NewtekOne, Inc. 10-K

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Introduction and Certain Cautionary Statements The following discussion and analysis of our financial condition and results of operations is intended to assist in the understanding and assessment of significant changes and trends related to the results of operations and financial position of the Company together with its subsidiaries. This discussion and analysis should be read in conjunction with the consolidated financial statements and the accompanying notes as well as Item 1 - Business. The statements in this Annual Report may contain forward-looking statements relating to such matters as anticipated future financial performance, business prospects, legislative developments and similar matters. We note that a variety of factors could cause our actual results to differ materially from the anticipated results expressed in the forward-looking statements such as intensified competition and/or operating problems in our operating business projects and their impact on revenues and profit margins or additional factors as described under “Risk Factors” above. 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. 70 Table of Contents 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 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. 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. 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 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: NSBF; NMS; Mobil Money; NBC; PMT; NIA; TAM; NALH; NCL; NTS and POS. 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 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 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 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 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 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. federal income tax purposes, beginning with our 2015 tax year. As an entity electing to be treated as a RIC, we generally did not have to pay U.S. federal income taxes at corporate rates on any ordinary income or capital gains that we distributed to our shareholders as dividends. To maintain our qualification as a RIC for U.S. federal income tax purposes, we were required to, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, in order to obtain tax benefits applicable to an entity treated as a RIC for U.S. federal income tax purposes, we were required to distribute to our shareholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses. 71 Table of Contents The Company and its subsidiaries no longer qualify as a RIC for U.S. federal income tax purposes and filed a consolidated U.S. federal income tax return beginning with the 2023 fiscal year. Financial holding companies are subject to federal and state income taxes in essentially the same manner as other corporations. Taxable income is generally calculated under applicable sections of the Internal Revenue Code of 1986, as amended (the “Code”), including Sections 581 through 597 that apply specifically to financial institutions. Some modifications are required by state law and the 2017 tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). Among other things, the Tax Act (i) established a new, flat corporate federal statutory income tax rate of 21%, (ii) eliminates the corporate alternative minimum tax and allowed the use of any such carryforwards to offset regular tax liability for any taxable year, (iii) limited the deduction for net interest expense incurred by U.S. corporations, (iv) allowed businesses to immediately expense, for tax purposes, the cost of new investments in certain qualified depreciable assets, (v) eliminated or reduced certain deductions related to meals and entertainment expenses, (vi) modified the limitation on excessive employee remuneration to eliminate the exception for performance-based compensation and clarified the definition of a covered employee and (vii) limited the deductibility of deposit insurance premiums. There can be no assurance as to the actual effective rate because it will be dependent upon the nature and amount of future income and expenses as well as actual investments generating investment tax credits and transactions with discrete tax effects. From 2012 through December 31, 2022, NSBF, a wholly-owned subsidiary, was consistently the largest non-bank SBA 7(a) lender in the U.S. based on dollar volume of loan approvals, and, as of December 31, 2022, was the third largest SBA 7(a) lender in the United States. 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. 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 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 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.” Our common shares are currently listed on the Nasdaq Global Market under the symbol “NEWT”. 72 Table of Contents 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. Being a national lender with PLP status allows Newtek Bank to expedite the origination of loans since Newtek Bank is not required to present applications to the SBA for concurrent review and approval. The loss of PLP status would adversely impact our marketing efforts and ultimately our loan origination volume, which would negatively impact our results of operations. See “Item 1A. 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 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 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. Income 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. 