# NewtekOne, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [NewtekOne, Inc.](/companies/newt.md) (CIK 1587987)
- Form: 10-Q
- Filed: 2024-11-12
- Accepted by EDGAR: Nov 12, 2024, 16:41 ET
- Period: 2024-09-30
- Accession: 0001587987-24-000237
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1587987/000158798724000237/newt-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1587987/000158798724000237/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $5.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $12.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $11.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $32.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.45 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $1.26 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.45 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $1.26 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 26,589,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 24,924,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$61.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $375.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2024-01-01 to 2024-09-30 | $15.0m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2024-09-30 | $9.7m | us-gaap:Cash |
| Total assets | at 2024-09-30 | $1.67bn | us-gaap:Assets |
| Total liabilities | at 2024-09-30 | $1.39bn | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $655.8m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2024-09-30 | $281.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 132,788 characters.

### Forward-Looking Statements

The matters discussed in this report, as well as in future oral and written statements by Company management that are forward-looking statements, are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our industry, our beliefs, and our assumptions. Words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or variations of these words and similar expressions are intended to identify forward-looking statements. Important assumptions include our ability to originate new investments, achieve certain margins and levels of profitability, the availability of additional capital, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, including recent economic and market events and unrelated bank failures and declines in depositor confidence in certain types of depository institutions, the inclusion of a projection or forward-looking statement in this report should not be regarded as a representation by us that our plans or objectives will be achieved. The forward-looking statements contained in this report, including the documents we incorporate by reference, involve risks and uncertainties, including statements as to:

- our future operating results;
- our business prospects and the prospects of our subsidiaries;
- our contractual arrangements and relationships with third parties;
- the dependence of our future success on the general economy and its impact on the industries in which we invest;
- the ability of our business to achieve its objectives;
- the impact of a protracted decline in the liquidity of credit markets on our business;
- the adequacy of our cash resources and working capital;
- our ability to operate as a financial holding company and increased compliance and other costs associated with such operations;
- our ability to adequately manage liquidity, deposits, capital levels and interest rate risk;
- our ability to operate our subsidiary Newtek Bank, a national bank regulated and supervised by the OCC, and increased compliance and other costs associated with such operations;
- the timing of cash flows, if any, from the operations of our subsidiaries;

These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in any and all of the forward-looking statements, including without limitation:

- an economic downturn, which could impair our subsidiaries’ ability to continue to operate or repay their borrowings, which could adversely affect our results;
- a contraction of available credit and/or an inability to access the equity markets could impair our lending and business activities;
- changing interest rates (including credit spreads) and the impacts on macroeconomic conditions and Company’s profitability, returns, and results of operations, which include but are not limited to, interest income and expense and valuations of assets measured at fair value;
- changes to the SBA 7(a) loan program, including recent revisions to SBA Standard Operating Procedure (“SOP”); and
- the risks, uncertainties and other factors we identify in “Risk Factors” and elsewhere in this report and in our filings with the SEC, including the documents we incorporate by reference.

The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this report. In addition to historical information, the following discussion and other parts of this report contain forward-looking information that involves risks and uncertainties. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include the ability of Newtek Bank to originate loans under the SBA 7(a) program, maintain PLP status, sell SBA guaranteed portions of SBA 7(a) loans at premiums and grow deposits; our ability to originate new loans; our subsidiaries’ ability to generate revenue and obtain and maintain certain margins and levels of profitability; and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this report, including the documents that we incorporate by reference herein, should not be regarded as a representation by us that our plans and objectives will be achieved. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under Part II “Item 1A. Risk Factors” of this quarterly report on Form 10-Q and “Item 1A. Risk Factors” of our 2023 Form 10-K, and in any subsequent filings we have made with the SEC that are incorporated by reference into this report.

You should not place undue reliance on these forward-looking statements, which apply only as of the date of this report. And while we believe such information forms, or will form, a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely on these statements. Any forward-looking statements made by or on behalf of the Company speak only as to the date they are made, and the Company does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made, except as required by applicable law.

### 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 Newtek® and NewtekOne® brands to the independent business owner (SMB) market. Effective January 6, 2023, following authorization by our shareholders, we withdrew our previous election to be regulated as a BDC under the 1940 Act. Prior to such time, we operated as a BDC under the 1940 Act. Contemporaneously with withdrawing our election to be regulated as a BDC, on January 6, 2023, we completed the Acquisition of NBNYC, a national bank regulated and supervised by the OCC, pursuant to which we acquired from NBNYC’s shareholders all of the issued and outstanding stock of NBNYC. NBNYC has been renamed Newtek Bank and has become our wholly owned bank subsidiary. In connection with the completion of the Acquisition, we contributed to Newtek Bank $31 million of cash and two of our subsidiaries, NBL and SBL (subsequently, NBL was merged into SBL). As a result of the Acquisition, we are now a financial holding company subject to the regulation and supervision of the Federal Reserve and the Federal Reserve Bank of Atlanta. We no longer qualify as a RIC under Subchapter M of the Code for federal income tax purposes and no longer qualify for accounting treatment as an investment company. As a result, in addition to Newtek Bank and its consolidated subsidiary SBL, the following former portfolio companies and subsidiaries are now consolidated non-bank subsidiaries in our financial statements: NSBF; NMS; Mobil Money; NBC; PMT; NIA; TAM; NALH; NCL; NTS and POS. In addition, as a result of commitments made to the Federal Reserve, we agreed to divest or otherwise terminate the activities conducted by NTS by January 6, 2025, subject to any extension. As a result of the Company’s entry into the NTS Sale Agreement and the Company’s anticipation to divest of NTS, the Company has reported NTS as Held for Sale as of September 30, 2024. See “Item 1A. Risk Factors – Risks Related to Operating as a Financial Holding Company – We are subject to extensive regulation and supervision as a financial holding company, which may adversely affect our business.” See NOTE 9—ASSETS AND LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS HELD FOR SALE.

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

On April 13, 2023, the Company, NSBF and the SBA entered into the Wind-down Agreement, pursuant to which NSBF has begun to wind-down its operations and NSBF’s SBA 7(a) pipeline of new loans was transitioned to Newtek Bank. During this wind-down process, NSBF will continue to own the SBA 7(a) loans and PPP Loans currently in its SBA loan portfolio to maturity, liquidation, charge-off or (subject to SBA’s prior written approval) sale or transfer. SBL will service and liquidate NSBF’s SBA loan portfolio pursuant to an SBA approved lender service provider agreement. In addition, during the wind-down process, NSBF will be subject to minimum capital requirements established by the SBA, be required to continue to maintain certain amounts of restricted cash available to meet any obligations to the SBA, have restrictions on its ability to make dividends and distributions to the Company, and remain liable to the SBA for post-purchase denials and repairs on the guaranteed portions of SBA 7(a) loans originated and sold by NSBF, from the proceeds generated by NSBF’s SBA loan portfolio. The Company has guaranteed certain of NSBF’s obligations to the SBA and has funded a $10 million account at Newtek Bank to secure these potential obligations.

#### Historical Business Regulation and Taxation

Prior to January 6, 2023, we operated as an internally managed non-diversified closed-end management investment company that elected to be regulated as a BDC under the 1940 Act. As a BDC under the 1940 Act we were not permitted to acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets, and we were not permitted to issue senior securities unless the ratio of our total assets (less total liabilities other than indebtedness represented by senior securities) to our total indebtedness represented by senior securities plus preferred stock, if any, was at least 150%. As of December 31 2022, our asset coverage was 169%. Although we are no longer regulated as a BDC, certain covenants in our outstanding 2026 Notes require us to maintain an asset coverage of at least 150% as long as the 2026 Notes are outstanding. See “Item 1A. Risk Factors – Risks Related to Our Notes – We are subject to 150% asset coverage requirements due to covenants contained in the indentures under which the 2026 Notes were issued.”

Additionally, prior to January 6, 2023, due to our status as a BDC, we elected to be treated as a RIC for U.S. federal income tax purposes, beginning with our 2015 tax year. As an entity electing to be treated as a RIC, we generally did not have to pay U.S. federal income taxes at corporate rates on any ordinary income or capital gains that we distributed to our shareholders as dividends. To maintain our qualification as a RIC for U.S. federal income tax purposes, we were required to, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, in order to obtain tax benefits applicable to an entity treated as a RIC for U.S. federal income tax purposes, we were required to distribute to our shareholders, for each taxable year, at least 90% of our “investment company taxable income,” which is generally our ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses.

The Company and its subsidiaries no longer qualify as a RIC for U.S. federal income tax purposes and filed a consolidated U.S. federal income tax return beginning with the 2023 fiscal year. Financial holding companies are subject to federal and state income taxes in essentially the same manner as other corporations. Taxable income is generally calculated under applicable sections of the Internal Revenue Code of 1986, as amended (the “Code”), including Sections 581 through 597 that apply specifically to financial institutions. Some modifications are required by state law and the 2017 tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). Among other things, the Tax Act (i) established a new, flat corporate federal statutory income tax rate of 21%, (ii) eliminates the corporate alternative minimum tax and allowed the use of any such carryforwards to offset regular tax liability for any taxable year, (iii) limited the deduction for net interest expense incurred by U.S. corporations, (iv) allowed businesses to immediately expense, for tax purposes, the cost of new investments in certain qualified depreciable assets, (v) eliminated or reduced certain deductions related to meals and entertainment expenses, (vi) modified the limitation on excessive employee remuneration to eliminate the exception for performance-based compensation and clarified the definition of a covered employee and (vii) limited the deductibility of deposit insurance premiums. There can be no assurance as to the actual effective rate because it will be dependent upon the nature and amount of future income and expenses as well as actual investments generating investment tax credits and transactions with discrete tax effects.

From 2012 through December 31, 2022, NSBF, a wholly-owned subsidiary, was consistently the largest non-bank SBA 7(a) lender in the U.S. based on dollar volume of loan approvals, and, as of December 31, 2022, was the third largest SBA 7(a) lender in the United States. Currently, Newtek Bank is ranked as the largest SBA 7(a) lender based on dollar volume of loans approved. Historically, NSBF structured its loans so that it could both sell the government guaranteed portions of SBA 7(a) loans and securitize the unguaranteed portions. This structure generally allowed NSBF to recover its capital and earn excess capital on each loan, typically within a year. Pursuant to the Wind-down Agreement described above, in April 2023 NSBF transitioned its SBA 7(a) loan originations to Newtek Bank and is in the process of winding down its operations and will continue to own the 7(a) Loans and PPP Loans in its SBA loan portfolio to maturity, liquidation, charge-off or (subject to SBA’s prior written approval) sale or transfer.

Additionally, we and our subsidiaries have historically provided a wide range of business and financial solutions to independent business owner relationships, including Business Lending, which includes SBA 7(a) loans, SBA 504 loans and our ALP loans, Electronic Payment Processing, Managed Technology Solutions (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. We support the operations of our subsidiaries by providing access to our proprietary and patented technology platform, including NewTracker®, our patented prospect management software. We have historically defined independent business owners (SMBs) as companies having revenues of $1 million to $100 million, and we have generally estimated the SMB market to be over 33 million businesses in the United States. We have historically made loans and provided business and financial solutions to the SMB market through NSBF and our controlled portfolio companies (now subsidiaries). In addition, 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, Managed Technology Solutions, personal and commercial lines Insurance Services and Payroll and Benefits Solutions. Moreover, we believe the Newtek Advantage provides our independent business owner clients with analytics on their businesses, as well as transactional capabilities, including free unlimited document storage, free real-time updated traffic analytics, free real-time credit card processing and chargeback batch information for merchant solutions clients and the ability for PMT clients to make payroll directly from the Newtek Advantage business portal.

Following the Acquisition, there can be no assurance regarding our continued lending prospects or operations as a financial holding company. See “Item 1A. Risk Factors – Risks Related to Operating as a Financial Holding Company – We have a limited operating history as a financial holding company.”

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

Newtek Bank is a national bank and nationally licensed SBA lender under the federal Section 7(a) loan program, and originates, sells and services SBA 7(a) loans. Newtek Bank has been granted PLP status and is authorized to place SBA guarantees on loans without seeking prior SBA review and approval. Being a national lender with PLP status allows Newtek Bank to expedite the origination of loans since Newtek Bank is not required to present applications to the SBA for concurrent review and approval. The loss of PLP status would adversely impact our marketing efforts and ultimately our loan origination volume, which would negatively impact our results of operations. See “Item 1A. Risk Factors - Risks Related to SBA Lending - There can be no guarantee that Newtek Bank and NSBF will be able to maintain their SBA 7(a) lending licenses” and “Item 1A. Risk Factors - Risks Related to SBA Lending - A governmental failure to fund the SBA could adversely affect NSBF’s and Newtek Bank’s SBA 7(a) loan originations and our results of operations.”

### Economic Developments

We have observed and continue to observe supply chain interruptions, significant labor and resource shortages, commodity inflation, rising interest rates, unrelated bank failures and declines in depositor confidence in certain types of depository institutions. Additionally geopolitical events, such as trade disruptions, the ongoing war between Russia and Ukraine, conflict in the Middle East, rising tensions in Asia, and elements of political, economic and financial market instability in the United States, the United Kingdom, the European Union and China have led to increased economic uncertainty. One or more of these factors may contribute to increased market volatility, may have long term effects in the United States and worldwide financial markets, and may cause economic uncertainties or deterioration in the United States and worldwide. Additionally, in the event that the U.S. economy enters into a protracted recession, it is possible that the businesses and industries in which our customers operate and to which we lend to could experience deterioration, which could ultimately lead to difficulty in meeting debt service requirements and an increase in defaults. While we are not seeing signs of an overall, broad deterioration in our operating results at this time, there can be no assurance that the performance of certain of our subsidiaries and our current and prospective borrowers will not be negatively impacted by economic conditions, which could have a negative impact on our future results.

### Income

For the quarterly period ended September 30, 2024, we generated income in the form of interest, net gains on the sales of loans originated (which primarily include sales of SBA 7(a) and ALP loans) and related servicing assets on such sales, dividends, electronic payment processing income, technology and IT support income, servicing income, and other fee income generated by loan originations and by our subsidiaries. We originated loans that typically have terms of 10 to 25 years and bear interest at prime plus a margin. In some instances, we received payments on our loans based on scheduled amortization of the outstanding balances. In addition, we received repayments of some of our loans prior to their scheduled maturity date. The frequency or volume of these repayments fluctuated significantly from period to period. Our portfolio activity for the quarterly period ended September 30, 2024, also reflects the proceeds of sales of guaranteed portions of SBA 7(a) loans we originated. In addition, we received servicing income related to the guaranteed portions of SBA 7(a) loans which we originated and sold into the secondary market as well as on the portfolios of ALP loans owned by NCL JV and TSO JV. These recurring fees were earned daily and recorded when earned. In addition, we generated revenue in the form of loan packaging, loan prepayment, legal and late fees. We recorded such fees related to loans as other income. Distributions of earnings from our joint ventures were evaluated to determine if the distribution was income, return of capital or realized gain.

