 31, 2023 (File No.

001-36742) , filed April 1, 2024) .

NewtekOne 2023 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to Newtek’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (File No.

10 unchanged sentences

001-36742), filed November 9, 2023).

F orm of Change in Control A gree ment .

filed herewith.

Form of Change in Control Agreement (incorporated by reference to Exhibit 10.25 to Newtek’s Annual Report on Form 1 0 -K for the year ended December 31, 2023 (File No.

001- 36742) , filed April 1, 2024) .

Amendment to Employment Agreement by and between NewtekOne, Inc.

and Barry Slo ane dated as of January 1 , 202 5 (incorporated by reference to Item 5.02 to Newtek’s Current Report on Form 8-K (File No.

001-36742), filed J anuary 3, 2025) .

Code of Ethics (Previously filed in connection with Pre-Effective Amendment No.

1 unchanged sentence

333-191499) filed on November 3, 2014, and incorporated by reference herein).

NewtekOne, Inc.

Statement of Policy on Insider Trading

Subsidiaries of the Registrant filed herewith.

2 unchanged sentences

Certification by Principal Financial Officer required by Rule 13a-14 under the Securities Exchange Act of 1934, as amended, furnished herewith.

Certification by Principal Accounting Officer required by Rule 13a-14 under the Securities Exchange Act of 1934, as amended, furnished herewith.

Certification by Principal Executive Officer pursuant to 18 U.S.C.

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith.

NewtekOne Clawback Policy, filed herewith.

Certification by Principal Accounting Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith.

NewtekOne Clawback Polic y (incorporated by reference to Exhibit 97.1 to Newtek’s Annual Report on Form 10-K for the year ended December 31, 2023 (File No.

001-36742), filed April 1, 2024).

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NEWTEKONE, INC.

April 1, 2024 By:

March 17, 2025 By:

/ S / B ARRY S LOANE

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(Principal Executive Officer)

April 1, 2024 By:

March 17, 2025 By:

S COTT P RICE

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(Principal Financial Officer)

April 1, 2024 By:

March 17, 2025 By:

/ S / F RANK D E M ARIA

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/ S / B ARRY S LOANE

Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) April 1, 2024

Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) March 17, 2025

S COTT P RICE

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(Principal Financial Officer)

April 1, 2024

March 17, 2025

/ S / F RANK D E M ARIA

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(Principal Accounting Officer)

April 1, 2024

March 17, 2025

Frank DeMaria

/S/ RICHARD SALUTE Director April 1, 2024

/S/ RICHARD SALUTE Director March 17, 2025

Richard Salute

/S/ SALVATORE MULIA Director April 1, 2024

/S/ SALVATORE MULIA Director March 17, 2025

Salvatore Mulia

/S/ GREGORY ZINK Director April 1, 2024

/S/ PETER DOWNS Director April 1, 2024

/S/ FERNANDO PEREZ-HICKMAN Director April 1, 2024

/S/ GREGORY ZINK Director March 17, 2025

/S/ CRAIG BRUNET

Director March 17, 2025

/S/ PETER DOWNS Director March 17, 2025

/S/ FERNANDO PEREZ-HICKMAN Director March 17, 2025

Fernando Perez-Hickman

/S/ HALLI RAZON-FEINGOLD Director April 1, 2024

/S/ HALLI RAZON-FEINGOLD Director March 17, 2025

Halli Razon-Feingold

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Our report dated April 1, 2024 expressed an opinion that the Company had not maintained effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for the recognition and measurement of credit losses as of January 1, 2023, due to the adoption of Accounting Standard Codification (“ASC”)Topic 326, Financial Instruments—Credit Losses.

Registered Investment Company to Financial Holding Company

As discussed in Note 1 to the consolidated financial statements, the Company ceased being an investment company subject to accounting guidance ASC 946, Financial Services - Investment Companies and ASC 810, Consolidations became effective for the Company on January 6, 2023.

Therefore, controlled investments previously carried at fair value became subsidiaries of the Company and consolidated utilizing historical cost basis.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 17, 2025, expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

Basis for Opinion

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Additionally, we recalculated the present value of expected cashflows and compared it with the value of loans determined by management.