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 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 (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. 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, as well as amortization and impairment, if any, of LCM servicing rights in the consolidated statements of operations. Expenses 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. 73 Table of Contents 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. NCL JV: 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 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 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. The Notes were priced at a yield of 3.209%. The proceeds of the securitization were used, in part, to repay the Deutsche Bank credit facility and return capital to the NCL partners. Refer to NOTE 4—INVESTMENTS for selected financial information and a schedule of investments of NCL as of December 31, 2024. TSO JV: On August 5, 2022, NCL and TSO II Booster Aggregator, L.P. (“TSO II”) entered into a joint venture, TSO JV, governed by the Amended and Restated Limited Partnership Agreement for the TSO JV. 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 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. 74 Table of Contents Discussion and Analysis of Financial Condition December 31, 2024 vs. December 31, 2023 ASSETS 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. Loans December 31, 2024 December 31, 2023 Change Loans held for sale, at fair value $ 372,286 $ 118,867 $ 253,419 Loans held for sale, at LCM 58,803 56,607 2,196 Loans held for investment, at fair value 369,746 469,801 (100,055) Loans held for investment, at amortized cost, net of deferred fees and costs 621,651 336,305 285,346 Allowance for credit losses (30,233) (12,574) (17,659) Loans held for investment, at amortized cost, net 591,418 323,731 267,687 Total Loans $ 1,392,253 $ 969,006 $ 423,247 Loans held for sale 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 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 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 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. 75 Table of Contents Credit Quality: 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 Current $ 575,444 92.8 % $ 325,643 96.9 % Past Due 31-89 Days 20,585 3.3 % 4,896 1.5 % 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 1,281 393 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 % At Fair Value Current $ 251,616 68.1 % $ 385,172 81.9 % 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 % Total $ 369,746 100.0 % $ 469,801 100.0 % Past due and nonaccrual loans as % of Outstanding UPB $ 118,130 31.9 % $ 84,629 18.0 % Nonperforming Assets, as a percentage of total assets Loans HFI, at amortized cost $ 24,341 1.2 % $ 5,373 0.4 % Loans HFI, at fair value 67,304 3.2 % 48,174 3.3 % Other real estate owned 3,764 0.2 % 1,110 0.1 % Total Nonperforming Assets $ 95,409 4.6 % $ 54,657 3.8 % CRE exposure 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%. 76 Table of Contents 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 by CRE type 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 NOO CRE by type: Retail $ 45,594 $ — $ 45,594 51.4 % $ 40,400 $ — $ 40,400 49.7 % 1-4 Family 25,139 — 25,139 56.1 % 31,700 — 31,700 57.6 % Multifamily 35,713 — 35,713 52.6 % 29,800 — 29,800 51.3 % Industrial 27,866 — 27,866 50.1 % 23,400 — 23,400 47.3 % Office 21,586 — 21,586 47.7 % 6,599 — 6,599 48.9 % Construction and land development 1 22,775 44,987 67,762 65.1 % 28,404 51,907 80,311 83.1 % Hotel — 13,817 13,817 66.2 % — 4,700 4,700 55.3 % Other 13,158 — 13,158 61.5 % 3,500 — 3,500 52.8 % 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 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 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 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 13,814 — 13,814 13,814 13 13,827 Technology segment 1 — — — 11,800 3,379 15,179 Total $ 14,085 $ 667 $ 14,752 $ 25,885 $ 4,235 $ 30,120 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. 77 Table of Contents Settlement Receivable 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. LIABILITIES 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. Deposits 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 Borrowings Outstanding December 31, 2024 December 31, 2023 Change Bank Borrowings 1 : NMS Webster Note $ 32,688 $ 36,628 $ (3,940) SPV I Capital One Facility 21,192 16,080 5,112 SPV II Deutsche Bank Facility 54,036 6,799 47,237 SPV III One Florida Bank Facility 23,011 257 22,754 FHLB Advances 2 15,330 23,184 (7,854) Total Lines of Credit 146,257 82,948 63,309 Parent Company Notes 1 : 2024 Notes 3 (5.75%) — 38,124 (38,124) 2025 Notes (5.00%) 29,913 29,563 350 2025 Notes 4 (8.125%) — 49,433 (49,433) 2026 Notes (5.50%) 114,282 113,564 718 2027 Notes 4 (8.125%) 49,944 — 49,944 2028 Notes (8.00%) 38,726 38,378 348 2029 Notes (8.50%) 69,622 — 69,622 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 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. 78 Table of Contents Borrowings were $708.0 million at December 31, 2024, compared to $644.1 million at December 31, 2023. 