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What changed in NewtekOne, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NewtekOne, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+1312 added−845 removedSource: 10-K (2025-03-17) vs 10-K (2024-04-01)

Top changes in NewtekOne, Inc.'s 2024 10-K

1312 paragraphs added · 845 removed · 496 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

181 edited+73 added−35 removed194 unchanged
Biggest changeNSBF, which is in the process of winding-down its operations, will continue to manage and service its portfolio of guaranteed and unguaranteed SBA 7(a) loans pursuant to a lender servicer provider agreement with SBL. 10 We believe our more than twenty years of experience as one of the largest SBA 7(a) lenders, provides us with a distinct competitive advantage over other lenders that have not overcome these significant barriers-to-entry in our primary loan market.
Biggest changeWe believe our more than twenty years of experience as one of the largest SBA 7(a) lenders, provides us with a distinct competitive advantage over other lenders that have not overcome significant barriers-to-entry into our primary loan market. We originated $943.0 million of SBA 7(a) loans during 2024 and $814.4 million of SBA 7(a) loans during 2023.
We believe our current infrastructure and expansive relationships will continue to enable us to review a significant amount of direct (or non-brokered) business opportunities. Flexible, Customized Business and Financial Solutions for Seasoned, Independent Business Owners.
We believe our current infrastructure and expansive relationships will continue to enable us to review a significant amount of direct (or non-brokered) business opportunities. Flexible, Customized Financial Solutions for Seasoned, Independent Business Owners.
Even though NSBF has ceased originating new SBA 7(a) loans, it has retained and may be exposed to repair and denial liability to the SBA for SBA 7(a) loans in NSBF’s portfolio.
Even though NSBF has ceased originating new SBA 7(a) loans, it has retained and may be exposed to repair and denial liability to the SBA for the SBA 7(a) loans in NSBF’s portfolio.
In certain instances, the SBA may refuse to honor a guaranty purchase request in full (referred to by the SBA as a “denial”) or in part (referred to by the SBA as a “repair”), or recover all or part of the funds already paid in connection with a guaranty purchase.
In certain instances, the SBA may refuse to honor a guaranty purchase request in full (referred to by the SBA as a “denial”) or in part (referred to by the SBA as a “repair”), or recover all or part of the funds already paid in connection with a guaranty purchase.
Financials should consist of (a) year-end balance sheets for the last three years, including detailed debt schedule, (b) year-end profit & loss (P&L) statements for the last three years, (c) reconciliation of net worth, (d) interim balance sheet, including a detailed debt schedule, and (e) interim P&L statements; • formation documents for all obligor entities to validate existence and structure; • the applicant’s original business license or certificate of doing business; 26 • records of any loans the applicant may have applied for in the past; • signed personal and business U.S. federal income tax returns of the principals of the applicant’s business for previous three years; • personal resumes for each principal; • a brief history of the business and its challenges, including an explanation of why the SBA loan is needed and how it will help the business; • a copy of the applicant’s business lease, or note from the applicant’s landlord, giving terms of proposed lease; and • if purchasing an existing business, (a) current balance sheet and P&L statement of business to be purchased, (b) previous two years’ U.S. federal income tax returns of the business, (c) proposed Bill of Sale including Terms of Sale, and (d) asking price with schedule of inventory, machinery and equipment, furniture and fixtures.
Financials should consist of (a) year-end balance sheets for the last three years, including detailed debt schedule, (b) year-end profit & loss (P&L) statements for the last three years, (c) reconciliation of net worth, (d) interim balance sheet, including a detailed debt schedule, and (e) interim P&L statements; • formation documents for all obligor entities to validate existence and structure; • the applicant’s original business license or certificate of doing business; • records of any loans the applicant may have applied for in the past; • signed personal and business U.S. federal income tax returns of the principals of the applicant’s business for previous three years; • personal resumes for each principal; • a brief history of the business and its challenges, including an explanation of why the SBA loan is needed and how it will help the business; • a copy of the applicant’s business lease, or note from the applicant’s landlord, giving terms of proposed lease; and • if purchasing an existing business, (a) current balance sheet and P&L statement of business to be purchased, (b) previous two years’ U.S. federal income tax returns of the business, (c) proposed Bill of Sale including Terms of Sale, and (d) asking price with schedule of inventory, machinery and equipment, furniture and fixtures.
For example: • pursuant to Rule 13a-14 of the Exchange Act, our Chief Executive Officer and Chief Financial Officer must certify the accuracy of the consolidated financial statements contained in our periodic reports; • pursuant to Item 307 of Regulation S-K, our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures; • pursuant to Rule 13a-15 of the Exchange Act, our management must prepare a report regarding its assessment of our internal controls over financial reporting; and 34 • pursuant to Item 308 of Regulation S-K and Rule 13a-15 of the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
For example: • pursuant to Rule 13a-14 of the Exchange Act, our Chief Executive Officer and Chief Financial Officer must certify the accuracy of the consolidated financial statements contained in our periodic reports; • pursuant to Item 307 of Regulation S-K, our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures; • pursuant to Rule 13a-15 of the Exchange Act, our management must prepare a report regarding its assessment of our internal controls over financial reporting; and • pursuant to Item 308 of Regulation S-K and Rule 13a-15 of the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
See “Risk Factors - Risks Related to SBA Lending - There can be no guarantee that Newtek Bank and NSBF will be able to maintain their SBA 7(a) lending licenses.” During the initial application process for a loan originated under the SBA 7(a) Program, a NewtekOne business service specialist assists and guides the applicant through the application process, beginning with the submission of an online form through our customized loan portal.
See “Risk Factors - Risks Related to SBA Lending - There can be no guarantee that Newtek Bank and NSBF will be able to maintain their SBA 7(a) lending licenses.” During the initial application process for a loan originated under the SBA 7(a) Program, a NewtekOne business service specialist (BSS) assists and guides the applicant through the application process, beginning with the submission of an online form through our customized loan portal.
In this regard, and unless otherwise directed by the OCC, we have made commitments for Newtek Bank to maintain a tier 1 leverage ratio of no less than 10% and a total risk-based capital ratio of 11.5% for the term of the Operating Agreement. 19 The Federal Deposit Insurance Act provides for a system of “prompt corrective action” (“PCA”).
In this regard, and unless otherwise directed by the OCC, we have made commitments for Newtek Bank to maintain a tier 1 leverage ratio of no less than 10% and a total risk-based capital ratio of 11.5% for the term of the Operating Agreement. The Federal Deposit Insurance Act provides for a system of “prompt corrective action” (“PCA”).
These businesses should be well positioned to capitalize on organic and strategic growth opportunities, and should compete in industries with strong fundamentals and meaningful barriers to entry. We further analyze prospective lending opportunities in order to identify competitive advantages within their industry, which may result in superior operating margins or industry-leading growth. 23 Customer and Supplier Diversification.
These businesses should be well positioned to capitalize on organic and strategic growth opportunities, and should compete in industries with strong fundamentals and meaningful barriers to entry. We further analyze prospective lending opportunities in order to identify competitive advantages within their industry, which may result in superior operating margins or industry-leading growth. Customer and Supplier Diversification.
Other than rejections for ineligibility of the applicant, the type of business or the loan purpose, we may decline a loan application for the following reasons: 30 • after taking into consideration prior liens and considered along with other credit factors, the net value of the collateral offered as security is not sufficient to protect the interest of the U.S.
Other than rejections for ineligibility of the applicant, the type of business or the loan purpose, we may decline a loan application for the following reasons: • after taking into consideration prior liens and considered along with other credit factors, the net value of the collateral offered as security is not sufficient to protect the interest of the U.S.
We believe that some of the competitive advantages of our platform include: • compatible products such as our e-commerce offerings that we are able to bundle to increase sales, reduce costs and reduce risks for our customers and enable us to sell two, three, or four products at the same time; • our patented NewTracker® referral system, which allows us to process new business utilizing a web-based, centralized processing point and provides back end scalability, and allows our alliance partners to offer a centralized access point for their independent business owner clients as part of their larger strategic approach to marketing, thus demonstrating their focus on providing a suite of services to this market in addition to their core service; • our focus on developing and marketing business solutions and financial products and services aimed at the independent business owner market; • scalability, which allows us to size our business solutions capabilities very quickly to meet customer and market needs; • the ability to offer personalized service and competitive rates; • a strategy of multiple channel distribution, which gives us maximum exposure in the marketplace; 32 • high quality customer service 24/7/365 across all business lines, with a focus primarily on absolute customer service and; • a telephonic interview process, as opposed to requiring handwritten or data-typing processes, which allows us to offer high levels of customer service and satisfaction, particularly for independent business owner who do not get this service from our competitors.
We believe that some of the competitive advantages of our platform include: 32 Table of Contents • compatible products such as our e-commerce offerings that we are able to bundle to increase sales, reduce costs and reduce risks for our customers and enable us to sell two, three, or four products at the same time; • our patented NewTracker® referral system, which allows us to process new business utilizing a web-based, centralized processing point and provides back end scalability, and allows our alliance partners to offer a centralized access point for their independent business owner clients as part of their larger strategic approach to marketing, thus demonstrating their focus on providing a suite of services to this market in addition to their core service; • our focus on developing and marketing business solutions and financial products and services aimed at the independent business owner market; • scalability, which allows us to size our business solutions capabilities very quickly to meet customer and market needs; • the ability to offer personalized service and competitive rates; • a strategy of multiple channel distribution, which gives us maximum exposure in the marketplace; • high quality customer service 24/7/365 across all business lines, with a focus primarily on absolute customer service and; • a telephonic and video interview process, as opposed to requiring handwritten or data-typing processes, which allows us to offer high levels of customer service and satisfaction, particularly for independent business owner who do not get this service from our competitors.
However, there is a specific exception for loans by financial institutions, such as Newtek Bank, to its executive officers and directors that are made in compliance with federal 21 banking laws. Acquisition of a Significant Interest in the Company Banking laws impose various regulatory requirements on parties that may seek to acquire a significant interest in the Company.
However, there is a specific exception for loans by financial institutions, such as Newtek Bank, to its executive officers and directors that are made in compliance with federal banking laws. Acquisition of a Significant Interest in the Company Banking laws impose various regulatory requirements on parties that may seek to acquire a significant interest in the Company.
Following the Acquisition, NBSF continues to service its current portfolio of SBA 7(a) loans via a lender servicer provider agreement with SBL, and new SBA 7(a) loan originations are being made by Newtek Bank. However, there can be no guarantee that Newtek Bank and NSBF will be able to maintain their SBA 7(a) lending licenses.
Following the Acquisition, NBSF continues to service its current portfolio of SBA 7(a) loans via a lender service provider agreement with SBL, and new SBA 7(a) loan originations are being made by Newtek Bank. However, there can be no guarantee that Newtek Bank and NSBF will be able to maintain their SBA 7(a) lending licenses.
As a result, we believe we are well positioned to provide financing to the types of independent business owners that we have historically targeted and we have the technology and infrastructure in place presently to do it cost effectively in all 50 states and across many industries. Increased demand for comprehensive, business-critical SMB solutions .
As a result, we believe we are well positioned to continue to provide financing to the types of independent business owners that we have historically targeted and we have the technology and infrastructure in place presently to do it cost effectively in all 50 states and across many industries. Increased demand for comprehensive, business-critical SMB solutions .
Taxation as a Financial Holding Company As a BDC, prior to our conversion on January 6, 2023 to a financial holding company, for any taxable year in which we qualified as a RIC and satisfied the Annual Distribution Requirement, we generally were not be subject to U.S. federal income tax on the portion of our income we distributed to our stockholders.
Taxation as a Financial Holding Company Prior to our conversion on January 6, 2023 to a financial holding company from a BDC, for any taxable year in which we qualified as a RIC and satisfied the Annual Distribution Requirement, we generally were not be subject to U.S. federal income tax on the portion of our income we distributed to our stockholders.
Our Code of Ethics establishes applicable policies, guidelines, and procedures that promote ethical practices and conduct by the Company and all its employees, officers, and directors. Our Code of Ethics can be found on our website at https:/investor.newtekbusinessservices.com/corporate-governance . 33 We aim to provide a safe environment at work.
Our Code of Ethics establishes applicable policies, guidelines, and procedures that promote ethical practices and conduct by the Company and all its employees, officers, and directors. Our Code of Ethics can be found on our website at https:/investor.newtekbusinessservices.com/corporate-governance . We aim to provide a safe environment at work.
The Company has guaranteed NSBF’s obligations to the SBA and has funded a $10 million account at Newtek Bank to secure these potential obligations. Any future post-purchase denials and repairs demands on NSBF could negatively impact our results of operations. Newtek Bank has been granted PLP status.
The Company has guaranteed NSBF’s obligations to the SBA and has funded a $10.0 million account at Newtek Bank to secure these potential obligations. Any future post-purchase denials and repairs demands on NSBF could negatively impact our results of operations. Newtek Bank has been granted PLP status.
We expect that this approach will allow us to continue to cross-sell the business and financial solutions of our subsidiaries and subsidiaries to our customers and customers of our subsidiaries, and to build upon our extensive deal sourcing infrastructure. 25 Screening We screen all potential loan opportunities that we receive for suitability and consistency with our underwriting criteria.
We expect that this approach will allow us to continue to cross-sell the business and financial solutions of our subsidiaries and subsidiaries to our customers and customers of our subsidiaries, and to build upon our extensive deal sourcing infrastructure. Screening We screen all potential loan opportunities that we receive for suitability and consistency with our underwriting criteria.
A thorough review of the facts 27 behind the bankruptcy and impact on creditors will be undertaken in determining whether the principal has demonstrated the necessary willingness and ability to repay debts. In addition, we will examine whether the applicant and its principals and guarantors have abided by the laws of their community.
A thorough review of the facts behind the bankruptcy and impact on creditors will be undertaken in determining whether the principal has demonstrated the necessary willingness and ability to repay debts. In addition, we will examine whether the applicant and its principals and guarantors have abided by the laws of their community.
Newtek Insurance Newtek Insurance Agency (NIA), is a wholly-owned subsidiary which is a retail and wholesale brokerage insurance agency licensed in all 50 states, specializing in the sale of commercial and health/benefits lines insurance products to independent business owners, as well as the sale of various personal lines of insurance.
Newtek Insurance Agency (NIA), a wholly-owned subsidiary, is a retail and wholesale brokerage insurance agency licensed in all 50 states, specializing in the sale of commercial and health/benefits lines insurance products to independent business owners, as well as the sale of various personal lines of insurance.
Under the SBA’s 7(a) lending program, a bank, such Newtek Bank, or a nonbank lender licensed by the SBA (such as NSBF) underwrites a loan between $5,000 and $5.0 million for a variety of general business purposes based on the SBA’s loan program requirements.
Under the SBA 7(a) program, a bank, such as Newtek Bank, or a nonbank lender licensed by the SBA, such as NSBF, underwrites a loan between $5,000 and $5.0 million for a variety of general business purposes based on the SBA’s loan program requirements.
In addition, we believe that the Newtek Advantage TM dashboard, which patent is pending, is designed to be a management tool for our business clientele that can make their businesses more successful and that our clients can depend on.
In addition, we believe that the Newtek Advantage ® dashboard, which patent is pending, is designed to be a management tool for our business clientele that can make their businesses more successful and that our clients can depend on.
Through our web presence, www.newtekone.com , we believe we are establishing ourselves as a preferred “go-to” provider for independent business owner financial and business solutions offered by NewtekOne ® and its subsidiaries, including Newtek Bank ® .
Through our web presence, www.newtekone.com and newtekbank.com , we believe we are establishing ourselves as a preferred “go-to” provider for independent business owner financial and business solutions offered by NewtekOne ® and its subsidiaries, including Newtek Bank ® .
As a result of the Acquisition, all SBA 7(a) loan originations were transitioned to Newtek Bank in April 2023, and NSBF ceased the origination of SBA 7(a) loans, relinquished its PLP status and is winding-down its operations.
As a result of the Acquisition, all SBA 7(a) loan originations were transitioned from NSBF to Newtek Bank in April 2023, and NSBF ceased the origination of SBA 7(a) loans, relinquished its PLP status and is winding-down its operations.
In general, appraisals will be required as follows: • For loans greater than $500,000 secured by commercial real property; or • For loans $500,000 or less secured by commercial real property, an appraisal will be required if such appraisal is necessary for appropriate evaluation of creditworthiness. • The appraiser must be either State-licensed or State-certified (except when the property’s estimated value is over $1,000,000, when the appraiser must be State-certified) and the appraisal report must conform to Uniform Standards of Professional Appraisal Practice (USPAP); • Appraisal reviews are required for all commercial real estate with an appraised value of $500,000 or more conducted by a licensed/certified and independent MAI appraiser.
In general, appraisals will be required as follows: • For loans greater than $500,000 secured by commercial real property; or • For loans $500,000 or less secured by commercial real property, an appraisal will be required if such appraisal is necessary for appropriate evaluation of creditworthiness. • The appraiser must be either State-licensed or State-certified (except when the property’s estimated value is over $1,000,000, when the appraiser must be State-certified) and the appraisal report must conform to Uniform Standards of Professional Appraisal Practice (USPAP); • Appraisal reviews are required for all CRE with an appraised value of $500,000 or more conducted by a licensed/certified and independent MAI appraiser.
Human Capital including Senior Lending Team and Executive Officers The long-term success of our Company depends on our people. Our team comprises experienced lending professionals, executive officers and treasury, finance, risk management, administrative support, IT and human resources professionals.
Human Capital including Senior Lending Team and Executive Officers The long-term success of our Company depends on our people. Our team comprises experienced lending professionals, executive officers and treasury, finance, risk management, administrative support and human resources professionals.
The key members of our senior lending team (“Senior Lending Team”), many of whom have worked together for more than ten years, each have over 25 years of experience in finance-related fields.
The key members of our senior lending team (“Senior Lending Team”), many of whom have worked together for more than ten years, have over 25 years of experience in finance-related fields.
In the event of a repair or denial, liability on the guaranty, in whole or in part, would be transferred to NSBF or 22 Newtek Bank as the originator of the loan, as the case may be.
In the event of a repair or denial, liability on the guaranty, in whole or in part, would be transferred to Newtek Bank or NSBF as the originator of the loan, as the case may be.
We believe the combination of our brand, our portal, our patented NewTracker® technology, and our web presence as Your Business Solutions Company® have created an extensive deal sourcing infrastructure. Although we pay fees for loan originations that are referred to us by our alliance partners, our lending team works directly with the borrower to assemble and underwrite loans.
We believe the combination of our alliance relationships, brand, portal, patented NewTracker® technology, and brand presence as Your Business Solutions Company® have created an extensive deal sourcing infrastructure. Although we pay fees for loan originations that are referred to us by our alliance partners, our lending team works directly with the borrower to assemble and underwrite loans.
If the NAICS code begins with 457 (gas stations with or without convenience stores), the environmental investigation must begin with a Phase I and the SBA lender must also refer to and, if applicable, comply with “Environmental Investigation Requirements for Gas Station Loans” in the applicable Appendix of SBA SOP 50 10; • If there is not a NAICS code match to an environmentally sensitive industry, or if the property is a unit in a multi-unit building, the SBA lender must proceed as follows: ◦ If the loan amount is up to and including $250,000, the environmental investigation may begin with an environmental questionnaire. ◦ If the loan amount is more than $250,000, the environmental investigation must, at a minimum, begin with an environmental questionnaire and records search with risk assessment.
If the NAICS code begins with 457 (gas stations with or without convenience stores), the environmental investigation must begin with a Phase I and the SBA lender must also refer to and, if applicable, comply with “Environmental Investigation Requirements for Gas Station Loans” in the applicable Appendix of SBA SOP 50 10; • If there is not a NAICS code match to an environmentally sensitive industry, or if the property is a unit in a multi-unit building, the SBA lender must proceed as follows: ◦ If the loan amount is up to and including $250,000, the environmental investigation may begin with an environmental questionnaire. 30 Table of Contents ◦ If the loan amount is more than $250,000, the environmental investigation must, at a minimum, begin with an environmental questionnaire and records search with risk assessment.