We recognized realized gains or losses on loans based on the difference between (1) the net proceeds from the disposition and any servicing assets recognized and (2) the cost basis of the loan without regard to unrealized gains or losses previously recognized. We recorded current period changes in fair value of loans and assets that were measured at fair value as a component of the net change in unrealized appreciation (depreciation) on the loans or servicing assets, as appropriate, in the consolidated statements of operations.

### Expenses

For the quarterly period ended September 30, 2024, our primary operating expenses were salaries and benefits, interest expense including interest on deposits, electronic payment processing expense, technology services expense, origination and servicing, and other general and administrative costs, such as professional fees, marketing, referral fees, servicing costs and rent.

### The Company’s Alternative Lending Program (ALP)

The Company has originated loans under its ALP since 2019. These loans have terms between 10 and 25 years, bear fixed interest rates that reset every five years, and have prepayment penalties. The criteria evaluated in underwriting ALP loans and the terms of these loans have been generally consistent over the ALP’s existence. Prior to July 1, 2024, the Company originated ALP loans with the intent to sell to a JV. While the Company continues to source JV partners to participate in this program, the Company could also originate ALP loans designated as HFI. The Company does not expect any significant changes to the underwriting or terms of loans in its ALP.

NCL JV: In 2019, we launched a 50/50 joint venture, NCL JV, between NCL, a wholly-owned subsidiary of Newtek, and Conventional Lending TCP Holding, LLC, a wholly-owned, indirect subsidiary of BlackRock TCP Capital Corp. (Nasdaq:TCPC). NCL JV provided ALP loans to U.S. middle-market companies and small businesses. NCL JV ceased funding new loans during 2020. On January 28, 2022, NCL JV closed an ALP loan securitization with the sale of $56.3 million Class A Notes, NCL Business Loan Trust 2022-1, Business Loan-Backed Notes, Series 2022-1, secured by a segregated asset pool consisting primarily of NCL JV’s portfolio of ALP loans, including loans secured by liens on commercial or residential mortgaged properties, originated by NCL JV and NBL. The Notes were rated “A” (sf) by DBRS Morningstar. The Notes were priced at a yield of 3.209%. The proceeds of the securitization were used, in part, to repay the Deutsche Bank credit facility and return capital to the NCL partners. Refer to NOTE 4—INVESTMENTS for selected financial information and a schedule of investments of NCL as of September 30, 2024.

TSO JV: On August 5, 2022, NCL and TSO II Booster Aggregator, L.P. (“TSO II”) entered into a joint venture, TSO JV, governed by the Amended and Restated Limited Partnership Agreement for the TSO JV. NCL and TSO II each committed to contribute an equal share of equity funding to the TSO JV and each have equal voting rights on all material matters. The TSO JV intends to deploy capital over the course of time with additional leverage supported by a warehouse line of credit for the purpose of investing in ALP loans made to middle-market companies as well as small businesses. TSO JV began making investments in ALP loans during the fourth quarter of 2022. On July 23, 2024, TSO JV closed a securitization backed by ALP loans, selling $137.2 million of Class A Notes and $17.2 million of Class B Notes (collectively, the “TSO Notes”) issued by NALP Business Loan Trust 2024-1. The TSO Notes are backed by $190.5 million of collateral, consisting of Company originated ALP loans. The Class A and Class B Notes received Morningstar DBRS ratings of “A (sf)” and “BBB (high) (sf),” respectively. TSO JV ceased investing in new ALP loans in July 2024. Refer to NOTE 4—INVESTMENTS for selected financial information and a schedule of investments of TSO JV as of September 30, 2024.

### Unfunded Commitments

At September 30, 2024, the Company had $102.5 million of unfunded commitments consisting of $17.5 million in connection with its SBA 7(a) loans, $73.4 million in connection with its SBA 504 loans, and $11.6 million relating to commercial and industrial loans. The Company funds these commitments from the same sources it uses to fund its other loan commitments.

### Discussion and Analysis of Financial Condition

#### September 30, 2024 vs. December 31, 2023

### ASSETS

Total assets at September 30, 2024 were $1.7 billion, an increase of $244.7 million, or 17.1%, compared to total assets of $1.4 billion at December 31, 2023.

### Loans

|  | September 30, 2024 | December 31, 2023 | Change |
| --- | ---: | ---: | ---: |
| Loans held for sale, at fair value | $242,225 | $118,867 | $123,358 |
| Loans held for sale, at LCM | 60,203 | 56,607 | 3,596 |
| Loans held for investment, at fair value | 394,471 | 469,801 | (75,330) |
| Loans held for investment, at amortized cost, net of deferred fees and costs | 518,489 | 336,305 | 182,184 |
| Allowance for credit losses | (26,045) | (12,574) | (13,471) |
| Loans held for investment, at amortized cost, net | 492,444 | 323,731 | 168,713 |
| **Total Loans** | $1,189,343 | $969,006 | $220,337 |

### Loans held for sale

Loans HFS, at fair value increased $123.4 million during the nine months ended September 30, 2024, while loans HFS, at LCM increased $3.6 million during the same period. The overall increase was primarily the result of new loan originations during 2024.

### Loans held for investment

*At Fair value:* Loans HFI, at fair value was $394.5 million at September 30, 2024 compared to $469.8 million at December 31, 2023. The balance consists primarily of SBA 7(a) loans as well as $6.8 million of loans that the Company owns 100% as a result of originating the loan and subsequently repurchasing the guaranteed portion from the SBA. As previously discussed, NSBF ceased originating loans during 2023, resulting in the decrease in the balance of loans held for investment from December 31, 2023 to September 30, 2024, primarily due to the principal payments of existing loans held by NSBF.

*At Amortized Cost:* Loans HFI, at amortized cost consists of loans originated at Newtek Bank. The $182.2 million increase in loans HFI, at amortized cost is the result of an increase in originations for the nine months ended September 30, 2024 over 2023.

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

| Credit Quality Ratios At Amortized Cost | September 30, 2024 $% |  | December 31, 2023 $% |  |
| --- | ---: | ---: | ---: | ---: |
| Current | $490,036 | 94.5% | $325,643 | 96.9% |
| Past Due 31-89 Days | 8,564 | 1.7% | 4,896 | 1.5% |
| Nonaccrual loans | 19,588 | 3.8% | 5,373 | 1.6% |
| Total, at amortized cost | $518,188 | 100.0% | $335,912 | 100.0% |
| Deferred fees and costs | 301 |  | 393 |  |
| Total, at amortized cost, net of deferred fees and costs | $518,489 |  | $336,305 |  |
| Allowance for credit losses | $(26,045) | 5.0% | $(12,574) | 3.7% |
| **At Fair Value** |  |  |  |  |
| Current | $304,853 | 77.3% | $385,172 | 81.9% |
| Past Due 31-89 Days and accruing | 19,950 | 5.1% | 36,455 | 7.8% |
| Past Due 90-119 Days and accruing | 9,634 | 2.4% | — | —% |
| Past Due 120 and more Days and accruing | 435 | 0.1% | — | —% |
| Nonaccrual loans | 59,599 | 15.1% | 48,174 | 10.3% |
| Total | $394,471 | 100.0% | $469,801 | 100.0% |
| Past due and nonaccrual loans as % of Outstanding UPB | $89,618 | 86.6% | $84,629 | 75.2% |
| **Nonperforming Assets, as a percentage of total assets** |  |  |  |  |
| Loans HFI, at amortized cost | $19,588 | 1.3% | $5,373 | 0.4% |
| Loans HFI, at fair value | 59,599 | 4.0% | 48,174 | 3.3% |
| Other real estate owned | 2,199 | 0.1% | 1,110 | 0.1% |
| Total Nonperforming Assets | $81,386 | 5.4% | $54,657 | 3.8% |

66

### CRE exposure

The Company’s loan portfolio consists of loans to independent business owners (SMBs). The Company’s Loans HFI at amortized cost and Loans HFS at LCM include a total of $284.8 million of loans, including unfunded commitments, backed by CRE and considered non-owner occupied as of September 30, 2024. The average loan-to-value for this CRE portfolio was 56.2%. The table below presents a detail of the loans considered non-owner occupied CRE that are not carried at fair value:

|  | September 30, 2024 HFI at amortized cost, net of deferred fees and costs | HFS at LCM | Total | LTV by CRE type | December 31, 2023 HFI at amortized cost, net of deferred fees and costs | HFS at LCM | Total | LTV by CRE type |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Loans not backed by NOO CRE | $339,614 | $— | $339,614 |  | $172,502 | $— | $172,502 |  |
| Loans backed by NOO CRE | 178,875 | 60,203 | 239,078 |  | 163,803 | 56,607 | 220,410 |  |
| Total loans | $518,489 | $60,203 | $578,692 |  | $336,305 | $56,607 | $392,912 |  |
| Loans backed by NOO CRE by type: |  |  |  |  |  |  |  |  |
| Retail | $45,469 | $— | $45,469 | 51.2% | $40,400 | $— | $40,400 | 49.7% |
| 1-4 Family | 27,270 | — | 27,270 | 56.9% | 31,700 | — | 31,700 | 57.6% |
| Multifamily | 29,842 | — | 29,842 | 51.2% | 29,800 | — | 29,800 | 51.3% |
| Industrial | 22,936 | — | 22,936 | 46.5% | 23,400 | — | 23,400 | 47.3% |
| Office | 12,049 | — | 12,049 | 43.9% | 6,599 | — | 6,599 | 48.9% |
| Construction and land development1 | 24,737 | 46,439 | 71,176 | 64.7% | 28,404 | 51,907 | 80,311 | 83.1% |
| Hotel | — | 13,764 | 13,764 | 51.6% | — | 4,700 | 4,700 | 55.3% |
| Other | 16,572 | — | 16,572 | 56.2% | 3,500 | — | 3,500 | 52.8% |
| Total NOO CRE | $178,875 | $60,203 | $239,078 | 56.2% | $163,803 | $56,607 | $220,410 | 60.3% |
| Unfunded Commitments |  |  |  |  |  |  |  |  |
| Construction and land development1 | $— | $45,721 | $45,721 |  | $— | $4,493 | $4,493 |  |
| Hotel | — | 13 | 13 |  | — | — | — |  |
| Multifamily | — | — | — |  | — | — | — |  |
| Total unfunded commitments | — | 45,734 | 45,734 |  | — | 4,493 | 4,493 |  |
| Total CRE Loans | $178,875 | $105,937 | $284,812 |  | $163,803 | $61,100 | $224,903 |  |

1 Construction and land development includes first and second lien loans. The LTV on first lien is generally 65%. Second liens are typically taken out by the SBA following project completion and occupancy by the borrower. The LTV calculated is based on total exposure.

### Goodwill and Intangibles

|  | September 30, 2024 Goodwill | Intangible Assets | Total | December 31, 2023 Goodwill | Intangible Assets | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| NBNYC acquisition | $271 | $709 | $980 | $271 | $843 | $1,114 |
| Payments segment | 13,814 | — | 13,814 | 13,814 | 13 | 13,827 |
| Technology segment1 | — | — | — | 11,800 | 3,379 | 15,179 |
| Total | $14,085 | $709 | $14,794 | $25,885 | $4,235 | $30,120 |

1 As of September 30, 2024, the assets of the Technology segment are classified as held-for-sale. See NOTE 9—ASSETS AND LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS HELD FOR SALE for more information.

The change in goodwill and intangible assets for the Payments segment and NBNYC acquisition relates to amortization of intangible assets during the nine months ended September 30, 2024.

### Servicing Assets

A sensitivity analysis of the current fair value of servicing assets to adverse changes in significant assumptions as of September 30, 2024 and December 31, 2023 is as follows:

| Discount factor | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Effect on fair value of a 100 basis point adverse change | $(887) | $(1,050) |
| Effect on fair value of a 200 basis point adverse change | (1,711) | (2,028) |
| **Cumulative prepayment rate** |  |  |
| Effect on fair value of a 100 basis point adverse change | $(96) | $(141) |
| Effect on fair value of a 500 basis point adverse change | (479) | (706) |
| **Average cumulative default rate** |  |  |
| Effect on fair value of a 100 basis point adverse change | $(79) | $(149) |
| Effect on fair value of a 500 basis point adverse change | (395) | (744) |

The sensitivity analysis presents the hypothetical effect on fair value of the servicing assets due to the change in significant assumptions. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value is not linear. Additionally, the sensitivity analysis shocks each significant assumption individually, while keeping all other assumptions unchanged. In practice, changes in one assumption generally impact other assumptions, which could increase or lessen the effect of the change.

### Settlement Receivable

Settlement receivables were $62.1 million as of September 30, 2024, a decrease of $0.1 million compared to December 31, 2023. The settlement receivable arises from the guaranteed portions of SBA 7(a) loans that were traded in the period but did not settle during the current period end and the cash was not received from the purchasing broker during the current period; the amount varies depending on loan origination volume and timing of sales at quarter end.

### LIABILITIES

Total liabilities at September 30, 2024, were $1.4 billion, an increase of $211.9 million, or 18.0%, compared to total liabilities of $1.2 billion at December 31, 2023.

### Deposits

Total deposits were $649.5 million at September 30, 2024, consisting of $11.0 million in non-interest bearing deposits and $638.4 million in interest bearing deposits, a $185.0 million increase from the balance as of December 31, 2023.

