BOCA RATON, Fla., April 23, 2024 (GLOBE NEWSWIRE) -- NewtekOne, Inc. (NASDAQ:NEWT), announced today that NewtekOne's CEO and President, Barry Sloane, and CFO, M. Scott Price, will attend and hold-one-on-one meetings at the B. Riley Securities 24th Institutional Investor Conference on May 22-23, 2024 at the Beverly Hilton Hotel in Beverly Hills, CA. To schedule a meeting, please contact your B. Riley representative, or Jayne Cavuoto, Director of Investor Relations at NewtekOne, at jcavuoto@newtekone.com. Abo ...

[FORM 10-K General Information](index=1&type=section&id=FORM%2010-K%20General%20Information) This section provides fundamental information about NewtekOne, Inc., including its corporate structure, registration details, and filing status [Registrant Information](index=1&type=section&id=Registrant%20Information) NewtekOne, Inc. is a Maryland-incorporated company with IRS Employer Identification No. 46-3755188, headquartered in Boca Raton, Florida, with its common stock and various notes registered on the Nasdaq Global Market LLC - NewtekOne, Inc. is a Maryland corporation (IRS Employer ID: **46-3755188**) with its principal executive offices in Boca Raton, Florida[2](index=2&type=chunk) Securities Registered on Nasdaq Global Market LLC | Title of each class | Trading Symbol(s) | | :------------------------------ | :---------------- | | Common Stock, par value $0.02 per share | NEWT | | 5.75% Notes due 2024 | NEWTL | | 5.50% Notes due 2026 | NEWTZ | | 8.00% Notes due 2028 | NEWTI | - The registrant is an accelerated filer and has filed all required reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months[3](index=3&type=chunk)[5](index=5&type=chunk) [Market Value and Shares Outstanding](index=2&type=section&id=Market%20Value%20and%20Shares%20Outstanding) As of the last business day of Q2 2023, the aggregate market value of common equity held by non-affiliates was approximately $365.7 million, with 24,708,771 shares of common stock outstanding as of March 28, 2024 - Aggregate market value of voting and non-voting common equity held by non-affiliates was approximately **$365.7 million** as of the last business day of the second fiscal quarter of 2023, based on a closing price of **$15.90**[5](index=5&type=chunk) - As of March 28, 2024, there were **24,708,771** shares of Common Stock, par value **$0.02** per share, outstanding[6](index=6&type=chunk) [TABLE OF CONTENTS](index=3&type=section&id=TABLE%20OF%20CONTENTS) This section provides an organized listing of all major sections and subsections within the report [Defined Terms and Subsidiaries](index=4&type=section&id=Defined%20Terms%20and%20Subsidiaries) This section outlines key terminology and lists the company's consolidated subsidiaries and joint ventures [Defined Terms](index=4&type=section&id=Defined%20Terms) This section provides definitions for key terms used throughout the report, including various loan trusts, notes, and financial/regulatory acronyms [Subsidiaries and Joint Ventures](index=5&type=section&id=Subsidiaries%20and%20Joint%20Ventures) The company lists its consolidated subsidiaries and joint ventures, including Newtek Small Business Finance (NSBF), Newtek Bank, Newtek Merchant Solutions (NMS), Newtek Technology Solutions (NTS), and various lending and payment entities - Key consolidated subsidiaries include NSBF, Newtek Bank, NMS, Mobil Money, NTS, NBC, PMT, NIA, TAM, Holdco 6, NCL, and POS; joint ventures include NCL JV and TSO JV[11](index=11&type=chunk)[12](index=12&type=chunk) - NBL was merged into SBL on May 2, 2023, and SIDCO and EWS were merged into NTS on December 31, 2023[11](index=11&type=chunk) [Explanatory Note](index=7&type=section&id=Explanatory%20Note) This section explains the company's significant transition to a financial holding company and its implications for financial reporting [Conversion to Financial Holding Company](index=7&type=section&id=Conversion%20to%20Financial%20Holding%20Company) On January 6, 2023, NewtekOne completed the acquisition of NBNYC (renamed Newtek Bank) and withdrew its election to be a Business Development Company (BDC), becoming a financial holding company subject to Federal Reserve supervision - On January 6, 2023, NewtekOne completed the acquisition of NBNYC (renamed Newtek Bank) and ceased to be a BDC, becoming a financial holding company regulated by the Federal Reserve[14](index=14&type=chunk) - The company no longer qualifies as a Regulated Investment Company (RIC) for federal income tax purposes or for investment company accounting treatment, necessitating adjustments for prior period comparisons[14](index=14&type=chunk) [CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND PROJECTIONS](index=8&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS%20AND%20PROJECTIONS) This section warns that the report contains forward-looking statements subject to substantial risks and uncertainties [Forward-Looking Statements and Risks](index=8&type=section&id=Forward-Looking%20Statements%20and%20Risks) This section highlights that the report contains forward-looking statements subject to substantial risks and uncertainties, including the impact of COVID-19, interest rate changes, market volatility, and the costs associated with operating as a financial holding company - The report contains forward-looking statements based on current expectations, estimates, and projections, which are not historical facts[16](index=16&type=chunk) - These statements involve substantial risks and uncertainties, including the impact of COVID-19, changes in interest rates, market volatility, and increased compliance costs as a financial holding company[16](index=16&type=chunk)[17](index=17&type=chunk) - Key assumptions include Newtek Bank's ability to originate SBA 7(a) loans, maintain PLP status, sell guaranteed portions, grow deposits, and the subsidiaries' ability to generate revenue and profitability[17](index=17&type=chunk) [ITEM 1. BUSINESS.](index=9&type=section&id=ITEM%201.%20BUSINESS.) This section provides a comprehensive overview of NewtekOne's business operations, transformation, market strategy, and regulatory environment [Business Overview and Transformation](index=9&type=section&id=Business%20Overview%20and%20Transformation) NewtekOne transitioned from a Business Development Company (BDC) to a financial holding company on January 6, 2023, following the acquisition of NBNYC (now Newtek Bank), subjecting it to Federal Reserve supervision and consolidating its non-bank subsidiaries - On January 6, 2023, NewtekOne completed the acquisition of NBNYC (renamed Newtek Bank) and ceased operating as a BDC, becoming a financial holding company regulated by the Federal Reserve[19](index=19&type=chunk)[20](index=20&type=chunk) - The company now consolidates its non-bank subsidiaries (e.g., NSBF, NMS, NTS) into its financial statements[21](index=21&type=chunk) - NewtekOne offers a suite of business and financial solutions to SMBs (revenues **$1 million-$100 million**), supported by patented technology like NewTracker® and the Newtek Advantage dashboard for client interaction and access to services[21](index=21&type=chunk) - NSBF is winding down its SBA 7(a) loan originations, with new originations transitioned to Newtek Bank in Q2 2023; Newtek Bank received PLP status in April 2023[22](index=22&type=chunk)[25](index=25&type=chunk) [NewtekOne's Business and Financial Solutions Ecosystem](index=10&type=section&id=NewtekOne's%20Business%20and%20Financial%20Solutions%20Ecosystem) NewtekOne offers a diverse range of financial and business solutions, including SBA 7(a) and 504 loans, C&I, CRE, and ABL through Newtek Bank, alongside third-party loan servicing, alternative lending, digital deposit growth, electronic payment processing, insurance, payroll, and technology solutions - Newtek Lending, a material revenue source, includes SBA 7(a) loans (originated **$814.4 million** in 2023, **$775.6 million** in 2022), SBA 504, C&I, CRE, and ABL loans, primarily through Newtek Bank[24](index=24&type=chunk)[26](index=26&type=chunk)[33](index=33&type=chunk) - Newtek Bank, a digital direct bank, grew total deposits by **$382 million (279%)** to **$519 million** by December 31, 2023, with over **7,500** retail deposit customers acquired digitally in 2023[37](index=37&type=chunk) - Newtek Payments (NMS, Mobil Money, POS) processed **$5.4 billion** in merchant transactions in 2023, leveraging direct and indirect sales channels[38](index=38&type=chunk)[40](index=40&type=chunk) - Newtek Technology Solutions (NTS) provides various IT services but is mandated to divest or terminate its activities by January 6, 2025, due to Federal Reserve commitments[46](index=46&type=chunk) [Market Opportunity and Competitive Advantages](index=15&type=section&id=Market%20Opportunity%20and%20Competitive%20Advantages) NewtekOne targets the large, underserved SMB market with competitive advantages including an experienced Senior Lending Team, a business model enabling attractive risk-weighted returns on SBA 7(a) loans, patented NewTracker® technology, and a direct origination platform - The independent business owner/SMB market, estimated at over **33 million** businesses, is largely underserved by traditional capital providers[50](index=50&type=chunk) - NewtekOne's competitive advantages include a Senior Lending Team with over **25 years** of experience, a business model for SBA 7(a) lending that allows rapid sale of guaranteed portions and securitization of unguaranteed portions, and patented NewTracker® software for efficient client onboarding and processing[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) - The company's direct origination platform and comprehensive business finance ecosystem enable cross-selling and improved client retention, focusing on seasoned businesses with strong balance sheets and cash flow[55](index=55&type=chunk)[56](index=56&type=chunk) [Regulatory Environment and Compliance](index=18&type=section&id=Regulatory%20Environment%20and%20Compliance) As a financial holding company, NewtekOne is extensively regulated by the Federal Reserve, OCC, and FDIC, with strict capital and liquidity requirements, consumer protection, anti-money laundering, and cybersecurity laws, while NSBF winds down its SBA 7(a) operations - NewtekOne is regulated by the Federal Reserve (as a financial holding company), OCC (for Newtek Bank), and FDIC (for deposit insurance), with broad examination and enforcement authority[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) - Newtek Bank operates under an Operating Agreement with the OCC, setting parameters