We target our loans made through our business finance ecosystem under the SBA 7(a) program, to produce generally, a coupon rate of prime plus 3.0% to 6.50% which enables us to generate rapid sales of the guaranteed portions of SBA 7(a) loans in the secondary market, which have historically produced gains and a yield on investment in excess of 30%.
We target our loans made through our business finance ecosystem under the SBA 7(a) program, to produce generally, a coupon rate of prime plus 3.0% to 6.50% which enables us to generate rapid sales of the guaranteed portions of SBA 7(a) loans in the secondary market, which have historically produced gains and a yield on investment.
Each member brings a complementary component to a team well-rounded in lending, finance, accounting, operations, strategy, business law and executive management. Our executive officers also oversees our subsidiaries and, to the extent that we may make additional equity investments in the future, the executive officers will also have primary responsibility for the identification, screening, review and completion of such investments.
Each member brings a complementary component to a team well-rounded in lending, finance, accounting, operations, strategy, business law and executive management. Our executive officers also oversee our subsidiaries and, to the extent that we may make additional equity investments in the future, the executive officers will also have primary responsibility for the identification, screening, review and completion of such investments.
Any portion of the premium that is above 110% of par value is shared equally with the SBA. However, there is no guarantee that Newtek Bank will be able to continue to earn premiums of 106% to 123% on future sales of the guaranteed portions of SBA 7(a) loans or will be able to maintain PLP status. See “Item 1A.
Any portion of the premium that is above 110% of par value is shared equally with the SBA. However, there is no guarantee that Newtek Bank will be able to continue to earn premiums on future sales of the guaranteed portions of SBA 7(a) loans or will be able to maintain PLP status. See “Item 1A.
There can be no assurance as to the actual effective income tax rates impacting the amounts and timing of cash flows and the amounts of income tax expense recorded by the Company, because such rates 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. 36
There can be no assurance as to the actual effective income tax rates impacting the amounts and timing of cash flows and the amounts of income tax expense recorded by the Company, because such rates 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. 36 Table of Contents
Deposits and Depository Services We are focused on growing and retaining a stable deposit base and deepening relationships with our current and prospective deposit customers by leveraging our customer-direct, easy-to-use, digital account opening platform. Newtek Bank is a digital direct bank with no branch network that obtains retail deposits directly from customers.
Deposits and Depository Services We are focused on growing and retaining a stable deposit base and deepening relationships with Newtek Bank’s current and prospective deposit customers by leveraging Newtek Bank’s customer-direct, easy-to-use, digital account opening platform. Newtek Bank is a digital direct bank with no branch network that obtains retail deposits directly from customers.
Other laws and regulations generally applicable to national banks also limit the amount of dividends and capital distributions that may be made by a national bank and/or require prior approval of the OCC. Federal Home Loan Bank System Newtek Bank is a member of the FHLB, which consists of 11 regional Federal Home Loan Banks.
Other laws and regulations generally applicable to national banks also limit the amount of dividends and capital distributions that may be made by a national bank and/or require prior approval of the OCC. Federal Home Loan Bank System Newtek Bank is a member of the Federal Home Loan Bank System (“FHLB”), which consists of 11 regional Federal Home Loan Banks.
Deposit costs are based on multiple factors that impact businesses and consumers and can diverge from observed market indices (e.g. Prime or SOFR). To the extent deposit costs increase without a corresponding increase in the Prime rate, our profitability and net interest margins can be negatively impacted.
Deposit costs are based on multiple factors that impact businesses and consumers and can diverge from observed market indices (e.g. US Treasuries, Prime or SOFR). To the extent deposit costs increase without a corresponding increase in the Prime rate, our profitability and net interest margins can be negatively impacted.
These investment professionals have worked together to screen opportunities, underwrite new loans and manage a portfolio of loans made to independent business owner through two recessions, a credit crunch, the dot-com boom and bust and a historic, leverage-fueled asset valuation bubble and the COVID-19 pandemic.
These professionals have worked together to screen opportunities, underwrite new loans and manage a portfolio of loans made to independent business owner through two recessions, a credit crunch, the dot-com boom and bust, a leverage-fueled asset valuation bubble, and the COVID-19 pandemic.
Newtek Bank’s policy regarding the use of real estate appraisals and environmental reports is intended to provide for a secure, orderly and independent process for the ordering, receipt and approval of independent valuation and environmental reports. Commercial real estate appraisals are required on all primary collateral prior to the loan closing.
Newtek Bank’s policy regarding the use of real estate appraisals and environmental reports is intended to provide for a secure, orderly and independent process for the ordering, receipt and approval of independent valuation and environmental reports. CRE appraisals are required on all primary collateral prior to the loan closing.
Other companies, including Intuit®, are bundling electronic payment processing, web hosting and payroll services similar to ours in offerings that compete in the same SMB market. In addition, Newtek Bank competes with national banks, regional banks and digital banks to acquire and retain deposits.
Other companies, including Intuit®, are bundling electronic payment processing and payroll services similar to ours in offerings that compete in the same SMB market. In addition, Newtek Bank competes with national banks, regional banks and digital banks to acquire and retain deposits.
If the applicant’s debt service coverage ratio decreases to 1:1 or less than 1:1, the loan may only be made as an exception to our Underwriting Guidelines and would require the approval of our credit committee. Required Site Visit No loan will be funded without an authorized representative of Newtek Bank first making a site visit to the business premises.
If the applicant’s debt service coverage ratio decreases to 1:1 or less than 1:1, the loan may only be made as an exception to our Underwriting Guidelines and would require the approval of our credit committee. 27 Table of Contents Required Site Visit No loan will be funded without an authorized representative of Newtek Bank first making a site visit to the business premises.
SBA Lending Procedures Newtek Bank originates (and prior to January 6, 2023, for 20 years NSBF originated) loans under the SBA 7(a) Program (authorized by section 7(a) of the Small Business Act, 15 U.S.C. 636(a)), in accordance with our credit and underwriting policy, which incorporates by reference the applicable regulations and the SBA Standard Operating Procedures, Lender and Development Company Loan Program (“SOP 50 10 and 50 57”) (collectively, “SBA Loan Program Requirements”) as they relate to the financing and servicing of such loans.
SBA Lending Procedures Newtek Bank originates (and prior to January 6, 2023, for 20 years NSBF originated) loans under the SBA 7(a) Program (authorized by section 7(a) of the Small Business Act, 15 U.S.C. 636(a)), in accordance with our credit and underwriting policy, which incorporates by reference the applicable regulations and the SBA Standard Operating Procedures, Lender and Development Company Loan Program (collectively, “SBA Loan Program Requirements”) as they relate to the financing and servicing of such loans.
The incurrence of repairs and denials while NSBF is no longer generating income from the sales of guaranteed portions of SBA 7(a) loans can have a material negative impact on our financial results and liquidity. In addition, changes in SBA regulations and economic factors may adversely impact NSBF’s or Newtek Bank’s repair and denial rates. See “Item 1A.
The incurrence of repairs and denials while NSBF is no longer generating income from the sales of guaranteed portions of SBA 7(a) loans can have a material negative impact on our financial results and liquidity. In addition, changes in SBA regulations and economic factors may adversely impact Newtek Bank’s or NSBF’s repair and denial rates.
While capital can serve as an important cushion against losses, higher capital requirements can also adversely affect an institution’s ability to grow and/or increase leverage through deposit-gathering or other sources of funding. The Company and Newtek Bank are each subject to generally similar capital requirements adopted by the Federal Reserve and the OCC, respectively.
While capital can serve as an important cushion against losses, higher capital requirements can also adversely affect an institution’s ability to grow and/or increase leverage through deposit-gathering or other sources of funding. 18 Table of Contents The Company and Newtek Bank are each subject to generally similar capital requirements adopted by the Federal Reserve and the OCC, respectively.
We expect to lend to businesses with sufficiently diverse customer and supplier bases. We believe these businesses will be better able to endure industry consolidation, economic contraction and increased competition than those that are not sufficiently diversified.
We seek to lend to businesses with sufficiently diverse customer and supplier bases. We believe these businesses will be better able to endure industry consolidation, economic contraction and increased competition than those that are not sufficiently diversified.
ITEM 1. BUSINESS. Prior to January 6, 2023 and during the entirety of the 2022 fiscal year, we operated as an internally managed non-diversified closed-end management investment company that was regulated as a BDC under the 1940 Act, and was treated as a RIC under the Code for U.S. federal income tax purposes.
Prior to January 6, 2023 and during the entirety of the 2022 fiscal year, we operated as an internally managed non-diversified closed-end management investment company that was regulated as a BDC under the 1940 Act, and was treated as a RIC under the Code for U.S. federal income tax purposes.
The legal and regulatory regime is continually under review by legislatures, regulators and other governmental bodies, and changes regularly occur through the enactment or amendment of laws and regulations or through shifts in policy, implementation or enforcement. Changes are difficult to predict and could have significant effects on our business.
The legal and regulatory regime is continually under review by legislatures, regulators and other governmental bodies, and changes regularly occur through the enactment or amendment of laws and regulations or through shifts in policy, implementation or enforcement. Changes are difficult to predict and could have significant effects on our business. See “Item 1A.
If we fail to comply with these laws and regulations, we may be subject to significant penalties, judgments, other monetary or injunctive remedies, lawsuits (including putative class action lawsuits and actions by state and local attorneys general or other officials), customer rescission rights, supervisory or enforcement actions, and civil or criminal liability.
If we fail to comply with these laws and regulations, we may be subject to significant penalties, judgments, other monetary or injunctive remedies, lawsuits (including putative class action lawsuits and actions by state and local attorneys general or other officials), customer rescission rights, supervisory or enforcement actions, and civil or criminal liability. See “Item 1A.
Appraisals on a “subject to” basis are not acceptable. Liquidity: Liquidity, as measured by the current ratio, must be in line with the RMA industry average. An assessment of the adequacy of working capital is required. An assessment of the liquidity of a business is essential in determining the ability to meet future obligations.
Appraisals on a “subject to” basis are not acceptable. 28 Table of Contents Liquidity: Liquidity, as measured by the current ratio, must be in line with the RMA industry average. An assessment of the adequacy of working capital is required. An assessment of the liquidity of a business is essential in determining the ability to meet future obligations.
Valuation factors are applied as follows: 28 • Commercial real estate — 75% • Residential real estate — 85% • Vacant land — 50% • Machinery & Equipment — 50% • Furniture & Fixtures — 10% • Accounts receivable & inventory —10% • Leasehold improvements — 5% • Certificate of Deposit — 100% • Regulated Licenses — will vary dependent upon type of license and geographic area.
Valuation factors are applied as follows: • CRE — 75% • Residential real estate — 85% • Vacant land — 50% • Machinery & Equipment — 50% • Furniture & Fixtures — 10% • Accounts receivable & inventory —10% • Leasehold improvements — 5% • Certificate of Deposit — 100% • Regulated Licenses — will vary dependent upon type of license and geographic area.
We have adopted certain policies and procedures intended to comply with the Nasdaq Global Market’s corporate governance rules. We will continue to monitor our compliance with all future listing standards that are approved by the SEC and will take actions necessary to ensure that we are in compliance therewith.
We have adopted certain policies and procedures intended to comply with the Nasdaq Global Market’s corporate governance rules. We will continue to monitor our compliance with all future listing standards that are approved by the SEC and will take actions necessary to ensure that we are in compliance therewith. See “Item 1A.
See “Item 1A Risk Factors - Risks Related to Operating as a Financial Holding Company - Federal law may discourage certain acquisitions of our common stock which could have a material adverse effect on our shareholders.” Effect on Economic Environment The policies of regulatory authorities, including the monetary policy of the Federal Reserve, have a significant effect on the operating results of bank holding companies and their subsidiaries.
Risk Factors - Risks Related to Operation as a Financial Holding Company - Federal law may discourage certain acquisitions of our common stock which could have a material adverse effect on our shareholders.” Effect on Economic Environment The policies of regulatory authorities, including the monetary policy of the Federal Reserve, have a significant effect on the operating results of bank holding companies and their subsidiaries.
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 a Deutsche Bank credit facility and return capital to the NCL JV partners. On August 5, 2022, NewtekOne launched its second joint venture to invest in alternative lending program loans.
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 a Deutsche Bank credit facility and return capital to the NCL JV partners. On August 5, 2022, NewtekOne launched its second joint venture to invest in ALP loans.
On January 28, 2022, NCL JV closed a securitization with the sale of $56.3 million of Class A Notes, NCL Business Loan Trust 2022-1, Business Loan-Backed Notes, Series 2022-1, secured by a segregated asset pool consisting primarily of NCL JV’s portfolio of alternative lending program loans, including loans secured by liens on commercial or residential mortgaged properties, originated by NCL JV and NBL.
On January 28, 2022, NCL JV closed a securitization with the sale of $56.3 million of Class A Notes, NCL Business Loan Trust 2022-1, Business Loan-Backed Notes, Series 2022-1, secured by a segregated asset pool consisting primarily of NCL JV’s portfolio of ALP loans, including loans secured by liens on commercial or residential mortgaged properties, originated by NCL JV and NBL.
See “Item 1A Risk Factors - Risks Related to Operating as a Financial Holding Company - The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations.” Company as Source of Strength for Newtek Bank Federal law and Federal Reserve policy require that a bank holding company serve as a source of financial and managerial strength for any FDIC-insured depository institution that it controls.
Risk Factors - Risks Related to Operation as a Financial Holding Company - The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations.” The Company as a Source of Strength for Newtek Bank Federal law and Federal Reserve policy require that a bank holding company serve as a source of financial and managerial strength for any FDIC-insured depository institution that it controls.
We market our business and financial solutions through referrals from our alliance partners such as Stifel Bank, Axiom Bank, Credit Union National Association, ENT Federal Credit Union, Legacy Bank, Morgan Stanley Smith Barney, Flagstar Bank, Raymond James, Randolph Brooks Federal Credit Union, UBS, Meineke Dealers Purchasing Cooperative, Regions Bank, Hartford Insurance, Bank United, US Century Bank, Anderson Capital Advisors, Transworld Business Advisors, Army Navy Federal Credit Union, Teachers Federal Credit Union, Spire Federal Credit Union, Aamco, 1800 Accountants, and True Value Company, among others using our patented NewTracker® referral system as well as direct referrals from our web presence, www.newtekone.com .
We market our business and financial solutions through referrals from our alliance partners such as Stifel Bank, Credit Union National Association, ENT Federal Credit Union, Legacy Bank, Morgan Stanley Smith Barney, Flagstar Bank, Raymond James, Randolph Brooks Federal Credit Union, UBS, Meineke Dealers Purchasing Cooperative, Regions Bank, Hartford Insurance, Bank United, US Century Bank, Anderson Capital Advisors, Transworld Business Advisors, Army Navy Federal Credit Union, Teachers Federal Credit Union, Aamco, 1800 Accountants, Henry Schein, Stearns Bank, California Coast Credit Union, and True Value Company, among others using our patented NewTracker® referral system as well as direct referrals from our web presence, www.newtekone.com .
As such, we believe that we offer a competitive compensation and benefits structure that we believe is attractive to our current and prospective professionals. As we hire and develop individuals, we take succession planning into account and have succession plans in place for each of our senior leaders. As of December 31, 2023, our workforce consisted of 528 professionals.
As such, we believe that we offer a competitive compensation and benefits structure that we believe is attractive to our current and prospective professionals. As we hire and develop individuals, we take succession planning into account and have succession plans in place for each of our senior leaders. As of December 31, 2024, our workforce consisted of 591 professionals.
A key consideration is a strong balance sheet and sufficient historical or projected free cash flow to service any debt we may invest. Strong Competitive Position. We seek to lend to businesses that have developed strong, defensible product or service offerings within their respective market segment(s).
A key consideration is a strong balance sheet and sufficient historical or projected free cash flow to service any debt we may invest. 23 Table of Contents Strong Competitive Position. We seek to lend to businesses that have developed strong, defensible product or service offerings within their respective market segment(s).
In order to support a culture of learning, we provide many training opportunities for our employees to continue to build their skills and increase their effectiveness as members of a team, including offering a variety of external and internal classes and training sessions as well as hands-on learning and one-on-one mentorship. We continue to encourage dialogue between managers and employees.
In order to support a culture of learning, we provide many training opportunities for our employees to continue to build their skills and increase their effectiveness as members of a team, including offering a variety of external and internal classes and training sessions as well as hands-on learning and one-on-one mentorship.
See “Item 1A Risk Factors - Risks Related to Operating as a Financial Holding Company - The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations.” 20 Anti-Money Laundering, Sanctions and Financial Crime We are subject to a wide range of laws related to anti-money laundering, economic sanctions and prevention of financial crime, including the Bank Secrecy Act, the USA PATRIOT Act and economic sanctions programs.
Risk Factors - Risks Related to Operation as a Financial Holding Company - The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations.” Anti-Money Laundering, Sanctions and Financial Crime We are subject to a wide range of laws related to anti-money laundering, economic sanctions and prevention of financial crime, including the Bank Secrecy Act, the USA PATRIOT Act and economic sanctions programs.
The determination whether a party “controls” a depository institution or its holding company for purposes of these laws is based on applicable regulations and all of the facts and circumstances surrounding the investment.
The determination whether a party “controls” a depository institution or its holding company for purposes of these laws is based on applicable regulations and all of the facts and circumstances surrounding the investment. See “Item 1A.
The discussion below describes our procedures. The stages of our selection process for loan originations are as follows: Loan and Deal Generation/Origination We believe that the combination of our brand, our portal, our patented NewTracker® technology, and our web presence as Your Business Solutions Company ® have created an extensive loan and deal sourcing infrastructure.
The stages of our selection process for loan originations are as follows: Loan and Deal Generation/Origination We believe that the combination of our brand, our portal, our patented NewTracker® technology, and our web presence as Your Business Solutions Company ® have created an extensive loan and deal sourcing infrastructure.
The rule was scheduled to take effect on August 29, 2023, and would have required compliance by October 1, 2024, April 1, 2025, or January 1, 2026, depending on the number of covered small business loans that a covered lender originates. On July 31, 2023, the U.S.
The rule was scheduled to take effect on August 29, 2023, and would have required compliance by October 1, 2024, April 1, 2025, or January 1, 2026, depending on the number of covered small business loans that a covered lender originates.
Risk Factors - Risks Related to SBA Lending - There can be no guarantee that Newtek Bank and NSBF will be able to maintain their SBA 7(a) lending licenses.” Pursuant to the SBA’s regulations, the SBA is released from liability on its guaranty of an SBA 7(a) loan and may, in its sole discretion, refuse to honor a guaranty purchase request in full or in part, or recover all or part of the funds already paid in connection with a guaranty purchase, if the lender failed to comply materially with a SBA Loan Program Requirement; failed to make, close, service or liquidate the loan in a prudent manner; placed the SBA at risk through improper action or inaction; failed to disclose a material fact to the SBA in a timely manner; or misrepresented a material fact to the SBA regarding the loan.
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.” 35 Table of Contents Pursuant to the SBA’s regulations, the SBA is released from liability on its guaranty of a SBA 7(a) loan and may, in its sole discretion, refuse to honor a guaranty purchase request in full or in part, or recover from the lender all or part of the funds already paid in connection with a guaranty purchase, if the lender failed to comply materially with an SBA Loan Program Requirement; failed to make, close, service or liquidate the loan in a prudent manner; placed the SBA at risk through improper action or inaction; failed to disclose a material fact to the SBA in a timely manner; or misrepresented a material fact to the SBA regarding the loan.