### Borrowings

| Borrowings Outstanding Other Bank Borrowings1: | September 30, 2024 | December 31, 2023 | Change |
| --- | ---: | ---: | ---: |
| Webster NMS Note | $33,666 | $36,628 | $(2,962) |
| SPV I Capital One Facility | 7,561 | 16,080 | (8,519) |
| SPV II Deutsche Bank Facility | 328 | 6,799 | (6,471) |
| SPV III One Florida Bank Facility | (104) | 257 | (361) |
| FHLB Advances | 15,800 | 23,184 | (7,384) |
| Total Lines of Credit | 57,251 | 82,948 | (25,697) |
| Parent Company Notes due 2024, 2025, 2026, 2028 and 20291: |  |  |  |
| 2024 5.75% Notes | — | 38,124 | (38,124) |
| 2025 5.00% Notes | 29,825 | 29,563 | 262 |
| 2025 8.125% Notes | 49,825 | 49,433 | 392 |
| 2026 5.50% Notes | 114,102 | 113,564 | 538 |
| 2028 8.00% Notes | 38,639 | 38,378 | 261 |
| 2029 8.50% Notes | 69,500 | — | 69,500 |
| 2029 8.625% Notes | 72,525 | — | 72,525 |
| Total 2024, 2025, 2026, 2028, and 2029 Notes | 374,416 | 269,062 | 105,354 |
| Notes Payable - Securitization Trusts1 | 224,167 | 292,112 | (67,945) |
| Total | $655,834 | $644,122 | $11,712 |

1 Net of deferred financing costs.

Borrowings were $655.8 million at September 30, 2024, compared to $644.1 million at December 31, 2023. This increase was primarily due to a $69.5 million issuance of the 2029 8.50% Notes and a $72.5 million issuance of the 2029 8.625% Notes. These increases were partially offset by a $67.9 million reduction in the notes payable on securitization trusts, a $38.1 million redemption of the 2024 5.75% Notes, a $8.5 million paydown of the SPV I facility, a $6.5 million paydown on the SPV II facility, and a $7.4 million paydown of FHLB advances.

### Deferred Taxes

The deferred tax liability, net represents the cumulative timing differences between book and tax to the extent such assets or liabilities give rise to taxable income or expense in future periods. Within this balance is the deferred tax asset on net operating loss (NOL) carryforwards not expected to be utilized in the current year. The Company evaluated all NOLs for a valuation allowance and determined that none were required.

### Results of Operations

### Comparison of the nine months ended September 30, 2024 and 2023

As disclosed in our 2023 Form 10-K, the Company’s prior year condensed, comparative financial statements have been adjusted to correct errors made in the Company’s financial statements previously issued for the first, second, and third quarters of 2023. Results for the nine months ended September 30, 2023 are presented as restated. Refer to our 2023 Form 10-K for further detail.

### Summary

For the nine months ended September 30, 2024, the Company reported net income of $32.5 million, or $1.26 per basic and diluted share, compared to net income of $36.5 million, or $1.46 per basic and diluted share, for the nine months ended September 30, 2023.

The decrease in net income was attributable to income tax benefit on the realization of deferred tax assets in 2023 when the Company converted to an FHC. Below is a summary of changes in the components of Net income:

|  | Nine Months Ended September 30, 2024 | 2023 (as restated) | Change |
| --- | ---: | ---: | ---: |
| Net interest income after provision for credit losses | $12,271 | $10,994 | $1,277 |
| Noninterest income | 153,238 | 127,665 | 25,573 |
| Noninterest expense | 120,570 | 108,120 | 12,450 |
| Net income before taxes | 44,939 | 30,539 | 14,400 |
| Income tax expense/(benefit) | 12,410 | (5,941) | 18,351 |
| Net income | $32,529 | $36,480 | $(3,951) |

### Net Interest Income

| Interest income | Nine Months Ended September 30, 2024 | 2023 (as restated) | Change |
| --- | ---: | ---: | ---: |
| Debt securities available-for-sale | $1,168 | $1,083 | $85 |
| Loans and fees on loans | 80,346 | 60,341 | 20,005 |
| Other interest earning assets | 6,177 | 6,580 | (403) |
| Total interest income | 87,691 | 68,004 | 19,687 |
| **Interest expense** |  |  |  |
| Deposits | 19,755 | 10,738 | 9,017 |
| Notes and securitizations | 33,427 | 28,806 | 4,621 |
| Bank and FHLB borrowings | 5,496 | 10,127 | (4,631) |
| Total interest expense | 58,678 | 49,671 | 9,007 |
| **Net interest income** | 29,013 | 18,333 | 10,680 |
| Provision for credit losses | 16,742 | 7,339 | 9,403 |
| Net interest income after provision for credit losses | $12,271 | $10,994 | $1,277 |

### Interest Income

*Loans and fees on loans:* The $20.0 million increase in interest income on the Company’s loan portfolio was attributable to increases in the average balances of loans HFI and HFS, which increased $170.9 million and $96.3 million, respectively, as well as the average outstanding accrual portfolio of loans held for investment increasing to $1.1 billion from $687.2 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in the average balance of loans HFS was attributable to originations of SBA 504 and ALP loans, and the increase in the average outstanding accrual loan portfolio resulted from the origination of new SBA 7(a) loans period over period.

*Other interest earning assets:* The $0.4 million decrease in interest income from other interest earnings assets was attributable to lower interest rates on cash and due from banks, as well as interest bearing deposits in banks, including Newtek Bank earning interest on Federal Reserve Bank cash deposits.

### Interest Expense

The following is a summary of interest expense by facility for the nine months ended September 30, 2024 and 2023:

|  | Nine Months Ended September 30, 2024 | September 30, 2023 (as restated) | Change |
| --- | ---: | ---: | ---: |
| Deposits | $19,755 | $10,738 | $9,017 |
| Notes and securitizations: |  |  |  |
| Notes payable - Securitization Trusts | 16,734 | 16,913 | (179) |
| 2024 Notes1 | 1,409 | 1,816 | (407) |
| 2025 5.00% Notes | 1,387 | 1,303 | 84 |
| 2025 8.125% Notes | 3,440 | 3,188 | 252 |
| 2026 Notes | 5,282 | 5,282 | — |
| 2028 Notes1 | 2,661 | 304 | 2,357 |
| 2029 8.50% Notes2 | 2,224 | — | 2,224 |
| 2029 8.625% Notes3 | 290 | — | 290 |
| Total notes and securitizations | 33,427 | 28,806 | 4,621 |
| Bank and FHLB Borrowings: |  |  |  |
| Bank notes payable | 5,085 | 9,603 | (4,518) |
| FHLB Advances | 411 | 524 | (113) |
| Total bank and FHLB borrowings | 5,496 | 10,127 | (4,631) |
| **Total interest expense** | $58,678 | $49,671 | $9,007 |

(1) On August 1, 2024, the 2024 Notes matured.

(2) On August 31, 2023, the Company completed a public offering of $40.0 million aggregate principal amount of 8.00% notes due 2028. The Notes will mature on September 1, 2028. The Notes bear interest at a rate of 8.000% per year, payable quarterly on March 1, June 1, September 1, and December 1 each year, commencing on December 1, 2023.

(3) On May 30, 2024, the Company completed a public offering of $62.5 million aggregate principal amount of 8.500% notes due 2029. On June 3, 2024, the underwriters exercised their option to purchase an additional $9.4 million in aggregate principal amount of the 2029 Notes. The Notes will mature on June 1, 2029. The Notes bear interest at a rate of 8.500% per year, payable quarterly on March 1, June 1, September 1, and December 1 each year, commencing on September 1, 2024.

(4) On September 16, 2024, the Company completed a public offering of $75.0 million aggregate principal amount of 8.625% notes due 2029. The Notes will mature on October 15, 2029. The Notes bear interest at a rate of 8.625% per year, payable quarterly on January 15, April 15, July 15, and October 15 each year, commencing on January 15, 2025.

The increase in interest expense period over period is primarily from additional interest expense on deposits of $9.0 million. The Company also completed a public offering in August 2023, resulting in an additional $2.4 million of interest relating to the 2028 Notes, and public offerings in May and September 2024, resulting in an additional $2.2 million and $0.3 million, respectively, of interest relating to the 2029 Notes. The increase is partially offset by a $0.4 million reduction in interest due to the payoff of the 2024 Notes at maturity, as well as a $4.6 million reduction in interest on bank and FHLB borrowings.

### Provision for Credit Losses

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

For the nine months ended September 30, 2024 and 2023, there was a provision for credit losses of $16.7 million and $7.3 million, respectively. The increase was due to an increase in loans held for investment at amortized cost, specifically SBA 7(a) loans, as well as a sequential build of the ACL year over year due to higher growth in SBA 7(a) loans in the nine months ended September 30, 2024 versus the comparable period in 2023.

### Net Interest Income and Margin

***Average Balances and Yields.*** The following table presents information regarding average balances for assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amount of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing the income or expense by the average balances for assets or liabilities, respectively, for the periods presented and annualizing that result. Loan fees are included in interest income on loans.

| Interest-earning assets: | Nine Months Ended September 30, 2024 Average Balance | Interest | Average Yield / Rate | 2023 (as restated) Average Balance | Interest | Average Yield / Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest-earning balances in other banks | $157,415 | $6,177 | 5.24% | $191,036 | $6,580 | 4.60% |
| Investment securities | 29,641 | 1,168 | 5.26 | 30,746 | 1,083 | 4.71 |
| Loans held for sale | 210,110 | 17,743 | 11.28 | 113,819 | 12,476 | 14.65 |
| Loans held for investment | 934,010 | 62,603 | 8.95 | 763,070 | 47,865 | 8.39 |
| Total interest-earning assets | 1,331,176 | 87,691 | 8.80 | 1,098,671 | 68,004 | 8.28 |
| Less: Allowance for credit losses on loans | (16,663) |  |  | (3,205) |  |  |
| Noninterest earning assets | 206,952 |  |  | 199,296 |  |  |
| Total assets | $1,521,465 |  |  | $1,294,762 |  |  |
| **Interest-bearing liabilities** |  |  |  |  |  |  |
| Demand | $33,442 | $282 | 1.13% | $22,705 | $23 | 0.13% |
| Savings, Super NOW | 252,295 | 9,603 | 5.08 | 109,302 | 4,021 | 4.92 |
| Money Market | 23,878 | 767 | 4.29 | 20,646 | 729 | 4.72 |
| Time | 239,477 | 9,103 | 5.08 | 177,672 | 5,965 | 4.49 |
| Total deposits | 549,092 | 19,755 | 4.81 | 330,325 | 10,738 | 4.35 |
| Borrowings | 641,106 | 38,923 | 8.11 | 676,764 | 38,933 | 7.69 |
| Total interest-bearing liabilities | 1,190,198 | 58,678 | 6.59 | 1,007,089 | 49,671 | 6.59 |
| Noninterest-bearing deposits | 9,511 |  |  | 1,845 |  |  |
| Noninterest-bearing liabilities | 64,675 |  |  | 61,776 |  |  |
| Shareholders’ equity | 257,081 |  |  | 224,052 |  |  |
| Total liabilities and shareholders' equity | $1,521,465 |  |  | $1,294,762 |  |  |
| Net interest income and interest rate spread |  | $29,013 | 2.21% |  | $18,333 | 1.68% |
| Net interest margin |  |  | 2.91% |  |  | 2.23% |
| Ratio of average interest-earning assets to average interest bearing liabilities |  |  | 111.84% |  |  | 109.09% |

72

### Rate/Volume Analysis

The following table sets forth the effects of changing rates and volumes on net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, increases or decreases attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.

| Interest income: | Nine Months Ended September 30, 2024 vs. 2023 (as restated) Increase (Decrease) Due to Rate | Volume | Total |
| --- | ---: | ---: | ---: |
| Interest-earning balances in other banks | $755 | $(1,158) | $(403) |
| Investment securities | 124 | (39) | 85 |
| Loans held for sale | (576) | 8,395 | 7,819 |
| Loans held for investment | 890 | 11,296 | 12,186 |
| Total interest income | 1,193 | 18,494 | 19,687 |
| **Interest expense:** |  |  |  |
| Demand | 266 | 5 | 271 |
| Savings, Super NOW | 285 | 5,281 | 5,566 |
| Money Market | (76) | 114 | 38 |
| Time | 1,068 | 2,074 | 3,142 |
| Borrowings | 2,042 | (2,052) | (10) |
| Total interest expense | 3,585 | 5,422 | 9,007 |
| Net interest income | $(2,392) | $13,072 | $10,680 |

### Noninterest Income

|  | Nine months ended September 30, 2024 | 2023 (as restated) | 2024/2023 Increase/(Decrease) Amount | Percent |
| --- | ---: | ---: | ---: | ---: |
| Dividend income | $1,128 | $1,397 | $(269) | (19.3)% |
| Loan servicing asset revaluation | (5,383) | (1,566) | (3,817) | 243.7 |
| Servicing income | 14,922 | 13,304 | 1,618 | 12.2 |
| Net gains on sales of loans | 68,531 | 33,482 | 35,049 | 104.7 |
| Net (loss) gain on loans under the fair value option | (4,181) | 12,588 | (16,769) | (133.2) |
| Technology and IT support income | 14,255 | 18,456 | (4,201) | (22.8) |
| Electronic payment processing income | 35,409 | 32,196 | 3,213 | 10.0 |
| Other noninterest income | 28,557 | 17,808 | 10,749 | 60.4 |
| Total noninterest income | $153,238 | $127,665 | $25,573 | 20.0% |

### Loan Servicing Asset Revaluation

The Company accounts for servicing assets in accordance with ASC Topic 860-50 - Transfers and Servicing - Servicing Assets and Liabilities. The Company earns servicing fees from the guaranteed portions of SBA 7(a) loans it originates and sells and from servicing the ALP portfolios of NCL JV and TSO JV. Servicing assets for loans originated by the Company’s nonbank subsidiaries are measured at FV at each reporting date and the Company reports changes in the FV of servicing assets in earnings in the period in which the changes occur. The valuation model for servicing assets incorporates assumptions including, but not limited to, servicing costs, discount rate, prepayment rate, and default rate. Considerable judgment is required to estimate the fair value of servicing assets and, as such, these assets are classified as Level 3 in our fair value hierarchy. Servicing assets for loans originated by Newtek Bank are measured at LCM and amortized based on their estimated life, and impairment is recorded to the extent the amortized cost exceeds the asset’s FV.

The decrease in loan servicing asset revaluation is due to the decrease in NSBF’s total portfolio of investments during the wind-down.

### Servicing Income, Net of Amortization

The increase in servicing income was related to an increase of $195.1 million in the average total loan portfolio for which we earn servicing income period over period.