for capital (Tier 1 leverage ratio ≥ **10%**, total risk-based capital ratio ≥ **11.5%**), liquidity, and concentration limits[72](index=72&type=chunk)[82](index=82&type=chunk) - The company is subject to various laws including CRA, consumer protection, anti-money laundering, economic sanctions, and cybersecurity regulations, requiring significant compliance investment[77](index=77&type=chunk)[88](index=88&type=chunk)[91](index=91&type=chunk)[93](index=93&type=chunk) - NSBF is winding down its SBA 7(a) loan originations and remains liable for post-purchase denials and repairs on its legacy portfolio, with NewtekOne guaranteeing these obligations up to **$10 million**[98](index=98&type=chunk)[100](index=100&type=chunk) [Lending Activities and Process](index=26&type=section&id=Lending%20Activities%20and%20Process) NewtekOne's lending strategy targets SMBs with experienced management and strong financials, employing a rigorous origination process involving deal generation, screening, stress testing, site visits, and comprehensive credit assessments, with guaranteed portions of SBA 7(a) loans sold in the secondary market - Lending targets SMBs with experienced management, significant equity, appropriate capital structures, strong competitive positions, and diversified customer/supplier bases[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) - Loans are typically structured with first liens on business assets, first or second liens on guarantor assets (primarily real estate), and personal guarantees from owners[110](index=110&type=chunk)[114](index=114&type=chunk) - The loan origination process includes deal generation via NewTracker® and alliance partners, screening, detailed SBA lending procedures, stress testing (up to **2%** interest rate increase), site visits, and credit assessments (character, cash flow, capital, liquidity, collateral)[118](index=118&type=chunk)[119](index=119&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) - Guaranteed portions of SBA 7(a) loans are sold in the secondary market, historically at premiums ranging from **106% to 123%** of par value, with premiums above **110%** shared with the SBA[158](index=158&type=chunk) [Competition and Human Capital](index=38&type=section&id=Competition%20and%20Human%20Capital) NewtekOne operates in a highly competitive market for SMB loans, financial solutions, and deposits, leveraging its financial technology, experienced team, and customized solutions, with long-term success dependent on its Senior Lending Team and executive officers - NewtekOne competes in a highly competitive market for SMB loans, payment processing, technology solutions, and deposits, facing larger financial institutions and fintech companies[159](index=159&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk) - Competitive advantages include financial technology infrastructure, experienced Senior Lending Team, customized solutions, efficient underwriting, and personalized customer service[159](index=159&type=chunk)[164](index=164&type=chunk) - The company's success is dependent on its Senior Lending Team and executive officers, who have extensive experience; it prioritizes competitive compensation, succession planning, and an inclusive work environment for its **528** professionals[165](index=165&type=chunk)[166](index=166&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) [Corporate Governance and Compliance](index=40&type=section&id=Corporate%20Governance%20and%20Compliance) NewtekOne adheres to SEC and Nasdaq listing rules, maintaining a Code of Ethics and complying with Sarbanes-Oxley, while its subsidiaries navigate SBA regulations, and the company now faces corporate-level federal and state income taxes as a financial holding company - NewtekOne is subject to SEC and Nasdaq Global Market requirements, maintaining a Code of Ethics and Privacy Principles[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[180](index=180&type=chunk) - The Sarbanes-Oxley Act mandates CEO/CFO certification of financial statements and management's assessment of internal controls over financial reporting[177](index=177&type=chunk)[178](index=178&type=chunk) - NSBF is winding down its SBA 7(a) lending, while Newtek Bank holds PLP status, both remaining subject to SBA regulations and potential guaranty liabilities[181](index=181&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk) - Effective January 6, 2023, NewtekOne no longer qualifies as a RIC and will file a consolidated U.S. federal income tax return, subjecting it to a flat corporate federal statutory income tax rate of **21%**[185](index=185&type=chunk)[186](index=186&type=chunk) [ITEM 1A. RISK FACTORS.](index=43&type=section&id=ITEM%201A.%20RISK%20FACTORS.) This section details the various risks NewtekOne faces, including those related to its operation as a financial holding company, economic conditions, business structure, SBA lending, AI, tax, and subsidiary-specific challenges [Risks Related to Operation as a Financial Holding Company](index=45&type=section&id=Risks%20Related%20to%20Operation%20as%20a%20Financial%20Holding%20Company) Operating as a financial holding company presents significant risks due to limited operating history, extensive federal and state regulation, loss of 1940 Act protections, altered accounting, and identified material weaknesses in internal controls - NewtekOne has a limited operating history as a financial holding company, making future operating results difficult to predict[195](index=195&type=chunk) - The banking industry is highly regulated by the FDIC, OCC, and Federal Reserve; non-compliance can result in sanctions, penalties, and reputational harm[196](index=196&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - The company's conversion from a BDC on January 6, 2023, removed 1940 Act protections for shareholders and significantly altered accounting and financial reporting requirements, leading to identified material weaknesses in internal controls[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[215](index=215&type=chunk) - Loss of pass-through tax treatment (RIC status) substantially reduces net assets and income available for dividends and debt repayments due to corporate-level taxes[218](index=218&type=chunk) [Risks Related to the Economy](index=49&type=section&id=Risks%20Related%20to%20the%20Economy) Global economic, political, and market conditions, including geopolitical conflicts, inflation, and banking sector instability, pose significant risks, potentially impairing client repayment abilities, decreasing portfolio value, and increasing funding costs - Global economic, political, and social conditions (e.g., wars, natural disasters, inflation) create uncertainty and can adversely affect business, operating results, and financial condition[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) - Economic recessions or prolonged high interest rates can impair clients' ability to repay debt, decrease portfolio value, and increase funding costs, potentially leading to increased loan delinquencies and losses[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk) - Recent banking sector events (e.g., Silicon Valley Bank, Signature Bank failures) highlight risks of rapid deposit outflows and market volatility, which could affect Newtek Bank's deposit funding and the company's stock price[208](index=208&type=chunk)[230](index=230&type=chunk) - Inflation increases capital, labor, energy, and raw material costs, potentially impacting clients' ability to service loans and reducing the fair value of investments; governmental efforts to curb inflation (e.g., raising interest rates) can negatively affect economic activity[234](index=234&type=chunk)[235](index=235&type=chunk) [Risks Related to Our Business and Structure](index=53&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Structure) NewtekOne's success is highly dependent on its Senior Lending Team, operates in a highly competitive market, is affected by indebtedness and interest rate fluctuations, faces integration challenges from acquisitions, and is vulnerable to ineffective risk management or internal control deficiencies - The company's future success is dependent on its Senior Lending Team and executive officers; loss of key personnel could significantly harm the business[239](index=239&type=chunk) - Operating in a highly competitive market for clients, including banks, non-bank lenders, and fintech companies, could reduce returns or result in losses if NewtekOne cannot match competitors' terms[240](index=240&type=chunk)[241](index=241&type=chunk) - Indebtedness and changes in interest rates affect the cost of capital and net interest margin, with rising rates potentially increasing funding costs and impacting loan premiums and prepayments[246](index=246&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk) - The company has identified material weaknesses in its internal controls over financial reporting, which could adversely affect timely and accurate financial reporting and investor confidence[269](index=269&type=chunk) - Client concentration in a limited number of industries could lead to significant losses if those industries experience downturns[272](index=272&type=chunk) [Risks Related to SBA Lending](index=59&type=section&id=Risks%20Related%20to%20SBA%20Lending) Changes to the SBA Section 7(a) Program, non-compliance with regulations, curtailment of government-guaranteed loan programs, high default risk in small business loans, and governmental funding failures could adversely affect NewtekOne's SBA lending operations and profitability - Changes to the SBA Section 7(a) Program, including SOP revisions, can negatively impact loan origination volume and the ability of Newtek Bank and NSBF to maintain their lending licenses and PLP status[274](index=274&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk) - Failure to comply with SBA regulations in loan origination, servicing, or liquidation can result in the SBA being released from its guaranty, transferring liability (denials/repairs) to NSBF or Newtek Bank[281](index=281&type=chunk)[282](index=282&type=chunk) - Curtailment of government-guaranteed loan programs, high default risk in small business loans, and governmental failure to fund the SBA could adversely affect loan originations and profitability[283](index=283&type=chunk)[285](index=285&type=chunk)[287](index=287&type=chunk) - Participation in the PPP exposed the company to risks of SBA not funding loan guaranties due to potential non-compliance or deficiencies in origination/servicing[288](index=288&type=chunk)[289](index=289&type=chunk) [Risks Related to the Development and Use of Artificial Intelligence (AI)](index=62&type=section&id=Risks%20Related%20to%20the%20Development%20and%20Use%20of%20Artificial%20Intelligence%20(AI)) The development and use of AI, both internally and by third parties, present risks including an uncertain regulatory environment, potential for incorrect or biased outputs, release of confidential information, intellectual property infringement, and challenges in understanding complex AI models, alongside threats from bad actors using AI for fraud and cyberattacks - The legal and regulatory environment for AI is uncertain and rapidly evolving, potentially requiring changes in AI implementation and increasing compliance costs[292](index=292&type=chunk) - AI models may produce incorrect, biased, or harmful outputs, release confidential information, or infringe on intellectual property rights, leading to liability and reputational damage[292](index=292&type=chunk) - The complexity of AI models makes it challenging to assess proper operation, understand capabilities, reduce errors, and comply with regulations requiring decision basis documentation[292](index=292&type=chunk) - The use of AI by bad actors for fraud and cyberattacks poses a significant threat to financial stability and the company's security measures[293](index=293&type=chunk) [Risks Related to U.S. Federal Income Tax](index=62&type=section&id=Risks%20Related%20to%20U.S.