Our patented NewTracker® software enables us to board an SMB customer, process the application or inquiry, assemble necessary documents, complete the transaction and create a daily reporting system that is sufficiently unique as to receive a U.S. patent.
Our patented NewTracker® software enables us to acquire an SMB customer cost effectively, process the application or inquiry, assemble necessary documents, complete the transaction and create a daily reporting system that is sufficiently unique as to receive a U.S. patent.
While Newtek Bank’s primary focus will be to expand its lending activities by providing SBA 7(a) loans to independent business owners, we also seek to offer independent business owners a variety of attractive financial solutions, as well as cost effective and efficient business solutions, to meet their capital needs through Newtek Bank and our nonbank subsidiaries.
While Newtek Bank’s primary focus will be to expand its lending activities by providing a full suite of commercial loans to independent business owners, we also seek to offer independent business owners a variety of attractive financial solutions, as well as cost effective and efficient business solutions, to meet their capital needs through Newtek Bank and our nonbank subsidiaries.
In order to comply with these requirements, we maintained a dividend policy of making quarterly distributions in an amount that approximated 90 - 100% of the Company's annual taxable income. For 2023, the Company and its subsidiaries will no longer qualify as a RIC and will file a consolidated U.S. federal income tax return.
In order to comply with these requirements, we maintained a dividend policy of making quarterly distributions in an amount that approximated 90 - 100% of the Company's annual taxable income. Beginning with 2023, the Company and its subsidiaries no longer qualify as a RIC and files a consolidated U.S. federal income tax return.
Newtek Payroll PMTWorks Payroll, LLC d/b/a Newtek Payroll and Benefits Solutions (PMT), is a wholly-owned subsidiary which offers an array of industry standard and competitively priced payroll management, and related payment and tax reporting services to independent business owners. Newtek Technology Newtek Technology Solutions, Inc.
Newtek Payroll, Insurance, and Other PMTWorks Payroll, LLC d/b/a Newtek Payroll and Benefits Solutions (PMT), is a wholly-owned subsidiary which offers an array of industry standard and competitively priced payroll management, and related payment and tax reporting services to independent business owners.
We are continuing to evaluate the potential impact of the new rule to our business, financial condition and results of operations, which cannot be predicted at this time.
We are continuing to evaluate the potential impact of the new rule to our business, financial condition and results of operations, which cannot be predicted at this time. See “Item 1A.
Since the guaranteed portions of SBA 7(a) loans carry the full faith and credit of the U.S. government, lenders may, and frequently do, sell the guaranteed portion of SBA 7(a) loans in the capital markets, hold the unguaranteed portion and retain all loan servicing rights.
Since the guaranteed portions of SBA 7(a) loans carry the full faith and credit of the U.S. government, lenders may, and frequently do, sell the guaranteed portion of SBA 7(a) loans (subject to certain conditions) in the capital markets, hold the unguaranteed portion and retain all loan servicing rights.
See “Item 1A Risk Factors - Risks Related to Operating as a Financial Holding Company - The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations.” 17 Broad Powers to Ensure Safety and Soundness A principal objective of the U.S. bank regulatory system is to ensure the safety and soundness of banking organizations.
Risk Factors - Risks Related to Operation as a Financial Holding Company - The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations.” Broad Powers to Ensure Safety and Soundness A principal objective of the U.S. bank regulatory system is to ensure the safety and soundness of banking organizations.
In addition, during the wind-down process, NSBF will be subject to minimum capital requirements established by the SBA, be required to continue to maintain certain amounts of restricted cash available to meet any obligations to the SBA, have restrictions on its ability to make dividends and distributions to the Company, and remain liable to the SBA for post-purchase denials and repairs on the guaranteed portions of SBA 7(a) loans originated and sold by NSBF, from the proceeds generated by NSBF’s SBA loan portfolio.
In addition, during the wind-down process, NSBF is subject to minimum capital requirements established by the SBA, is required to continue to maintain certain amounts of restricted cash available to meet any obligations to the SBA, has restrictions on its ability to make dividends and distributions to the Company, and remains liable to the SBA for post-purchase denials and repairs on the guaranteed portions of SBA 7(a) loans originated and sold by NSBF, from the proceeds generated by NSBF’s SBA loan portfolio.
Following the Acquisition of NBNYC and its $137 million deposit portfolio, we launched our High Yield Savings and Retail CD product offerings in March and April of 2023. Since that time, we have grown our deposit base rapidly and have offered competitive market rates using an accounting opening process that is straightforward with limited interaction.
Following the Acquisition of Newtek Bank and its $137 million deposit portfolio, we launched our High Yield Savings and Retail CD product offerings in March and April of 2023. Since that time, we have grown Newtek Bank’s deposit base rapidly and have offered competitive market rates using an account opening process that is straightforward with limited interaction.
See “Item 1A Risk Factors - Risks Related to Operating as a Financial Holding Company - The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations.” 16 The material regulatory requirements that are applicable to us and our subsidiaries are summarized below.
Risk Factors - Risks Related to Operation as a Financial Holding Company - The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations.” The material regulatory requirements that are applicable to us and our subsidiaries are summarized below.
In addition, SBL, an S&P rated servicer, is a third-party servicer for commercial, SBA 7(a) and other government guaranteed investments, whose exceptional servicing capabilities with compact timelines for loan resolutions and dispositions has attracted various third-party portfolios to SBL.
In addition, Newtek Bank’s subsidiary SBL, an S&P rated servicer, is a third-party servicer for commercial, SBA 7(a) and other government guaranteed loans, whose exceptional servicing capabilities with compact timelines for loan resolutions and dispositions has attracted various third-party portfolios to SBL for servicing.
The bank regulatory regime is intended primarily for the protection of customers, the public, the financial system and the DIF, rather than our stockholders or creditors. The legal and regulatory regime affects virtually all aspects of our operations.
The bank regulatory regime is intended primarily for the protection of customers, the public, the financial system and the DIF, support of the community and economic development, rather than our stockholders or creditors. The legal and regulatory regime affects virtually all aspects of our operations.
The loan underwriter will review the contract for sale, which will be included in the credit file. The contract for sale must include a complete breakdown of the purchase price, which must be justified through either a third party appraisal or directly by the loan underwriter through an approved valuation method specified in SBA SOP 50 10.
The contract for sale must include a complete breakdown of the purchase price, which must be justified through either a third party appraisal or directly by the loan underwriter through an approved valuation method specified in SBA SOP 50 10.
NSBF is currently winding down its operations and is no longer originating new SBA 7(a) loans, but remains subject to SBA regulation during its wind-down process. (See Wind-down Agreement below.) Newtek Bank is licensed to make loans under the SBA 7(a) Program. The SBA generally reduces risks to lenders by guaranteeing major portions of qualified loans made to small businesses.
NSBF is currently winding down its operations and is no longer originating new SBA 7(a) loans, but remains subject to SBA regulation during its wind-down process. (See Wind-down Agreement below.) The SBA generally reduces risks to lenders by guaranteeing major portions of qualified loans made to small businesses.
We provide critical business solutions such as electronic payment processing, managed IT solutions, personal and commercial insurance services and full-service payroll and benefit solutions, receivables financing, funding of SBA 504 loans, which provide financing of fixed assets such as real estate or equipment, and non-conforming (non-SBA) commercial loans.
We provide critical business solutions such as electronic payment processing, personal and commercial insurance services and full-service payroll and benefit solutions, receivables financing, funding of SBA 504 loans, which provide financing of fixed assets such as real estate or equipment, and ALP loans.
The SBA is an independent government agency that facilitates one of the nation’s largest sources of SMB financing by providing credit guarantees for its loan programs. SBA 7(a) loans are partially guaranteed by the SBA, with SBA guarantees typically ranging between 50% and 90% of the principal and interest due.
The SBA is an independent government agency that facilitates one of the nation’s largest sources of financing to independent business owners of SMBs by providing credit guarantees for its loan programs. SBA 7(a) loans are partially guaranteed by the SBA, with SBA guarantees typically ranging between 50% and 90% of the principal and interest due on SBA 7(a) loans.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisk Factors - Risks Related to SBA Lending - If NSBF or Newtek Bank fail to comply with SBA regulations in connection with the origination, servicing, or liquidation of an SBA 7(a) loan, liability on the SBA guaranty, in whole or in part, could be transferred to NSBF or Newtek Bank.” NSBF will remain subject to SBA regulation as it winds down its operations.
Biggest changeRisks Related to SBA Lending • Changes to the SBA 7(a) Program can negatively impact our SBA 7(a) loan origination volume. • There can be no guarantee that Newtek Bank will be able to maintain its SBA 7(a) lending license and PLP status. • NSBF will remain subject to SBA regulation as it winds down its operations. • We have specific risks associated with our secondary market sales of the guaranteed portions of SBA loans. • If NSBF or Newtek Bank fail to comply with SBA regulations in connection with the origination, servicing, or liquidation of an SBA 7(a) loan, liability on the SBA guaranty, in whole or in part, could be transferred to NSBF or Newtek Bank. • Curtailment of the government-guaranteed loan programs could adversely affect our results of operations. • Our loans under the SBA 7(a) Program involve a high risk of default and such default could adversely impact our results of operations. • The loans we make under the SBA 7(a) Program face competition. • A governmental failure to fund the SBA could adversely affect Newtek Bank’s SBA 7(a) loan originations and our results of operations. • We could be adversely affected by weakness in the residential housing and CRE markets.
A number of factors related to a public health emergency impacting us or our borrowers, customers or business partners could materially adversely affect our business, results of operations, and financial condition, including but not limited to: • increases in loan delinquencies, losses and charge-offs; • increases in borrowers seeking and being granted deferments of principal and interest payments; • collateral for loans, including real estate, may decline in value, which could cause loan losses to increase; • demand for our business products and solutions may decline, making it difficult to grow or maintain our assets and income; • net worth and liquidity of the guarantors on our loans may decline, which could cause loan losses to increase; • our risk management policies and practices may be negatively impacted by, among other things, changes in the SBA 7(a) loan program, including changes to SBA rules, regulations and SBA standard operating procedures; • increases in cyber risk as criminals may take advantage of the changes of business practices necessitated by a public health emergency.
A number of factors related to a public health emergency impacting us or our borrowers, customers or business partners could materially adversely affect our business, results of operations, and financial condition, including but not limited to: • increases in loan delinquencies, losses and charge-offs; • increases in borrowers seeking and being granted deferments of principal and interest payments; • collateral for loans, including real estate, may decline in value, which could cause loan losses to increase; • demand for our business products and solutions may decline, making it difficult to grow or maintain our assets and income; • net worth and liquidity of the guarantors on our loans may decline, which could cause loan losses to increase; • our risk management policies and practices may be negatively impacted by, among other things, changes in the SBA 7(a) Program, including changes to SBA rules, regulations and SBA standard operating procedures; • increases in cyber risk as criminals may take advantage of the changes of business practices necessitated by a public health emergency.
If we issue preferred stock, the preferred stock would rank “senior” to common stock in our capital structure, preferred shareholders would have separate voting rights on certain matters and might have other rights, preferences, or privileges more favorable than those of our common shareholders, and the issuance of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in your best interest.
If we issue preferred stock, the preferred stock would rank “senior” to common stock in our capital structure, preferred shareholders could have separate voting rights on certain matters and might have other rights, preferences, or privileges more favorable than those of our common shareholders, and the issuance of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in your best interest.
The laws and regulations applicable to us govern a variety of matters, including permissible types, amounts, and terms of loans and investments we may make, the maximum interest rate that may be charged, the amount of reserves we must hold against deposits we take, the types of deposits we may accept, maintenance of adequate capital and liquidity, changes in the control of Newtek Bank, N.A. and us, restrictions on dividends, and establishment of new offices.
The laws and regulations applicable to us govern a variety of matters, including permissible types, amounts, and terms of loans and investments we may make, the maximum interest rate that may be charged, the amount of reserves we must hold against deposits we take, the types of deposits we may accept, maintenance of adequate capital and liquidity, changes in the control of Newtek Bank and us, restrictions on dividends, and establishment of new offices.
In connection with NSBF’s 2018 examination by the SBA, NSBF entered into a voluntary agreement with the SBA pursuant to which NSBF established a segregated restricted cash account in the amount of $10 million to account for potential post-purchase repairs and denials of guaranteed portions of SBA 7(a) loans, and take certain actions to demonstrate the sufficiency of NSBF’s liquidity and establish certain additional reporting and compliance procedures.
In connection with NSBF’s 2018 examination by the SBA, NSBF entered into a voluntary agreement with the SBA pursuant to which NSBF established a segregated restricted cash account in the amount of $10.0 million to account for potential post-purchase repairs and denials of guaranteed portions of SBA 7(a) loans, and take certain actions to demonstrate the sufficiency of NSBF’s liquidity and establish certain additional reporting and compliance procedures.
For example, the SEC recently enacted rules, effective as of December 18, 2023, requiring public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on annual basis material information regarding their cybersecurity risk management, strategy, and governance.
For example, the SEC enacted rules, effective as of December 18, 2023, requiring public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on annual basis material information regarding their cybersecurity risk management, strategy, and governance.
Continued adverse political and economic conditions could have a material adverse effect on our business, financial condition and results of operations. 45 If we cannot obtain additional capital because of either regulatory or market price constraints, we could be forced to curtail or cease our new lending activities and our level of distributions and liquidity could be affected adversely.
Continued adverse political and economic conditions could have a material adverse effect on our business, financial condition and results of operations. If we cannot obtain additional capital because of either regulatory or market price constraints, we could be forced to curtail or cease our new lending activities and our level of distributions and liquidity could be affected adversely.
Many of our competitors will be substantially larger and have considerably greater financial, technical and marketing resources than us. For example, some competitors may have a lower cost of capital and access to funding sources that will not be available to us. Our competitors often seek to provide financing on terms more favorable to independent business owners than we offer.
Many of our competitors will be substantially larger and have considerably greater financial and marketing resources than us. For example, some competitors may have a lower cost of capital and access to funding sources that will not be available to us. Our competitors often seek to provide financing on terms more favorable to independent business owners than we offer.
A governmental failure to fund the SBA could adversely affect NSBF’s and Newtek Bank’s SBA 7(a) loan originations and our results of operations. We are dependent upon the Federal government to maintain the SBA 7(a) Program. NSBF’s and Newtek Bank’s lending business could be materially and adversely affected by circumstances or events limiting the availability of funds for this program.
A governmental failure to fund the SBA could adversely affect Newtek Bank’s SBA 7(a) loan originations and our results of operations. We are dependent upon the Federal government to maintain the SBA 7(a) Program. Newtek Bank’s lending business could be materially and adversely affected by circumstances or events limiting the availability of funds for this program.
If we cannot continue originating and selling government-guaranteed loans, we will generate fewer origination fees and our ability to generate gains on the sale of loans will 53 decrease. From time-to-time, the government agencies that guarantee these loans reach their internal budgeted limits and cease to guarantee loans for a stated time period.
If we cannot continue originating and selling government-guaranteed loans, we will generate fewer origination fees and our ability to generate gains on the sale of loans will decrease. From time-to-time, the government agencies that guarantee these loans reach their internal budgeted limits and cease to guarantee loans for a stated time period.
The speed and pervasiveness with which information can be disseminated through these channels, in particular social media, may magnify risks relating to negative publicity. 39 The rapid dissemination of negative information through social media, in part, is believed to have led to the collapse of Silicon Valley Bank, Signature Bank and First Republic Bank.
The speed and pervasiveness with which information can be disseminated through these channels, in particular social media, may magnify risks relating to negative publicity. The rapid dissemination of negative information through social media, in part, is believed to have led to the collapse of Silicon Valley Bank, Signature Bank and First Republic Bank.
In addition, rising interest rates may increase pressure on us to provide fixed rate loans, which could adversely affect our net interest margin, as increases in our cost of borrowed funds would not be accompanied by increased interest income from such fixed-rate investments.
In addition, rising interest rates may increase pressure on us to provide fixed rate loans, which could adversely affect our net interest margin, as increases in our cost of borrowed funds would not be accompanied by increased interest income from such fixed-rate loans.
The government could again fail to fund the SBA which would affect NSBF’s and Newtek Bank’s ability to originate government guaranteed loans and to sell the government guaranteed portions of those loans in the secondary market. Any failure to fund the SBA could adversely affect NSBF’s SBA 7(a) loan originations and our results of operations.
The government could again fail to fund the SBA which would affect Newtek Bank’s ability to originate government guaranteed loans and to sell the government guaranteed portions of those loans in the secondary market. Any failure to fund the SBA could adversely affect Newtek Bank’s SBA 7(a) loan originations and our results of operations.
The systems we have implemented to manage risks relating to these types of events could prove to be inadequate and, if compromised, could become inoperable for extended periods of time, cease 69 to function properly or fail to adequately secure private information.
The systems we have implemented to manage risks relating to these types of events could prove to be inadequate and, if compromised, could become inoperable for extended periods of time, cease to function properly or fail to adequately secure private information.
Based on this assessment, we have concluded that we did not maintain effective internal controls over financial reporting as of December 31, 2023, as a result of the material weaknesses described in “Item 9A. Controls and Procedures,” herein.
Based on this assessment, we concluded that we did not maintain effective internal controls over financial reporting as of December 31, 2023, as a result of the material weaknesses described in “Item 9A. Controls and Procedures,” herein.
If it cannot pass along these increases to its merchants, its profit margins will be reduced. NMS pays interchange fees or assessments to bankcard associations for each transaction it processes using their credit, debit and gift cards.
If it cannot pass along these increases to its merchants, its profit margins will be reduced. NMS pays interchange fees or assessments to bankcard associations for each transaction it processes using their credit and debit cards.
We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as environmental stewardship, corporate governance and transparency and considering ESG factors in our investment processes.
We may risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as environmental stewardship, corporate governance and transparency and considering ESG factors in our investment processes.
In addition, if we cannot service our indebtedness, we may have to take actions such as utilizing available capital, limiting the origination of loans, selling assets, selling equity or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances, any of which could impede the implementation of our business strategy, prevent us from entering into transactions that would otherwise benefit our business and/or adversely affect our business and financial results.
In addition, if we cannot service our indebtedness, we may have to take actions such as utilizing available capital, limiting the origination of loans, selling assets, selling equity or reducing, delaying, or eliminating capital expenditures or returns of capital, strategic acquisitions, investments and alliances, any of which could impede the implementation of our business strategy, prevent us from entering into transactions that would otherwise benefit our business and/or adversely affect our business and financial results.
There are a large number of banks and several non-bank lenders that participate in the SBA Section 7(a) Loan Program. All of these participants compete for the business of eligible borrowers. Accordingly, we may be at a competitive disadvantage with regard to other lenders or financial institutions that may be able to achieve greater leverage at a lower cost.
There are a large number of banks and several non-bank lenders that participate in the SBA 7(a) Program. All of these participants compete for the business of eligible borrowers. Accordingly, we may be at a competitive disadvantage with regard to other lenders or financial institutions that may be able to achieve greater leverage at a lower cost.
Accordingly, we may be unable to raise additional capital if needed or on acceptable terms, which may adversely affect our liquidity, business, financial condition and results of operations. Our acquisitions and other strategic transactions, including the Acquisition, may not yield the intended benefits. We have historically and may continue to evaluate and consider strategic transactions, combinations, acquisitions, dispositions or alliances.
Accordingly, we may be unable to raise additional capital if needed or on acceptable terms, which may adversely affect our liquidity, business, financial condition and results of operations. Our acquisitions and other strategic transactions may not yield the intended benefits. We have historically and may continue to evaluate and consider strategic transactions, combinations, acquisitions, dispositions or alliances.