### Net Gains on Sales of Loans

Net gains on sales of loans for the nine months ended September 30, 2024 and 2023 were as follows:

|  | Nine Months Ended September 30, 2024 $ Amount | September 30, 2023 (as restated) $ Amount |
| --- | ---: | ---: |
| Gains recognized on sales of loans | $72,092 | $51,613 |
| Losses recognized on sales of loans | (3,558) | (18,131) |
| Net gains on sales of loans | $68,534 | $33,482 |

|  | Nine Months Ended September 30, 2024 # of Loans | $ Amount | September 30, 2023 (as restated) # of Loans | $ Amount |
| --- | ---: | ---: | ---: | ---: |
| SBA loans originated | 1,732 | $680,659 | 1,236 | $553,708 |
| SBA guaranteed loans sold | 1,449 | 501,570 | 1,235 | 418,576 |
| Average sale price as a percent of principal balance1 |  | 111.00% |  | 110.17% |

1 Realized gains greater than 110.00% must be split 50/50 with the SBA in accordance with SBA regulations. The realized gains recognized above reflect amounts net of split with the SBA.

For the nine months ended September 30, 2024, the average sale price as a percent of principal balance was 111.00% compared to 110.17% for the prior period. The increase in sales prices in 2024 resulted from higher demand. The increase in overall net gains on sales of loans resulted from higher volumes of sales compared to the prior year at better market premiums than the prior year and the expectation of lower interest rates which would slow prepay speeds.

During the wind-down of NSBF’s operations, NSBF will be required to continue to own its SBA 7(a) loans and PPP Loans in its SBA loan portfolio to maturity, liquidation, charge-off, or (subject to SBA’s prior written approval) sale or transfer. In addition, SBL will continue to service and liquidate NSBF’s SBA Loan Portfolio, including processing forgiveness and loan reviews for PPP Loans pursuant to an SBA approved lender service provider agreement with SBL. The Company will continue to measure NSBF’s SBA 7(a) loan portfolio at fair value until the portfolio is completely runoff. The Company will report both realized and unrealized gains and losses relating to the fair value adjustments on the legacy NSBF SBA 7(a) portfolio.

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

Net gain (loss) on loans accounted for under the fair value option for the nine months ended September 30, 2024 and 2023 were as follows:

|  | For the nine months ended September 30, 2024 | September 30, 2023 (as restated) | Change |
| --- | ---: | ---: | ---: |
| SBA 7(a) Unguaranteed Loans | $(17,215) | $12,132 | $(29,347) |
| SBA 7(a) Guaranteed Loans | 326 | (615) | 941 |
| SBA 504 and Non-SBA Loans | 12,709 | 1,071 | 11,638 |
| Net Gain (Loss) on Loans Accounted for Under the Fair Value Option | $(4,180) | $12,588 | $(16,768) |

Net gain (loss) on loans accounted for under the fair value option relates to the guaranteed portions of SBA loans made which the Company sells into a secondary market, the unguaranteed portions of SBA loans made which the Company holds, SBA 504 loans that are held for sale, and ALP loans that are held for sale. This gain (loss) represents the fair value adjustment of loans. The amount of the gain (loss) is determined by the quantity of loans held for sale at quarter end, the change in secondary market pricing conditions, and the valuation of the loans that are not held for sale.

During the nine months ended September 30, 2024, the Company recorded unrealized losses on SBA 7(a) unguaranteed loans accounted for under the fair value option as the portfolio paid down. During the first nine months of 2023, the Company originated $157.4 million of SBA 7(a) loans and elected the fair value option on those loans, which led to increased gains.

### Technology and IT Support Income

Technology and IT support income decreased by $4.2 million from $18.5 million for the nine months ended September 30, 2023 to $14.3 million for the nine months ended September 30, 2024. The overall decrease was due to a decrease in web hosting and IT support revenue.

### Other Noninterest Income

For the nine months ended September 30, 2024 and 2023, other noninterest income was related primarily to legal, packaging, prepayment, and late fees earned from SBA 7(a) loans and increased as a result of the higher number of SBA 7(a) loans originated of 1,732 loans compared to 1,236 loans for the nine months ended September 30, 2024 and 2023, respectively. The increase also includes $9.6 million of gains on joint ventures and non-control investments for the nine months ended September 30, 2024 compared to $3.1 million in the prior period.

### Non-Interest Expense

|  | Nine months ended September 30, 2024 | 2023 (as restated) | 2024/2023 Increase/(Decrease) Amount | Percent |
| --- | ---: | ---: | ---: | ---: |
| Salaries and employee benefits expense | $60,445 | $51,173 | $9,272 | 18.1% |
| Technology services expense | 8,624 | 10,007 | (1,383) | (13.8) |
| Electronic payment processing expense | 14,977 | 14,159 | 818 | 5.8 |
| Professional services expense | 11,237 | 9,766 | 1,471 | 15.1 |
| Other loan origination and maintenance expense | 9,391 | 6,930 | 2,461 | 35.5 |
| Depreciation and amortization | 1,570 | 2,271 | (701) | (30.9) |
| Other general and administrative costs | 14,326 | 13,814 | 512 | 3.7 |
| Total other expense | $120,570 | $108,120 | $12,450 | 11.5% |

75

### Salaries and Employee Benefits Expense

The increase in salaries and employee benefits was primarily attributable to an increase in entity headcount from 529 employees at September 30, 2023 to 570 employees at September 30, 2024, as well as an increase in the bonus pool accrual.

### Technology Services Expense

The $1.4 million decrease in technology services expenses for the nine months ended September 30, 2024 corresponded with the $4.2 million decrease in technology and IT support income.

### Professional Services Expense

The increase in professional services expense period over period is primarily attributable to additional audit fees related to the completion of the Company’s first annual audit as a financial holding company after the Acquisition of NBNYC and related audit services, including internal and external audit of controls and procedures, as well as costs associated with the anticipated NTS disposition.

### Other Loan Origination and Maintenance Expense

Origination and loan processing expenses during the nine months ended September 30, 2024, was $9.4 million compared to $6.9 million for the nine months ended September 30, 2023. During the first quarter of 2024, the majority of loans were funded by Newtek Bank, which accounts for loans at amortized cost, net of deferred fees and costs, resulting in a portion of the loan origination fees being deferred and amortized over the life of the loan, compared to the first quarter of 2023, when most loans were funded by NSBF, which accounts for loans at fair value and expenses all origination fees at the time they are incurred.

### Depreciation and Amortization

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

### Results of Segment Operations

The Company has four reportable segments Banking, Technology, NSBF, and Payments. A description of each segment and the methodologies used to measure financial performance is described in NOTE 19—SEGMENTS in the accompanying Notes to the Consolidated Financial Statements. Net income (loss) by operating segment is presented below:

|  | Nine Months Ended September 30, 2024 | September 30, 2023 (as restated) | 2024/2023 Increase/(Decrease) Amount | Percent |
| --- | ---: | ---: | ---: | ---: |
| Banking | $35,339 | $13,064 | $22,275 | 171% |
| Technology | (51) | 1,799 | (1,850) | (103)% |
| NSBF | (17,961) | 21,560 | (39,521) | (183)% |
| Payments | 14,173 | 9,452 | 4,721 | 50% |
| Other | 1,029 | (9,395) | 10,424 | (111)% |
| Consolidated net income | $32,529 | $36,480 | $(3,951) | (11)% |

### Banking

The banking segment includes Newtek Bank as well as its consolidated subsidiary SBL. The financial results include the origination, sale, and servicing of SBA 7(a) loans, 504 loans, C&I loans, CRE loans and ABL loans. In addition, the bank offers depository services. The results include $28.2 million of net interest income during the nine months ended September 30, 2024 compared to $11.1 million of net interest income during the nine months ended September 30, 2023. During the first three quarters of 2024, the majority of loans were funded by Newtek Bank compared to the first three quarters of 2023, when all SBA 7(a) loans were funded by NSBF until it went into wind-down on April 13, 2023.

### Technology

Technology (NTS) provides website hosting, dedicated server hosting, cloud hosting, web design and development, internet marketing, e-commerce, data storage, backup and disaster recovery, and other related services including consulting and implementing technology solutions for enterprise and commercial clients across the U.S. As a result of commitments made to the Federal Reserve, the Company will divest or otherwise terminate the activities conducted by NTS by January 6, 2025, subject to any extension.

### NSBF

NSBF includes NSBF’s legacy portfolio of SBA 7(a) loans held outside Newtek Bank. The decrease in net income is due to the wind-down of NSBF’s operations.

### Payments

Payments includes NMS, POS and Mobil Money. Within the segment’s results are $39.1 million of noninterest income for the nine months ended September 30, 2024 resulting from marketing credit and debit card processing services, check approval services, processing equipment, and software, compared to $35.0 million during the nine months ended September 30, 2023. The net income also included $24.4 million and $24.0 million of noninterest expense for the nine months ended September 30, 2024 and 2023, respectively.

### Corporate and Other

Corporate and Other represents operations not considered to be reportable segments and/or general operating expenses of the Company, and includes the parent company, other non-bank subsidiaries including NIA, PMT, non-bank lending, including NALH (Newtek ALP Holdings) 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.

### Results of Operations

### Comparison of the three months ended September 30, 2024 and 2023

As disclosed in our 2023 Form 10-K, the Company’s prior year condensed, comparative financial statements have been adjusted to correct errors made in the Company’s financial statements previously issued for the first, second, and third quarters of 2023. Results for the three months ended September 30, 2023 are presented as restated. Refer to our 2023 Form 10-K for further detail.

### Summary

For the three months ended September 30, 2024, the Company reported net income of $11.9 million, or $0.45 per basic and diluted share, compared to net income of $10.9 million, or $0.43 per basic and diluted share, for the three months ended September 30, 2023.

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

|  | Three Months Ended September 30, 2024 | 2023 (as restated) | Change |
| --- | ---: | ---: | ---: |
| Net interest income after provision for credit losses | $4,053 | $4,631 | $(578) |
| Noninterest income | 51,851 | 41,026 | 10,825 |
| Noninterest expense | 38,847 | 31,320 | 7,527 |
| Net income before taxes | 17,057 | 14,337 | 2,720 |
| Income tax expense | 5,123 | 3,418 | 1,705 |
| Net income | $11,934 | $10,919 | $1,015 |

### Net Interest Income

| Interest income | Three Months Ended September 30, 2024 | 2023 (as restated) | Change |
| --- | ---: | ---: | ---: |
| Debt securities available-for-sale | $334 | $436 | $(102) |
| Loans and fees on loans | 28,588 | 23,232 | 5,356 |
| Other interest earning assets | 2,349 | 3,068 | (719) |
| Total interest income | 31,271 | 26,736 | 4,535 |
| **Interest expense** |  |  |  |
| Deposits | 7,314 | 5,212 | 2,102 |
| Notes and securitizations | 11,482 | 11,005 | 477 |
| Bank and FHLB borrowings | 1,494 | 2,442 | (948) |
| Total interest expense | 20,290 | 18,659 | 1,631 |
| **Net interest income** | 10,981 | 8,077 | 2,904 |
| Provision for credit losses | 6,928 | 3,446 | 3,482 |
| Net interest income after provision for credit losses | $4,053 | $4,631 | $(578) |

78

### Interest Income

*Loans and fees on loans:* The $5.4 million increase in interest income on the Company’s loan portfolio was attributable to an increase in interest rates as well as the average outstanding accrual portfolio of loans held for investment increasing to $1.2 billion from $788.2 million for the three months ended September 30, 2024 and 2023, respectively. The increase in the average outstanding accrual loan portfolio resulted from the origination of new SBA 7(a) loans period over period.

*Other interest earning assets:* The $0.7 million decrease in interest income from other interest earnings assets was attributable to a decrease in the average quarterly outstanding balance of interest-earning balances in other banks.

### Interest Expense

The following is a summary of interest expense by facility for the three months ended September 30, 2024 and 2023:

|  | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 (as restated) | Change |
| --- | ---: | ---: | ---: |
| Deposits | $7,314 | $5,212 | $2,102 |
| Notes and securitizations: |  |  |  |
| Notes payable - Securitization Trusts | 5,078 | 6,742 | (1,664) |
| 2024 Notes | 201 | 606 | (405) |
| 2025 5.00% Notes | 462 | 434 | 28 |
| 2025 8.125% Notes | 1,147 | 1,158 | (11) |
| 2026 Notes | 1,761 | 1,761 | — |
| 2028 Notes1 | 887 | 304 | 583 |
| 2029 Notes2 | 1,655 | — | 1,655 |
| 2029 Notes3 | 291 | — | 291 |
| Bank and FHLB Borrowings: |  |  |  |
| Bank notes payable | 1,362 | 2,286 | (924) |
| FHLB Advances | 132 | 156 | (24) |
| **Total interest expense** | $20,290 | $18,659 | $1,631 |

(1) On August 31, 2023, the Company completed a public offering of $40.0 million aggregate principal amount of 8.00% notes due 2028. The Notes will mature on September 1, 2028. The Notes bear interest at a rate of 8.000% per year, payable quarterly on March 1, June 1, September 1, and December 1 each year, commencing on December 1, 2023.

(2) On May 30, 2024, the Company completed a public offering of $62.5 million aggregate principal amount of 8.50% notes due 2029, and on June 3, 2024, the underwriters exercised their option to purchase an additional $9.4 million in aggregate principal amount of the 2029 Notes. The Notes will mature on June 1, 2029. The Notes bear interest at a rate of 8.500% per year, payable quarterly on March 1, June 1, September 1, and December 1 each year, commencing on September 1, 2024.

(3) On September 16, 2024, the Company completed a public offering of $75.0 million aggregate principal amount of 8.625% notes due 2029. The Notes will mature on October 15, 2029. The Notes bear interest at a rate of 8.625% per year, payable quarterly on January 15, April 15, July 15, and October 15 each year, commencing on January 15, 2025.

The increase in interest expense period over period is primarily due to the Company’s continued growth in deposits that increased interest expense by $2.1 million. In addition, there was additional interest expense on the 2028, 2029 8.50%, and 2029 8.625% Notes of $0.6 million, $1.7 million and $0.3 million, respectively. The increase was partially offset by a reduction in Notes payable - Securitization Trusts of $1.7 million, the 2024 Notes of $0.4 million, and Bank notes payable interest of $0.9 million.

### Provision for Credit Losses

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

For the three months ended September 30, 2024 and 2023, there was a provision for loan credit losses of $6.9 million and $3.4 million, respectively. The increase was due to an increase in loans held for investment at amortized cost, specifically SBA 7(a) loans, as well as a sequential build of the provision year over year.