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 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 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. Summary 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, 2024 2023 Change Net interest income after provision for credit losses $ 14,089 $ 14,930 $ (841) Noninterest income 217,312 176,772 40,540 Noninterest expense 162,709 146,329 16,380 Net income before taxes 68,692 45,373 23,319 Income tax expense/(benefit) 17,839 (1,956) 19,795 Net income $ 50,853 $ 47,329 $ 3,524 79 Table of Contents Net Interest Income and Margin Average Balances and Yields. The following table presents information regarding average balances for assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amount of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing the income or expense by the average balances for assets or liabilities, respectively, for the periods presented and annualizing that result. Loan fees are included in interest income on loans. Year Ended December 31, 2024 2023 Average Balance Interest Average Yield / Rate Average Balance Interest Average Yield / Rate Interest-earning assets: Interest-earning balances in other banks $ 180,753 $ 9,044 5.00 % $ 186,566 $ 8,854 4.75 % Investment securities 31,847 1,482 4.65 31,958 1,518 4.75 Loans held for sale 237,903 26,692 11.22 120,598 17,085 14.17 Loans held for investment 951,988 84,200 8.84 783,808 66,916 8.54 Total interest-earning assets 1,402,491 121,418 8.66 1,122,930 94,373 8.40 Less: Allowance for credit losses on loans (19,033) (3,619) Noninterest earning assets 204,655 197,612 Total assets $ 1,588,113 $ 1,316,923 Interest-bearing liabilities Demand $ 51,759 $ 461 0.89 % $ 23,973 $ 31 0.13 % 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 Time 261,174 13,285 5.09 168,912 7,579 4.49 Total deposits 614,044 28,690 4.67 358,557 15,849 4.42 Borrowings 643,234 52,423 8.15 674,687 51,890 7.69 Total interest-bearing liabilities 1,257,278 81,113 6.45 1,033,244 67,739 6.56 Noninterest-bearing deposits 600 531 Noninterest-bearing liabilities 67,405 60,524 Shareholders’ equity 262,830 222,624 Total liabilities and shareholders' equity $ 1,588,113 $ 1,316,923 Net interest income and interest rate spread $ 40,305 2.21 % $ 26,634 1.85 % Net interest margin 2.87 % 2.37 % 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. 80 Table of Contents Rate/Volume Analysis The following table sets forth the effects of changing rates and volumes on net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. 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. Year Ended December 31, 2024 vs. 2023 Increase (Decrease) Due to Rate Volume Total Interest income: Interest-earning balances in other banks $ 466 $ (276) $ 190 Investment securities (31) (5) (36) Loans held for sale (7,010) 16,617 9,607 Loans held for investment 2,926 14,358 17,284 Total interest income (3,649) 30,694 27,045 Interest expense: Demand 390 40 430 Savings and NOW (4,190) 10,805 6,615 Money Market (259) 348 89 Time 2,144 3,562 5,706 Borrowings 3,106 (2,572) 534 Total interest expense 1,191 12,183 13,374 Net interest income $ (4,840) $ 18,511 $ 13,671 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, 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. 81 Table of Contents Noninterest Income Year ended December 31, 2024/2023 Increase/(Decrease) 2024 2023 Amount Percent Dividend income $ 1,519 $ 1,757 $ (238) (13.5) % Net loss on loan servicing assets (12,665) (4,282) (8,383) 195.8 Servicing income 20,087 18,289 1,798 9.8 Net gains on sales of loans 97,183 51,467 45,716 88.8 Net gain (loss) on loans under the fair value option 5,200 18,008 (12,808) (71.1) Technology and IT support income 19,643 24,916 (5,273) (21.2) Electronic payment processing income 46,049 42,855 3,194 7.5 Other noninterest income 40,296 23,762 16,534 69.6 Total noninterest income $ 217,312 $ 176,772 $ 40,540 22.9 % 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 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 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. 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. 82 Table of Contents 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 year ended December 31, 2024 and 2023 were as follows: Year Ended December 31, 2024 December 31, 2023 $ Amount $ Amount 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 $ 97,183 $ 51,467 Year Ended December 31, 2024 December 31, 2023 # of Loans $ Amount # of Loans $ Amount 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 1 110.97 % 110.20 % 1 Realized gains greater than 110.00% must be split 50/50 with the SBA in accordance with SBA regulations. The realized gains recognized above reflect amounts net of split with the SBA. 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 (%) Average 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. 83 Table of Contents 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 December 31, 2024 December 31, 2023 Change SBA 7(a) Unguaranteed Loans $ (26,346) $ 14,765 $ (41,111) SBA 7(a) Guaranteed Loans 493 (688) 1,181 SBA 504 and Non-SBA Loans 31,053 3,931 27,122 Net Gain (Loss) on Loans Accounted for Under the Fair Value Option $ 5,200 $ 18,008 $ (12,808) 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 Year ended December 31, 2024/2023 Increase/(Decrease) 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 Professional services expense 15,813 13,077 2,736 20.9 Other loan origination and maintenance expense 13,770 9,433 4,337 46.0 Depreciation and amortization 1,784 2,884 (1,100) (38.1) Loss on extinguishment of debt — 271 (271) (100.0) Other general and administrative costs 21,272 22,357 (1,085) (4.9) Total noninterest expense $ 162,709 $ 146,329 $ 16,380 11.2 % 84 Table of Contents 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 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 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: 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 % 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, 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. 