Although we believe we and our IT providers employ appropriate security technologies (including data encryption processes, intrusion detection systems), and conduct comprehensive risk assessments and other internal control procedures to assure the security of our and our customers’ data, we cannot guarantee that these measures will be sufficient for this purpose.
Although we believe we and our IT providers employ security technologies (including data encryption processes, intrusion detection systems), and conduct comprehensive risk assessments and other internal control procedures designed to assure the security of our and our customers’ data, we cannot guarantee that these measures will be sufficient for this purpose.
None of the loans facilitated on our platform are guaranteed or insured by any third party or backed by any governmental authority in any way. We are the loan servicer for all loans supporting notes, all certificates and certain secured borrowings, and we are the loan servicer for most, though not all, loans sold as whole loans.
None of the non-SBA loans facilitated on our platform are guaranteed or insured by any third party or backed by any governmental authority in any way. We are the loan servicer for all non-SBA loans supporting notes, all certificates and certain secured borrowings, and we are the loan servicer for most, though not all, loans sold as whole loans.
Additionally, it may take us longer than expected to fully realize the anticipated benefits and synergies of these transactions (including the Acquisition), and those benefits and synergies may ultimately be smaller than anticipated or may not be realized at all, which could adversely affect our business and operating results.
Additionally, it may take us longer than expected to fully realize the anticipated benefits and synergies of these transactions, and those benefits and synergies may ultimately be smaller than anticipated or may not be realized at all, which could adversely affect our business and operating results.
Legislative or other actions relating to taxes could have a negative effect on us. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department.
Legislative or other actions relating to taxes could have a negative effect on us. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S.
These factors include, but are not limited to, the following: • price and volume fluctuations in the overall stock market from time to time; • investor demand for our stock; • significant volatility in the market price and trading volume of securities of other companies in our sector, which are not necessarily related to the operating performance of these companies; • changes in regulatory policies or tax guidelines with respect to financial holding companies; • any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts; 63 • changes, or perceived changes, in the value of our investments; • departures of key Company personnel; • operating performance of companies comparable to us; or • general economic conditions and trends and other external factors.
These factors include, but are not limited to, the following: • price and volume fluctuations in the overall stock market from time to time; • investor demand for our stock; • significant volatility in the market price and trading volume of securities of other companies in our sector, which are not necessarily related to the operating performance of these companies; • changes in regulatory policies or tax guidelines with respect to financial holding companies; • any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts; • changes, or perceived changes, in the value of our loan portfolios; • departures of key Company personnel; • operating performance of companies comparable to us; or • general economic conditions and trends and other external factors.
If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage ownership of our shareholders at that time will decrease, and shareholders may experience dilution. The authorization and issuance of “blank check” preferred shares could have an anti-takeover effect detrimental to the interests of our shareholders.
If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage ownership of our shareholders at that time will decrease, and shareholders may experience dilution. 59 Table of Contents The authorization and issuance of “blank check” preferred shares could have an anti-takeover effect detrimental to the interests of our shareholders.
NMS and the sponsoring bank can require that merchants maintain cash reserves under its control to cover charge-back liabilities but such reserves may not be sufficient to cover the liability or may not even be available to them in the event of a bankruptcy or other legal action. NMS has potential liability for customer or merchant fraud.
NMS and the sponsoring bank can require that merchants maintain cash reserves under its control to cover charge-back liabilities but such reserves may not be sufficient to cover the liability or may not even be available to them in the event of a bankruptcy or other legal action. 56 Table of Contents NMS has potential liability for customer or merchant fraud.
The portions of Section 7(a) loans to be retained by us do not benefit directly from any SBA guarantees; in an event of default, however, we and the SBA typically cooperate in collateral foreclosure or other work-out efforts and share in any resulting collections. The loans we make under the Section 7(a) Loan Program face competition.
The unguaranteed portions of SBA 7(a) loans to be retained by us do not benefit directly from any SBA guarantees; in an event of default, however, we and the SBA typically cooperate in collateral foreclosure or other work-out efforts and share in any resulting collections. The loans we make under the SBA 7(a) Program face competition.
Although we have insurance in place that covers such incidents, the cost of a breach or cyber-attack could well exceed any such insurance coverage. The failure in cyber-security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning could impair our ability to conduct business effectively.
Although we have insurance in place that covers such incidents, the cost of a breach or cyber-attack could well exceed any such insurance coverage. 61 Table of Contents The failure in cyber-security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning could impair our ability to conduct business effectively.
Additionally, competition for clients has emerged among alternative investment vehicles, such as CLOs, some of which are sponsored by other alternative asset investors, as these entities have begun to focus on making investments in SMBs. As a result of these new entrants, competition for our clients may intensify.
Additionally, competition for clients has emerged among alternative investment vehicles, such as collateralize loan obligations (CLOs), some of which are sponsored by other alternative asset investors, as these entities have begun to focus on making investments in SMBs. As a result of these new entrants, competition for our clients may intensify.
We monitor developments and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so. 42 Any public health emergency, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us and the fair value of our investments, our subsidiaries and our clients.
We monitor developments and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so. 43 Table of Contents Any public health emergency, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us and the fair value of our investments, our subsidiaries and our clients.
We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our charter classifying our Board in three classes serving staggered three-year terms and authorizing our Board to classify or reclassify shares of our stock in one or more classes or series, to cause the issuance of additional shares of our stock, to amend our charter without shareholder approval and to increase or decrease the number of shares of stock that we have authority to issue.
We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our charter classifying our Board in three classes serving staggered three-year terms and authorizing our Board to classify or reclassify shares of our stock in one or more classes or series, to cause the issuance of additional shares of our stock and to increase or decrease the number of shares of stock that we have authority to issue.
If these changes occur, the volume of loans to SMBs and industrial borrowers of the types that now qualify for government-guaranteed loans could decline, as could the profitability of these loans. Our loans under the Section 7(a) Loan Program involve a high risk of default and such default could adversely impact our results of operations.
If these changes occur, the volume of loans to SMBs and industrial borrowers of the types that now qualify for government-guaranteed loans could decline, as could the profitability of these loans. Our loans under the SBA 7(a) Program involve a high risk of default and such default could adversely impact our results of operations.
During this wind down process, NSBF will be required to continue to own the SBA 7(a) loans and PPP Loans in its SBA loan portfolio to maturity, liquidation, charge-off, or (subject to SBA’s prior written approval), sale or transfer.
During this wind down process, NSBF is required to continue to own the SBA 7(a) loans and PPP Loans in its SBA loan portfolio to maturity, liquidation, charge-off, or (subject to SBA’s prior written approval), sale or transfer.
We could be adversely affected by weakness in the residential housing and commercial real estate markets. Weakness in residential home and commercial real estate values could impair our ability to collect on defaulted SBA loans as real estate is pledged in many of our SBA loans as part of the collateral package.
We could be adversely affected by weakness in the residential housing and CRE markets. Weakness in residential home and CRE values could impair our ability to collect on defaulted loans, as real estate is pledged in many of our loans as part of the collateral package.
As a result of the Acquisition, all SBA 7(a) loan originations are being transitioned to Newtek Bank in April 2023, and NSBF has ceased origination of SBA 7(a) loans, relinquished its PLP status and is winding-down its operations.
As a result of the Acquisition, all SBA 7(a) loan originations were transitioned to Newtek Bank in April 2023, and NSBF has ceased origination of SBA 7(a) loans, relinquished its PLP status and is winding-down its operations.
The commercial lending market to independent business owners is very competitive and is served by a variety of entities, including banks, savings and loan associations, credit unions, independent finance companies, and nonbank lenders, including financial technology companies.
The commercial lending market and the electronic payment processing market to independent business owners is very competitive and is served by a variety of entities, including commercial banks, savings and loan associations, credit unions, independent finance companies, and nonbank lenders, including financial technology companies.
Such actions could be public or of a confidential nature, and arise even if we are acting in good faith or operating under a reasonable interpretation of the law and could include, for example, monetary penalties, payment of damages or other monetary relief, restitution or disgorgement of profits, directives to take remedial action or to cease or modify practices, restrictions on growth or expansionary proposals, denial or refusal to accept applications, removal of officers or directors, prohibition on dividends or capital distributions, increases in capital or liquidity requirements and/or termination of Newtek Bank’s deposit insurance.
Such actions could be public or of a confidential nature, and arise even if we are acting in good faith or operating under a reasonable interpretation of the law and could include, for example, monetary penalties, payment of damages or other monetary relief, restitution or disgorgement of profits, directives to take remedial action or to cease or modify practices, restrictions on growth or expansionary proposals, denial or refusal to accept applications, removal of officers or directors, prohibition on dividends or capital distributions (both from Newtek Bank to its parent, NewtekOne, and/or from NewtekOne to its stockholders), increases in capital or liquidity requirements and/or termination of Newtek Bank’s deposit insurance.
Any failure or interruption of such systems, including as a result of the termination of an agreement with any such third party service provider, could cause delays or other problems in our activities.
Any failure or interruption of the systems we rely on, including as a result of the termination of an agreement with any such third party service provider, could cause delays or other problems in our activities.
Additionally, there may be risks that exist, or that develop in the future, that we have not appropriately anticipated, identified or mitigated.
There may also be risks that exist, or that develop in the future, that we have not appropriately anticipated, identified or mitigated.
The trading price of our common stock may fluctuate substantially. The price of our common stock may be higher or lower depending on many factors, some of which are beyond our control and may not be directly related to our operating performance.
The price of our common stock may be higher or lower depending on many factors, some of which are beyond our control and may not be directly related to our operating performance.
NSBF will be required to continue to service and liquidate its SBA Loan Portfolio, including processing forgiveness and loan reviews for PPP Loans, pursuant to an SBA approved lender service provider agreement with SBL.
NSBF is required to continue to service and liquidate its SBA Loan Portfolio, including processing forgiveness and loan reviews for PPP Loans, pursuant to an SBA approved lender service provider agreement with SBL.
Any such losses could adversely affect our business, financial condition and results of operations. 46 Moreover, we may be adversely affected by the soundness of other financial institutions even when we are not directly exposed to those institutions.
Any such losses could adversely affect our business, financial condition and results of operations. 47 Table of Contents Moreover, we may be adversely affected by the soundness of other financial institutions even when we are not directly exposed to those institutions.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Due to the potential volatility of our stock price once a market for our stock is established, we may become the target of securities litigation in the future.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Due to the potential volatility of our stock price, we may become the target of securities litigation in the future.
If we fail to comply with the relevant laws and regulations, we could suffer financial losses, a disruption of our businesses, liability to investors, regulatory intervention or reputational damage. We and our service providers continue to be impacted by the increase in remote work in response to the global COVID-19 pandemic.
If we fail to comply with the relevant laws and regulations, we could suffer financial losses, a disruption of our businesses, liability to investors, regulatory intervention or reputational damage. We and our service providers continue to be impacted by the increase in remote work.
The Fourth Supplemental Indenture and Seventh Supplemental Indenture include covenants requiring us to comply with (regardless of whether we are 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 we are subject to) the restrictions on dividends, distributions and purchase of capital stock set forth in Section 18(a)(1)(B) of the 1940 Act as modified by Section 61(a) of the 1940 Act and to provide financial information to the holders of the Notes and the Trustee if we should no longer be subject to the reporting requirements under the Exchange Act.
Certain of our outstanding debt include covenants requiring us to comply with (regardless of whether we are 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 we are subject to) the restrictions on dividends, distributions and purchase of capital stock set forth in Section 18(a)(1)(B) of the 1940 Act as modified by Section 61(a) of the 1940 Act and to provide financial information to the holders of the Notes and the Trustee if we should no longer be subject to the reporting requirements under the Exchange Act.
Accordingly, any acquisition, disposition or other strategic transaction may not be successful, may not benefit our business strategy, may not generate sufficient revenue to offset the associated costs or may not otherwise result in the intended benefits.
Any acquisition, disposition or other strategic transaction involve risks and may not be successful, may not benefit our business strategy, may not generate sufficient revenue to offset the associated costs or may not otherwise result in the intended benefits.
Policies of extended periods of remote working, whether by us or by our service providers, could strain technology resources, introduce operational risks and otherwise heighten the risks described above. Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts. Accordingly, the risks described above are heightened under current conditions.
Policies of extended periods of remote working, whether by us or by our service providers, could strain technology resources, introduce operational risks and otherwise heighten the risks described above. Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts.
Terrorist attacks, acts of war, global health emergencies or natural disasters may impact the businesses in which we invest and harm our business, operating results and financial condition. Terrorist acts, acts of war, global health emergencies or natural disasters may disrupt our operations, as well as the operations of the businesses in which we invest.
Terrorist attacks, acts of war, global health emergencies or natural disasters may impact the businesses in which we invest and harm our business, operating results and financial condition.
The lending market to independent business owners is also highly fragmented, with a small number of lenders capturing large shares of each market and many smaller lenders competing for the remaining market share. We compete for clients with other financial institutions and various SMB lenders, as well as other sources of funding.
The lending market and the electronic payment processing market to independent business owners are also highly fragmented, with a small number of players capturing large shares of each market and many smaller players competing for the remaining market share. We compete for clients with other financial institutions and various SMB lenders, as well as other sources of funding.
During the wind down process NSBF will be required to maintain minimum capital requirements established by the SBA, will be required to maintain certain amounts of restricted cash available to meet any obligations to the SBA, will have restrictions on its ability to make dividends and distributions to its parent, and will remain liable to SBA for post-purchase denials and repairs, from the proceeds generated by NSBF’s SBA loan portfolio.
During the wind down process NSBF is required to maintain minimum capital requirements established by the SBA, required 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 its parent, and remains liable to SBA for post-purchase denials and repairs, from the proceeds generated by NSBF’s SBA loan portfolio.
It is critical to NTS’ business strategy that its facilities and infrastructure remain secure and are perceived by the marketplace to be secure.
It is critical to our business strategy that our facilities and infrastructure remain secure and are perceived by the marketplace to be secure.
Additionally, the increased use of mobile and cloud technologies due to the increased amount of remote work resulting from the COVID-19 pandemic could heighten these and other operational risks as certain aspects of the security of such technologies may be complex and unpredictable.
Additionally, the increased use of mobile and cloud technologies due to the increased amount of remote work could heighten these and other operational risks as certain aspects of the security of such technologies may be complex and unpredictable.
We may experience fluctuations in our quarterly and annual operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate payable on the debt securities we acquire, the default rate of such securities, the level of portfolio dividend and fee income, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions.
We may experience fluctuations in our quarterly and annual operating results due to a number of factors, including our ability or inability to make loans that meet our investment criteria, the default rate of such loans, the level of dividend, interest and fee income, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions.
If our debt service obligations increase, whether due to the increased cost of existing indebtedness or the incurrence of additional indebtedness, more of our cash flow from operations would need to be allocated to the payment of principal of, and interest on, our indebtedness, which would reduce the funds available for other purposes.
If our debt service obligations increase, whether due to the increased cost of existing indebtedness or the incurrence of additional indebtedness, more of our cash flow from operations, including dividends our holding company receives from its subsidiaries, would need to be allocated to the payment of principal of, and interest on, our indebtedness, which would reduce the funds available for other purposes.
If we and our subsidiaries are unable to protect our intellectual property rights, our business and prospects could be harmed. The proprietary software essential to our business and that of our subsidiaries is owned by us and made available to them for their use.
If we and our subsidiaries are unable to protect our intellectual property rights, our business and prospects could be harmed. The proprietary software and trademarks essential to our business, including NewTracker (R) and Newtek Advantage (R) , and that of our subsidiaries, is owned by us and made available to them for their use.
A failure by us to timely and effectively remediate the material weaknesses could prevent us from accurately and timely reporting our financial results and could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.
A failure by us to timely and effectively remediate any future material weaknesses or significant deficiencies in our internal controls could prevent us from accurately and timely reporting our financial results and could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.
Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on these loans. Accordingly, we and our designated third-party servicers and collection agencies are limited in our ability to collect loans.
Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on these loans. Accordingly, we are limited in our ability to collect loans.
Losses from terrorist attacks, global health emergencies and natural disasters are generally uninsurable. A failure or the perceived risk of a failure to raise the statutory debt limit of the U.S. could have a material adverse effect on our business, financial condition and results of operations. In June 2023, the U.S. federal government suspended the federal debt limit until 2025.
Losses from terrorist attacks, global health emergencies and natural disasters are generally uninsurable. A failure or the perceived risk of a failure to raise the statutory debt limit of the U.S. could have a material adverse effect on our business, financial condition and results of operations.
Failure to comply with laws, regulations, policies or other regulatory guidance could result in civil or criminal sanctions by regulatory agencies, civil monetary penalties and damage to our reputation. In addition, we will be required to serve as a “source of strength” to Newtek Bank.
Failure to comply with laws, regulations, policies or other regulatory guidance could result in civil or criminal sanctions by regulatory agencies, civil monetary penalties and damage to our reputation. In addition, we will be required to serve as a “source of strength” to Newtek Bank. We may be adversely affected by increased governmental and regulatory scrutiny or negative publicity.
See “ITEM I.C Cybersecurity.” As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.
Risks Related to the Economy • Global economic, political, social and market conditions, including uncertainty about the financial stability of the United States could have a significant adverse effect on our business, operating results and financial condition. • Inflation may adversely affect our business, operating results and financial condition. • Terrorist attacks, acts of war, global health emergencies or natural disasters may impact the businesses in which we invest and harm our business, operating results and financial condition. • If we cannot obtain additional capital because of either regulatory or market price constraints, we could be forced to curtail or cease our new lending activities and the value of our loan portfolio value could decrease and our level liquidity and distributions could be affected adversely.
Risks Related to the Economy • Global economic, political, social and market conditions, including uncertainty about the financial stability of the United States could have a significant adverse effect on our business, operating results and financial condition. • Any public health emergency, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us and the fair value of our investments, our subsidiaries and our clients. • Economic recessions or downturns could impair our clients and our operating results. • Inflation may adversely affect our business, operating results and financial condition. • Terrorist attacks, acts of war, global health emergencies or natural disasters may impact the businesses in which we lend to and/or operate, and harm our business, operating results and financial condition. • If we cannot obtain additional capital because of either regulatory or market price constraints, we could be forced to curtail or cease our new lending activities and the value of our loan portfolio value could decrease and our level of liquidity and distributions could be affected adversely.
From time to time, regulators may implement changes to these capital adequacy and liquidity requirements. If we fail to meet these minimum capital adequacy and liquidity guidelines and other regulatory requirements, our business activities, including lending, and its ability to expand could be limited.
If we fail to meet these minimum capital adequacy and liquidity guidelines and other regulatory requirements, our business activities, including lending, and its ability to expand could be limited.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us, which could have a material adverse effect on our business, financial condition or results of operations.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us, which could have a material adverse effect on our business, financial condition or results of operations. Changes in laws, regulations, or policies may adversely affect our business.
Finally, our risk management framework may be deemed insufficient or inadequate by our regulators, which have in the past required, and we expect to continue to require, that we invest additional resources into remediating any deficiencies and adversely impact our ability to operate our business until such time as the revised framework is deemed sufficient and adequate by our regulators. 50 Internal control deficiencies could impact the accuracy of our financial results or prevent the detection of fraud.
Finally, our risk management framework may be deemed insufficient or inadequate by our regulators, which have in the past required, and we expect to continue to require, that we invest additional resources into remediating any deficiencies and adversely impact our ability to operate our business until such time as the revised framework is deemed sufficient and adequate by our regulators.
Controls and Procedures.” We can give no assurance that a comprehensive remediation plan will remediate the material weakness in internal control, or that additional material weaknesses or significant deficiencies in our internal controls over financial reporting will not be identified in the future.
Controls and Procedures.” We can give no assurance that additional material weaknesses or significant deficiencies in our internal controls over financial reporting will not be identified in the future.