### Net Interest Income and Margin

***Average Balances and Yields.*** The following table presents information regarding average balances for assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amount of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing the income or expense by the average balances for assets or liabilities, respectively, for the periods presented and annualizing that result. Loan fees are included in interest income on loans.

| Interest-earning assets: | Three Months Ended September 30, 2024 Average Balance | Interest | Average Yield / Rate | Three Months Ended September 30, 2023 (as restated) Average Balance | Interest | Average Yield / Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest-earning balances in other banks | $171,193 | $2,349 | 5.46% | $238,677 | $3,068 | 5.10% |
| Investment securities | 25,472 | 334 | 5.22 | 36,408 | 436 | 4.75 |
| Loans held for sale | 248,507 | 6,634 | 10.62 | 137,106 | 5,647 | 16.34 |
| Loans held for investment | 971,396 | 21,954 | 8.99 | 818,865 | 17,585 | 8.52 |
| Total interest-earning assets | 1,416,568 | 31,271 | 8.78 | 1,231,056 | 26,736 | 8.62 |
| Less: Allowance for credit losses on loans | (21,152) |  |  | (4,801) |  |  |
| Noninterest earning assets | 215,433 |  |  | 198,415 |  |  |
| Total assets | $1,610,849 |  |  | $1,424,670 |  |  |
| Interest-bearing liabilities |  |  |  |  |  |  |
| Demand | $67,270 | $191 | 1.13% | $22,395 | $7 | 0.12% |
| Savings, Super NOW | 252,325 | 3,240 | 5.11 | 198,514 | 2,513 | 5.02 |
| Money Market | 30,049 | 311 | 4.12 | 30,082 | 369 | 4.87 |
| Time | 279,215 | 3,572 | 5.09 | 201,743 | 2,323 | 4.57 |
| Total deposits | 628,859 | 7,314 | 4.63 | 452,734 | 5,212 | 4.57 |
| Borrowings | 630,796 | 12,976 | 8.18 | 680,852 | 13,447 | 7.84 |
| Total interest-bearing liabilities | 1,259,655 | 20,290 | 6.41 | 1,133,586 | 18,659 | 6.53 |
| Noninterest-bearing deposits | 10,893 |  |  | 1,073 |  |  |
| Noninterest-bearing liabilities | 65,413 |  |  | 60,105 |  |  |
| Shareholders’ equity | 274,888 |  |  | 229,906 |  |  |
| Total liabilities and shareholders' equity | $1,610,849 |  |  | $1,424,670 |  |  |
| Net interest income and interest rate spread |  | $10,981 | 2.37% |  | $8,077 | 2.09% |
| Net interest margin |  |  | 3.08% |  |  | 2.60% |
| Ratio of average interest-earning assets to average interest bearing liabilities |  |  | 112.46% |  |  | 108.60% |

80

### Rate/Volume Analysis

The following table sets forth the effects of changing rates and volumes on net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, increases or decreases attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.

| Interest income: | For the three months ended September 30, 2024 2024 vs. 2023 (as restated) Increase (Decrease) Due to Rate | Volume | Total |
| --- | ---: | ---: | ---: |
| Interest-earning balances in other banks | $150 | $(867) | $(717) |
| Investment securities | 28 | (131) | (103) |
| Loans held for sale | (3,603) | 4,589 | 986 |
| Loans held for investment | 1,093 | 3,276 | 4,369 |
| Total interest income | (2,332) | 6,867 | 4,535 |
| **Interest expense:** |  |  |  |
| Demand | 170 | 14 | 184 |
| Savings, Super NOW | 46 | 681 | 727 |
| Money Market | (58) | — | (58) |
| Time | 357 | 892 | 1,249 |
| Borrowings | 518 | (989) | (471) |
| Total interest expense | 1,033 | 598 | 1,631 |
| Net interest income | $(3,365) | $6,269 | $2,904 |

### Non-Interest Income

|  | Three Months Ended September 30, 2024 | 2023 (as restated) | 2024/2023 Increase/(Decrease) Amount | Percent |
| --- | ---: | ---: | ---: | ---: |
| Dividend income | $374 | $388 | $(14) | (3.6)% |
| Loan servicing asset revaluation | (1,786) | (1,951) | 165 | (8.5) |
| Servicing income | 4,958 | 4,602 | 356 | 7.7 |
| Net gains on sales of loans | 25,675 | 13,751 | 11,924 | 86.7 |
| Net (loss) gain on loans under the fair value option | (4,085) | 2,809 | (6,894) | (245.4) |
| Technology and IT support income | 3,311 | 5,376 | (2,065) | (38.4) |
| Electronic payment processing income | 11,777 | 11,192 | 585 | 5.2 |
| Other noninterest income | 11,627 | 4,859 | 6,768 | 139.3 |
| Total noninterest income | $51,851 | $41,026 | $10,825 | 26.4% |

81

### Loan Servicing Asset Revaluation

The Company accounts for servicing assets in accordance with ASC Topic 860-50 - Transfers and Servicing - Servicing Assets and Liabilities. The Company earns servicing fees from the guaranteed portions of SBA 7(a) loans it originates and sells and from servicing the ALP portfolios owned by NCL JV and TSO JV. Servicing assets for loans originated by the Company’s nonbank subsidiaries are measured at FV at each reporting date and the Company reports changes in the FV of servicing assets in earnings in the period in which the changes occur. The valuation model for servicing assets incorporates assumptions including, but not limited to, servicing costs, discount rate, prepayment rate, and default rate. Considerable judgment is required to estimate the fair value of servicing assets and as such these assets are classified as Level 3 in our fair value hierarchy. Servicing assets for loans originated by Newtek Bank are measured at LCM and amortized based on their estimated life and impairment is recorded to the extent the amortized cost exceeds the asset’s FV.

The increase in loan servicing asset revaluation is due to the runoff of the servicing asset since NSBF is no longer originating loans during its wind-down of operations.

### Servicing Income, Net of Amortization

The increase in servicing income was related to an increase of $143.6 million in the average total loan portfolio for which we earn servicing income period over period.

### Net Gains on Sales of Loans

Net gains on sales of loans for the three months ended September 30, 2024 and 2023 were as follows:

|  | Three Months Ended September 30, 2024 $ Amount | September 30, 2023 (as restated) $ Amount |
| --- | ---: | ---: |
| Gains recognized on sales of loans | $27,340 | $19,038 |
| Losses recognized on sales of loans | (1,661) | (5,287) |
| Net gains on sales of loans | $25,679 | $13,751 |

|  | Three Months Ended September 30, 2024 # of Loans | $ Amount | September 30, 2023 (as restated) # of Loans | $ Amount |
| --- | ---: | ---: | ---: | ---: |
| SBA loans originated | 639 | $226,513 | 515 | $209,939 |
| SBA guaranteed loans sold | 525 | 176,002 | 421 | 154,530 |
| Average sale price as a percent of principal balance1 |  | 110.78% |  | 109.73% |

1 Realized gains greater than 110.00% must be split 50/50 with the SBA in accordance with SBA regulations. The realized gains recognized above reflect amounts net of split with the SBA.

For the three months ended September 30, 2024, the average sale price as a percent of principal balance was 110.78% compared to 109.73% for the prior period. The increase in sales prices in 2024 resulted from higher demand. The increase in overall net gains on sales of loans resulted from higher volumes of sales at better market premiums compared to the prior year and the expectation of lower interest rates which would slow prepay speeds.

During the wind-down of NSBF’s operations, NSBF will be required to continue to own its SBA 7(a) loans and PPP Loans in its SBA loan portfolio to maturity, liquidation, charge-off, or (subject to SBA’s prior written approval), sale or transfer. In addition, SBL will continue to 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. The Company will continue to measure NSBF’s SBA 7(a) loan portfolio at fair value until the portfolio is completely runoff. The Company will report both realized and unrealized gains and losses relating to the fair value adjustments on the legacy NSBF SBA 7(a) portfolio.

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

Net gain (loss) on loans accounted for under the fair value option for the three months ended September 30, 2024 and 2023 were as follows:

|  | For the three months ended September 30, 2024 | September 30, 2023 (as restated) | Change |
| --- | ---: | ---: | ---: |
| SBA 7(a) Unguaranteed Loans | $(11,538) | $3,168 | $(14,706) |
| SBA 7(a) Guaranteed Loans | 300 | (290) | 590 |
| SBA 504 and Non-SBA Loans | 7,153 | (69) | 7,222 |
| Net Gain (Loss) on Loans Accounted for Under the Fair Value Option | $(4,085) | $2,809 | $(6,894) |

Net gain (loss) on loans accounted for under the fair value option relates to the guaranteed portions of SBA loans made which the Company sells into a secondary market, the unguaranteed portions of SBA loans made which the Company holds, SBA 504 loans that are HFS, and ALP loans that are HFSh. This gain (loss) represents the fair value adjustment of loans. The amount of the gain (loss) is determined by the quantity of loans HFS at quarter end, the change in secondary market pricing conditions, and the valuation of the loans that are not HFS. During the three months ended September 30, 2024, there was an increase in the gain-on-sale pricing as compared to the prior period.

### Technology and IT Support Income

Technology and IT support income decreased by $2.1 million from $5.4 million for the three months ended September 30, 2023 to $3.3 million for the three months ended September 30, 2024. The overall decrease was due to a decrease in web hosting and IT support revenue.

### Other Noninterest Income

For the three months ended September 30, 2024 and 2023, other noninterest income related primarily to legal, packaging, prepayment, and late fees earned from SBA 7(a) loans and increased as a result of the higher volume of SBA 7(a) loans originated of 639 loans compared to 515 loans for the three months ended September 30, 2024 and 2023, respectively. The increase also included a $5.7 million increase in gains on joint ventures and non-control investments.

### Non-Interest Expense

|  | Three Months Ended September 30, 2024 | 2023 (as restated) | 2024/2023 Increase/(Decrease) Amount | Percent |
| --- | ---: | ---: | ---: | ---: |
| Salaries and employee benefits expense | $19,149 | $13,726 | $5,423 | 39.5% |
| Technology services expense | 1,796 | 2,738 | (942) | (34.4) |
| Electronic payment processing expense | 4,438 | 4,817 | (379) | (7.9) |
| Professional services expense | 3,929 | 3,170 | 759 | 23.9 |
| Other loan origination and maintenance expense | 4,132 | 1,836 | 2,296 | 125.1 |
| Depreciation and amortization | 517 | 730 | (213) | (29.2) |
| Other general and administrative costs | 4,886 | 4,303 | 583 | 13.5 |
| Total other expense | $38,847 | $31,320 | $7,527 | 24.0% |

### Salaries and Employee Benefits Expense

The increase in salaries and employee benefits was primarily attributable to an increase in entity headcount from 529 employees at September 30, 2023 to 570 employees at September 30, 2024.

### Technology Services Expenses

The $0.9 million decrease in technology services expenses for the three months ended September 30, 2024 corresponded with the $2.1 million decrease in technology and IT support income.

### Professional Services Expense

The increase in professional fees period over period is attributable to costs associated with the anticipated NTS disposition.during the three months ended September 30, 2024, compared to the prior year that did not include expenses related to the disposition.

### Other Loan Origination and Maintenance Expense

Origination and loan processing expenses during the three months ended September 30, 2024, was $4.1 million compared to $1.8 million for the three months ended September 30, 2023. The change was due to the increase in loans originated during the period.

### Depreciation and Amortization

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

### 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 19—SEGMENTS in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements. Net income (loss) by operating segment is presented below:

|  | Three Months Ended September 30, 2024 | September 30, 2023 (as restated) | 2024/2023 Increase/(Decrease) Amount | Percent |
| --- | ---: | ---: | ---: | ---: |
| Banking | $13,485 | $8,805 | $4,680 | 53% |
| Technology | 101 | 766 | (665) | (87)% |
| NSBF | (10,791) | 1,424 | (12,215) | (858)% |
| Payments | 5,305 | 3,974 | 1,331 | 33% |
| Other | 3,834 | (4,050) | 7,884 | (195)% |
| Consolidated net income | $11,934 | $10,919 | $1,015 | 9% |

### Banking

The banking segment includes Newtek Bank as well as its consolidated subsidiary SBL. The financial results include the origination and servicing of SBA 504 loans, SBA 7(a) loans, C&I loans, CRE loans and ABL loans. In addition, the bank offers depository services. The results include $11.2 million of net interest income during the three months ended September 30, 2024 compared to $5.1 million of net interest income during the three months ended September 30, 2023.

### Technology

Technology provides website hosting, dedicated server hosting, cloud hosting, web design and development, internet marketing, e-commerce, data storage, backup and disaster recovery, and other related services including consulting and implementing technology solutions for enterprise and commercial clients across the U.S. As a result of commitments made to the Federal Reserve, the Company will divest or otherwise terminate the activities conducted by NTS by January 6, 2025, subject to any extension.

### NSBF

NSBF relates to NSBF’s legacy portfolio of SBA 7(a) loans held outside Newtek Bank. The decrease in net income is due to the wind-down of NSBF’s operations.

### Payments

Payments includes POS and Mobil Money. Within the segment’s results are $12.7 million of noninterest income for the three months ended September 30, 2024, resulting from marketing credit and debit card processing services, check approval services, processing equipment, and software, compared to $12.2 million during the three months ended September 30, 2023. The net income also included $7.3 million and $7.8 million of noninterest expense for the three months ended September 30, 2024 and 2023, respectively.

### Corporate and Other

Corporate and Other represents operations not considered to be reportable segments and/or general operating expenses of the Company, and includes the parent company, other non-bank subsidiaries including NIA, PMT, non-bank lending, including NALH 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.

### Liquidity and Capital Resources

### Overview

Our liquidity and capital resources are derived from our Notes payable - related parties, 2024 Notes, 2025 5.00% Notes, 2025 8.125% Notes, 2026 Notes, 2028 Notes, 2029 Notes, securitization transactions and cash flows from operations, including investment sales and repayments, and income earned. In the nine months ended September 30, 2024, 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. On January 27, 2023, the Company submitted a Form S-3 with the SEC in order to commence the process of re-establishing an effective shelf registration statement. The registration statement on Form S-3 was declared effective by the SEC on July 27, 2023. On November 17, 2023, the Company entered into the 2023 ATM Equity Distribution Agreement. The 2023 ATM Equity Distribution Agreement provides that the Company may offer and sell up to 3,000,000 shares of Common Stock from time to time through the placement agents.