85 Table of Contents 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 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 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 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. 86 Table of Contents Liquidity and Capital Resources Overview 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. The 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 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. 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: Actual For Capital Adequacy Purposes 1 For Consideration as Well-Capitalized NewtekOne, Inc. - December 31, 2024 Amount Ratio Amount Ratio Amount Ratio Tier 1 Capital (to Average Assets) $ 231,899 13.3 % $ 69,727 4.0 % N/A N/A Common Equity Tier 1 (to Risk-Weighted Assets) 231,899 17.0 % 61,492 4.5 % N/A N/A Tier 1 Capital (to Risk-Weighted Assets) 231,899 17.0 % 81,990 6.0 % N/A N/A 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, 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. Actual For Capital Adequacy Purposes 1 For Consideration as Well-Capitalized Newtek Bank - December 31, 2024 Amount Ratio Amount Ratio Amount Ratio Tier 1 Capital (to Average Assets) $ 120,078 11.9 % $ 40,197 4.0 % $ 50,246 5.0 % Common Equity Tier 1 (to Risk-Weighted Assets) 120,078 14.2 % 38,151 4.5 % 55,107 6.5 % Tier 1 Capital (to Risk-Weighted Assets) 120,078 14.2 % 50,868 6.0 % 67,823 8.0 % 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. 87 Table of Contents Public Offerings Equity ATM Program On June 25, 2020, the Company entered into the 2020 ATM Equity Distribution Agreement. On July 20, 2022, the Company entered into Amendment No. 1 to the 2020 ATM Equity Distribution Agreement. The 2020 ATM Equity Distribution Agreement, as amended, provided that the Company could offer and sell up to 6,400,000 shares of common stock from time to time through the placement agents. From inception through December 31, 2022, we sold 3,069,754 shares of our common stock at a weighted average price of $23.02 per share. Proceeds, net of offering costs and expenses, were $70.6 million. The Company paid the placement agents $1.4 million in compensation. On November 17, 2023, the Company entered into the 2023 ATM Equity Distribution Agreement. 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 $ 282 $ — Stock Repurchase Program 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 following twelve months. 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 30 — — Net weighted average price per share $ 13.35 $ — $ — Net proceeds $ 402 $ — $ — 2029 Notes 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 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. 88 Table of Contents 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. 2028 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. 2026 Notes 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 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. 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 these 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 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. 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. 2024 Notes 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. 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. The 2024 Notes traded on the Nasdaq Global Market under the trading symbol “NEWTL” until the 2024 Notes matured on August 1, 2024. 89 Table of Contents Private Placements 2025 Notes 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. The offering was consummated pursuant to the terms of a purchase agreement among the Company and an accredited investor, which provided for the 2025 6.85% Notes to be issued to the purchaser in a private placement in reliance on Section 4(a)(2) of the Securities Act. 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. 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 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. 2027 Notes 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 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 Prior to October 2023, NSBF maintained a $150.0 million Capital One facility to finance NSBF’s origination of unguaranteed and guaranteed portions of SBA 7(a) loans. The portion of the facility collateralized by the government guaranteed portion of SBA 7(a) loans had an interest rate of Prime minus 0.75% and the interest rate on the portion of the facility collateralized by the non-guaranteed portion of SBA 7(a) loans was Prime plus 0.25% . The facility provided for a 55% advance rate on the non-guaranteed portions of the SBA 7(a) loans NSBF originated, and a 90% advance rate on the guaranteed portions of SBA 7(a) loans NSBF originated and a 90% advance rate on the guaranteed portions of SBA 7(a) loans NSBF originated. NSBF ceased originating new loans in April 2023. 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. 