We may, from time to time, be required to institute litigation to enforce the patents, copyrights or other intellectual property rights, protect trade secrets, determine the validity and scope of the proprietary rights of others or defend against claims of infringement. Such litigation could result in substantial costs and diversion of resources.
We may, from time to time, be required to institute litigation to enforce the patents, copyrights or other intellectual property rights, protect trade secrets, determine the validity and scope of the proprietary rights of others or defend against claims of infringement.
Under these requirements we are only permitted to issue multiple classes of indebtedness and one class of shares senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance.
As a result, we are subject to 150% asset coverage requirements under the 1940 Act even though we are not regulated as a BDC. 60 Table of Contents Under these requirements we are only permitted to issue multiple classes of indebtedness and one class of shares senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance.
Changes in interest rates could adversely affect our results of operations and financial condition. Our earnings depend substantially on our interest rate spread, which is the difference between (i) the rates Newtek Bank earns on loans, securities and other earning assets and (ii) the interest rates Newtek Bank pays on deposits and other borrowings, and its costs of capital.
Our earnings depend substantially on our interest rate spread, which is the difference between (i) the rates Newtek Bank earns on loans, securities and other earning assets and (ii) the interest rates Newtek Bank pays on deposits and other borrowings, and its costs of capital.
The current worldwide financial markets situation, as well as various social, political, economic and other conditions and events (including political tensions in the United States and around the world, wars and other forms of conflict, terrorist acts, security operations and catastrophic events such as natural disasters, epidemics and pandemics) may create uncertainty and have significant impacts on issuers, industries, governments and other systems, including the financial markets, to which companies and their investments are exposed.
RISKS RELATED TO THE ECONOMY Global economic, political, social and market conditions, including uncertainty about the financial stability of the United States could have a significant adverse effect on our business, operating results and financial condition The current worldwide financial markets situation, as well as various social, political, economic and other conditions and events (including political tensions in the United States and around the world, wars and other forms of conflict, terrorist acts, security operations and catastrophic events such as natural disasters, epidemics and pandemics) may create uncertainty and have significant impacts on issuers, industries, governments and other systems, including the financial markets, to which companies and their investments are exposed.
The loss Newtek Bank’s SBA 7(a) lending license would negatively impact our results of operations. Further, there can be no assurance that Newtek Bank will be able to maintain its status as a PLP. Newtek Bank’s loss of PLP status would adversely impact our marketing efforts and ultimately loan origination volume which would negatively impact our results of operations.
Further, there can be no assurance that Newtek Bank will be able to maintain its status as a PLP. Newtek Bank’s loss of PLP status would adversely impact our marketing efforts and ultimately loan origination volume which would negatively impact our results of operations. NSBF will remain subject to SBA regulation as it winds down its operations.
While our management team takes reasonable efforts to ensure that we are in full compliance with all laws applicable to its operations, the increasing rate and extent of regulatory change increases the risk of a failure to comply, which may result in our ability to operate our business in the ordinary course or may subject us to potential fines, regulatory findings or other matters that may materially impact our business. 51 Our clients may be concentrated in a limited number of industries, which may subject us to a risk of significant loss if there is a downturn in a particular industry in which a number of our loans are concentrated.
While our management team takes reasonable efforts to ensure that we are in full compliance with all laws applicable to its operations, the increasing rate and extent of regulatory change increases the risk of a failure to comply, which may result in our ability to operate our business in the ordinary course or may subject us to potential fines, regulatory findings or other matters that may materially impact our business.
Also, an increase in interest rates available to investors could make an investment in our common stock less attractive if we are not able to increase our dividend rate, which could reduce the value of our common stock. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations.
Also, an increase in interest rates available to investors could make an investment in our common stock less attractive if we are not able to increase our dividend rate, which could reduce the value of our common stock.
The current U.S. presidential administration has enacted significant changes to the existing U.S. tax rules, and there are a number of proposals in Congress that would similarly modify the existing U.S. tax rules. The likelihood of any such legislation being enacted is uncertain, but new legislation and any U.S.
Treasury Department.Significant changes to the existing U.S. tax rules have been enacted in recent years, and there are a number of proposals in Congress that would similarly modify the existing U.S. tax rules. The likelihood of any such legislation being enacted is uncertain, but new legislation and any U.S.
Adverse economic conditions may also decrease the value of any collateral securing our loans. A severe recession may further decrease the value of such collateral and result in losses of value in our portfolio and a decrease in our revenues, net income, assets and net worth.
A severe recession may further decrease the value of such collateral and result in losses of value in our portfolio and a decrease in our revenues, net income, assets and net worth.
Because NMS is not a bank, it is unable to belong to and directly access the Visa® and MasterCard® bankcard associations. The Visa® and MasterCard® operating regulations require NMS to be sponsored by a bank in order to process bankcard transactions.
Newtek Merchant Solutions (NMS) relies on bank sponsorships for payment processing. Because NMS is not a bank, it is unable to belong to and directly access the Visa ® and Mastercard ® bankcard associations. The Visa and Mastercard operating regulations require NMS to be sponsored by a bank in order to process bankcard transactions.
Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us on terms we deem acceptable. These events could prevent us from increasing investments and harm our operating results.
Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us on terms we deem acceptable.
Curtailment of the government-guaranteed loan programs could adversely affect our results of operations. Although the SBA 7(a) Program has been in existence since 1953, there can be no assurance that the federal government will maintain the SBA 7(a) program, or that it will continue to guarantee loans at current levels.
Although the SBA 7(a) Program has been in existence since 1953, there can be no assurance that the federal government will maintain the SBA 7(a) Program or the SBA 504 loan program, or that it will continue to guarantee loans at current levels.
In addition, investment in funds that specialize in companies that perform well in such assessments are increasingly popular, and major institutional investors have publicly emphasized the importance of such ESG measures to their investment decisions. Additionally, new regulatory initiatives related to ESG could adversely affect our business.
In addition, investment in funds that specialize in companies that perform well in such assessments are increasingly popular, and major institutional investors have publicly emphasized the importance of such ESG measures to their investment decisions.
In addition, any future financial market uncertainty could lead to financial market disruptions and could further impact our ability to obtain financing. These events could limit our investment originations, limit our ability to grow and negatively impact our operating results and financial condition.
In addition, any future financial market uncertainty could lead to financial market disruptions and could further impact our ability to obtain financing. These events could limit our investment originations, limit our ability to grow and negatively impact our operating results and financial condition. Inflation and changes in interest rates may adversely affect our business, results of operations and financial condition.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThese external stakeholders conduct independent assessments, penetration testing, vulnerability scans, and audits to evaluate the effectiveness of our cybersecurity controls and identify areas for improvement. 2. Continuous Improvement: The insights and recommendations provided by external assessors and consultants inform our ongoing efforts to strengthen our cybersecurity defenses.
Biggest changeIn addition, we engage assessors, consultants, auditors, and other third-party experts with specialized knowledge in cybersecurity. These external stakeholders conduct independent assessments, penetration testing, vulnerability scans, and audits to evaluate the effectiveness of our cybersecurity controls and identify areas for improvement. 3.
The CISO is chiefly responsible for developing, maintaining, and enforcing cybersecurity and cyber risk-related policies; ensuring the Company and its subsidiaries satisfy requirements of relevant regulations, industry standards, and third-party risk assessment requirements; keeping abreast of developing security threats, and helping both the Board and the Risk Committee understand potential security problems that might arise from the changing threat landscape; and overseeing and implementing regular security awareness training of all employees on cybersecurity, and supporting effective communication with users to limit security vulnerabilities.
The CISO is chiefly responsible for developing, maintaining, and enforcing cybersecurity and cyber risk-related policies; ensuring the Company and its subsidiaries satisfy requirements of relevant regulations, industry standards, and third-party risk assessment requirements; keeping abreast of developing security threats, and helping both the Board and the Technology Steering Committee understand potential security problems that might arise from the changing threat landscape; and overseeing and implementing regular security awareness training of all employees on cybersecurity, and supporting effective communication with users to limit security vulnerabilities.
The Risk Committee reviews these reports and discusses them with management. The Risk Committee reports to the full Board on key aspects of management’s presentations on cybersecurity and broader technology risks.
The Technology Steering Committee reviews these reports and discusses them with management. The Technology Steering Committee reports to the full Board on key aspects of management’s presentations on cybersecurity and broader technology risks.
Our CISO coordinates with the Company’s and our subsidiaries’ executive officers relating to potentially material cybersecurity incidents and regularly discusses with the Risk Committee the effectiveness of the Company’s technology security, capabilities for disaster recovery, data protection, cyber threat detection and cyber incident response and management of technology-related compliance risks.
Our CISO coordinates with the CTO, who coordinates with the Company’s and our subsidiaries’ executive officers relating to potentially material cybersecurity incidents and regularly discusses with the Technology Steering Committee the effectiveness of the Company’s technology security, capabilities for disaster recovery, data protection, cyber threat detection and cyber incident response and management of technology-related compliance risks.
Our CTO has over 25 years of experience in enterprise technology services with expertise in managed services, private cloud, service operations, and security. He is committed to driving reliability of services while prioritizing robust security measures. 74 Table of Contents
Our CTO has over 25 years of experience in enterprise technology solutions, with expertise in managed services, private cloud, service operations, and security. He is committed to driving reliability of services while prioritizing robust security measures.
Accountability of our cybersecurity program is housed within our subsidiary NTS, which is led by our CTO. Reporting to our CTO is the CISO, the individual who provides day-to-day oversight of our cybersecurity program. Our CISO is responsible for assessing and managing material risks from cybersecurity threats, including monitoring the prevention, detection, mitigation and remediation of cybersecurity threats.
Accountability of our cybersecurity program is housed within IPM, with oversight by our CTO. Reporting to our CTO is the CISO, the individual who provides day-to-day oversight of our cybersecurity program. Our CISO is responsible for assessing and managing material risks from cybersecurity threats, including monitoring the prevention, detection, mitigation and remediation of cybersecurity threats.
All members of the Board have access to written cybersecurity reports that are provided to the Risk Committee. 73 While our Board and Risk Committee oversee risk, our senior leadership is responsible for identifying, assessing, and managing our exposure to risks from cybersecurity threats.
All members of the Board have access to written cybersecurity reports that are provided to the Technology Steering Committee. 66 Table of Contents While our Board and Technology Steering Committee oversee cybersecurity and technology risk, our senior leadership is responsible for identifying, assessing, and managing our exposure to risks from cybersecurity threats.
We have developed an enterprise-wide cybersecurity risk management system and strategy to safeguard our assets and operations, including the protection of the confidentiality of nonpublic, sensitive personal and business information and the integrity and security of our information systems, as follows: Assessment, Identification, and Management of Material Risks: 1.
We and NTS, and NTS’s successor, IPM, which manages our IT infrastructure and cybersecurity under the direction of our CTO, have developed an enterprise-wide cybersecurity risk management system and strategy to safeguard our assets and operations, including the protection of the confidentiality of nonpublic, sensitive personal and business information and the integrity and security of our information systems, as follows: Assessment, Identification, and Management of Material Risks: 1.
By integrating cybersecurity into our overall risk management system, we promote a comprehensive approach to risk mitigation and resilience-building across the organization. 72 Engagement of Assessors, Consultants, and Auditors: 1. External Expertise: We recognize the value of external expertise in assessing and enhancing our cybersecurity posture.
By integrating cybersecurity into our overall risk management system, we promote a comprehensive approach to risk mitigation and resilience-building across the organization. 65 Table of Contents Engagement of Assessors, Consultants, and Auditors: 1.
The CISO regularly reports to the Risk Committee, as well as the risk committee of the board of directors of Newtek Bank, on the state of our cybersecurity risk management program and provides updates on cybersecurity matters. The Risk Committee also receives regular reports on how management identifies, assesses, and manages cybersecurity and broader technology risks.
The CISO regularly reports to our CTO who reports to the Technology Steering Committee on a quarterly and more frequently as needed, on the state of our cybersecurity risk management program and provides updates on cybersecurity matters. The Technology Steering Committee also receives regular reports on how management identifies, assesses, and manages cybersecurity and broader technology risks.
The Risk Committee is informed of risks from cybersecurity threats through regular reports from the Company’s management, including our CISO and CTO. Our CISO and CTO, who are employees of our subsidiary NTS, oversee our cybersecurity risk management program.
In the case of cybersecurity and technology risk, in 2024 the Board formed the Technology Steering Committee which has that responsibility. The Technology Steering Committee is informed of risks from cybersecurity threats through regular reports from the Company’s management, including our CTO. Our CTO and the CISO, who is employed by IPM, oversee our cybersecurity risk management program.
Governance Our Board oversees material risks facing the Company. For some categories of risk, the Board has empowered a committee to provide more focused oversight. In the case of cybersecurity and technology risk, the Board’s Risk Committee has that responsibility.
Any identified threats, vulnerabilities, or cybersecurity incidents are addressed as appropriate through our CTO, CISO and IPM. Governance Our Board oversees material risks facing the Company. For some categories of risk, the Board has empowered committees to provide more focused oversight.
ITEM 1C. CYBERSECURITY. Risk Management and Strategy NewtekOne maintains an enterprise-wide risk-management (“ERM”) framework to identify, measure, mitigate, monitor and report material risks to NewtekOne. Our ERM process includes participation by our senior management and employees across NewtekOne and its consolidated subsidiaries and is overseen by our Board.
ITEM 1C. CYBERSECURITY. Risk Management and Strategy NewtekOne maintains a Risk Management framework to identify, measure, mitigate, monitor and report material risks to the Risk Committee of our Board.
Cybersecurity has been identified among the material risks in our business and the following approach has been developed to address cybersecurity.
The Risk Committee sets the risk appetite across NewtekOne while the executive leadership team and our associates identify and monitor current and emerging risks and manage those risks within our risk appetite. Cybersecurity has been identified among the material risks in our business and the following approach has been developed to address cybersecurity.
We prioritize the implementation of their recommendations, ensuring that our cybersecurity measures remain robust and adaptive to evolving threats. Oversight of Third-Party Service Providers: 1. Vendor Risk Management: We recognize that third-party service providers may introduce additional cybersecurity risks to our organization.
Continuous Improvement: The insights and recommendations provided by external assessors and consultants inform our ongoing efforts to strengthen our cybersecurity defenses. We prioritize the implementation of their recommendations, ensuring that our cybersecurity measures remain robust and adaptive to evolving threats. Oversight of Third-Party Service Providers: Our management is actively engaged in overseeing our third-party service providers.
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To complement the internal capabilities of our Chief Information Security Officer (“CISO”), Chief Technology Officer (“CTO”) and their team of professionals, we engage assessors, consultants, auditors, and other third-party experts with specialized knowledge in cybersecurity.
Added
Our Risk Management process includes participation by our senior management and employees across NewtekOne and its consolidated subsidiaries and is overseen by our Chief Risk Officer who reports to the Risk Committee and our CEO.
Removed
As such, we have established a vendor risk management program to assess and monitor the cybersecurity posture of our third-party vendors and partners. 2. Due Diligence: Prior to engaging with third-party service providers, we conduct due diligence assessments to evaluate their cybersecurity controls, practices, and compliance with industry standards and regulations.
Added
Internal Expertise: Our CTO is responsible for overseeing the Company’s IT infrastructure and cybersecurity and reports to our executive management team and the Technology Steering Committee of our Board. 2. External Expertise: We recognize the value of external expertise in assessing and enhancing our cybersecurity posture.
Removed
This due diligence process includes assessing the vendor's security policies, procedures, incident response capabilities, and contractual obligations related to cybersecurity. 3. Ongoing Monitoring: We continuously monitor the cybersecurity performance of our third-party vendors throughout the duration of our engagement. This includes regular assessments, audits, and compliance reviews to ensure that vendors adhere to agreed-upon cybersecurity standards and contractual obligations. 4.
Added
Historically, the Company’s subsidiary NTS and its team of professionals, including NTS’ Chief Information Security Officer (“CISO”), who currently serves as our CISO, and CTO, and their team of professionals, have managed the Company’s IT infrastructure, including our dedicated server hosting, managed cybersecurity, backup and disaster recovery, and other related services.
Removed
Remediation and Escalation: In the event that cybersecurity risks or deficiencies are identified within our third-party vendor ecosystem, we work collaboratively with the vendor to address and remediate these issues in a timely manner. Depending on the severity of the risk, we may escalate concerns to senior management or terminate the vendor relationship if necessary.
Added
As of the January 2, 2025, close of our divestiture of NTS to IPM, we and IPM entered into a Master Services Agreement pursuant to which IPM provides us with the same services NTS provided to the Company prior to the divestiture. Our CTO is responsible for overseeing IPM’s provision of the managed technology services, including cybersecurity, to NewtekOne.
Added
Our Enterprise Third Party Risk Management (TPRM) Policy establishes requirements and practices used to oversee and manage the activities of third parties with whom we have a relationship, under which we identify, measure, monitor, and manage third-party risk (including information cybersecurity risks) in alignment with our strategic objectives and in compliance with applicable law.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeBelow is a list of our leased offices and space as of December 31, 2023 which are material to the conduct of our business: Location Lease expiration Purpose Approximate square feet 4800 T Rex Avenue Boca Raton, FL 33431 April 2026 Corporate headquarters and NSBF lending operations 7,800 1981 Marcus Avenue Lake Success, NY 11042 April 2027 Lending operations, corporate operations, NY Capco offices and subsidiaries’ offices 44,800 14 East Washington Street Orlando, FL 32801 Month to Month Lending operations 1,700 1111 Brickell Avenue, Suite 135 Miami, Florida 33131 February 2027 Main office Newtek Bank 1,800
Biggest changeBelow is a list of our leased offices and space as of December 31, 2024, which are material to the conduct of our business: Location Lease expiration Purpose Approximate square feet 4800 T Rex Avenue Boca Raton, FL 33431 April 2026 Corporate headquarters, lending operations and subsidiaries’ offices 7,800 1981 Marcus Avenue Lake Success, NY 11042 April 2027 Newtek Bank, lending operations, corporate operations, NY Capco offices and subsidiaries’ offices 44,800 1985 Marcus Avenue Lake Success, NY 11042 April 2027 Newtek Bank and lending operations 7,300 200 and 250 South Orange Avenue, Orlando, FL 32801 February 2030 Lending operations 5,800 1111 Brickell Avenue, Suite 135 Miami, Florida 33131 February 2027 Main office Newtek Bank 1,800 Wilmington, NC October 2027 Newtek Bank operations 3,000

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAs of December 31, 2023, the Company had accrued an immaterial reserve that we believe is appropriate to cover potential settlements. In addition, as a result of a litigation brought by the Federal Trade Commission (the “FTC”) in October 2012, NMS voluntarily entered into, and is presently operating under, a permanent injunction with respect to certain of its business practices.
Biggest changeIn addition, as a result of a litigation brought by the Federal Trade Commission (the “FTC”) in October 2012, NMS voluntarily entered into, and is presently operating under, a permanent injunction with respect to certain of its business practices.
ITEM 3. LEGAL PROCEEDINGS. Refer to “NOTE 14—COMMITMENTS AND CONTINGENCIES” within the accompanying Notes to the Consolidated Financial Statements, which is incorporated by reference herein.
ITEM 3. LEGAL PROCEEDINGS. Refer to “NOTE 15—COMMITMENTS AND CONTINGENCIES” within the accompanying Notes to the Consolidated Financial Statements, which is incorporated by reference herein.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock is traded on the Nasdaq Global Market under the symbol “NEWT.” The last reported price for our common stock on March 28, 2024 was $11.00 per share.
Added
Item 5.02 to Newtek’s Current Report on Form 8-K (File No. 001-36742), filed J anuary 3, 2025) . 14.1 Code of Ethics (Previously filed in connection with Pre-Effective Amendment No. 3 to the Registrant’s Registration Statement on Form N-2 (File No. 333-191499) filed on November 3, 2014, and incorporated by reference herein). 19.1 NewtekOne, Inc.