### Public Offerings

### ATM Program

The Company’s shelf registration statement on Form S-3 was declared effective by the SEC on July 27, 2023. On November 17, 2023, the Company entered into the 2023 ATM Equity Distribution Agreement. The 2023 ATM Equity Distribution Agreement provides that the Company may offer and sell up to 3.0 million shares of Common Stock from time to time through the placement agents under the ATM Program. The Company may, subject to market conditions, engage in activity under the ATM Program.

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

|  | Nine Months Ended September 30, 2024 | Year Ended December 31, 2023 |
| --- | ---: | ---: |
| Shares sold | 1,100 | — |
| Net weighted average price per share | $12.56 | $— |
| Net proceeds | $13,818 | $— |
| Placement agent fees paid | $282 | $— |

### 2029 Notes

On May 30, 2024, the Company completed a registered offering of $71.9 million in aggregate principal amount of its 8.50% 2029 Notes, which includes the underwriters’ exercise of the option granted by the Company to purchase an additional $9.4 million in aggregate principal amount of the 2029 8.50% Notes. The Company received $69.6 million in proceeds, before expenses, from the sale of the 2029 8.50% Notes. The 2029 8.50% Notes bear interest at a rate of 8.50% per year payable quarterly on March 1, June 1, September 1 and December 1 of each year, commencing on September 1, 2024, and trade on the Nasdaq Global Market under the trading symbol “NEWTG.” At September 30, 2024, the Company was in compliance with all covenants related to the 2029 8.50% Notes.

On September 16, 2024, the Company completed a public offering of $75.0 million aggregate principal amount of 8.625% notes due 2029. The Notes will mature on October 15, 2029. The Company received $72.8 million in proceeds, before expenses, from the sale of the 2029 Notes. The Notes bear interest at a rate of 8.625% per year, payable quarterly on January 15, April 15, July 15, and October 15 each year, commencing on January 15, 2025. , and trade on the Nasdaq Global Market under the trading symbol “NEWTH.” At September 30, 2024, the Company was in compliance with all covenants related to the 2029 8.625% Notes.

### 2028 Notes

On August 31, 2023, the Company completed a registered offering of $40.0 million in aggregate principal amount of its 8.00% 2028 Notes, which includes the underwriters’ exercise of the option granted by the Company to purchase an additional $5.0 million in aggregate principal amount of the 2028 Notes. The Company received $38.0 million in proceeds, before expenses, from the sale of the 2028 Notes. The 2028 Notes bear interest at a rate of 8.00% per year payable quarterly on March 1, June 1, September 1 and December 1 of each year, commencing on December 1, 2023, and trade on the Nasdaq Global Market under the trading symbol “NEWTI.” At September 30, 2024, 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 sale of the 2026 Notes generated proceeds of approximately $111.3 million, net of underwriter's fees and expenses. The 2026 Notes are the Company’s direct unsecured obligations and rank: (i) *pari passu* with the Company’s other outstanding and future unsecured indebtedness; (ii) senior to any of the Company’s future indebtedness that expressly provides it is subordinated to the 2026 Notes; (iii) effectively subordinated to all the Company’s existing and future secured indebtedness (including indebtedness that is initially unsecured to which the Company subsequently grants security), to the extent of the value of the assets securing such indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries.

The 2026 Notes will mature on February 1, 2026 and may be redeemed in whole or in part at any time or from time to time at the Company’s option upon not less than 30 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof, at a redemption price equal to 100% of the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption. The 2026 Notes bear interest at a rate of 5.50% per year payable quarterly on February 1, May 1, August 1 and November 1 of each year, commencing on May 1, 2021, and trade on the Nasdaq Global Market under the trading symbol “NEWTZ.” At September 30, 2024, the Company was in compliance with all covenants related to the 2026 Notes.

The Base Indenture, and each supplemental indenture thereto, contains certain covenants. The Base Indenture provides for customary events of default and further provides that the Trustee or the holders of 25% in aggregate principal amount of the outstanding Notes may declare such Notes immediately due and payable upon the occurrence of any event of default after expiration of any applicable grace period. In addition, the supplemental indentures for the 2024 Notes and 2026 Notes include covenants requiring the Company to comply with (regardless of whether it is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) of the 1940 Act as modified by Section 61(a) of the 1940 Act (or any successor provisions), to comply with (regardless of whether it is subject to) the restrictions on dividends, distributions and purchase of capital stock set forth in Section 18(a)(1)(B) of the 1940 Act as modified by Section 61(a) of the 1940 Act and to provide financial information to the holders of the 2026 Notes and the Trustee if the Company should no longer be subject to the reporting requirements under the Exchange Act (“BDC Covenants”). These covenants are subject to important limitations and exceptions that are described in the Base Indenture, as supplemented by the supplemental indentures. At September 30, 2024, the Company was in compliance with all covenants related to the Notes.

### 2024 Notes

In July 2019, the Company and the Trustee entered into the Fourth Supplemental Indenture to the Base Indenture between the Company and the Trustee, relating to the Company’s issuance, offer and sale of $55.0 million aggregate principal amount of 5.75% 2024 Notes. The Company granted an overallotment option of up to $8.25 million in aggregate principal amount of the 2024 Notes. The sale of the 2024 Notes generated proceeds of approximately $53.2 million, net of underwriter's fees and expenses. In July 2019 the underwriters exercised their option to purchase $8.25 million in aggregate principal amount of 2024 Notes for an additional $8.0 million in net proceeds. On February 16, 2021 and May 20, 2021, the Company issued an additional $5.0 million and $10.0 million in aggregate principal amount of the 2024 Notes, respectively. The new 2024 Notes were treated as a single series with the prior 2024 Notes and had the same terms as the prior 2024 Notes.

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

The 2024 Notes traded on the Nasdaq Global Market under the trading symbol “NEWTL” until the 2024 Notes matured on August 1, 2024. The 2024 Notes were also subject to BDC Covenants.

### 2025 Notes (Private Placements)

On November 27, 2020, the Company and Trustee entered into the Fifth Supplemental Indenture to the Base Indenture between the Company and the Trustee, relating to the issuance, offer and sale of $5.0 million aggregate principal amount of its 2025 6.85% Notes. The offering was consummated pursuant to the terms of a purchase agreement among the Company and an accredited investor, which provided for the 2025 6.85% Notes to be issued to the purchaser in a private placement in reliance on Section 4(a)(2) of the Securities Act. The net proceeds from the sale of the notes were approximately $4.8 million, after deducting structuring fees and estimated offering expenses, each payable by the Company. The Company exercised its option to issue up to $10.0 million of additional 2025 6.85% Notes to the purchaser, and issued $10.0 million in additional 2025 6.85% Notes to the purchaser in an exempt offering in January 2021.

On March 31, 2022, the Company caused notices to be issued to the holder of its 2025 6.85% Notes regarding the Company’s exercise of its option to redeem all $15.0 million in aggregate principal amount of the Notes on May 2, 2022. The Notes were redeemed on May 2, 2022 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon from February 28, 2022 through, but excluding, May 2, 2022.

On March 31, 2022, the Company completed a private placement of $15.0 million aggregate principal amount of its 5.00% notes due 2025 (2025 5.00% Notes). The offering was consummated pursuant to the terms of a purchase agreement dated March 31, 2022 among the Company and an accredited investor, which provided for the 2025 5.00% Notes to be issued to the purchaser in a transaction that relied on Section 4(a)(2) of the Securities Act to be exempt from registration under the Securities Act. The net proceeds from the sale of the notes were approximately $14.5 million, after deducting structuring fees and estimated offering expenses, each payable by the Company. The 2025 5.00% Notes are the Company’s direct unsecured obligations and rank: (i) *pari passu* with the Company’s other outstanding and future unsecured indebtedness; (ii) senior to any of the Company’s future indebtedness that expressly provides it is subordinated to the 2025 5.00% Notes; (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. Under the purchase agreement, the Company also issued an additional $15.0 million in aggregate principal amount of the 2025 5.0% Notes to the purchaser on May 2, 2022. The 2025 5.00% Notes were issued under the Base Indenture and the Tenth Supplemental Indenture, dated as of March 31, 2022. The 2025 5.00% Notes will mature on March 31, 2025, and under the terms of the Indenture, the Notes are redeemable at any time, at the option of the Company, at a redemption price of 100% of the outstanding principal amount thereof.

On January 23, 2023, we completed a private placement offering of $50.0 million aggregate principal amount of 8.125% notes due 2025. The net proceeds from the sale of the notes were approximately $48.94 million after deducting estimated offering expenses payable by the Company. The Notes will mature on February 1, 2025. The Notes bear interest at a rate of 8.125% per year payable semiannually on February 1 and August 1 each year, commencing on August 1, 2023.

### NSBF Capital One Facility

Prior to October 2023, NSBF maintained a $150.0 million Capital One facility to finance NSBF’s origination of unguaranteed and guaranteed portions of SBA 7(a) loans. The portion of the facility collateralized by the government guaranteed portion of SBA 7(a) loans had an interest rate of Prime minus 0.75% and the interest rate on the portion of the facility collateralized by the non-guaranteed portion of SBA 7(a) loans was Prime plus 0.25% . The facility provided for a 55% advance rate on the non-guaranteed portions of the SBA 7(a) loans NSBF originated, and a 90% advance rate on the guaranteed portions of SBA 7(a) loans NSBF originated and a 90% advance rate on the guaranteed portions of SBA 7(a) loans NSBF originated. NSBF ceased originating new loans in April 2023. On May 7, 2020, NSBF amended the facility to, among other things, extend the maturity date on which the credit facility converted into a term loan for a period of three years to May 7, 2023, with the term loan maturing on May 7, 2025. The NSBF Capital One facility was paid off and terminated in October of 2023.

### Securitization Transactions

From 2010 through June 2023, NSBF engaged in thirteen (13) securitizations of the unguaranteed portions of its SBA 7(a) loans. In the securitizations, NSBF used a special purpose entity (the “Trust”) which is considered a variable interest entity. Applying the consolidation requirements for VIEs under the accounting rules in ASC Topic 860, Transfers and Servicing, and ASC Topic 810, Consolidation, which became effective January 1, 2010, the Company determined that as the primary beneficiary of the securitization vehicle, based on its power to direct activities through its role as servicer for the Trust and its obligation to absorb losses and right to receive benefits, it needed to consolidate the Trusts. NSBF therefore consolidated the entity using the carrying amounts of the Trust’s assets and liabilities. NSBF reflects the legacy portfolio of SBA 7(a) loans and reflects the associated financing in Notes Payable - Securitization trusts on the Consolidated Statements of Financial Condition.

In June 2023, NSBF completed its thirteenth securitization which resulted in the transfer of $103.9 million of unguaranteed portions of SBA loans to the 2023-1 Trust. The 2023-1 Trust in turn issued securitization notes for the par amount of $103.9 million, consisting of $84.3 million of Class A notes and $19.6 million Class B notes, against the 2023-1 Trust assets in a private placement. The Class A and Class B notes received an “A-” and “BBB-” rating by S&P, respectively, and the final maturity date of the notes is October 2049. The Class A and Class B notes bear interest at an average rate of 30-day average compounded SOFR plus 3.24% across both classes.

In September 2022, NSBF completed its twelfth securitization which resulted in the transfer of $116.2 million of unguaranteed portions of SBA loans to the 2022-1 Trust. The 2022-1 Trust in turn issued securitization notes for the par amount of $116.2 million, consisting of $95.4 million of Class A notes and $20.8 million Class B notes, against the 2022-1 Trust assets in a private placement. The Class A and Class B notes received an “A-” and “BBB-” rating by S&P, respectively, and the final maturity date of the notes is October 2049. The Class A and Class B notes bear interest at an average rate of 30-day average compounded SOFR plus 2.97% across both classes.

In December 2021, NSBF completed its eleventh securitization which resulted in the transfer of $103.4 million of unguaranteed portions of SBA loans to the 2021-1 Trust. The 2021-1 Trust in turn issued securitization notes for the par amount of $103.4 million, consisting of $79.7 million of Class A notes and $23.8 million Class B notes, against the 2021-1 Trust assets in a private placement. The Class A and Class B notes received an “A” and “BBB-” rating by S&P, respectively, and the final maturity date of the notes is December 2048. The Class A and Class B notes bear interest at an average rate of adjusted SOFR plus 1.92% across both classes.

In October 2019, NSBF completed its tenth securitization which resulted in the transfer of $118.9 million of unguaranteed portions of SBA loans to the 2019-1 Trust. The 2019-1 Trust in turn issued securitization notes for the par amount of $118.9 million, consisting of $93.5 million of Class A notes and $25.4 million Class B notes, against the 2019-1 Trust assets in a private placement. The Class A and Class B notes received an “A” and “BBB-” rating by S&P, respectively, and the final maturity date of the notes is December 2044. The Class A and Class B notes bear interest at an average rate of adjusted SOFR plus 1.83% across both classes. In October, 2024, the 2019-1 Trust was terminated as a result of NSBF purchasing the 2019-1 Trust assets, with the 2019-1 Trust’s noteholders receiving the redemption price.

In November 2018, NSBF completed its ninth securitization which resulted in the transfer of $108.6 million of unguaranteed portions of SBA loans to the 2018-1 Trust. The 2018-1 Trust in turn issued securitization notes for the par amount of $108.6 million, consisting of $82.9 million Class A notes and $25.7 million of Class B notes, against the assets in a private placement. The Class A and Class B notes received an “A” and “BBB-” rating by S&P, respectively, and the final maturity date of the notes is February 2044. In October, 2024, the 2018-1 Trust was terminated as a result of NSBF purchasing the 2018-1 Trust assets, with the 2018-1 Trust’s noteholders receiving the redemption price.

In December 2017, NSBF completed its eighth securitization which resulted in the transfer of $76.2 million of unguaranteed portions of SBA loans to the 2017-1 Trust. The 2017-1 Trust in turn issued securitization notes for the par amount of $75.4 million, consisting of $58.1 million Class A notes and $17.3 million of Class B notes, against the assets in a private placement. The Class A and Class B notes received an “A” and “BBB-” rating by S&P, respectively, and the final maturity date of the notes is February 2043. On February 27, 2023, the 2017-1 Trust was terminated as a result of NSBF purchasing the 2017-1 Trust assets, with the 2017-1 Trust’s noteholders receiving the redemption price.

### Regulatory Capital

The Company strives to maintain prudent capital levels to absorb risk and maximizing returns to shareholders. The Company and Newtek Bank are primarily constrained by the Total Capital and Leverage ratios given the mix of assets vis-a-vis capital.