%20Federal%20Income%20Tax) New tax legislation or changes in interpretations by the IRS and Treasury Department could adversely affect the company, its investments, or stockholders, with uncertain likelihood and impact - New tax legislation or changes in interpretations by the IRS and Treasury Department could adversely affect the company, its investments, or stockholders[294](index=294&type=chunk) - The likelihood of such legislation being enacted is uncertain, and new rules could significantly and negatively affect federal income tax consequences[294](index=294&type=chunk) [Risks Related to Our Subsidiaries - Newtek Merchant Solutions (NMS)](index=63&type=section&id=Risks%20Related%20to%20Our%20Subsidiaries%20-%20Newtek%20Merchant%20Solutions%20(NMS)) NMS faces risks from the termination of essential bank sponsorships, non-compliance with card standards, reduced profit margins from unpassable fee increases, liability from data breaches, charge-backs, and merchant fraud, as well as challenges from rapid technological changes and increased regulatory scrutiny - Termination of NMS's bank sponsorships, essential for processing bankcard transactions, or failure to comply with Visa/MasterCard standards, could materially adversely affect its business[295](index=295&type=chunk)[297](index=297&type=chunk) - Inability to pass on increases in interchange and sponsorship fees to merchants would reduce NMS's profit margins[298](index=298&type=chunk) - Unauthorized disclosure of sensitive merchant or cardholder data, ineffective collection of charge-backs, and merchant fraud expose NMS to liability, business losses, and reputational damage[299](index=299&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk) - Rapid technological changes (e.g., mobile payments) and increased regulatory focus on the payments industry (e.g., data protection, AML, FTC investigations) present competitive and costly compliance burdens[305](index=305&type=chunk)[306](index=306&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk) [Risks Related to Our Subsidiaries - Newtek Bank](index=66&type=section&id=Risks%20Related%20to%20Our%20Subsidiaries%20-%20Newtek%20Bank) Newtek Bank's business relies on credit decisioning, pricing, loss forecasting, and scoring models, where errors or ineffectiveness could lead to higher losses, mispriced loans, and negative investor confidence, while ineffective collection efforts on delinquent loans would adversely affect investor returns and servicing fee revenue - Newtek Bank's credit decisioning, pricing, loss forecasting, and scoring models are critical; errors or ineffectiveness could lead to higher than forecasted losses, mispriced loans, and reduced investor confidence[309](index=309&type=chunk)[310](index=310&type=chunk)[311](index=311&type=chunk)[312](index=312&type=chunk) - Many loan products are unsecured, and ineffective collection efforts on delinquent loans would adversely affect investor returns and servicing fee revenue[313](index=313&type=chunk)[314](index=314&type=chunk)[315](index=315&type=chunk) [Risks Related to Our Subsidiaries - Newtek Technology Solutions (NTS)](index=67&type=section&id=Risks%20Related%20to%20Our%20Subsidiaries%20-%20Newtek%20Technology%20Solutions%20(NTS)) NewtekOne's commitment to divest or terminate NTS activities by January 2025 may negatively impact revenue and IT management, while NTS faces intense competition, rapid technological change, and risks from system failures, security breaches, and dependence on software licenses - NewtekOne is committed to divesting or terminating NTS activities by January 2025, which may negatively impact the company's revenue and ability to manage IT systems and cybersecurity risk[316](index=316&type=chunk) - NTS operates in a highly competitive industry with rapid technological change, facing larger competitors and potential price pressure[317](index=317&type=chunk) - NTS's business depends on the uninterrupted operation of its computer and communication systems; failures or security breaches could lead to severe disruption, liability, reputational damage, and significant remediation costs[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk) - NTS's managed technology business relies on licenses for software and intellectual property, primarily from Microsoft, and the inability to maintain these or product obsolescence could adversely affect the business[321](index=321&type=chunk) [Risks Related to Our Subsidiaries - Newtek Insurance Agency (NIA)](index=69&type=section&id=Risks%20Related%20to%20Our%20Subsidiaries%20-%20Newtek%20Insurance%20Agency%20(NIA)) NIA's business depends on third-party property and casualty insurance companies for products, faces comprehensive state-level government regulations and licensing requirements, and has no control over commission rates or premiums, leading to potential reductions in profit margins - NIA depends on third-party property and casualty insurance companies; termination of contracts or inability to obtain competitive prices would adversely affect its business[322](index=322&type=chunk) - NIA's insurance agency business is subject to comprehensive state regulations and licensing; failure to comply or changes in regulations could have a material adverse effect[323](index=323&type=chunk)[325](index=325&type=chunk) - NIA has no control over commission rates or premiums, which are set by insurers and market conditions, potentially reducing profit margins[324](index=324&type=chunk) [Risks Related to Our Subsidiaries - Newtek Payroll and Benefit Solutions (PMT)](index=69&type=section&id=Risks%20Related%20to%20Our%20Subsidiaries%20-%20Newtek%20Payroll%20and%20Benefit%20Solutions%20(PMT)) PMT faces risks from unauthorized disclosure of sensitive employee data due to cybersecurity breaches, credit risk in ACH payments, disruptions in computer systems, and potential unreimbursed costs or damages from delays in processing payroll or tax payments - Unauthorized disclosure of sensitive employee data through cybersecurity breaches could expose PMT to liability, business losses, and reputational damage[326](index=326&type=chunk) - PMT is subject to credit risk in ACH payments if clients fail to deposit funds, potentially bearing the financial burden of settling contracts[327](index=327&type=chunk) - Disruptions in PMT's computer systems or failure to adapt technology to client needs and preferences could adversely affect its business and reputation[328](index=328&type=chunk)[329](index=329&type=chunk) - Delays in processing customer payrolls or payroll taxes could incur unreimbursed costs or damages[330](index=330&type=chunk) [Risks Related to Our Subsidiaries - Newtek Business Credit Solutions (NBC)](index=70&type=section&id=Risks%20Related%20to%20Our%20Subsidiaries%20-%20Newtek%20Business%20Credit%20Solutions%20(NBC)) NBC faces risks from unexpected defaults in its accounts receivables or inventory portfolios, which would reduce income and increase expenses, and its reserve for credit losses may prove insufficient to cover unexpected losses, particularly in unstable economic conditions - Unexpected defaults in NBC's accounts receivables or inventory portfolios would reduce income and increase expenses[331](index=331&type=chunk) - NBC's reserve for credit losses may be insufficient to cover unexpected losses, particularly in unstable economic conditions, which could materially affect its financial condition and results of operations[332](index=332&type=chunk) [Risks Related to Our Capco Business](index=71&type=section&id=Risks%20Related%20to%20Our%20Capco%20Business) The Capco programs are subject to state legislation and regulation, with risks of repeal or retroactive revision, failure to meet state law requirements, and difficulty in peer comparison due to the unique nature of operating Capcos as a publicly-held company - Capco programs and their associated tax credits are subject to state legislation and regulation, with a risk of repeal or retroactive revision, which could cause material financial harm[333](index=333&type=chunk)[334](index=334&type=chunk) - Failure to meet state law requirements for Capcos could lead to the loss of one or more Capcos[335](index=335&type=chunk) - The lack of comparable publicly-held companies operating Capcos makes it difficult for investors to assess the business, potentially depressing stock value[336](index=336&type=chunk) [Risks Related to Our Securities](index=71&type=section&id=Risks%20Related%20to%20Our%20Securities) The common stock price may be volatile due to various factors, future issuances of common stock or other securities could dilute existing shareholders' ownership, provisions in Maryland General Corporation Law and the company's charter/bylaws could deter takeover attempts, and sales of substantial amounts of common stock may adversely affect the market price - The common stock price may be volatile due to factors like market fluctuations, operating performance, regulatory changes, and departures of key personnel[338](index=338&type=chunk) - Future issuances of common stock or other securities (e.g., preferred