Removed
Holders As of March 28, 2024, there were approximately 89 holders of record of our common stock. Sales of Unregistered Securities We have issued shares of common stock that are not subject to the registration requirements of the Securities Act in connection with the DRIP.
Added
Statement of Policy on Insider Trading 21.1 Subsidiaries of the Registrant filed herewith. 23.1 Consent of Independent Registered Public Accounting Firm. 31.1 Certification by Principal Executive Officer required by Rule 13a-14 under the Securities Exchange Act of 1934, as amended, furnished herewith. 31.2 Certification by Principal Financial Officer required by Rule 13a-14 under the Securities Exchange Act of 1934, as amended, furnished herewith. 31.3 Certification by Principal Accounting Officer required by Rule 13a-14 under the Securities Exchange Act of 1934, as amended, furnished herewith. 32.1 Certification by Principal Executive Officer pursuant to 18 U.S.C.
Removed
During the year ended December 31, 2023 and December 31, 2022, we issued 15,700 and 95,300 shares of common stock, respectively, valued at $0.2 million and $1.6 million, respectively, to shareholders in connection with the DRIP. On December 8, 2023, the Company terminated the DRIP.
Added
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith. 32.2 Certification by Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith. 32.3 Certification by Principal Accounting Officer pursuant to 18 U.S.C.
Removed
We also issue shares of common stock that are not subject to the registration requirements of the Securities Act in connection with dividends on unvested restricted stock awards.
Added
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith. 97.1 NewtekOne Clawback Polic y (incorporated by reference to Exhibit 97.1 to Newtek’s Annual Report on Form 10-K for the year ended December 31, 2023 (File No. 001-36742), filed April 1, 2024). 104 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Removed
During the years ended December 31, 2023 and December 31, 2022 we issued an additional 18,700 and 35,500 shares, respectively, valued at $0.3 million and $0.6 million, respectively, related to dividends on unvested restricted stock awards. Dividends The Company declared common dividends of $0.18 per share for the first, second, third and fourth quarters of 2023.
Added
NEWTEKONE, INC. Date: March 17, 2025 By: / S / B ARRY S LOANE Barry Sloane Chief Executive Officer, President and Chairman of the Board (Principal Executive Officer) Date: March 17, 2025 By: / S / M. S COTT P RICE M.
Removed
The Company’s ability to continue to pay common stock dividends is subject to, among other things, Board approval and limitations on capital distributions in the event of a breach of any regulatory capital buffers, with the degree of such restrictions based on the extent to which the buffers are breached.
Added
Scott Price Chief Financial Officer (Principal Financial Officer) Date: March 17, 2025 By: / S / F RANK D E M ARIA Frank DeMaria Chief Accounting Officer (Principal Accounting Officer) In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Removed
We can offer no assurance that we will achieve results that will permit the payment of any cash distributions. See “Item 1.
Added
Signature Title Date / S / B ARRY S LOANE Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) March 17, 2025 Barry Sloane / S / M. S COTT P RICE Chief Financial Officer (Principal Financial Officer) March 17, 2025 M.
Removed
Business.” Prior to our 2023 taxable year, when the Company operated as a RIC, we were required to timely distribute to our shareholders, in respect of each taxable year, dividends for U.S. federal income tax purposes of an amount generally at least equal to the Annual Distribution Requirement.
Added
Scott Price / S / F RANK D E M ARIA Chief Accounting Officer (Principal Accounting Officer) March 17, 2025 Frank DeMaria /S/ RICHARD SALUTE Director March 17, 2025 Richard Salute /S/ SALVATORE MULIA Director March 17, 2025 Salvatore Mulia /S/ GREGORY ZINK Director March 17, 2025 Gregory Zink /S/ CRAIG BRUNET Director March 17, 2025 Craig Brunet /S/ PETER DOWNS Director March 17, 2025 Peter Downs /S/ FERNANDO PEREZ-HICKMAN Director March 17, 2025 Fernando Perez-Hickman /S/ HALLI RAZON-FEINGOLD Director March 17, 2025 Halli Razon-Feingold 105 Table of Contents NEWTEKONE, INC.
Removed
Upon satisfying this requirement in respect of a taxable year, we generally were not subject to U.S. federal income taxes at corporate rates on any income we distributed to our shareholders as dividends for U.S. federal income tax purposes. 76 Table of Contents The following table summarizes our dividend declarations and distributions from January 1, 2019 through December 31, 2022, after which the Company no longer operates as a RIC: Record Date Payment Date Distribution Declared March 15, 2019 March 29, 2019 $ 0.40 June 14, 2019 June 28, 2019 $ 0.46 September 20, 2019 September 30, 2019 $ 0.58 December 16, 2019 December 30, 2019 $ 0.71 March 18, 2020 March 31, 2020 $ 0.44 July 15, 2020 July 31, 2020 $ 0.56 September 21, 2020 September 30, 2020 $ 0.58 December 18, 2020 December 30, 2020 $ 0.47 March 22, 2021 March 31, 2021 $ 0.50 June 15, 2021 June 30, 2021 $ 0.70 September 20, 2021 September 30, 2021 $ 0.90 December 20, 2021 December 30, 2021 $ 1.05 March 21, 2022 March 31, 2022 $ 0.65 June 20, 2022 June 30, 2022 $ 0.75 September 20, 2022 September 30, 2022 $ 0.65 December 20, 2022 December 30, 2022 $ 0.70 The Company has a stock-based compensation plan as discussed in NOTE 15—STOCK BASED COMPENSATION.
Added
AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Table of Contents PAGE NO.
Removed
Securities authorized for issuance under equity compensation plans as of December 31, 2023: Plan Category (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (b) Weighted-average exercise price of outstanding options, warrants and rights (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders None None 2,257,528 shares Equity compensation plans not approved by security holders None None None 77 Table of Contents Stock Performance Graph The following graph compares the return on our common stock with that of the Standard & Poor’s 500 Stock Index, the NASDAQ Composite Index, the Russell 2000, and S&P Small Cap 600 for the period from December 31, 2018 through December 31, 2023.
Added
Report of Independent Registered Public Accounting Firm (PCAOB ID : 49) F- 2 Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting F- 101 Consolidated Statements of Financial Condition as of December 31, 202 4 and 202 3 F- 5 Consolidated Statements of Income for the years ended December 31, 202 4 , 202 3 and 202 2 F- 6 Consolidated Statements of Comprehensive Income for the years ended December 31, 2 02 4 , 202 3 and 202 2 F- 7 Consolidated Statements of Changes in Changes in Shareholders’ Equity for the years ended December 31, 202 4 , 202 3 and 202 2 F- 8 Consolidated Statements of Cash Flows for the years ended December 31, 202 4 , 202 3 and 202 2 F- 11 Notes to Consolidated Financial Statements F- 14 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of NewtekOne Inc.
Removed
The graph assumes that, on January 1, 2019, a person invested $100 in each of our common stock, the Nasdaq Composite, S&P 500 Index, Russell 2000 and S&P Small Cap 600. The graph measures total shareholder return, which takes into account both changes in stock price and dividends. It assumes that dividends paid are invested in like securities. Source: Bloomberg
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Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial condition of NewtekOne Inc. and its subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements).
Added
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Added
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 17, 2025, expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.
Added
Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits.
Added
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB.
Added
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Added
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Added
Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.
Added
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Added
Valuation of loans held for sale and loans held for investment, measured at fair value — Accrual and Non-accrual loans As described in Notes 2, 5, and 10 to the consolidated financial statements, the Company has loans held for sale and loans held for investment, which are measured at fair value using unobservable inputs and assumptions, and as such the Company’s loans held for sale and loans held for investment, which are measured at fair value as of December 31, 2024 are classified as level 3 within the fair value hierarchy as described in Note 10.
Added
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.
Added
As of December 31, 2024, total Level 3 loans held for sale and loans held for investment, which are measured at fair value had a fair value of $372.3 and $369.7 million, respectively.
Added
We identified the valuation of level 3 loans held for sale and loans held for investment, which are measured at fair value as a critical audit matter because of the judgments necessary for management to select and apply valuation techniques and assumptions, the high degree of auditor judgment involved, and the extensive audit effort involved in testing the valuations.
Added
Our audit procedures related to the valuation of the Company’s level 3 loans held for sale and loans held for investment, which are measured at fair value included the following, among others: • We obtained an understanding of and evaluated the methods and assumptions management uses to value the loans held for sale and loans held for investment, which are measured at fair value - accrual and non-accrual loans. • We tested the completeness and accuracy of information used in the valuations by agreeing the total amount of schedules to the trial balance.
Added
F-2 Table of Contents • With the assistance of our valuation specialists, we evaluated the reasonableness of the methods and assumptions used by management in the valuation of accrual loans (discount rate, default rate, prepayment rate, cost of servicing, etc.) and performed a recalculation for a sample of loans to ensure validity of the valuation model. • With the assistance of our valuation specialists, we evaluated the reasonableness of the methods and assumptions used by management in the valuation of non-accrual loans (prepayment rate, probability of default, time to liquidate and discount rate). • We tested management’s estimates to evaluate the reasonableness of the fair market value of collateral used by management in the valuation of non-accrual loans for a sample of loans, by validating the source of information used by management with the relevant internal or external information from which it was derived.
Added
Additionally, we recalculated the present value of expected cashflows and compared it with the value of loans determined by management.
Added
Valuation of servicing assets, at fair value As described in Notes 2, 7 and 10 to the consolidated financial statements, servicing assets for loans originated by the Company’s nonbank subsidiaries are measured at fair value at each reporting date and the Company reports changes in the fair value of servicing assets in earnings in the period in which the changes occur.
Added
The Company’s servicing assets, at fair value are measured at fair value using unobservable inputs and assumptions. As such the Company’s servicing assets for the nonbank subsidiaries as of December 31, 2024, is classified as Level 3 within the fair value hierarchy as described in Note 10.
Added
Determining the fair value of the Level 3 servicing assets, at fair value requires management to make significant judgments about the valuation methodologies and inputs and assumptions used in the fair value calculation, including, but not limited to, discount rate, servicing costs, default rate, prepayment rate, and the impact of economic conditions.
Added
As of December 31, 2024, total Level 3 servicing assets recorded at fair value had a balance of $22.1 million.
Added
We identified the valuation of servicing assets, at fair value as a critical audit matter because of the judgments necessary for management to select and apply valuation techniques and assumptions, the high degree of auditor judgment involved, and the extensive audit effort involved in testing the valuations.
Added
Our audit procedures related to the valuation of the servicing assets included the following, among others: • We obtained an understanding of and evaluated the methods and assumptions management uses to value the servicing assets, at fair value. • We tested the completeness and accuracy of information used in the valuations by agreeing the total principal balance, interest rate, interest type, and maturity date of the loans sold in the schedules to the loan subledger. • With the assistance of valuation specialists, developed an independent estimate of fair value for servicing assets or tested management’s fair value estimates as of December 31, 2024. • We reviewed the significant assumptions (e.g. discount rate, prepayment rate, default rate and servicing cost) used by externally engaged and internal valuation specialist for reasonableness.
Added
Allowance for credit losses on loans As described in Notes 2 and 5 to the consolidated financial statements, the allowance for credit losses on loans is established through a provision for credit losses and represents an amount which, in management’s judgment, will be adequate to absorb losses on existing loans.
Added
The Company’s consolidated allowance for credit losses on loan balances was $30.2 million at December 31, 2024. The allowance for credit losses on loans is comprised of reserves measured on a collective (pool) basis based on a lifetime loss-rate model when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on an individual basis.
Added
F-3 Table of Contents The Company uses the discounted cash flow method to estimate expected credit losses for all loan portfolio segments measured on a pool basis wherein payment expectations are adjusted for estimated prepayment speeds, probability of default (PD), and loss given default (LGD).
Added
The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime PD. This analysis also determines how expected PD and LGD will react to forecasted levels of the loss drivers.
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Management utilizes various economic indicators such as changes in unemployment rates, gross domestic product (GDP), and other relevant factors as loss drivers and has determined that, due to historical volatility in economic data, four quarters currently represents a reasonable and supportable forecast period, followed by a four-period reversion to historical mean levels for each of the various economic indicators.
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The allowance evaluation also considers various qualitative factors, such as: (i) changes to lending policies, underwriting standards and/or management personnel performing such functions, (ii) delinquency and other credit quality trends, (iii) credit risk concentrations, if any, (iv) changes to the nature of the Company’s business impacting the loan portfolio, (v) and other external factors, that may include, but are not limited to, results of internal loan reviews, stress testing, examinations by bank regulatory agencies, or other events such as a natural disaster.
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The development of the loan loss allocation for pools of loans with similar risk characteristics requires a significant amount of judgment by management and the assumptions utilized are subject to changing economic conditions.
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We identified the Company’s allowance for credit losses on loans as a critical audit matter, specifically the economic forecasts and qualitative factors, because they involved complex auditor judgment in the evaluation of the Company’s assumptions. Additionally, complex auditor judgment was required to examine the methodology that underpins the allowance for credit losses on pools of loans with similar risk characteristics.
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This includes modeling of PD, LGD, economic forecasts, and qualitative factors.
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Our audit procedures related to this critical audit matter included the following, among others: • We tested the completeness and accuracy of data used by management in determining inputs to the PD and LGD by agreeing those inputs to internal or external information sources. • We evaluated management’s judgments used in the identification of peer banks for PD and LGD calculations by comparing peer banks to external information sources. • We evaluated management’s forecasts of future economic indicators for reasonableness, which included unemployment, housing price index, and national GDP growth, among others, by comparing these forecasts to external and internal information sources. • We evaluated management’s judgments and assumptions used in the development of the qualitative factors for reasonableness and tested the reliability of the underlying data on which these factors are based, by comparing information to source documents and external information sources. /s/ RSM US LLP We have served as the Company's auditor since 2013.
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Hartford, Connecticut March 17, 2025 F-4 Table of Contents NEWTEKONE, INC.
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AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In Thousands, except for Per Share Data) December 31, 2024 December 31, 2023 ASSETS Cash and due from banks $ 6,941 $ 15,398 Restricted cash 28,226 30,919 Interest bearing deposits in banks 346,207 137,689 Total cash and cash equivalents 381,374 184,006 Debt securities available-for-sale, at fair value 23,916 32,171 Loans held for sale, at fair value 372,286 118,867 Loans held for sale, at LCM 58,803 56,607 Loans held for investment, at fair value 369,746 469,801 Loans held for investment, at amortized cost, net of deferred fees and costs 621,651 336,305 Allowance for credit losses (30,233) (12,574) Loans held for investment, at amortized cost, net 591,418 323,731 Federal Home Loan Bank and Federal Reserve Bank stock 3,585 3,635 Settlement receivable 52,465 62,230 Joint ventures and other non-control investments, at fair value (cost of $44,039 and $38,660), respectively 57,678 41,587 Goodwill and intangibles 14,752 30,120 Right of use assets 5,688 5,701 Deferred tax asset, net — 5,230 Servicing assets, at fair value 22,062 29,336 Servicing assets, at LCM 24,195 10,389 Other assets 60,636 56,102 Assets held for sale 21,308 — Total assets $ 2,059,912 $ 1,429,513 LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities: Deposits: Noninterest-bearing $ 11,142 $ 10,053 Interest-bearing 961,910 453,452 Total deposits 973,052 463,505 Borrowings 708,041 644,122 Dividends payable 5,233 4,792 Lease liabilities 6,498 6,952 Deferred tax liabilities, net 2,244 — Due to participants 21,532 23,796 Accounts payable, accrued expenses and other liabilities 40,806 37,300 Liabilities directly associated with assets held for sale 6,224 — Total liabilities 1,763,630 1,180,467 Commitment and contingencies (Note 15) Shareholders' Equity: Preferred stock (par value $0.02 per share; authorized 20 shares, 20 shares issued and outstanding) 19,738 19,738 Common stock (par value $0.02 per share; authorized 199,980 shares, 26,291 and 24,680 shares issued and outstanding, respectively) 526 492 Additional paid-in capital 218,266 200,913 Retained earnings 57,773 28,051 Accumulated other comprehensive income (loss), net of income taxes (21) (148) Total shareholders' equity 296,282 249,046 Total liabilities and shareholders' equity $ 2,059,912 $ 1,429,513 F-5 See accompanying notes to consolidated financial statements.
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AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In Thousands, except for Per Share Data) Year Ended December 31, 2024 Financial Holding Company 2023 Financial Holding Company 2022 Investment Company Interest income Debt securities available-for-sale $ 1,482 $ 1,518 $ — Loans and fees on loans 110,892 84,001 35,696 Interest from affiliates — — 2,921 Other interest earning assets 9,044 8,854 — Total interest income 121,418 94,373 38,617 Interest expense Deposits 28,690 15,849 — Notes and securitizations 45,454 40,217 21,780 Bank and FHLB borrowings 6,969 11,673 3,998 Notes payable related parties — — 547 Total interest expense 81,113 67,739 26,325 Net interest income 40,305 26,634 12,292 Provision for credit losses 26,216 11,704 — Net interest income after provision for credit losses 14,089 14,930 12,292 Noninterest income Dividend income 1,519 1,757 24,657 Net loss on loan servicing assets (12,665) (4,282) (10,095) Servicing income 20,087 18,289 13,698 Net gains on sales of loans 97,183 51,467 56,901 Net gain (loss) on loans under the fair value option 5,200 18,008 (26,504) Technology and IT support income 19,643 24,916 — Electronic payment processing income 46,049 42,855 — Other noninterest income 40,296 23,762 34,221 Total noninterest income 217,312 176,772 92,878 Noninterest expense Salaries and employee benefits expense 77,931 65,708 20,186 Technology services expense 12,261 14,272 — Electronic payment processing expense 19,878 18,327 — Professional services expense 15,813 13,077 7,134 Other loan origination and maintenance expense 13,770 9,433 30,746 Depreciation and amortization 1,784 2,884 239 Loss on extinguishment of debt — 271 417 Other general and administrative costs 21,272 22,357 7,673 Total noninterest expense 162,709 146,329 66,395 Net income before taxes 68,692 45,373 38,775 Income tax expense (benefit) 17,839 (1,956) 6,464 Net income 50,853 47,329 32,311 Dividends to preferred shareholders (1,600) (1,454) — Net income available to common shareholders $ 49,253 $ 45,875 $ 32,311 Earnings per common share: Basic $ 1.97 $ 1.89 $ 1.34 Diluted $ 1.96 $ 1.88 $ 1.34 F-6 See accompanying notes to consolidated financial statements.
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AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands, except for Per Share Data) Year Ended December 31, 2024 Financial Holding Company 2023 Financial Holding Company 2022 Investment Company Net income $ 50,853 $ 47,329 $ 32,311 Other comprehensive gain (loss) before tax: Net unrealized gain (loss) on debt securities available-for-sale during the period 183 (201) — Other comprehensive gain (loss) before tax 183 (201) — Income tax (benefit) expense (56) 53 — Other comprehensive income (loss), net of tax 127 (148) — Comprehensive income $ 50,980 $ 47,181 $ 32,311 F-7 See accompanying notes to consolidated financial statements.