Capital amounts and ratios for the Company as of September 30, 2024 are presented in the table below:

| NewtekOne, Inc. - September 30, 2024 | Actual Amount | Ratio | For Capital Adequacy Purposes1 Amount | Ratio | For Consideration as Well-Capitalized Amount | Ratio |
| --- | ---: | ---: | ---: | ---: | --- | --- |
| Tier 1 Capital (to Average Assets) | $218,604 | 13.9% | $62,703 | 4.0% | N/A | N/A |
| Common Equity Tier 1 (to Risk-Weighted Assets) | 218,604 | 17.7% | 55,678 | 4.5% | N/A | N/A |
| Tier 1 Capital (to Risk-Weighted Assets) | 218,604 | 17.7% | 74,237 | 6.0% | N/A | N/A |
| Total Capital (to Risk-Weighted Assets) | 253,942 | 20.5% | 98,983 | 8.0% | N/A | N/A |

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

Capital amounts and ratios for Newtek Bank as of September 30, 2024, are presented in the table below. As of September 30, 2024, Newtek Bank was categorized as “well-capitalized” under the prompt corrective action measures and met the capital conservation buffer requirements.

| Newtek Bank - September 30, 2024 | Actual Amount | Ratio | For Capital Adequacy Purposes1 Amount | Ratio | For Consideration as Well-Capitalized Amount | Ratio |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Tier 1 Capital (to Average Assets) | $112,836 | 13.3% | $33,941 | 4.0% | $42,426 | 5.0% |
| Common Equity Tier 1 (to Risk-Weighted Assets) | 112,836 | 15.5% | 32,742 | 4.5% | 47,294 | 6.5% |
| Tier 1 Capital (to Risk-Weighted Assets) | 112,836 | 15.5% | 43,656 | 6.0% | 58,208 | 8.0% |
| Total Capital (to Risk-Weighted Assets) | 122,144 | 16.8% | 58,207 | 8.0% | 72,759 | 10.0% |

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

### Cash Flows and Liquidity

The following table summarizes the Company’s available sources of liquidity as of September 30, 2024:

|  | Availability as of September 30, 2024 |
| --- | ---: |
| Unrestricted cash | $9,688 |
| Lines of credit at other commercial banks | 85,758 |
| Newtek Bank: |  |
| Interest bearing deposits in banks | 152,805 |
| FHLB borrowing availability | 49,198 |
| Lines of credit at other financial institutions | 30,000 |
| Total liquidity sources | $327,449 |

The Company has restricted cash of $27.9 million as of September 30, 2024. NSBF holds $11.0 million of the Company’s restricted cash, which includes reserves in the event payments are insufficient to cover interest and/or principal with respect to securitizations and loan principal and interest collected which are due to loan participants. In addition, the Company has $10.0 million in a restricted cash account to fund certain of NSBF’s potential obligations to the SBA pursuant to the Wind-down Agreement. of which the Company is a guarantor. The majority of the Company’s remaining restricted cash is related to payroll processing by PMT, our subsidiary.

The Company generated and used cash as follows:

|  | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 (as restated) |
| --- | ---: | ---: |
| Net cash used in operating activities | $(61,419) | $(101,474) |
| Net cash used in investing activities | (122,833) | (138,220) |
| Net cash provided by financing activities | 192,132 | 315,475 |
| Net increase in cash and restricted cash | 7,880 | 75,781 |
| Cash and restricted cash—beginning of period (Note 2) | 184,006 | 125,606 |
| Consolidation/(deconsolidation) of cash and restricted cash from controlled investments related to business combinations and dispositions, net of cash paid | (1,464) | 22,306 |
| Cash and restricted cash—end of period (Note 2) | $190,422 | $223,693 |

During the nine months ended September 30, 2024, operating activities used cash of $61.4 million, consisting primarily of $799.6 million of funding loans held for sale. This use of cash was offset by (i) $598.2 million of proceeds from the sale of loans; and (ii) $14.5 million of principal payments received from loans held for sale.

Cash used by investing activities was $122.8 million primarily comprised (i) $179.0 million in the net increase in loans held for investment, at cost and (ii) $5.5 million in contributions to non-consolidating joint ventures. These uses were partially offset by a $53.2 million net decrease in loans held for investment, at fair value and $8.6 million in maturities of available-for-sale securities.

Net cash provided by financing activities was $192.1 million consisting primarily of a (i) $185.0 million net increase in deposits; (ii) $71.9 million of net proceeds from the 2029 8.50% Notes; (iii) $75.0 million of net proceeds from the 2029 8.625% Notes, and (iv) $13.8 million in proceeds from common shares sold, net of offering costs. These sources of cash were offset by (i) $68.9 million of principal payments related to securitization notes payable (ii) $38.3 million redemption of the 2024 Notes, (iii) $18.7 million net paydowns on bank notes payable, and (iv) $15.0 million of dividends paid.

### Contractual Obligations

The following table represents the Company’s obligations and commitments as of September 30, 2024. Amounts represent principal only and are not shown net of unamortized debt issuance costs. See NOTE 12—BORROWINGS.

| Contractual Obligations Deposits: | Payments due by period Total | 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Demand | $11,040 | $11,040 | $— | $— | $— | $— | $— |
| Checking | 67,204 | 67,204 | — | — | — | — | — |
| Money market | 56,482 | 56,482 | — | — | — | — | — |
| Savings | 257,958 | 257,958 | — | — | — | — | — |
| Time deposits | 256,774 | 120,204 | 79,340 | 36,059 | 20,361 | 671 | 139 |
| Webster NMS Note1 | 33,891 | 997 | 3,987 | 5,981 | 22,926 | — | — |
| FHLB Advances | 15,799 | 3,496 | 4,955 | 2,094 | 5,254 | — | — |
| SPV I Capital One Facility1 | 7,600 | — | 7,600 | — | — | — | — |
| SPV II Deutsche Bank Facility1 | 346 | 346 | — | — | — | — | — |
| SPV III One Florida Bank Facility1 | — | — | — | — | — | — | — |
| Securitization Notes Payable | 227,301 | — | — | — | — | — | 227,301 |
| Parent Company Notes: |  |  |  |  |  |  |  |
| 2025 5.00% Notes | 30,000 | — | 30,000 | — | — | — | — |
| 2025 8.125% Notes | 50,000 | — | 50,000 | — | — | — | — |
| 2026 Notes | 115,000 | — | — | 115,000 | — | — | — |
| 2028 Notes | 40,000 | — | — | — | — | 40,000 | — |
| 2029 8.625% Notes | 75,000 | — | — | — | — | — | 75,000 |
| 2029 8.50% Notes | 71,875 | — | — | — | — | — | 71,875 |
| Employment Agreements | 1,768 | 866 | 902 | — | — | — | — |
| Operating Leases | 5,180 | 527 | 2,147 | 2,028 | 478 | — | — |
| **Totals** | $1,323,218 | $519,120 | $178,931 | $161,162 | $49,019 | $40,671 | $374,315 |

1Guaranteed by the parent company

### 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 is also a guarantor on an NMS term loan facility. At September 30, 2024, the Company determined that it is not probable that payments would be required to be made under the guarantees. The Company is also a guarantor on certain of NSBF’s potential obligations to the SBA pursuant to the Wind-down Agreement. Specifically, pursuant to the Wind-down Agreement, the Company has guaranteed NSBF’s obligations to the SBA for post-purchase repairs or denials on the guaranteed portion of 7(a) Loans sold by NSBF on the secondary market or servicing/liquidation post-purchase repairs or denial, and has funded a $10.0 million restricted cash account at Newtek Bank to secure these potential obligations.

### Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies for the quarterly period ended September 30, 2024.

### Fair Value Measurements

For the quarterly period ended September 30, 2024, we valued instruments for which market quotations are readily available at their market quotations. However, a readily available market value did not exist for many of the instruments in our portfolio, and we valued these instruments at fair value as determined in good faith by our management under our valuation policy and process. We may have sought pricing information with respect to certain of our instruments from pricing services or brokers or dealers in order to value such instruments. We also employed independent third party valuation firms for certain of our instruments for which there is not a readily available market value.

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

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels for disclosure purposes.

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

|  |  |
| --- | --- |
| **Level 1** | Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as certain U.S. Treasury, other U.S. Government and agency mortgage-backed debt securities that are highly liquid and are actively traded in over-the-counter markets. |
| **Level 2** | Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain U.S. Government and agency mortgage-backed debt securities, derivative contracts and loans held-for-sale. |
| **Level 3** | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments, retained residual interests in securitizations, residential mortgage servicing assets, warrant liabilities, joint ventures, guaranteed loans held at fair value, and highly structured or long-term derivative contracts. |

### Valuation of Instruments

Level 1 assets and liabilities were valued using quoted market prices. Level 2 assets and liabilities were valued using market consensus prices that are corroborated by observable market data and quoted market prices for similar assets and liabilities. Level 3 assets and liabilities were valued at fair value as determined in good faith by the Board, based on input of management, the audit committee and independent valuation firms that were engaged at the direction of the Board to assist in the valuation of certain portfolio investments without a readily available market quotation at least once during a trailing twelve-month period under a valuation policy and a consistently applied valuation process.

For certain investments, the Company generally calculated the fair value of the investment primarily based on the NAV of the entity and adjusted the fair value for other factors that would affect the fair value of the investment. The Company used this valuation approach for its investment in its joint ventures.

Due to the inherent uncertainty of determining the fair value of Level 3 investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be received or settled. Further, such investments are generally subject to legal and other restrictions or otherwise are less liquid than publicly traded instruments. If the Company were required to liquidate a portfolio investment in a forced or liquidation sale, the Company may realize significantly less than the value at which such investment had previously been recorded.

The Company’s investments are subject to market risk. Market risk is the potential for changes in the value due to market changes. Market risk is directly impacted by the volatility and liquidity in the markets in which the investments are traded. See NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION under the heading “Fair Value Measurements” and NOTE 10—FAIR VALUE MEASUREMENTS for a detailed discussion of determining fair value, including pricing validation processes.

We believe our portfolio as of September 30, 2024 and December 31, 2023 approximates fair value as of those dates based on the markets in which we operate and other conditions in existence on those reporting dates.

As of January 6, 2023, the Company no longer qualifies as a regulated investment company for federal income tax purposes and no longer qualifies for accounting treatment as an investment company and therefore, we no longer fair value the investments in our portfolio companies. During this wind-down of NSBF’s operations, NSBF will be required to continue to own its SBA 7(a) loans and PPP Loans in its SBA loan portfolio to maturity, liquidation, charge-off, or (subject to SBA’s prior written approval), sale or transfer. In addition, NSBF will be required to continue to service and liquidate its SBA Loan Portfolio, including processing forgiveness and loan reviews for PPP Loans, pursuant to an SBA approved lender service provider agreement with SBL. The Company will continue to measure NSBF’s SBA 7(a) loan portfolio at fair value until the portfolio is completely runoff. The Company reports both realized and unrealized gains and losses relating to the fair value adjustments on the legacy NSBF SBA 7(a) portfolio.

### Allowance for Credit Losses

The allowance for credit losses consists of the allowance for credit losses and the reserve for unfunded commitments. As a result of the Company’s Acquisition the adoption of ASU 2016-13, *Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“*CECL”) and its related amendments, we developed a methodology for estimating the reserve for credit losses. The standard replaced the “incurred loss” approach with an “expected loss” approach known as current expected credit loss. The CECL approach requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). It removes the incurred loss approach’s threshold that delayed the recognition of a credit loss until it was “probable” a loss event was “incurred.” The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. The Company then considers whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, the Company considers forecasts about future economic conditions that are reasonable and supportable. The reserve for unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. However, a liability is not recognized for commitments unconditionally cancellable by the Company. The reserve for unfunded commitments is determined by estimating future draws and applying the expected loss rates on those draws.

Management of the Company considers the accounting policy relating to the allowance for credit losses to be a critical accounting policy given the uncertainty in evaluating the level of the allowance required to cover management’s estimate of all expected credit losses over the expected contractual life of our loan portfolio. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolio and other financial assets to which CECL applies, in light of the factors then prevailing, may result in significant changes in the allowance for credit losses in those future periods. While management’s current evaluation of the allowance for credit losses indicates that the allowance is appropriate, the allowance may need to be increased under adversely different conditions or assumptions. Going forward, the impact of utilizing the CECL approach to calculate the reserve for credit losses will be significantly influenced by the composition, characteristics, and quality of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility in the reserve for credit losses, and therefore, greater volatility to our reported earnings.

Consideration of losses occurs when serious doubt regarding the repayment of the loan is present. For real estate loans, current appraisals will aid in determining the amount to be charged off. For commercial loans, collateral valuations and borrower guarantees should be considered; however, weight to these two sources should be limited. Once a deficiency in collateral is determined, a reserve equal to the deficiency should be made immediately to the Allowance for Credit Losses (ACL). A charge off should be made within 90 days if a full analysis confirms the deficiency cannot be covered via additional collateral or resources of the borrower or guarantors.

### Nonaccrual Loans

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

A loan is “well secured” if it is secured (1) by collateral in the form of liens on or pledges of real or personal property, including securities, that have a realizable value sufficient to discharge the debt (including accrued interest) in full, or (2) by the guarantee of a financially responsible party. A loan is “in the process of collection” if collection of the asset is proceeding in due course either (1) through legal action, including judgment enforcement procedures, or (2) in appropriate circumstances, through collections efforts not involving legal action which are reasonably expected to result in repayment of the debt or in its restoration to a current status in the near future.

A non-accrual loan may be restored to accrual status when (1) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest, or (2) when it otherwise becomes well secured in the process of collection. If any interest payments received while the asset was in nonaccrual status were applied to reduce the recorded investment in, or the amortized cost basis of, the asset, as applicable, the application of these payments to the asset’s recorded investment or amortize cost basis, as applicable should not be reversed (and interest income should not be credited) when the asset is returned to accrual status.

### Valuation of Servicing Assets

For the quarterly period ended September 30, 2024, the Company accounted for servicing assets in accordance with ASC Topic 860-50 - Transfers and Servicing - Servicing Assets and Liabilities. The Company and Newtek Bank earn servicing fees from the guaranteed portions of SBA 7(a) loans they originate and sell. Servicing assets for loans originated by the Company’s nonbank subsidiaries are measured at FV at each reporting date and the Company reports changes in the FV of servicing assets in earnings in the period in which the changes occur. The valuation model for servicing assets incorporates assumptions including, but not limited to, servicing costs, discount rate, prepayment rate, and default rate. Considerable judgment is required to estimate the fair value of servicing assets and as such these assets are classified as Level 3 in our fair value hierarchy. Servicing assets for loans originated by Newtek Bank are measured at LCM and amortized based on their estimated life and impairment is recorded to the extent the amortized cost exceeds the asset’s FV.