shares, stock options) could dilute current shareholders' ownership interest and decrease per-share book value[340](index=340&type=chunk)[341](index=341&type=chunk)[342](index=342&type=chunk) - Provisions in Maryland General Corporation Law and the company's charter/bylaws, such as 'blank check' preferred shares and classified boards, could deter takeover attempts[343](index=343&type=chunk)[345](index=345&type=chunk)[346](index=346&type=chunk) - Sales of substantial amounts of common stock in the public market could adversely affect the prevailing market price and the company's ability to raise additional capital[347](index=347&type=chunk) [Risks Related to Our Notes](index=75&type=section&id=Risks%20Related%20to%20Our%20Notes) The company's various Notes are unsecured and structurally subordinated to secured indebtedness and subsidiary liabilities, offer limited protection in their indentures, and may be redeemed when interest rates are low, while their market value can fluctuate, and the 2024 and 2026 Notes remain subject to 150% asset coverage requirements - The 2024, 2025, 2026, and 2028 Notes are unsecured and effectively subordinated to any secured indebtedness of the company or its subsidiaries[348](index=348&type=chunk) - The Notes are structurally subordinated to all indebtedness and liabilities of the company's subsidiaries, as subsidiaries are not guarantors[349](index=349&type=chunk)[350](index=350&type=chunk) - Indentures for the Notes offer limited protection, lacking restrictions on additional debt, asset sales, or changes in financial condition, which could negatively affect holders[351](index=351&type=chunk)[352](index=352&type=chunk) - The company may redeem Notes when prevailing interest rates are low, potentially impacting holders' reinvestment returns[355](index=355&type=chunk) - The 2024 and 2026 Notes are subject to **150%** asset coverage requirements under the 1940 Act covenants, despite the company no longer being regulated as a BDC[361](index=361&type=chunk)[362](index=362&type=chunk) [Risks Related to Cybersecurity](index=77&type=section&id=Risks%20Related%20to%20Cybersecurity) NewtekOne's business relies heavily on secure information technology systems, making it vulnerable to cyber-attacks and information security breaches that could lead to operational disruptions, data misappropriation, financial losses, litigation, regulatory penalties, and reputational damage, with increased risks from mobile and cloud technologies - NewtekOne's business relies on secure IT systems, making it vulnerable to cyber-attacks and information security breaches that could cause operational disruptions, data misappropriation, financial losses, and reputational damage[363](index=363&type=chunk)[364](index=364&type=chunk)[365](index=365&type=chunk) - The increased use of mobile and cloud technologies, particularly with remote work, heightens cybersecurity and operational risks[366](index=366&type=chunk)[374](index=374&type=chunk)[376](index=376&type=chunk) - A cybersecurity risk management program, overseen by the CISO and the Board's Risk Committee, is in place, but complete protection is not guaranteed, and breach costs may exceed insurance coverage[367](index=367&type=chunk) - Third-party service providers also pose cybersecurity risks, and the company is subject to evolving regulations requiring disclosure of material cybersecurity incidents[372](index=372&type=chunk)[373](index=373&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS.](index=81&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS.) This section confirms that the company has no unresolved staff comments from the SEC [No Unresolved Staff Comments](index=81&type=section&id=No%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments from the SEC - There are no unresolved staff comments[385](index=385&type=chunk) [ITEM 1C. CYBERSECURITY.](index=81&type=section&id=ITEM%201C.%20CYBERSECURITY.) This section details NewtekOne's enterprise-wide cybersecurity risk management system, strategy, and governance framework [Risk Management and Strategy](index=81&type=section&id=Risk%20Management%20and%20Strategy) NewtekOne employs an enterprise-wide cybersecurity risk management system and strategy, integrated into its overall ERM framework, including regular comprehensive risk assessments, continuous threat intelligence monitoring, risk prioritization, and robust mitigation strategies - NewtekOne maintains an enterprise-wide cybersecurity risk management system and strategy, integrated into its overall ERM framework[386](index=386&type=chunk)[387](index=387&type=chunk) - The strategy involves comprehensive risk assessments, continuous threat intelligence monitoring, risk prioritization, and robust mitigation strategies (technical controls, policies, training)[387](index=387&type=chunk) - External assessors, consultants, and auditors are engaged for independent evaluations, and a vendor risk management program monitors third-party cybersecurity controls[391](index=391&type=chunk) [Governance and Oversight](index=83&type=section&id=Governance%20and%20Oversight) The Board's Risk Committee provides focused oversight of cybersecurity and technology risk, receiving regular reports from the CISO and CTO, who are accountable for identifying, assessing, and managing cybersecurity risks - The Board's Risk Committee oversees cybersecurity and technology risk, receiving regular reports from the CISO and CTO[388](index=388&type=chunk)[389](index=389&type=chunk) - The CISO, housed within NTS, is responsible for developing, maintaining, and enforcing cybersecurity policies, monitoring threats, and overseeing employee training[389](index=389&type=chunk)[392](index=392&type=chunk) - The CISO is a Certified Information System Security Professional (CISSP) with decades of experience, and the CTO has over **25 years** of experience in enterprise technology services[393](index=393&type=chunk) [ITEM 2. PROPERTIES.](index=85&type=section&id=ITEM%202.%20PROPERTIES.) This section describes NewtekOne's principal business locations, which are primarily leased facilities [Leased Facilities](index=85&type=section&id=Leased%20Facilities) NewtekOne conducts its principal business activities in leased facilities, with its headquarters in Boca Raton, Florida, and other significant offices in Lake Success, New York, and Miami, Florida - NewtekOne's principal business activities are conducted in leased facilities[395](index=395&type=chunk) Key Leased Office Locations (as of December 31, 2023) | Location | Lease expiration | Purpose | Approximate square feet | | :---------------------------- | :--------------- | :-------------------------------------------- | :---------------------- | | 4800 T Rex Avenue, Boca Raton, FL | April 2026 | Corporate headquarters and NSBF lending operations | 7,800 | | 1981 Marcus Avenue, Lake Success, NY | April 2027 | Lending operations, corporate operations, NY Capco offices and subsidiaries' offices | 44,800 | | 1111 Brickell Avenue, Suite 135, Miami, FL | February 2027 | Main office Newtek Bank | 1,800 | [ITEM 3. LEGAL PROCEEDINGS.](index=85&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS.) This section addresses the company's involvement in legal and regulatory matters, including an immaterial reserve for potential settlements and a permanent injunction against NMS [Legal Matters and Accruals](index=85&type=section&id=Legal%20Matters%20and%20Accruals) NewtekOne and its subsidiaries are routinely involved in legal proceedings and regulatory matters, with management believing outcomes will not materially affect financial position, and an immaterial reserve has been accrued for potential settlements - NewtekOne and its subsidiaries are routinely subject to actual or threatened legal proceedings and regulatory matters[397](index=397&type=chunk) - Management believes the outcomes of pending and threatened matters will not have a material effect on the company's business, consolidated financial position, results of operations, or cash flows[397](index=397&type=chunk) - As of December 31, 2023, an immaterial reserve has been accrued to cover potential settlements[397](index=397&type=chunk) - Newtek Merchant Solutions (NMS) operates under a permanent injunction from the Federal Trade Commission (FTC) since October 2012 regarding certain business practices[398](index=398&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES.](index=85&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES.) This section confirms that the company has no disclosures related to mine safety [No Mine Safety Disclosures](index=85&type=section&id=No%20Mine%20Safety%20Disclosures) The company has no disclosures related to mine safety - There are no mine safety disclosures[399](index=399&type=chunk) [PART II](index=86&type=section&id=PART%20II) This section covers market information, financial data, controls, and other disclosures required for Part II of the Form 10-K [ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.](index=86&type=section&id=ITEM%205.%20MARKET%20FOR%20THE%20REGISTRANT'S%20COMMON%20EQUITY%20AND%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES.) This section provides information on the market for NewtekOne's common stock, equity issuances, dividends, and stock performance [Common Stock Market and Holders](index=86&type=section&id=Common%20Stock%20Market%20and%20Holders) NewtekOne's common stock trades on the Nasdaq Global Market under the symbol 'NEWT', with a closing price of $11.00 per share and approximately 89 holders of record as of March 28, 2024 - NewtekOne's common stock is traded on the Nasdaq Global Market under the symbol '**NEWT**'[401](index=401&type=chunk) - The last reported price for common stock on March 28, 2024, was **$11.00** per share[401](index=401&type=chunk) - As of March 28, 2024, there were approximately **89** holders of record of the common stock[402](index=402&type=chunk) [Equity Issuances and Dividends](index=86&type=section&id=Equity%20Issuances%20and%20Dividends) The company issued common stock through its Dividend Reinvestment Plan (DRIP) and for dividends on unvested restricted stock awards in 2022 and 2023, with quarterly common dividends of $0.18 per share declared for 2023, though the DRIP was terminated Shares Issued from Unregistered Securities | Year Ended December 31, | DRIP Shares Issued | Value (Millions) | Shares for Unvested Restricted Stock | Value (Millions) | | :---------------------- | :----------------- | :--------------- | :----------------------------------- | :--------------- | | 2023 | 15,700 | $0.2 | 18,700 | $0.3 | | 2022 | 95,300 | $1.6 | 35,500 | $0.6 | - The Dividend Reinvestment Plan (DRIP) was terminated on December 8, 2023[403](index=403&type=chunk) - Common dividends of **$0.18** per share were declared for each quarter of 2023[405](index=405&type=chunk) - Prior to 2023, as a RIC, the company was required to distribute at least **90%** of its annual taxable income[406](index=406&type=chunk) Securities Authorized Under Equity Compensation Plans (as of December 31, 2023) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | | :------------------------------------------ | :------------------------------------------------------------------------ | :---------------------------------------------------------- | :------------------------------------------------------------------------------------------------------------------------------------ | | Equity compensation plans approved by security holders | None | None | 2,257,528 shares | | Equity compensation plans not approved by security holders | None | None | None | [Stock Performance Graph](index=88&type=section&id=Stock%20Performance%20Graph) The stock performance graph compares NewtekOne's total shareholder return against various market indices for the period from December 31, 2018, through December 31, 2023, assuming a $100 investment on January 1, 2019 [ITEM 6. [RESERVED].](index=88&type=section&id=ITEM%206.