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AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (In Thousands, except for Per Share Data) Common stock Preferred stock Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total equity Shares Amount Shares Amount Balance at December 31, 2023 24,680 $ 492 20 $ 19,738 $ 200,913 $ (148) $ 28,051 $ 249,046 Stock-based compensation expense, net of forfeitures — — — — 4,040 — — 4,040 Dividends declared related to RSA, net of accrued dividends forfeited 33 — — — 420 — (420) — Purchase of vested stock for employee payroll tax withholding (25) — — — (299) — — (299) Restricted stock awards, net of forfeitures 513 12 — — — — — 12 Retirement of common shares (30) (1) — — (401) — — (402) ESPP issuances 20 — — — 227 — — 227 Issuance of common stock, net of offering costs 1,100 23 — — 13,366 — — 13,389 Dividends declared common shares ($0.38/share) — — — — — — (19,111) (19,111) Dividends declared preferred shares ($80.00/share) — — — — — — (1,600) (1,600) Net income (loss) — — — — — — 50,853 50,853 Other comprehensive income, net of tax — — — — — 127 — 127 Balance at December 31, 2024 26,291 $ 526 20 $ 19,738 $ 218,266 $ (21) $ 57,773 $ 296,282 F-8 See accompanying notes to consolidated financial statements.
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AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (As Restated) (In Thousands, except for Per Share Data) Common stock Preferred stock Additional paid-in-capital Accumulated other comprehensive income (loss) Accumulated undistributed earnings Retained earnings Total equity Shares Amount Shares Amount Balance at December 31, 2022 24,609 $ 492 — $ — $ 354,243 $ — $ 20,623 $ — $ 375,358 Conversion from BDC to Bank Holding Company Adjustments: Change in presentation — — — — 20,623 — (20,623) — — Removal of fair value adjustments — — — — (138,043) — — — (138,043) Consolidation of controlled investments — — — 245 (57,961) — — (143) (57,859) Reassessment of deferred tax assets and liabilities — — — — 19,266 — — — 19,266 DRIP shares issued 16 — — — 216 — — — 216 Stock-based compensation expense, net of forfeitures — — — — 2,828 — — — 2,828 Dividends declared related to RSA, net of accrued dividends forfeited 16 — — — 218 — — (218) — Purchase of vested stock for employee payroll tax withholding (17) (1) — — (533) — — — (534) Restricted stock awards, net of forfeitures 52 1 — — — — — — 1 ESPP issuances 4 — — — 56 — — — 56 Issuance of preferred stock — — 20 20,000 — — — — 20,000 Preferred stock issuance costs — — — (507) — — — — (507) Dividends declared common shares ($0.54/share) — — — — — — — (17,463) (17,463) Dividends declared preferred shares ($72.44/share) — — — — — — — (1,454) (1,454) Net income (loss) — — — — — — — 47,329 47,329 Other comprehensive loss, net of tax — — — — — (148) — — (148) Balance at December 31, 2023 24,680 $ 492 20 $ 19,738 $ 200,913 $ (148) $ — $ 28,051 $ 249,046 F-9 See accompanying notes to consolidated financial statements.
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AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (In Thousands, except for Per Share Data) Common stock Additional paid-in-capital Accumulated undistributed earnings Total equity Shares Amount Balance at December 31, 2021 24,159 $ 483 $ 367,663 $ 35,741 $ 403,887 DRIP shares issued 95 3 1,611 — 1,614 Stock-based compensation expense — — 2,511 — 2,511 Dividends Declared related to RSA — — 646 (646) — Purchase of vested stock for employee payroll tax withholding (38) — (826) — (826) Issuance of common stock, net of offering costs 107 2 2,017 — 2,019 Restricted stock awards 286 4 (4) — — Dividends declared common shares — — — (66,158) (66,158) RIC tax reclassification — — (19,375) 19,375 — Net increase resulting from operations: Net investment income — — — (6,476) (6,476) Net realized gain on investments — — — 57,346 57,346 Net unrealized depreciation on investments — — — (18,559) (18,559) Balance at December 31, 2022 24,609 $ 492 $ 354,243 $ 20,623 $ 375,358 F-10 See accompanying notes to consolidated financial statements.
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AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Year Ended December 31, 2024 2023 2022 Financial Holding Company Financial Holding Company Investment Company Cash flows from operating activities: Net income $ 50,853 $ 47,329 $ 32,311 Adjustments to reconcile net income to net cash used in operating activities: Net appreciation on joint ventures and other non-control investments (10,712) (3,219) — Net unrealized appreciation on controlled investments — — (24,321) Net (gain) loss on loans accounted for under the fair value option (5,200) (18,008) 26,504 Loan servicing asset revaluation 12,665 4,282 10,095 Net unrealized (appreciation) depreciation on derivative transactions (1,344) 699 (183) Unrealized loss on assets classified as held for sale 616 — — Net gain on sales of loans (97,183) (51,467) (56,901) Net accretion of premium/discount (836) (675) — Loss on extinguishment of debt — 271 417 Amortization of deferred financing costs 4,564 4,052 2,494 Provision for credit losses 26,216 11,704 — Lower of cost or market adjustment on loans held for sale (73) — — Bad debt expense, net of recoveries 1,059 3,637 — Stock compensation expense 4,062 2,828 — Deferred income tax expense (benefit) 10,403 (4,800) 6,464 Depreciation and amortization 1,784 2,884 239 Proceeds from sale of loans held for sale 817,869 695,461 691,219 Purchase of loans held for sale — — (2,404) Sale (purchase) of loans held for sale from affiliate 140,009 (5,279) — Funding of loans held for sale (1,125,131) (783,035) (775,577) Funding of controlled investments — — (53,198) Funding of non-control/affiliate investment — — (360) Principal received on loans held for sale 18,898 12,235 74,287 Principal received from controlled investments — — 6,970 Return of investments from controlled investments — — 48,709 Other, net (230) — 3,257 Changes in operating assets and liabilities: Settlement receivable 9,765 (62,230) 44,537 Income tax payable 19 (4,040) — Dividends receivable — 493 — Due to/from related parties (91) (165) 2,778 Other assets (13,660) 7,432 1,816 Assets classified as held for sale (1,497) — — Liabilities directly associated with assets classified as held for sale (174) — — Dividends payable 441 4,776 — Due to participants (2,264) (11,832) (110,598) Accounts payable, accrued expenses and other liabilities 6,158 (22,552) 9,021 Other, net — — 6 F-11 See accompanying notes to consolidated financial statements.
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AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Year Ended December 31, 2024 2023 2022 Financial Holding Company Financial Holding Company Investment Company Net cash used in operating activities (153,014) (169,219) (62,418) Cash flows from investing activities: Net decrease in loans held for investment, at fair value 66,817 29,349 — Net increase in loans held for investment, at cost (278,539) (169,003) — Contributions to joint ventures and other non-control investments (25,680) (14,550) — Return of capital from joint ventures and other non-control investments 20,301 564 — Purchase of fixed assets (439) (458) (11) Net decrease (increase) in Federal Home Loan Bank and Federal Reserve Bank stock 50 (2,112) — Purchases of available-for-sale securities (33,021) (27,167) — Maturities of available-for-sale securities 41,460 — — Acquisitions, net of cash acquired — 11,142 — Net cash used in investing activities (209,051) (172,235) (11) Cash flows from financing activities: Net borrowings (paydowns) on bank notes payable 71,613 (78,663) 5,885 Net increase in deposits 508,577 324,705 — Repayment of Federal Home Loan Bank advances (7,959) (4,895) — Proceeds from common shares sold, net of offering costs 13,818 — 2,019 Proceeds from preferred stock, net of offering costs — 19,493 — Net repayments under related party line of credit — — 12,800 Proceeds from 2025 5.00% Notes — — 30,000 Proceeds from 2025 8.125% Notes — 50,000 — Proceeds from 2028 8.00% Notes — 40,000 — Redemption of 2024 Notes (38,250) — — Redemption of 2025 6.85% Notes — — (15,000) Proceeds from 2029 8.50% Notes 71,875 — Proceeds from 2029 8.625% Notes 75,000 — Payments on Notes Payable - Securitization Trusts (106,992) (90,780) (82,817) Issuance of Notes Payable - Securitization Trusts — 103,860 116,210 Dividends paid, net of dividend reinvestment plan (20,252) (14,147) (64,544) Payments of deferred financing costs (6,039) (4,650) (2,552) Proceeds from common stock issued under ESPP 207 51 Purchase of vested stock for employee payroll tax withholding (299) — (826) Retirement of common shares (402) — — Net cash provided by financing activities 560,897 344,974 1,175 Net increase in cash and restricted cash 198,832 3,520 (61,254) Cash and restricted cash—beginning of period (Note 2) 184,006 125,606 186,860 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 $ 125,606 F-12 See accompanying notes to consolidated financial statements.
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AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Year Ended December 31, 2024 2023 2022 Financial Holding Company Financial Holding Company Investment Company Non-cash operating, investing and financing activities: Foreclosed real estate acquired $ 4,569 $ 2,978 $ 3,466 Dividends declared but not paid during the period $ 5,237 $ 4,363 $ 2,118 Issuance of common shares under dividend reinvestment plan $ — $ 219 $ 1,614 Supplemental disclosure of cash flow information: (as restated) (as restated) Interest paid $ 79,192 $ 66,471 $ 25,348 Income taxes paid $ 7,429 $ 6,884 $ — F-13 See accompanying notes to consolidated financial statements.
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AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION: The Company is a financial holding company that is a leading provider of business and financial solutions to independent business owners (SMBs) and provides SMBs with the following Newtek® branded business and financial solutions: Newtek Banking, Newtek Alternative Lending, Newtek Technology, Newtek Payments, Newtek Insurance, and Newtek Payroll.
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NewtekOne reports on a consolidated basis the financial condition and results of operations for the following consolidated subsidiaries: Newtek Bank; NSBF; NMS (and its subsidiary Mobil Money); NBC; PMT; NIA; TAM; POS; NALH; NCL; and NTS. Except as otherwise noted, all financial information included in the tables in the following footnotes is stated in thousands, except per share data.
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Consolidation The consolidated financial statements include the accounts of NewtekOne, its subsidiaries and certain VIEs. Significant intercompany balances and transactions have been eliminated. The Company considers a voting rights entity to be a subsidiary and consolidates it if the Company has a controlling financial interest in the entity.
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VIEs are consolidated if NewtekOne has the power to direct the activities of the VIE that significantly impact financial performance and has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE (i.e., NewtekOne is the primary beneficiary).
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The determination of whether the Company is the primary beneficiary of a VIE is reassessed on an ongoing basis. Investments in companies which are not VIEs but in which the Company has more than minor influence over the operating and financial policies are accounted for using the equity method of accounting.
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Investments in VIEs, where NewtekOne is not the primary beneficiary of a VIE, are accounted for using the equity method of accounting. The maximum potential exposure to losses relative to investments in VIEs is generally limited to the investment balance. Refer to NOTE 4—INVESTMENTS.
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NTS Sale As a result of the Company’s entry into the NTS Sale Agreement and its completion of the NTS Sale on January 2, 2025 , t he Company reported NTS as Held for Sale as of December 31, 2024. See NOTE 25—SUBSEQUENT EVENTS: Sale of NTS.
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In addition, as of the date of the NTS Sale, the Company has concluded that the assets, liabilities and operations of NTS do not qualify for Discontinued Operations as of December 31, 2024. See NOTE 9—ASSETS AND LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS HELD FOR SALE.
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Reclassifications and Restatements Certain prior period amounts, to the extent comparable, have been reclassified to conform to the current period presentation. The supplemental disclosure of cash flow information for interest paid was restated for December 31, 2023 and 2022 as a result of the previously disclosed material weaknesses and restatements described in the 2023 Annual Report on Form 10-K.
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NOTE 2—SIGNIFICANT ACCOUNTING POLICIES: Use of Estimates in the Preparation of Financial Statements The preparation of consolidated financial statements in conformity with U.S.
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GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expense during the reporting period.
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The level of uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are complete. Actual results could differ from those estimates. F-14 Table of Contents Cash and due from banks The Company considers all highly liquid instruments with maturities of three months or less when purchased to be cash equivalents.
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Invested cash is held exclusively at financial institutions of high credit quality. As of December 31, 2024, cash deposits in excess of insured amounts totaled $30.3 million.
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The Company has not experienced any losses with respect to cash balances in excess of insured amounts and management does not believe there was a significant concentration of risk with respect to cash balances as of December 31, 2024.
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Restricted cash Restricted cash includes amounts due on SBA loan-related remittance s to third parties, cash reserves established as part of agreements with the SBA, cash reserves associated with consolidated securitization transactions, and cash margin as collateral for derivative instruments. As of December 31, 2024 and 2023, total restricted cash was $28.2 million and $30.9 million, respectively.
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Interest bearing deposits in banks The Company’s interest bearing deposits in banks reflects cash held at other financial institutions that earn interest.
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The following table provides a reconciliation of cash and due from banks, restricted cash, and interest bearing deposits in banks as of December 31, 2024 and 2023: December 31, 2024 December 31, 2023 Cash and due from banks $ 6,941 $ 15,398 Restricted cash 28,226 30,919 Interest bearing deposits in banks 346,207 137,689 Total cash and cash equivalents $ 381,374 $ 184,006 December 31, 2024 December 31, 2023 Cash held at Federal Reserve Bank 1 $ 345,680 $ 137,434 Cash held at other financial institutions 35,694 46,572 Total cash and cash equivalents $ 381,374 $ 184,006 1 Subject to changes in the Federal Funds rate set by the Federal Open Market Committee Debt securities, available for sale, at fair value The Company’s securities portfolio primarily consists of available for sale debt securities held by Newtek Bank that are classified as “available for sale” and carried at their estimated fair value, with any unrealized gains or losses, net of taxes, reported as accumulated other comprehensive income or loss in stockholders’ equity.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAt Amortized Cost: Loans held for investment, at amortized cost consists of Newtek Bank loans acquired as part of the Acquisition as well as new originations in 2023, which contributed to a net increase of $336.3 million in loans. 83 Credit Quality: The following table presents an analysis of loans held for investment with credit metrics, including a breakdown by days aged: Credit Quality Ratios December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 $ % $ % $ % $ % At Amortized Cost Current $ 326,036 96.9 % $ 274,930 97.6 % $ 213,938 97.9 % $ 163,487 98.0 % Past Due 31-89 Days 4,896 1.5 % 1,401 0.5 % 1,271 0.6 % — — % Nonaccrual loans 5,373 1.6 % 5,256 1.9 % 3,350 1.5 % 3,350 2.0 % Total 336,305 100.0 % 281,587 100.0 % 218,559 100.0 % 166,837 100.0 % Allowance for credit losses (12,574) 3.7 % (8,209) 2.9 % (4,764) 2.2 % (2,189) 1.3 % At Fair Value Current $ 385,172 81.9 % $ 420,673 85.4 % $ 448,788 87.6 % $ 450,846 84.6 % Past Due 31-89 Days $ 36,455 7.8 % $ 29,743 6.0 % $ 24,530 4.8 % $ 42,197 7.9 % Nonaccrual loans $ 48,174 10.3 % $ 42,571 8.6 % $ 39,100 7.6 % $ 39,745 7.5 % Total $ 469,801 100.0 % $ 492,987 100.0 % $ 512,418 100.0 % $ 532,788 100.0 % Past due and nonaccrual loans as % of Outstanding UPB $ 84,629 75.2 % $ 72,314 76.0 % $ 63,630 73.1 % $ 81,942 76.8 % Nonperforming Assets, as a percentage of total assets Loans HFI, at amortized cost $ 5,373 0.4 % $ 5,256 0.4 % $ 3,350 0.2 % $ 3,350 0.3 % Loans HFI, at fair value 48,174 3.3 % 42,571 3.0 % 39,100 2.7 % 39,745 3.1 % Other real estate owned 1,110 0.1 % 2,828 0.2 % 3,612 0.3 % 3,516 0.3 % Total Nonperforming Assets $ 54,657 3.8 % $ 50,655 3.6 % $ 46,062 3.2 % $ 46,611 3.7 % Other Statistics All Loans HFI 90 days past due still accruing interest $ — — % $ — — % $ — — % $ — — % 84 Commercial real estate exposure The Company’s loan portfolio consists of loans to SMBs.
Biggest changeThe $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).
Additionally, in the event that the U.S. economy enters into a protracted recession, it is possible that the businesses and industries in which our customers operate and to which we lend to could experience deterioration, which could ultimately lead to difficulty in meeting debt service requirements and an increase in defaults.
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.
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.
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.
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. 102 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.
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.
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 81 prior to their scheduled maturity date.
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 Company manages risk of exposure to credit losses under these commitments by subjecting them to credit approval and monitoring procedures. The Company assesses the credit risk associated with certain commitments to extend credit and establishes a liability for probable credit losses.
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.
As a BDC, under the 1940 Act, we were not permitted to acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets, and we were not permitted to issue senior securities unless the ratio of its total assets (less total liabilities other than indebtedness represented by senior securities) to its total indebtedness represented by senior securities plus preferred stock, if any, was at least 150%.
As a BDC under the 1940 Act we were not permitted to acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets, and we were not permitted to issue senior securities unless the ratio of our total assets (less total liabilities other than indebtedness represented by senior securities) to our total indebtedness represented by senior securities plus preferred stock, if any, was at least 150%.
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% 96 Notes to the purchaser in an exempt offering in January 2021.
The Company exercised its option to issue up to $10.0 million of additional 2025 6.85% Notes to the purchaser, and issued $10.0 million in additional 2025 6.85% Notes to the purchaser in an exempt offering in January 2021.
While we are not seeing signs of an overall, broad deterioration in our operating results at this time, there can be no assurance that the performance of certain of our subsidiaries and our current and prospective borrowers will not be negatively impacted by economic conditions, which could have a negative impact on our future results.
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.
Refer to NOTE 4—INVESTMENTS for selected financial information and a schedule of investments of NCL as of December 31, 2023. 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.
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.
The Company is also a guarantor on an NMS term loan facility. At December 31, 2023, 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.
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.
As of December 31 2022, our asset coverage was 169%. Although we are no longer regulated as a BDC, certain covenants in our outstanding 2024 and 2026 Notes require us to maintain an asset coverage of at least 150% as long as the 2024 and 2026 Notes are outstanding. See “Item 1A.
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.
The valuation model for servicing assets incorporates assumptions including, but not limited to, servicing costs, discount rate, prepayment rate, and default rate. Considerable judgement is required to estimate the fair value of servicing assets and, as such, these assets are classified as Level 3 in our fair value hierarchy.
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.
The valuation model for servicing assets incorporates assumptions including, but not limited to, servicing costs, discount rate, prepayment rate, and default rate. Considerable judgement is required to estimate the fair value of servicing assets and as such these assets are classified as Level 3 in our fair value hierarchy.
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.
The frequency or volume of these repayments fluctuated significantly from period to period. Our portfolio activity for the fiscal year ended December 31, 2023 also reflects the proceeds of sales of guaranteed portions of SBA 7(a) loans we originated.
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 the year ended December 31, 2023, our primary use of funds from operations included originations of loans and payments of fees and other operating expenses we incurred. We may raise additional equity or debt capital through both registered offerings off of a shelf registration, including “at-the-market”, or ATM, and private offerings of securities.
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 28, 2022, NCL JV closed a conventional commercial loan securitization with the sale of $56.3 million Class A Notes, NCL Business Loan Trust 2022-1, Business Loan-Backed Notes, Series 2022-1, secured by a segregated asset pool consisting primarily of NCL JV’s portfolio of conventional commercial business loans, including loans secured by liens on commercial or residential mortgaged properties, originated by NCL JV and NBL.
On January 28, 2022, NCL JV closed an ALP loan securitization with the sale of $56.3 million Class A Notes, NCL Business Loan Trust 2022-1, Business Loan-Backed Notes, Series 2022-1, secured by a segregated asset pool consisting primarily of NCL JV’s portfolio of ALP loans, including loans secured by liens on commercial or residential mortgaged properties, originated by NCL JV and NBL.
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 unconditionally cancellable by the Company.