### Income Recognition

For the quarterly period ended September 30, 2024, management reviewed all loans that became 90 days or more past due on principal or interest or when there was reasonable doubt that principal or interest would be collected for possible placement on management’s designation of non-accrual status. Interest receivable was analyzed regularly and reserved against when deemed uncollectible. Interest payments received on non-accrual loans were recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans were restored to accrual status when past due principal and interest was paid and, in management’s judgment, were likely to remain current, although there may have been exceptions to this general rule if the loan had sufficient collateral value and was in the process of collection.

For the quarterly period ended September 30, 2024, we received servicing income related to the guaranteed portions of SBA loan investments which we sell into the secondary market. These recurring fees were earned and recorded daily. Servicing income was earned for the full term of the loan or until the loan is repaid.

For the quarterly period ended September 30, 2024, we received a variety of fees from borrowers in the ordinary course of conducting our business, including packaging fees, legal fees, late fees and prepayment fees. All other income was recorded when earned.

For the quarterly period ended September 30, 2024, distributions of earnings from our joint ventures were evaluated to determine if the distribution is income, return of capital or realized gain.

Following our January 2023 conversion to a financial holding company, we generate income in the form of interest, servicing and other fee income on the loans we originate. In addition, our portfolio companies became consolidating subsidiaries of the Company in 2023 and therefore, under the new organizational structure, their income is consolidated within the statement of operations along with our joint ventures. With the inclusion of NMS, NIA, PMT, and NTS, we now report Technology and IT support income and Electronic payment processing income on our Consolidated Statements of Income, and we include insurance commissions income and payroll processing income within Other noninterest income.

### Determination of Provision for Income Taxes and Related Accounts

Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. We are subject to income taxes in the United States. We file income tax returns in approximately 47 jurisdictions: federal, state, and local. The laws and regulations of each jurisdiction are complex and may be subject to different interpretations. Significant judgments and estimates are required in determining consolidated income tax expense for each jurisdiction. Our interpretations of tax laws are subject to audits by various jurisdictions. Potential difference in the interpretation or changes in the tax laws may result in additional accrual of income tax expense or benefit, which could be material to our reported results. We consistently monitor new and reassess existing tax laws for changes and adjust our tax estimates accordingly.

Our provision for income taxes is comprised of current and deferred income taxes. Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent results of operations. In projecting future taxable income, we begin with historical results adjusted for changes in accounting policies and incorporate assumptions about the amount of future state, federal, and foreign pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions about future taxable income require significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss).

At least annually, we consider existing evidence, both positive and negative, that could impact our view with regard to future realization of deferred tax assets. We currently hold deferred tax asset attributes related to net operating tax loss carryforwards. We perform regular assessments to determine whether our tax attributes are realizable. As of December 31, 2023, we continue to believe it is more likely than not that the benefit for certain state net operating loss carryforwards will not be realized.

For additional information regarding our provision for income taxes, refer to NOTE 18—INCOME TAXES.

### Recently Adopted Accounting Pronouncements and New Accounting Standards

Refer to NOTE 2—SIGNIFICANT ACCOUNTING POLICIES for information on recently adopted accounting pronouncements and new accounting standards.

### Off Balance Sheet Arrangements

In the normal course of business, the Company enters into various transactions to meet the financing needs of clients, which, in accordance with GAAP, are not included in the consolidated balance sheets. These transactions may include commitments to extend credit, standby letters of credit, and the construction phase of SBA 504 loans, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. The SBA 504 loans are expected to partially draw, if not fully draw. All off-balance sheet commitments are included in the determination of the amount of risk-based capital that the Company and Newtek Bank are required to hold.

The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, standby letters of credit, and commercial letters of credit is represented by the contractual or notional amount of those instruments. The Company manages risk of exposure to credit losses under these commitments by subjecting them to credit approval and monitoring procedures. The Company assesses the credit risk associated with certain commitments to extend credit and establishes a liability for probable credit losses.

Further information related to financial instruments can be found in NOTE 14—COMMITMENTS AND CONTINGENCIES.

### Recent Developments

### Stock Repurchase Program

On November 1, 2024, the Company’s Board of Directors approved a new stock repurchase program granting the Company authority to repurchase up to 1.0 million shares of Company common stock during the next twelve months. The actual timing and amount of any repurchases under the plan will be determined by the Company in its discretion, and will depend on a number of factors, including market conditions, applicable legal requirements, the Company's capital needs and whether there is a better alternative use of capital. The Company has no obligation to repurchase any amount of its common stock under its new stock repurchase program.

### Early Redemption of Securitization Notes Issued by the 2018-1 Trust and 2019-1 Trust

On October 23, 2024, the Company executed an early redemption of the NSBF securitization notes (the “2018 and 2019 Notes”) issued by the 2018-1 and 2019-1 Trusts. The balance on the 2018 and 2019 Notes as of September 30, 2024, was $25.4 million, and the Company paid $18.3 million out of interest bearing deposits in banks and $6.9 million out of restricted cash.

### SBA 504 Loans Sale

On October 30, 2024, the Company executed a sale, to a third party, of $12.5 million of SBA 504 first lien loans at par, servicing retained.

## Market risk

As filed, 9,351 characters.

We consider the principal types of risk in our business activities to be fluctuations in interest rates, the ability to raise funds (deposits, debt, and or equity) to fund our operations, and the availability of the secondary market for our SBA loans. Risk management systems and procedures are designed to identify and analyze our risks, to set appropriate policies and limits and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs.

The Company’s interest rate profile on loans is based on a mix of fixed and variable rates. The same is true for its sources of funding (deposits, warehouse lines of credit, securitization trust notes, public notes, etc.). Some of our assets and liabilities are match funded, meaning that the interest rate and duration profiles are closely linked. Managing interest rate risk with matched funding means that movements in interest rates are expected to largely offset between income from assets and expenses on liabilities. For the remainder of our balance sheet, we largely take a portfolio approach to managing interest rate and liquidity risk that is inherently imprecise.

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. Sale prices for guaranteed portions of SBA 7(a) loans could be negatively impacted by market conditions, in particular a higher interest rate environment, which typically lead to higher prepayments during the period, resulting in lower sale prices in the secondary market. A 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 $190.4 million is subject to changes in the Federal Funds rate set by the Federal Open Market Committee. We do not purchase or hold derivative financial instruments for trading purposes. All of our transactions are conducted in U.S. dollars and we do not have any foreign currency or foreign exchange risk. We do not trade commodities or have any commodity price risk.

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 September 30, 2024, cash deposits in excess of insured amounts totaled approximately $32.5 million. The Company and its non-bank subsidiaries have deposit accounts at Newtek Bank that total $96.3 million, of which $93.4 million is uninsured.

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 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 Newtek Bank board of directors has established an Asset/Liability Committee (the “ALCO Committee”) to oversee the implementation of an effective process for managing the risk profile inherent in Newtek Bank’s balance sheet and related business activities as well as the ongoing monitoring and reporting thereon. Risks inherent in Newtek Bank’s balance sheet include interest rate risk (i.e., the risk to liquidity and capital resulting from changes in interest rates), liquidity risk (the risk to the availability of funds to execute its business strategy and meet its obligations), and similar risks. The ALCO Committee, subject to Newtek Bank board approval, is responsible for establishing policies, risk limits and capital levels (collectively “ALM Policies”) as well overseeing and monitoring compliance therewith. Newtek Bank’s ALM Policies set forth a risk management framework relating to managing liquidity, managing fluctuations in interest rates, capital management, investments, and hedging and the use of derivatives. The ALCO Committee and Newtek Bank’s board may implement additional policies and procedures relating to these areas in order to manage risk to an appropriate level.

The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The Company analyzes interest rate sensitivity position to manage the risk associated with interest rate movements through the use of two simulation models: economic value of equity (“EVE”) and net interest income (“NII”) simulations. These simulations project both short-term and long-term interest rate risk under a variety of instantaneous parallel rate shocks applied to a static balance sheet. The EVE simulation provides a long-term view of interest rate risk because it analyzes all of the Company’s future cash flows. EVE is defined as the present value of the Company’s assets, less the present value of its liabilities, adjusted for any off-balance sheet items. 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 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 simulation incorporates assumptions regarding the potential timing in the repricing of certain assets and liabilities when market rates change and the changes in spreads between different market rates. The simulation analysis incorporates management’s current assessment of the risk that pricing margins will change adversely over time due to competition or other factors. Simulation analysis is only an estimate of interest rate risk exposure at a particular point in time. The Company regularly models various forecasted rate projections with non-parallel shifts that are reflective of potential current rate environment outcomes. Under these scenarios, the Company’s interest rate risk profile may increase in asset sensitivity, decrease in asset sensitivity, or depending on the scenario and timing of anticipated rate changes, may transition to a liability sensitive interest rate risk profile. Regular, robust modeling of various interest rate outcomes allows the Company to properly assess and manage potential risks from various rate shifts.

Estimated Changes in EVE and NII. The table below sets forth, as of September 30, 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. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied on as indicative of actual results.

| Basis Point ("bp") Change in Interest Rates | Estimated Increase/Decrease in Net Interest Income 12 Months Beginning September 30, 2024 | 12 Months Beginning September 30, 2025 | Estimated Percentage Change in EVE As of September 30, 2024 |
| ---: | ---: | ---: | ---: |
| +200 | 16.6% | 15.9% | 2.5% |
| +100 | 7.7 | 7.4 | 1.3 |
| -100 | (9.3) | (9.1) | (1.5) |
| -200 | (18.1) | (17.9) | (3.1) |

Rates are increased instantaneously at the beginning of the projection. The Company is asset sensitive, as the Company’s variable rate loan portfolio reprices the full amount of the assumed change in interest rates, while fixed-rate Company notes will reprice on maturity and the retail savings and short-term retail certificates of deposits portfolio will reprice with an assumed beta. Interest rates do not normally move all at once or evenly over time, but management believes that the analysis is useful to understanding the potential direction and magnitude of net interest income changes due to changing interest rates.

The EVE analysis shows that the Company would theoretically modestly increase market value in a rising rate environment. The EVE asset sensitivity results from the combination of fixed-rate debt and variable-rate debt which funds the variable-rate loan portfolio outside of Newtek Bank.

## Controls and procedures

As filed, 5,595 characters.

### Evaluation of Disclosure Controls and Procedures:

As of September 30, 2024 (the end of the period covered by this report), management evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act).

Based on the evaluation of our disclosure controls and procedures, management concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2024, due to certain identified material weaknesses in the Company’s internal control over financial reporting (“ICFR”) that are described in Part II, Item 9A of our 2023 Form 10-K. A material weakness (as defined in Rule 12b-2 under the Exchange Act) is a deficiency, or combination of deficiencies, in ICFR such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will be presented or not detected on a timely basis.

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

### Changes in Internal Control over Financial Reporting.

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

### Remediation Process

Following the identification of the material weaknesses to which are referred above, with the oversight of the Audit Committee of our board of directors (“Audit Committee” and “Board,” respectively), we commenced a process to remediate the underlying causes of those material weaknesses, enhance the control environment and strengthen our ICFR. The initial steps that the Company has taken are described in Part II, Item 9A of our 2023 Form 10-K and additional steps are described in Part I, Item 4 of our March 31, 2024 Form 10-Q. Further steps taken to-date with respect to remediation of the material weaknesses identified are summarized below:

- Continue executing on the comprehensive remediation plan that was reviewed and approved by our Board by redesigning existing ICFR and designing additional ICFR to mitigate risks of material misstatement, including the level of precision at which the controls will operate.
- Utilized our public accounting consulting firm to test existing, redesigned and newly implemented controls in accordance with the SOX governance program and execution of the remediation plan, including the enhanced documentation to evidence the performance of management review controls and the completeness and accuracy of information produced by the entity.
- Tested the design and implementation of information technology general controls (“ITGCs”) and are assessing the results. Testing the operating effectiveness of ITGCs.
- Hired three Certified Public Accountants as additions to the finance and accounting department, two of whom have public accounting experience.
- Hired two Certified Public Accountants with public accounting experience within the risk department, one of whom is a certified information systems security professional holding CISSP, CISA, and CCSK credentials.
- Implemented Governance, Risk and Compliance technology to standardize and facilitate the SOX governance program.
- Established monthly SOX Steering Committee updates to allow senior executive management to report on the governance of the SOX program and remediation of the previously identified material weaknesses.
- Strengthened the SOX sub certification process to explicitly require management responsible for the oversight of certain processes and controls within the control environment to attest to the design, implementation, and operating effectiveness of their portion of the control environment on a quarterly basis, including required remediation, as well as communicate any changes thereto.

The status of our remediation plan is being, and will continue to be, reported by management to the Audit Committee on a regular basis. In addition, management has assigned executive owners to oversee the remedial changes to the overall design of the Company’s internal control environment and to address the root causes of our material weaknesses.

While certain actions have been taken to enhance the Company’s ICFR relating to the material weaknesses identified as of the date of this report, we are still in the process of executing on our comprehensive remediation plan. Accordingly, the previously identified material weaknesses cannot be considered remediated until each control has been appropriately designed, has operated for a sufficient period of time, and until management has concluded, through testing, that the control is operating effectively.

As management continues to evaluate and strive to improve the Company’s ICFR, management may take additional measures to address these control deficiencies or modify its comprehensive remediation plan. While management intends to resolve all of the material weaknesses, no assurances can be provided that these remediation efforts will be successful, that the Company’s ICFR will be effective as a result of these efforts by any particular date, nor is it certain whether additional actions will be required.

## Risk factors

As filed, 637 characters.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 2023 Form 10-K, which could materially affect our business, financial condition and/or operating results. The risks described in our 2023 Form 10-K are not the only risks we face. Additional risks and uncertainties that are not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There have been no material changes from the risk factors set forth in our 2023 Form 10-K.

Filed Nov 12, 2024.
Source: SEC EDGAR, the filing index for accession 0001587987-24-000237. Last ingested by Listed: Nov 6, 2026, 15:37 ET. No prices; not investment advice.