%20%5BRESERVED%5D.) This section is reserved and contains no information [Reserved](index=88&type=section&id=Reserved) This item is reserved and contains no information [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.](index=89&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS.) This section provides an executive overview of NewtekOne's business transformation, a detailed analysis of its financial condition, and results of operations [Executive Overview and Business Transformation](index=89&type=section&id=Executive%20Overview%20and%20Business%20Transformation) NewtekOne converted to a financial holding company on January 6, 2023, acquiring Newtek Bank and withdrawing its BDC election, leading to consolidation of former portfolio companies and a shift from RIC tax treatment to corporate income tax, while providing diverse business and financial solutions to SMBs - NewtekOne converted to a financial holding company on January 6, 2023, acquiring Newtek Bank and withdrawing its BDC election, leading to consolidation of former portfolio companies[412](index=412&type=chunk) - The company no longer qualifies as a RIC and will file a consolidated U.S. federal income tax return, subject to a **21%** corporate tax rate[415](index=415&type=chunk) - Newtek Bank, with PLP status, now originates SBA 7(a) loans, taking over from NSBF which is winding down its originations[416](index=416&type=chunk)[420](index=420&type=chunk) - Economic developments, including supply chain interruptions, labor shortages, commodity inflation, rising interest rates, and geopolitical events, create uncertainty and potential negative impacts on operating results[421](index=421&type=chunk)[422](index=422&type=chunk) [Financial Condition Analysis (December 31, 2023 vs. 2022)](index=93&type=section&id=Financial%20Condition%20Analysis%20(December%2031%2C%202023%20vs.%202022)) Total assets increased by **$430.6 million (43.1%)** to **$1.4 billion** at December 31, 2023, primarily due to the consolidation of entities and new loan originations, while total liabilities increased by **$556.9 million (89.3%)** to **$1.2 billion**, driven by deposits and increased borrowings Total Assets (in thousands) | Metric | Dec 31, 2023 | Dec 31, 2022 | Change ($) | Change (%) | | :------------- | :----------- | :----------- | :--------- | :--------- | | Total Assets | $1,429,513 | $998,902 | $430,611 | 43.1% | Loans (in thousands) | Loan Category | Dec 31, 2023 | Dec 31, 2022 | Change ($) | | :-------------------------------------------------- | :----------- | :----------- | :--------- | | Loans held for sale, at fair value | $118,867 | $19,171 | $99,696 | | Loans held for sale, at LCM | $56,607 | — | $56,607 | | Loans held for investment, at fair value | $469,801 | $505,268 | $(35,467) | | Loans held for investment, at amortized cost, net | $323,731 | — | $323,731 | | **Total Loans** | **$969,006** | **$524,439** | **$444,567** | - Total liabilities increased by **$556.9 million (89.3%)** to **$1.2 billion** at December 31, 2023, primarily due to the addition of **$463.5 million** in deposits and increased borrowings[439](index=439&type=chunk)[440](index=440&type=chunk) Borrowings (in thousands) | Borrowing Category | Dec 31, 2023 | Dec 31, 2022 | Change ($) | | :-------------------------------------- | :----------- | :----------- | :--------- | | Capital One Lines of Credit | — | $55,885 | $(55,885) | | Other Bank Borrowings | $82,948 | — | $82,948 | | Parent Company Notes (2024, 2025, 2026, 2028) | $269,062 | $180,055 | $89,007 | | Notes Payable - Securitization Trusts | $292,112 | $279,136 | $12,976 | | Notes Payable - Related Parties | — | $24,250 | $(24,250) | | **Total Borrowings** | **$644,122** | **$539,326** | **$104,796** | [Results of Operations (December 31, 2023 vs. 2022)](index=97&type=section&id=Results%20of%20Operations%20(December%2031%2C%202023%20vs.%202022)) Net income increased by **$15.0 million** to **$47.33 million** in 2023, driven by a significant rise in noninterest income (up **$83.9 million**) and net interest income (up **$14.3 million**), partially offset by a substantial increase in noninterest expense (up **$79.9 million**) and a **$11.7 million** provision for credit losses Key Financial Highlights (in thousands) | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | Change ($) | Change (%) | | :-------------------------- | :---------------------- | :---------------------- | :--------- | :--------- | | Net income | $47,329 | $32,311 | $15,018 | 46.5% | | Net interest income | $26,634 | $12,292 | $14,342 | 116.7% | | Provision for credit losses | $11,704 | — | $11,704 | N/A | | Noninterest income | $176,772 | $92,878 | $83,894 | 90.3% | | Noninterest expense | $146,329 | $66,395 | $79,934 | 120.4% | - Interest income increased by **$55.8 million** to **$94.4 million**, driven by higher interest rates and an expanded average outstanding accrual loan portfolio (**$552.3 million** in 2023 vs. **$482.6 million** in 2022), and interest from Federal Reserve Bank cash deposits[445](index=445&type=chunk)[446](index=446&type=chunk)[447](index=447&type=chunk) - Interest expense increased by **$41.4 million** to **$67.7 million**, primarily due to **$15.8 million** in interest on deposits (new in 2023), additional securitization notes, and increased bank borrowings[445](index=445&type=chunk)[448](index=448&type=chunk)[449](index=449&type=chunk) - Noninterest income surged due to the consolidation of technology and electronic payment processing segments (adding **$24.9 million** and **$42.9 million** respectively), partially offset by a decrease in dividend income (due to consolidation) and net gains on sales of loans[456](index=456&type=chunk)[457](index=457&type=chunk)[461](index=461&type=chunk)[466](index=466&type=chunk) - Noninterest expense increased significantly due to the consolidation of subsidiaries, particularly in salaries and benefits (up **$45.5 million**), technology services, and electronic payment processing expenses[467](index=467&type=chunk)[468](index=468&type=chunk)[469](index=469&type=chunk)[470](index=470&type=chunk) [Results of Segment Operations](index=103&type=section&id=Results%20of%20Segment%20Operations) NewtekOne operates four reportable segments: Banking, Technology, NSBF, and Payments, with Banking contributing **$28.1 million** to net income, Technology **$1.4 million**, NSBF **$17.1 million**, and Payments **$12.2 million** in 2023 - NewtekOne has four reportable segments: Banking, Technology, NSBF, and Payments[474](index=474&type=chunk) Net Income by Operating Segment (Year Ended December 31, 2023, in thousands) | Segment | Net Income ($) | | :--------- | :------------- | | Banking | $28,127 | | Technology | $1,367 | | NSBF | $17,061 | | Payments | $12,154 | | Other | $(11,380) | | **Consolidated net income** | **$47,329** | - Banking segment includes Newtek Bank and SBL, with **$17.7 million** in net interest income from SBA 504, C&I, CRE, and ABL loans, and depository services[475](index=475&type=chunk) - Technology segment (NTS) generated **$31.7 million** in noninterest income but is slated for divestiture or termination by January 2025[476](index=476&type=chunk) - Payments segment (NMS, POS, Mobil Money) contributed **$46.4 million** in noninterest income from credit/debit card processing and related services[478](index=478&type=chunk) [Liquidity and Capital Resources](index=104&type=section&id=Liquidity%20and%20Capital%20Resources) NewtekOne's liquidity and capital are derived from various notes, securitization transactions, and operational cash flows, maintaining prudent capital levels and meeting regulatory ratios, with cash flows from operating activities being negative in 2023 while financing activities provided significant cash - Liquidity and capital are sourced from notes, securitization transactions, and operational cash flows, with additional capital raised through ATM programs and public offerings (e.g., **$40 million** in **8.00%** 2028 Notes issued in August 2023)[480](index=480&type=chunk)[485](index=485&type=chunk)[486](index=486&type=chunk) Regulatory Capital Ratios (as of December 31, 2023) | Entity | Capital Ratio Type | Actual Ratio | Minimum for Adequacy | Minimum for Well Capitalized | | :----------- | :----------------------------- | :----------- | :------------------- | :--------------------------- | | NewtekOne, Inc. | Tier 1 Capital (to Average Assets) | 13.6% | 4.0% | N/A | | | Common Equity Tier 1 (to Risk-Weighted Assets) | 16.2% | 4.5% | N/A | | | Total Capital (to Risk-Weighted Assets) | 19.1% | 8.0% | N/A | | Newtek Bank | Tier 1 Capital (to Average Assets) | 16.6% | 4.0% | 5.0% | | | Common Equity Tier 1 (to Risk-Weighted Assets) | 21.5% | 4.5% | 6.5% | | | Total Capital (to Risk-Weighted Assets) | 22.8% | 8.0% | 10.0% |

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 March 19, 2024 Date of Report (date of Earliest Event Reported) NEWTEKONE, INC. (Exact Name of Company as Specified in its Charter) Maryland 814-01035 (Company's telephone number, including area code) (Former name or former address, if changed from last report) Securities registered pursuant to Section 12(b) of the Act: | Title of each class | ...