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 Company funds these commitments from the same sources it uses to fund its other loan commitments. Guarantees The Company is a guarantor on several warehouse lines of credit as noted in the above table under Contractual Obligations. Refer to NOTE 12—BORROWINGS to the consolidated financial statements for the amounts outstanding, line availability, and term.
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.
In addition, NSBF will be required to continue to service and liquidate its SBA Loan Portfolio, including processing forgiveness and loan reviews for PPP Loans pursuant to an SBA approved lender service provider agreement with SBL. The Company will continue to measure NSBF’s SBA 7(a) loan portfolio at fair value until the portfolio is completely runoff.
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.
Amounts represent principal only and are not shown net of unamortized debt issuance costs. See NOTE 12—BORROWINGS.
Amounts represent principal only and are not shown net of unamortized debt issuance costs. See NOTE 13—BORROWINGS.
In addition, during the wind-down process, NSBF will be subject to minimum capital requirements established by the SBA, be required to continue to maintain certain amounts of restricted cash available to meet any obligations to the SBA, have restrictions on its ability to make dividends and distributions to the Company, and remain liable to the SBA for post-purchase denials and repairs on the guaranteed portions of SBA 7(a) loans originated and sold by NSBF, from the proceeds generated by NSBF’s SBA loan portfolio.
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.
Risk Factors - Risks Related to SBA Lending - A governmental failure to fund the SBA could adversely affect NSBF’s and Newtek Bank’s SBA 7(a) loan originations and our results of operations.” Economic Developments We have observed and continue to observe supply chain interruptions, significant labor and resource shortages, commodity inflation, rising interest rates, unrelated bank failures and declines in depositor confidence in certain types of depository institutions.
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.
NewtekOne and Newtek Bank are primarily constrained by the Total Capital and Leverage ratios given the mix of assets vis a vie capital.
The Company and Newtek Bank are primarily constrained by the Total Capital and Leverage ratios given the mix of assets vis-a-vis capital.
During this wind-down process, NSBF will continue to own the SBA 7(a) loans and PPP Loans currently in its SBA loan portfolio to maturity, liquidation, charge-off or (subject to SBA’s prior written approval) sale or transfer. SBL will service and liquidate NSBF’s SBA loan portfolio pursuant to an SBA approved lender service provider agreement.
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.
Effective January 6, 2023, following authorization by our shareholders, we withdrew our previous election to be regulated as a BDC under the 1940 Act. Prior to such time, we operated as a BDC under the 1940 Act.
Effective January 6, 2023, following authorization by our shareholders, we withdrew our previous election to be regulated as a BDC under the 1940 Act.
Each supplemental indenture (except for the Tenth Supplemental Indenture) includes covenants requiring the Company to comply with (regardless of whether it is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) of the 1940 Act as modified by Section 61(a) of the 1940 Act (or any successor provisions), to comply with (regardless of whether it is subject to) the restrictions on dividends, distributions and purchase of capital stock set forth in Section 18(a)(1)(B) of the 1940 Act as modified by Section 61(a) of the 1940 Act and to provide financial information to the holders of the Notes and the Trustee if the Company should no longer be subject to the reporting requirements under the Exchange Act.
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”).
The 2024 Notes bear interest at a rate of 5.75% per year payable quarterly on February 1, May 1, August 1, and November 1 of each year, commencing on November 1, 2019, and trade on the Nasdaq Global Market under the trading symbol “NEWTL.” At December 31, 2023, the Company was in compliance with all covenants related to the 2024 Notes.
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.
We recognized realized gains or losses on loans based on the difference between the net proceeds from the disposition and the cost basis of the loan without regard to unrealized gains or losses previously recognized.
We 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.
Additionally geopolitical events, such as trade disruptions, the ongoing war between Russia and Ukraine, the Israel conflict with Hamas, rising tensions in Asia, and elements of economic and financial market instability in the United States, the United Kingdom, the European Union and China have led to increased economic uncertainty.
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.
In addition, the Company has begun to rollout the Newtek Advantage®, the One Dashboard for All of Your Business Needs®, which provides independent business owners with instant access to a team of NewtekOne business and financial solutions experts in the areas of Business Lending, Electronic Payment Processing, Managed Technology Solutions, personal and commercial lines Insurance Services and Payroll and Benefits Solutions.
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.
The 2026 Notes are the Company’s direct unsecured obligations and rank: (i) pari passu with the Company’s other outstanding and future unsecured indebtedness; (ii) senior to any of the Company’s future indebtedness that expressly provides it is subordinated to the 2026 Notes; (iii) effectively subordinated to all the Company’s existing and future secured indebtedness (including indebtedness that is initially unsecured to which the Company subsequently grants security), to the extent of the value of the assets securing such indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries.
The 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.
As a result, in addition to Newtek Bank and its consolidated subsidiary SBL, the following former portfolio companies and subsidiaries are now consolidated non-bank subsidiaries in our financial statements: NSBF; NMS; Mobil Money; NBC; PMT; NIA; TAM; Holdco 6; NCL; NTS and POS.
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.
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.
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.
We recorded current period changes in fair value of loans and assets that were measured at fair value as a component of the net change in unrealized appreciation (depreciation) on the loans or se rvicing assets, as appropriate, in the consolidated statements of operations.
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.
The TSO JV intends to deploy capital over the course of time with additional leverage supported by a warehouse line of credit for the purpose of investing in non-conforming conventional commercial and industrial term loans made to middle-market companies as well as small businesses.
The TSO JV intends to deploy capital over the course of time with additional leverage supported by a warehouse line of credit for the purpose of investing in ALP loans made to middle-market companies as well as small businesses.
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.
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.
Capital amounts and ratios for NewtekOne, Inc. as of December 31, 2023 are presented in the table below: Actual For Capital Adequacy Purposes 1 For Consideration as Well-Capitalized NewtekOne, Inc. - December 31, 2023 Amount Ratio Amount Ratio Amount Ratio 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 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.
The Company has guaranteed certain of NSBF’s obligations to the SBA. 79 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.
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.
Technology - Technology (NTS) provides website hosting, dedicated server hosting, cloud hosting, web design and development, internet marketing, e-commerce, data storage, backup and disaster recovery, and other related services including consulting and implementing technology solutions for enterprise and commercial clients across the U.S. The segment contributed $31.7 million of noninterest income and $29.9 million of noninterest expense.
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.
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.
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.
Income For the fiscal year ended December 31, 2023, we generated income in the form of interest, net gains on sale of the guaranteed portions of SBA 7(a) loans originated, dividends, electronic payment processing income, technology and IT support income, servicing income, and other fee income generated by loan originations and by our subsidiaries.
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.
When combining Newtek Bank and NSBF, the Company ranked as the third largest SBA 7(a) lender based on dollar volume of loans approved as of September 30, 2023, which is the SBA's fiscal year. 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.
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.
Additionally, we and our subsidiaries have historically provided a wide range of business and financial solutions to independent business owner relationships, including Business Lending, which includes SBA 7(a) loans, SBA 504 loans and our alternative lending program loans (formerly referred to as nonconforming conventional loans), Electronic Payment Processing, Managed Technology Solutions (Cloud Computing), Technology Consulting, eCommerce, Accounts Receivable and Inventory Financing, personal and commercial lines Insurance Services, Web Services, Data Backup, Storage and Retrieval, and Payroll and Benefits Solutions to independent business owner relationships nationwide across all industries.
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.
The financial results include the origination and servicing of SBA 504 loans, C&I loans, CRE loans and ABL loans. In addition, the bank offers depository services. The results include $17.7 million of net interest income.
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.
NSBF will continue to own the 7(a) Loans and PPP Loans in its SBA loan portfolio to maturity, liquidation, charge-off or (subject to SBA’s prior written approval) sale or transfer pursuant to the Wind-down Agreement and as described further above.
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.
NCL JV provided non-conforming conventional commercial and industrial term loans to U.S. middle-market companies and small businesses. NCL JV ceased funding new loans during 2020.
NCL JV provided ALP loans to U.S. middle-market companies and small businesses. NCL JV ceased funding new loans during 2020.
See “Item 1A. Risk Factors - Risks Related to SBA Lending - There can be no guarantee that Newtek Bank and NSBF will be able to maintain their SBA 7(a) lending licenses” and “Item 1A.
Risk Factors - Risks Related to SBA Lending - 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.
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.
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.
Results of Segment Operations The Company has four reportable segments Banking, 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.
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.
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, 2023, the Company was in compliance with all covenants related to the 2028 Notes. 2026 Notes In January 2021, the Company and the Trustee entered into the Seventh Supplemental Indenture to the Base Indenture between the Company and the Trustee, relating to the Company’s issuance, offer and sale of $115.0 million aggregate principal amount of 5.50% 2026 Notes, including $15.0 million in aggregate principal amount sold pursuant to a fully-exercised overallotment option.
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.
On November 17, 2023, the Company entered into the 2023 ATM Equity Distribution Agreement. The 2023 ATM Equity Distribution Agreement, as amended, provides that the Company may offer and sell up to three million shares of common stock from time to time through the placement agents.
The 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.
The Notes were redeemed on May 2, 2022 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon from February 28, 2022 through, but excluding, May 2, 2022. On March 31, 2022, the Company completed a private placement of $15.0 million aggregate principal amount of its 5.00% notes due 2025 (2025 5.00% Notes).
The 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.
Risk Factors – Risks Related to Operating as a Financial Holding Company – We are subject to extensive regulation and supervision as a financial holding company, which may adversely affect our business .” Effective January 13, 2023, we filed Articles of Amendment amending our Charter to change the name of the Company to “NewtekOne, Inc.” On April 13, 2023, the Company, NSBF and the SBA entered into the Wind-down Agreement, pursuant to which NSBF has begun to wind-down its operations and NSBF’s SBA 7(a) pipeline of new loans was transitioned to Newtek Bank.
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.
The balance consists primarily of SBA 7(a) loans as well as $7.1 million of loans that the Company owns 100% as a result of originating the loan and subsequently repurchasing the guaranteed portion from the SBA. As discussed above, as of January 6, 2023, the Company operates as a financial holding company. Prior to that, we operated as a BDC.
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.
The LTD on first lien is generally 65%. Second liens are typically taken out by the SBA following project completion.
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.
The realized gains recognized above reflect amounts net of split with the SBA. For the year ended December 31, 2023, the average sale price as a percent of principal balance was 110.20% compared to 109.71% for the prior period.
The 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.
Expenses For the fiscal year ended December 31, 2023, our primary operating expenses were salaries and benefits, interest expense including interest on deposits, electronic payment processing expense, technology services expenses, origination and servicing and other general and administrative costs, such as professional fees, marketing, referral fees, servicing costs and rent.
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.
The Company received $38.0 million in proceeds, before expenses, from the sale of the 2028 Notes. The Company intends to use the net proceeds from the sale of the Notes for general corporate purposes.
The Company received $38.0 million in proceeds, before expenses, from the sale of the 2028 Notes.
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. 85 LIABILITIES Total liabilities at December 31, 2023, were $1.2 billion, an increase of $556.9 million, or 89.3%, compared to total liabilities of $623.5 million at December 31, 2022.
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.
On February 16, 2021 and May 20, 2021, the Company issued an additional $5.0 million and $10.0 million in aggregate principal amount of its 2024 Notes, respectively. The new 2024 Notes are treated as a single series with the prior 2024 Notes and have the same terms as the prior 2024 Notes.
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.
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. 104 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’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.
We recorded such fees related to loans 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.
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.
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.
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.
Results of Operations Comparison of the years ended December 31, 2023 and 2022 Summary For the year ended December 31, 2023, the Company reported net income of $47.33 million, or $1.89 per basic and $1.88 per diluted share, compared to net income of $32.31 million, or $1.34 per basic and diluted share, for the year ended December 31, 2022, respectively.
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.
As a result of the Acquisition, we are now a financial holding company subject to the regulation and supervision of the Federal Reserve and the Federal Reserve Bank of Atlanta. We no longer qualify as a RIC under Subchapter M of the Code for federal income tax purposes and will no longer qualify for accounting treatment as an investment company.
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.
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, 2023. Fair Value Measurements For the fiscal year ended December 31, 2023, we valued instruments for which market quotations are readily available at their market quotations.
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.
Corporate and Other - Represents operations not considered to be reportable segments and/or general operating expenses of the Company, and includes the parent company, other non-bank subsidiaries including NIA, PMT, non-bank lending, including Holdco 6 and our joint ventures, and elimination adjustments to reconcile the results of the operating segments to the consolidated financial statements prepared in conformity with GAAP.
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.
Executive Overview Conversion to a Financial Holding Company As of January 6, 2023, we are a financial holding company that, together with our consolidated subsidiaries, provides a wide range of business and financial solutions under the NewtekOne ® brand to the independent business owner market.
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.
For a comparison of the results of operations for the years ended December 31, 2022 and 2021, see the Company's Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 15, 2023. Discussion and Analysis of Financial Condition December 31, 2023 vs.
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.
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. 100 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.
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.
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.
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.
An additional $11.2 million of restricted cash is held by NewtekOne, which includes $10.0 million in an account to fund certain of NSBF’s potential obligations to the SBA pursuant to the Wind-down Agreement in which the Company is a guarantor.
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.
Valuation of Servicing Assets For the fiscal year ended December 31, 2023, the Company accounted for servicing assets in accordance with ASC Topic 860-50 - Transfers and Servicing - Servicing Assets and Liabilities. The Company and Newtek Bank earn servicing fees from the guaranteed portions of SBA 7(a) loans they originate and sell.
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 largest component is $12.4 million of restricted cash held by NSBF, which includes reserves in the event payments are insufficient to cover interest and/or principal with respect to 98 securitizations and loan principal and interest collected which are due to loan participants.
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.
The 2026 Notes will mature on February 1, 2026 and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after February 1, 2022, upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price equal to the following amounts, plus accrued and unpaid interest to, but excluding, the redemption date: (1) 100% of the principal amount of the 2026 Notes to be redeemed plus (2) the sum of the present value of the scheduled payments of interest (exclusive of accrued and unpaid interest to the date of redemption) on the 2026 Notes to be redeemed from the redemption date until February 1, 2023, discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) using the applicable Treasury Rate plus 50 basis points; provided, however, that if the Company redeems any 2026 Notes on or after February 1, 2023 (the date falling three years prior to the maturity date of the 2026 Notes), the redemption price for the 2026 Notes will be equal to 100% 95 of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.
The 2026 Notes will mature on February 1, 2026 and may be redeemed in whole or in part at any time or from time to time at the Company’s option upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.
The Company’s Alternative Lending Program (Non-Conforming Conventional Commercial Loan Program) 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).
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).
ASSETS Total assets at December 31, 2023 were $1.4 billion, an increase of $430.6 million, or 43.1%, compared to total assets of $1.0 billion at December 31, 2022.
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.
Within those results are $46.4 million of noninterest income resulting from marketing credit and debit card processing services, check approval services, processing equipment, and software. The net income also included $31.6 million of noninterest expense.
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 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.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA reduction in the price of guaranteed portions of SBA 7(a) loans or disruptions in the markets to which we sell could negatively impact our business. The Company’s invested cash (includes cash and cash equivalents and restricted cash) of approximately $184.0 million is subject to changes in the Federal Funds rate set by the Federal Open Market Committee.
Biggest changeA reduction in the price of guaranteed portions of SBA 7(a) loans or disruptions in the markets to which we sell could negatively impact our business. The Company has cash and cash equivalents, which includes cash and due from banks, restricted cash, and interest bearing deposits in banks, of $381.4 million.
The table below sets forth, as of December 31, 2023, the estimated changes in our (i) EVE that would result from the designated instantaneous changes in the forward rate curves; and (ii) NII that would result from the designated instantaneous changes in the U.S. Treasury yield curve, Prime Rate and the Secured Overnight Finance Rate.
The table below sets forth, as of December 31, 2024, the estimated changes in our (i) EVE that would result from the designated instantaneous changes in the forward rate curves; and (ii) NII that would result from the designated instantaneous changes in the U.S. Treasury yield curve, Prime Rate and the Secured Overnight Finance Rate.
NewtekOne depends on the availability of secondary market purchasers of our loans held for sale, but primarily for the guaranteed portions of SBA loans and the premium received on such sales to support its lending operations.
The Company depends on the availability of secondary market purchasers of our loans held for sale, but primarily for the guaranteed portions of SBA loans and the premium received on such sales to support its lending operations.
The Company manages the interest rate sensitivity of interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment balanced against maximizing profit. Management of interest rate risk is carried out primarily through strategies involving available-for-sale securities, loan and lease portfolio, and available funding sources.
The Company manages the interest rate sensitivity of interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment balanced against maximizing profit. Management of interest rate risk is carried out primarily through strategies involving cash, loan portfolio, and available funding sources.
We believe that we have placed our cash investments and their equivalents, which include deposits at other institutions, with high credit-quality financial institutions. As of December 31, 2023, cash deposits in excess of insured amounts totaled approximately $37.2 million.
We believe that we have placed our cash investments and their equivalents, which include deposits at other institutions, with high credit-quality financial institutions. As of December 31, 2024, cash deposits in excess of insured amounts totaled approximately $30.3 million.
Basis Point ("bp") Change in Estimated Increase/Decrease in Net Interest Income Estimated Percentage Change in EVE Interest Rates 12 Months Beginning December 31, 2023 12 Months Beginning December 31, 2024 As of December 31, 2023 +200 15.4% 16.0% 1.8% +100 7.7 8.0 1.0 -100 (7.6) (7.7) (1.0) -200 (15.4) (15.6) (2.2) 106 Rates are increased instantaneously at the beginning of the projection.
Basis Point ("bp") Change in Estimated Increase/Decrease in Net Interest Income Estimated Percentage Change in EVE Interest Rates 12 Months Beginning December 31, 2024 12 Months Beginning December 31, 2025 As of December 31, 2024 200 17.7% 17.0% 4.4% 100 8.3 8.0 2.1 -100 (9.6) (9.1) (2.0) -200 (18.6) (17.7) (3.9) Rates are increased instantaneously at the beginning of the projection.
The simulations provide an estimate of the impact of changes in interest rates on equity and net interest income under a range of assumptions. The numerous assumptions used in the simulation process are provided to the ALCO Committee on at least an annual basis. Changes to these assumptions can significantly affect the results of the simulation.
The numerous assumptions used in the simulation process are provided to the ALCO Committee on at least an annual basis. Changes to these assumptions can significantly affect the results of the simulation.
The Company and its non-bank subsidiaries have deposit accounts at Newtek Bank that total $55.6 million, of which $52.8 million is uninsured. 105 Interest rate risk is a significant market risk and can result from timing and volume differences in the repricing of rate-sensitive assets and liabilities, widening or tightening of credit spreads, changes in the general level of market interest rates and changes in the shape and level of market yield curves.
Interest rate risk is a significant market risk and can result from timing and volume differences in the repricing of rate-sensitive assets and liabilities, widening or tightening of credit spreads, changes in the general level of market interest rates and changes in the shape and level of market yield curves.
The results show a theoretical change in the economic value of shareholders’ equity as interest rates change. EVE and NII simulations are completed routinely on Newtek Bank’s balance sheet and presented to the ALCO Committee. Other positions outside of Newtek Bank are typically match funded or hedged with instruments that have similar terms and/or interest rate features.
The results show a theoretical change in the economic value of shareholders’ equity as interest rates change. 97 Table of Contents EVE and NII simulations are completed routinely on Newtek Bank’s balance sheet and presented to the ALCO Committee.
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The Company and its non-bank subsidiaries have deposit accounts at Newtek Bank that total $69.4 million, of which $67.7 million is uninsured.
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Other positions outside of Newtek Bank are typically match funded or hedged with instruments that have similar terms and/or interest rate features. The simulations provide an estimate of the impact of changes in interest rates on equity and net interest income under a range of assumptions.

Other NEWTG 10-K year-over-year comparisons