Valuation of servicing assets

As described in Notes 2, 7 and 9 to the consolidated financial statements, servicing assets are measured at fair value.

The Company’s servicing assets are measured at fair value using unobservable inputs and assumptions, and as such the Company’s servicing assets as of December 31, 2023 are classified as Level 3 within the fair value hierarchy as described in Note 9.

Determining the fair value of the Level 3 servicing assets 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, discount rate, servicing costs, default rate, prepayment rate, and the impact of economic conditions.

As of December 31, 2023, total Level 3 servicing assets had a fair value of $39.7 million.

We identified the valuation of servicing assets as a critical audit matter because of the judgments necessary for management to select and apply valuation techniques and assumptions, the high degree of auditor judgment involved, and the extensive audit effort involved in testing the valuations.

Valuation of servicing assets, at fair value

As described in Notes 2, 7 and 10 to the consolidated financial statements, servicing assets for loans originated by the Company’s nonbank subsidiaries are measured at fair value at each reporting date and the Company reports changes in the fair value of servicing assets in earnings in the period in which the changes occur.

The Company’s servicing assets, at fair value are measured at fair value using unobservable inputs and assumptions.

As such the Company’s servicing assets for the nonbank subsidiaries as of December 31, 2024, is classified as Level 3 within the fair value hierarchy as described in Note 10.

Determining the fair value of the Level 3 servicing assets, 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, discount rate, servicing costs, default rate, prepayment rate, and the impact of economic conditions.

As of December 31, 2024, total Level 3 servicing assets recorded at fair value had a balance of $22.1 million.

We identified the valuation of servicing assets, at fair value as a critical audit matter because of the judgments necessary for management to select and apply valuation techniques and assumptions, the high degree of auditor judgment involved, and the extensive audit effort involved in testing the valuations.

Our audit procedures related to the valuation of the servicing assets included the following, among others:

• We obtained an understanding of and evaluated the methods and assumptions management uses to value the servicing assets.

• We tested the completeness and accuracy of information used in the valuations by agreeing the total principal balance of the loans sold in the schedules to the loan subledger.

• We obtained an understanding of and evaluated the methods and assumptions management uses to value the servicing assets, at fair value.

• We tested the completeness and accuracy of information used in the valuations by agreeing the total principal balance, interest rate, interest type, and maturity date of the loans sold in the schedules to the loan subledger.

• With the assistance of valuation specialists, developed an independent estimate of fair value for servicing assets or tested management’s fair value estimates as of December 31, 2024.

• We reviewed the significant assumptions (e.g.

discount rate, prepayment rate, default rate and servicing cost) used by externally engaged valuation specialist for reasonableness.

discount rate, prepayment rate, default rate and servicing cost) used by externally engaged and internal valuation specialist for reasonableness.

Allowance for credit losses on loans

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Our audit procedures related to this critical audit matter included the following, among others:

• We tested the completeness and accuracy of data used by management in determining inputs to the PD and LGD, and the loss rate model used for SBA 7(a) loans by agreeing those inputs to internal or external information sources.

• We tested the completeness and accuracy of data used by management in determining inputs to the PD and LGD by agreeing those inputs to internal or external information sources.

• We evaluated management’s judgments used in the identification of peer banks for PD and LGD calculations by comparing peer banks to external information sources.

• We evaluated management’s forecasts of future economic indicators for reasonableness, which included unemployment, housing price index, and national GDP growth, among others, by comparing these forecasts to external and internal information sources.

/s/ RSM US LLP

Hartford, Connecticut

April 1, 2024

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of NewtekOne, Inc.

Opinion on the Internal Control Over Financial Reporting

We have audited NewtekOne, Inc.

and its subsidiaries' (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion, because of the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial condition of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes to the consolidated financial statements and our report dated April 1, 2024 expressed an unqualified opinion.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in management's assessment:

• Significant Unusual Transactions – The Company converted from a business development company (BDC) to a financial holding company (FHC) effective January 6, 2023.