Financial Data and Key Metrics Changes - The company reported a net interest margin increase from 2.62% in Q3 2023 to 2.78% in Q4 2023, indicating improved profitability [77] - The return on average assets for the year was 5.76%, with a return on tangible common equity of 22.7% [74][108] - The company achieved diluted earnings per share of $1.70 and basic earnings per share of $1.71 for the calendar year [94] Business Line Data and Key Metrics Changes - The SBA loan portfolio reached $169.6 million, with total SBA loans funded increasing by 24.2% over the prior quarter [30][132] - The company originated $555 million in 7(a) SBA loans since 2017, with no charge-offs to date [34] - The alternative loan program has been growing steadily, contributing to the overall loan volume despite market challenges [109] Market Data and Key Metrics Changes - The company is positioned as a market leader in SBA 7(a) lending, being the number one originator by loan volume in Q4 2023 [132] - The company noted that the government guaranteed market is favorable, with a strong demand for short-term loans [7] Company Strategy and Development Direction - The company aims to leverage its digital deposit channel for funding and plans to roll out business checking accounts to optimize funding costs [87][61] - The management team is focused on scaling the business, with aspirations to grow to a $5 billion to $10 billion institution [39][96] - The company emphasizes a differentiated business model that relies on technology and non-interest income streams rather than traditional banking practices [78][79] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the quality of the loan portfolio and the adequacy of reserves, anticipating charge-offs but maintaining a strong capital position [14][80] - The company is optimistic about its growth trajectory, expecting to maintain double-digit growth in 7(a) loan volumes [7][41] - Management highlighted the importance of understanding the unique business model and the potential for future investor interest as the company continues to deliver strong performance [141][142] Other Important Information - The company has a high CECL reserve of 6.75%, which is significantly above industry norms, reflecting a conservative approach to risk management [100][64] - The company has been able to raise insured deposits quickly, demonstrating a high growth rate through digital account opening [61] Q&A Session Summary Question: What are the factors driving guidance from low to high end? - Management indicated that asset-side performance, particularly through the alternative loan program and government guaranteed market pricing, will influence guidance [4] Question: How is competition in the SBA lending space? - Management noted that supply and demand dynamics are crucial, and they feel confident about their current pricing and market position [7] Question: Can you provide details on credit quality and charge-offs? - Management confirmed that while there are signs of weakness in some microloans, there have been no charge-offs to date, and they expect full recovery on certain loans [12][14] Question: What is the expected impact of the cleanup call on the bond portfolio? - Management stated that a cleanup call could involve around $40 million to $45 million in bonds, which would free up capital for other uses [22] Question: Can you elaborate on the increase in loan volumes? - Management highlighted a 50% increase in loan units in 2023 compared to 2022, attributing this to improved efficiency and technology [21]

For the transition period from _____to_____ Commission file number: 814-01035 NEWTEKONE, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Not Applicable (Former name, former address and former fiscal year, if changed since last report) Secu ...

Note Regarding Forward-Looking Statements www.newtekone.com 2.92% 3.19% 3.49% 3.26% -9.7% 31.2% 38.3% 20.5% 109.9% 58.7% 49.1% 77.5% 34.8% 29.4% 25.0% | --- | --- | --- | --- | --- | |---------------------------------------------|-------|-------|-------|-------| | Metrics1 | 1Q23 | | | | | NIM | | | | | | ROAA | | | | | | ROE | | | | | | ROTCE | | | | | | Efficiency Ratio | | | | | | Capital | | | | | | CET 1 | | | | | | Total Capital | | | | | | Leverage | | | | | | Average Yield on Loans | | | | | | Avera ...

Company Overview - As of June 30, 2023, the company ranked as the second largest SBA 7(a) lender based on dollar volume of loans approved, combining Newtek Bank and NSBF[249]. - The company completed the acquisition of NBNYC, now renamed Newtek Bank, contributing $31 million in cash and merging two subsidiaries, enhancing its financial services capabilities[244]. - The company is now a financial holding company, subject to regulation by the Federal Reserve, and has withdrawn its previous BDC election, affecting its operational structure and compliance requirements[244]. - The company no longer qualifies as a RIC for U.S. federal income tax purposes, which changes its tax obligations and financial reporting[248]. Financial Performance - For the six months ended June 30, 2023, the company reported net income of $18.54 million, a decrease of 20.0% from $23.17 million for the same period in 2022[280]. - For the six months ended June 30, 2023, the company reported a consolidated net income of $18.6 million, compared to a net income of $24.5 million for the same period in 2022, reflecting a decrease of approximately 24.3%[322]. - The Company reported a loss attributable to noncontrolling interests of $31, impacting the net income attributable to NewtekOne, Inc. to $18.57 million[281]. - For the three months ended June 30, 2023, the Company reported net income of $6.9 million, a decrease of 48.9% compared to $13.5 million for the same period in 2022[328]. Revenue Streams - Noninterest income increased by 87.3% to $89.22 million in 2023, compared to $47.64 million in 2022, driven by significant growth in technology and IT support income and electronic payment processing income[298]. - The payments segment contributed $5.5 million to consolidated net income, with $22.8 million of noninterest income from various processing services[324]. - The technology segment contributed $16.5 million of noninterest income and incurred $15.2 million of noninterest expense for the six months ended June 30, 2023[325]. - The company generated $10.7 million in electronic payment processing income, reflecting a new revenue stream[347]. Loan and Asset Management - Total loans reached $873.8 million, an increase of $349.4 million from $524.4 million at December 31, 2022, primarily due to the consolidation of previously controlled portfolio companies and new loan originations[269]. - The company originated 721 SBA loans totaling $343.8 million for the six months ended June 30, 2023, compared to 576 loans totaling $363.9 million for the same period in 2022, indicating a 25.2% increase in the number of loans originated[312]. - The average outstanding accrual loan portfolio increased to $636.7 million in 2023 from $479.1 million in 2022, reflecting growth in SBA 7(A) loans and total commercial loan originations[283]. - The company transitioned SBA 7(a) loan originations to Newtek Bank as NSBF begins to wind down operations, continuing to manage existing loans until maturity or liquidation[249]. Financial Position - Total assets increased to $1.4 billion as of June 30, 2023, reflecting a growth of $440.2 million, or 44.1%, compared to $1.0 billion at December 31, 2022[268]. - Total deposits amounted to $447.4 million at June 30, 2023, with $38.2 million in non-interest bearing deposits and $409.1 million in interest bearing deposits, marking the first deposits recorded since the acquisition[275]. - Borrowings increased to $697.4 million at June 30, 2023, up from $539.3 million at December 31, 2022, driven by new notes payable and bank borrowings from newly consolidating entities[277]. - The company maintains an asset coverage requirement of at least 150% due to covenants in its outstanding 2024 and 2026 Notes[245]. Expenses and Losses - Salaries and employee benefits expense increased by 301.1% to $38.5 million for the six months ended June 30, 2023, compared to $9.6 million in the same period of 2022[305]. - Total non-interest expense for the three months ended June 30, 2023, was $40.180 million, an increase of 156.7% compared to $15.652 million in 2022[354]. - The total other expense for the six months ended June 30, 2023, was $79.4 million, an increase of 161.4% compared to $30.4 million in the same period of 2022[305]. - The provision for loan credit losses was $3.9 million for the six months ended June 30, 2023, compared to no provision in the same period in 2022 due to a change in accounting methodology[296]. Capital and Financing - The company raised approximately $111.3 million from the issuance of $115.0 million aggregate principal amount of 5.50% 2026 Notes, net of underwriter's fees and expenses[380]. - The company completed a private placement offering of $50.0 million aggregate principal amount of 8.125% notes due 2025, with net proceeds of approximately $48.94 million[392]. - The company was in compliance with all covenants related to the 2024 and 2026 Notes as of June 30, 2023[387]. - The Capital One facility was increased from $100.0 million to $150.0 million in June 2019, with various amendments to interest rates and terms[393]. Tax and Regulatory Matters - The company recognized an income tax benefit of $2.3 million during the six months ended June 30, 2023, primarily related to carried forward net operating losses[320]. - The company reported a deferred tax asset, net of $4.6 million, and a deferred tax liability, net of $19.2 million, reflecting changes in tax positions[436]. Market Conditions and Economic Factors - The company has observed significant economic challenges, including rising interest rates and supply chain interruptions, which may impact future performance and borrower defaults[254]. - The company adopted the CECL approach for estimating credit losses, which requires an estimate of expected credit losses over the life of an exposure[425].