90 Table of Contents Securitization Transactions From 2010 through June 2023, NSBF engaged in thirteen (13) securitizations of the unguaranteed portions of its SBA 7(a) loans. In the securitizations, NSBF used a special purpose entity (the “Trust”) which is considered a variable interest entity. Applying the consolidation requirements for VIEs under the accounting rules in ASC Topic 860, Transfers and Servicing, and ASC Topic 810, Consolidation, which became effective January 1, 2010, the Company determined that as the primary beneficiary of the securitization vehicle, based on its power to direct activities through its role as servicer for the Trust and its obligation to absorb losses and right to receive benefits, it needed to consolidate the Trusts. NSBF therefore consolidated the entity using the carrying amounts of the Trust’s assets and liabilities. NSBF reflects the legacy portfolio of SBA 7(a) loans and reflects the associated financing in Notes Payable - Securitization trusts on the Consolidated Statements of Financial Condition. In June 2023, NSBF completed its thirteenth securitization which resulted in the transfer of $103.9 million of unguaranteed portions of SBA loans to the 2023-1 Trust. The 2023-1 Trust in turn issued securitization notes for the par amount of $103.9 million, consisting of $84.3 million of Class A notes and $19.6 million Class B notes, against the 2023-1 Trust assets in a private placement. 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 October 2049. 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. The 2022-1 Trust in turn issued securitization notes for the par amount of $116.2 million, consisting of $95.4 million of Class A notes and $20.8 million Class B notes, against the 2022-1 Trust assets in a private placement. 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 October 2049. 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. The 2021-1 Trust in turn issued securitization notes for the par amount of $103.4 million, consisting of $79.7 million of Class A notes and $23.8 million Class B notes, against the 2021-1 Trust assets in a private placement. 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 December 2048. The Class A and Class B notes bear interest at an average rate of adjusted SOFR plus 1.92% across both classes. In October 2019, NSBF completed its tenth securitization which resulted in the transfer of $118.9 million of unguaranteed portions of SBA loans to the 2019-1 Trust. The 2019-1 Trust in turn issued securitization notes for the par amount of $118.9 million, consisting of $93.5 million of Class A notes and $25.4 million Class B notes, against the 2019-1 Trust assets in a private placement. 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 December 2044. 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. The 2018-1 Trust in turn issued securitization notes for the par amount of $108.6 million, consisting of $82.9 million Class A notes and $25.7 million of Class B notes, against the assets in a private placement. 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. The 2017-1 Trust in turn issued securitization notes for the par amount of $75.4 million, consisting of $58.1 million Class A notes and $17.3 million of Class B notes, against the assets in a private placement. 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 2043. On February 27, 2023, the 2017-1 Trust was terminated as a result of NSBF purchasing the 2017-1 Trust assets, with the 2017-1 Trust’s noteholders receiving the redemption price. 91 Table of Contents Cash Flows and Liquidity The following table summarizes the Company’s available sources of liquidity as of December 31, 2024: Availability as of December 31, 2024 December 31, 2023 Unrestricted cash $ 6,941 $ 15,398 Lines of credit at other commercial banks 1 60,903 40,418 Newtek Bank: 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 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, 2024 Year Ended December 31, 2023 Net cash used in operating activities $ (153,014) $ (169,219) Net cash used in investing activities (209,051) (172,235) Net cash provided by financing activities 560,897 344,974 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/(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, 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. 92 Table of Contents Contractual Obligations The following table represents the Company’s obligations and commitments as of December 31, 2024. Amounts represent principal only and are not shown net of unamortized debt issuance costs. See NOTE 13—BORROWINGS. Payments due by period Contractual Obligations Total 2025 2026 2027 2028 2029 Thereafter Deposits: Demand $ 11,142 $ 11,142 $ — $ — $ — $ — $ — Checking 103,978 103,978 — — — — — Money market 62,001 62,001 — — — — — Savings 386,680 386,680 — — — — — Time deposits 409,251 351,906 36,347 20,180 680 138 — Webster NMS Note 1 32,894 3,987 5,981 22,926 — — FHLB Advances 15,330 7,982 2,094 5,254 — — — SPV I Capital One Facility 1 21,300 21,300 — — — — — SPV II Deutsche Bank Facility 1 54,800 — — 54,800 — — — SPV III One Florida Bank Facility 1 23,075 23,075 — — — — — Securitization Notes Payable 189,231 — — — — — 189,231 Parent Company Notes: 2025 5.00% Notes 30,000 30,000 — — — — 2026 Notes 115,000 — 115,000 — — — 2027 Notes 2 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 — — — — — Operating Leases 8,264 2,383 2,355 798 242 249 2,237 Totals $ 1,700,723 $ 1,005,336 $ 161,777 $ 153,958 $ 40,922 $ 147,262 $ 191,468 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, 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. 