The Company did not adequately or appropriately identify and assess changes and resulting risks that could significantly impact the system of internal control resulting from this conversion.

This material weakness impacted the consolidation of the control investments that occurred on January 6, 2023, and the three subsequent interim periods, specifically goodwill and intangibles, net deferred tax assets, income taxes receivable, income tax expense, additional paid in capital, non-interest income and expense, and earnings per share.

This material weakness could affect all transaction cycles within the consolidated financial statements.

• SOX Governance Program – The Company’s controlled investments which were previously unconsolidated portfolio companies became consolidated subsidiaries subject to internal control over financial reporting (ICFR) for the first time.

There were significant delays in the documentation of the internal control environment’s processes, resulting in inadequate and untimely identification of financial reporting risks and the associated identification of key controls over financial reporting.

This material weakness in the control environment impacted the overall effectiveness of the Company’s ICFR and contributed to the Company adjusting its previously issued quarterly financial statements for 2023 as discussed in “Note 24 – Selected Quarterly Financial Data (Unaudited)” to the consolidated financial statements.

This material weakness could affect all transaction cycles within the consolidated financial statements.

• Knowledge, Skills, and Experience of Staff – Certain Company staff in financial reporting oversight roles had insufficient knowledge, skills, and experience for a public FHC.

This impacted the overall effectiveness of the Company’s ICFR and contributed to the Company adjusting its previously issued quarterly financial statements for 2023, as discussed in “Note 24- Selected Quarterly Financial Data (Unaudited)” to the consolidated financial statements.

This material weakness could affect all transaction cycles within the consolidated financial statements.

• Information Technology General Controls (ITGC) – There were a number of deficiencies related to the design and operating effectiveness of ITGCs for information systems that comprised part of the Company’s system of ICFR and are relevant to the preparation of the Company’s consolidated financial statements.

These deficiencies in the design and operating effectiveness of the ITGCs involved logical access and program change management which are intended to ensure that access to financial applications and data are adequately restricted to appropriate personnel, and that changes affecting the financial applications and underlying account records are identified, authorized, tested and implemented appropriately.

Deficiencies in ITGC logical access and related program change management, including controls intended to ensure that access rights are compatible with job duties (segregation of duties) and to test changes to relevant information systems, existed and therefore represented a material weakness.

This material weakness could affect all transaction cycles within the consolidated financial statements.

• Management Review Controls – There were deficiencies in the design and operating effectiveness of management review controls, including documentation and the level of precision.

The deficiencies related to control gaps, unmitigated risks, untimely review, insufficient documentation, improper testing procedures, and inconsistent performance frequency of certain controls.

This includes ITGC deficiencies in the precision of review, completeness and accuracy of reports used in management reviews, and the parameters used to generate such reports.

This material weakness could affect all transaction cycles within the consolidated financial statements.

• Completeness and Accuracy of Information Produced by the Entity (“IPE”) – There were deficiencies due to a lack of available and reliable IPE, including multiple control gaps.

The control gaps are related to reports extracted from certain information technology systems that were not verified for completeness and accuracy.

These deficiencies related to untimely review, insufficient documentation, improper testing procedures, and ineffective design of certain controls.

This material weakness could affect all transaction cycles within the consolidated financial statements.

• Newtek Technology Solutions (NTS) System Conversion – NTS’s system of record for webhosting revenue was converted during the first quarter of 2023 and certain changes made to the former and current systems were not tested and approved in a separate environment prior to being placed into production.

As it relates to this system conversion, management did not develop sufficient general control activities over program change management to support the achievement of the conversion’s objectives, resulting in a material weakness.

This material weakness impacted other assets, retained earnings, technology services expense, and technology and IT support income.

• NTS Revenue Cycle – There were deficiencies in design, implementation and operating effectiveness of the NTS revenue recognition controls.

Management did not retain consistent individuals with the appropriate skills knowledge and expertise in that financial reporting oversight role resulting in a material weakness.

This material weakness impacted other assets, retained earnings, technology services expense, and technology and IT support income.

These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2023 of the Company, and this report does not affect our report dated April 1, 2024 on those financial statements.