Financial Performance & Projections - NewtekOne的2023年稀释后每股收益预计为1.70美元至2.00美元[12] - Newtek Bank在截至2023年6月30日的三个月内的ROAA为4.9%[28, 80, 82] - NewtekOne在截至2023年6月30日的三个月内的ROTCE为32.1%[68, 70, 178] - NewtekOne预计2023财年税后净收入为4460万美元，每股收益为1.80美元[169] Balance Sheet & Capitalization - NewtekOne截至2023年6月30日的总资产为14亿美元[10, 78] - Newtek Bank截至2023年6月30日的总资产为5.68亿美元[10] - Newtek Bank截至2023年6月30日的总存款为4.474亿美元，比2022年12月31日的1.4亿美元增长了220.6%[67, 87] - Newtek Bank截至2023年6月30日的总风险资本比率为29.4%[10, 80, 98] Lending Operations - NewtekOne在截至2023年6月30日的六个月内发放了4.761亿美元的贷款，比2022年同期的4.283亿美元增长了11.2%[72] - NewtekOne预计2023年SBA 7(a)贷款总额为8.75亿美元，比2022年增长12.8%[124, 167] - Newtek Bank的SBA 7(a)贷款组合在2023年6月30日达到1.89亿美元[93]

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for NewtekOne, Inc [Consolidated Statements of Financial Condition](index=7&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) The company's total assets grew significantly due to the consolidation of Newtek Bank Consolidated Statements of Financial Condition (In Thousands) | ASSETS | March 31, 2023 (Unaudited) | December 31, 2022 (Investment Company Accounting) | |:---|:---|:---| | Cash and due from banks | $27,349 | $53,692 | | Restricted cash | $72,599 | $71,914 | | Interest bearing deposits in banks | $97,196 | — | | Total cash and cash equivalents | $197,144 | $125,606 | | Loans held for sale, at fair value | $125,639 | $19,171 | | Loans held for investment, at fair value | $532,788 | $505,268 | | Total assets | $1,249,739 | $998,902 | | **LIABILITIES AND NET ASSETS** | | | | Deposits: | | | | Noninterest-bearing | $22,878 | — | | Interest-bearing | $224,696 | — | | Total deposits | $247,574 | — | | Borrowings | $697,395 | $539,326 | | Total liabilities | $1,031,701 | $623,544 | | Total shareholders' equity | $218,038 | $375,358 | | Total liabilities and shareholders' equity | $1,249,739 | $998,902 | - Total assets increased by **$250.8 million (25.1%)** from December 31, 2022, to March 31, 2023, primarily due to the consolidation of Newtek Bank and other entities[13](index=13&type=chunk)[14](index=14&type=chunk)[242](index=242&type=chunk) - Total deposits of **$247.6 million** were reported at March 31, 2023, with no deposits at December 31, 2022, reflecting the acquisition of Newtek Bank[13](index=13&type=chunk)[14](index=14&type=chunk)[247](index=247&type=chunk) [Consolidated Statements of Income](index=9&type=section&id=Consolidated%20Statements%20of%20Income) Net income increased year-over-year, driven by higher interest and noninterest income Consolidated Statements of Income (In Thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Total interest income | $18,715 | $7,743 | | Total interest expense | $14,132 | $4,667 | | Net interest income | $4,583 | $3,076 | | Provision for loan credit losses | $1,318 | — | | Net interest income after provision for loan credit losses | $3,265 | $3,076 | | Total noninterest income | $42,787 | $22,228 | | Total noninterest expense | $39,197 | $14,709 | | Income before taxes | $6,855 | $10,595 | | Income tax (benefit) expense | $(4,863) | $943 | | Net income | $11,718 | $9,652 | | Net income available to common shareholders | $11,469 | $9,652 | | Basic EPS | $0.46 | $0.40 | | Diluted EPS | $0.46 | $0.40 | - Net income increased by **$2.066 million**, from $9.652 million in Q1 2022 to $11.718 million in Q1 2023[16](index=16&type=chunk)[18](index=18&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk) - Total interest income significantly increased by **$10.972 million**, driven by a $10.4 million increase in loan portfolio interest income[16](index=16&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk) - Total noninterest income increased by **$20.559 million (92.5%)** to $42.787 million in Q1 2023, primarily due to the consolidation of new entities and related technology/IT support and electronic payment processing income[16](index=16&type=chunk)[252](index=252&type=chunk)[265](index=265&type=chunk)[269](index=269&type=chunk) [Consolidated Statements of Comprehensive Income](index=11&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income for Q1 2023 was slightly lower than net income due to an unrealized loss Consolidated Statements of Comprehensive Income (In Thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Net income | $11,718 | $9,652 | | Other comprehensive loss, net of tax | $(82) | — | | Total comprehensive income | $11,636 | $9,652 | - Total comprehensive income for Q1 2023 was **$11.636 million**, including a net unrealized loss on debt securities available-for-sale of $(113) thousand before tax[19](index=19&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=12&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity decreased significantly due to accounting adjustments from the BDC conversion - Total shareholders' equity decreased from **$375.358 million** at December 31, 2022, to **$218.038 million** at March 31, 2023[14](index=14&type=chunk)[21](index=21&type=chunk) - Significant adjustments in Q1 2023 include a **$(138.043) million** removal of fair value adjustments and a **$(65.215) million** consolidation of controlled investments due to the conversion to a financial holding company[21](index=21&type=chunk) - The Company issued **$20.0 million** in preferred stock and declared common share dividends of **$(4.363) million** and preferred share dividends of **$(249) thousand** in Q1 2023[21](index=21&type=chunk) [Consolidated Statements of Cash Flows](index=15&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash flow from operations turned negative while financing activities provided substantial cash inflows Consolidated Statements of Cash Flows (In Thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Net cash (used in) provided by operating activities | $(116,359) | $6,478 | | Net cash used in investing activities | $(23,898) | — | | Net cash provided by (used in) financing activities | $186,899 | $(29,884) | | Net increase (decrease) in cash and restricted cash | $46,642 | $(23,406) | | Cash and restricted cash—end of period | $197,144 | $163,454 | - Operating activities used **$116.359 million** in Q1 2023, a significant change from $6.478 million provided in Q1 2022, primarily due to SBA 7(a) loan investments funded and increases in broker receivables[25](index=25&type=chunk)[27](index=27&type=chunk)[317](index=317&type=chunk) - Investing activities used **$23.898 million** in Q1 2023, mainly for purchasing available-for-sale securities and increasing loans held for investment[25](index=25&type=chunk)[27](index=27&type=chunk)[318](index=318&type=chunk) - Financing activities provided **$186.899 million** in Q1 2023, driven by preferred stock issuance, bank borrowings, and 2025 8.125% Notes issuance, offsetting securitization note payments[25](index=25&type=chunk)[27](index=27&type=chunk)[319](index=319&type=chunk) [Notes to Consolidated Financial Statements](index=17&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail the accounting policies and financial items following the company's transformation [NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION](index=17&type=section&id=NOTE%201%E2%80%94DESCRIPTION%20OF%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) The company transformed into a financial holding company after acquiring Newtek Bank - The Company is now a financial holding company providing business and financial solutions to SMBs, including **Newtek Bank, Newtek Lending, Newtek Payments, Newtek Insurance, Newtek Payroll, and Newtek Technology**[29](index=29&type=chunk) - On January 6, 2023, the Company acquired NBNYC for **$20 