93 Table of Contents Guarantees The Company is a guarantor on several warehouse lines of credit as noted in the above table under Contractual Obligations. Refer to NOTE 13—BORROWINGS to the consolidated financial statements for the amounts outstanding, line availability, and term. The Company is also a guarantor on an NMS term loan facility. At December 31, 2024, the Company determined that it is not probable that payments would be required to be made under the guarantees. The Company is also a guarantor on certain of NSBF’s potential obligations to the SBA pursuant to the Wind-down Agreement. Specifically, pursuant to the Wind-down Agreement, the Company has guaranteed NSBF’s obligations to the SBA for post-purchase repairs or denials on the guaranteed portion of 7(a) Loans sold by NSBF on the secondary market or servicing/liquidation post-purchase repairs or denial, and has funded a $10.0 million restricted cash account at Newtek Bank to secure these potential obligations. Critical Accounting Policies and Estimates The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies for the fiscal year ended December 31, 2024. 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. 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 The allowance for credit losses consists of the allowance for credit losses and the reserve for unfunded commitments. As a result of the Company’s Acquisition the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“CECL”) and its related amendments, we developed a methodology for estimating the reserve for credit losses. The standard replaced the “incurred loss” approach with an “expected loss” approach known as current expected credit loss. The CECL approach requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). It removes the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was “probable” a loss event was “incurred.” The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. The Company then considers whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, the Company considers forecasts about future economic conditions that are reasonable and supportable. 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 94 Table of Contents 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. Management of the Company considers the accounting policy relating to the allowance for credit losses to be a critical accounting policy given the uncertainty in evaluating the level of the allowance required to cover management’s estimate of all expected credit losses over the expected contractual life of our loan portfolio. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolio and other financial assets to which CECL applies, in light of the factors then prevailing, may result in significant changes in the allowance for credit losses in those future periods. While management’s current evaluation of the allowance for credit losses indicates that the allowance is appropriate, the allowance may need to be increased under adversely different conditions or assumptions. Going forward, the impact of utilizing the CECL approach to calculate the reserve for credit losses will be significantly influenced by the composition, characteristics, and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility in the reserve for credit losses, and therefore, greater volatility to our reported earnings. Consideration of losses occurs when serious doubt regarding the repayment of the loan is present. For real estate loans, current appraisals will aid in determining the amount to be charged off. For commercial loans, collateral valuations and borrower guarantees should be considered; however, weight to these two sources should be limited. Once a deficiency in collateral is determined, a reserve equal to the deficiency should be made immediately to the Allowance for Credit Losses (ACL). 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. 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 primarily from the guaranteed portions of SBA 7(a) loans and to a lesser extent ALP and SBA 504 loans they originate and sell. 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 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. Recently Adopted Accounting Pronouncements and New Accounting Standards Refer to NOTE 2—SIGNIFICANT ACCOUNTING POLICIES for information on recently adopted accounting pronouncements and new accounting standards. Off Balance Sheet Arrangements In the normal course of business, the Company enters into various transactions to meet the financing needs of clients, which, in accordance with GAAP, are not included in the consolidated balance sheets. These transactions may include commitments to extend credit, standby letters of credit, and the construction phase of SBA 504 loans, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. The SBA 504 loans are expected to partially draw, if not fully draw. All off-balance sheet commitments are included in the determination of the amount of risk-based capital that the Company and Newtek Bank are required to hold. The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, standby letters of credit, and commercial letters of credit is represented by the contractual or notional amount of those instruments. 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 credit losses. Further information related to financial instruments can be found in NOTE 15—COMMITMENTS AND CONTINGENCIES. 95 Table of Contents Recent Developments Sale of NTS 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: IPM). 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. 96 Table of Contents