million**, renamed it Newtek Bank, National Association, and contributed $31 million cash and two subsidiaries (NBL, SBL) to it[30](index=30&type=chunk) - The Company ceased to be a BDC and RIC, becoming subject to **Federal Reserve supervision**, and now consolidates various non-bank subsidiaries (e.g., NSBF, Newtek Merchant Solutions, Newtek Technology Solutions)[31](index=31&type=chunk) - Comparisons to prior periods include adjustments to reconcile investment company accounting to financial holding company accounting, affecting stockholders' equity and cash flows[32](index=32&type=chunk) [NOTE 2—SIGNIFICANT ACCOUNTING POLICIES](index=18&type=section&id=NOTE%202%E2%80%94SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines key accounting policies adopted after converting to a financial holding company - The Company applies fair value accounting to certain financial instruments, categorizing them into a **three-level hierarchy** based on observability of inputs (ASC Topic 820)[36](index=36&type=chunk) - Business combinations are accounted for under the acquisition method, recognizing identifiable assets and liabilities at fair value, with excess purchase price as goodwill (ASC 805)[41](index=41&type=chunk) - The Company adopted the **CECL (Current Expected Credit Loss)** approach for measuring credit losses on financial instruments, effective January 1, 2023, replacing the incurred loss approach[42](index=42&type=chunk)[72](index=72&type=chunk) - Deferred tax assets and liabilities are computed based on temporary differences between financial statement and income tax bases, with a valuation allowance if realization is unlikely[62](index=62&type=chunk) - Revenue from electronic payment processing and fee income is recognized when control of goods/services is transferred to customers, reflecting expected consideration (ASC 606)[89](index=89&type=chunk) [NOTE 3—BUSINESS COMBINATION](index=27&type=section&id=NOTE%203%E2%80%94BUSINESS%20COMBINATION) This note details the acquisition of NBNYC for $20 million, resulting in $1.3 million of goodwill - On January 6, 2023, the Company acquired NBNYC for **$20 million** in an all-cash transaction, plus $1.3 million in acquisition costs[102](index=102&type=chunk) - The acquisition resulted in a preliminary goodwill of **$1.3 million**, representing the excess of purchase price over the fair value of net assets acquired[106](index=106&type=chunk) Preliminary Allocation of Consideration Paid for NBNYC (in thousands) | Item | Amount | |:---|:---| | Purchase price consideration | $21,322 | | Fair value of assets acquired: | | | Cash and cash equivalents | $32,574 | | Securities | $6,527 | | Loans held for investment | $159,057 | | Goodwill | $1,279 | | Core deposit intangible | $1,040 | | Other Assets | $1,631 | | Total assets acquired | $202,108 | | Fair value of liabilities assumed: | | | Deposits | $137,015 | | Borrowings | $27,972 | | Other liabilities | $15,799 | | Total liabilities assumed | $180,786 | | Fair value of net assets acquired | $21,322 | - Fair values of acquired assets and assumed liabilities are **preliminary** and subject to adjustment for up to one year post-acquisition[104](index=104&type=chunk) [NOTE 4—INVESTMENTS](index=30&type=section&id=NOTE%204%E2%80%94INVESTMENTS) This note details the company's portfolio of equity investments, joint ventures, and debt securities Total Investments (in thousands) | Investment Type | March 31, 2023 Cost | March 31, 2023 Fair Value | December 31, 2022 Cost | December 31, 2022 Fair Value | |:---|:---|:---|:---|:---| | Non-controlled equity investments | $1,360 | $1,360 | $1,360 | $1,360 | | Joint Ventures | $23,314 | $25,022 | $23,314 | $23,022 | | Controlled investments (Equity) | — | — | $99,195 | $241,113 | | Controlled investments (Debt) | — | — | $32,300 | $18,104 | | Total investments | $24,674 | $26,382 | $156,169 | $283,599 | - The Company's debt securities available-for-sale portfolio totaled **$32.905 million** at fair value as of March 31, 2023, primarily consisting of U.S. Treasury notes and Government agency debentures[121](index=121&type=chunk) - Unrealized losses on available-for-sale securities totaled **$198 thousand** at March 31, 2023, primarily due to non-credit-related market volatility and interest rate changes[122](index=122&type=chunk) - NCL JV and TSO JV are **50% owned joint ventures** focused on non-conforming conventional commercial and industrial term loans[116](index=116&type=chunk)[118](index=118&type=chunk) [NOTE 5—LOANS HELD FOR INVESTMENT](index=34&type=section&id=NOTE%205%E2%80%94LOANS%20HELD%20FOR%20INVESTMENT) This note breaks down the loan portfolio, credit quality, and allowance for credit losses Loan Portfolio by Type (in thousands) | Loan Type | March 31, 2023 Fair Value | December 31, 2022 Fair Value | |:---|:---|:---| | Loans held for investment, at fair value | $532,788 | $505,268 | | Loans held for investment, at amortized cost, net | $164,639 | — | | Total Loans | $697,426 | $505,268 | - As of March 31, 2023, total past due and non-accrual loans amounted to **$120.092 million**, with **$42.380 million** on non-accrual status[128](index=128&type=chunk) - The Allowance for Credit Losses (ACL) at March 31, 2023, was **$2.189 million**, established due to the transition to a financial holding company and the acquisition of purchased credit deteriorated (PCD) loans[145](index=145&type=chunk) - The Company uses an internal grading system (1-8) to rank loan quality, from Exceptional (1) to Loss (8), with grades 6-7 representing classified loans[133](index=133&type=chunk)[140](index=140&type=chunk) [NOTE 6—TRANSACTIONS WITH AFFILIATED COMPANIES AND RELATED PARTY TRANSACTIONS](index=38&type=section&id=NOTE%206%E2%80%94TRANSACTIONS%20WITH%20AFFILIATED%20COMPANIES%20AND%20RELATED%20PARTY%20TRANSACTIONS) This note summarizes transactions with affiliated companies, including joint ventures and investments Affiliate Investments (in thousands) | Company | Fair Value at Dec 31, 2022 | Net Unrealized Gains/(Losses) | Fair Value at Mar 31, 2023 | Dividend Income | |:---|:---|:---|:---|:---| | Newtek Conventional Lending, LLC | $16,587 | $2,315 | $18,900 | $484 | | Newtek TSO II Conventional Credit Partners, LP | $6,435 | $(313) | $6,122 | — | | EMCAP Loan Holdings, LLC | $1,000 | — | $1,000 | $20 | | Biller Genie Software, LLC | $360 | — | $360 | — | | Total Affiliate Investments | $24,382 | $2,002 | $26,382 | $504 | - Amounts due from affiliated companies decreased from **$1.3 million** at December 31, 2022, to **$0.1 million** at March 31, 2023[148](index=148&type=chunk) - Newtek Business Services Holdco 6, Inc. purchased a **$5.3 million** loan from Newtek Conventional Lending, LLC during Q1 2023[148](index=148&type=chunk) [NOTE 7—SERVICING ASSETS](index=39&type=section&id=NOTE%207%E2%80%94SERVICING%20ASSETS) This note details the company's servicing assets derived from SBA 7(a) loans - Servicing assets are measured at **fair value**, with changes reported in earnings[149](index=149&type=chunk) - As of March 31, 2023, the Company services **$1.6 billion** in SBA 7(a) loans[149](index=149&type=chunk) Servicing Assets and Valuation Assumptions (in thousands) | Date | Fair Value | Unobservable Input | Weighted Average | Minimum | Maximum | |:---|:---|:---|:---|:---|:---| | March 31, 2023 | $33,351 | Discount factor | 14.50 % | 14.50 % | 14.50 % | | | | Cumulative prepayment rate | 25.00 % | 25.00 % | 25.00 % | | | | Average cumulative default rate | 20.00 % | 20.00 % | 20.00 % | | December 31, 2022 | $30,268 | Discount factor | 16.50 % | 16.50 % | 16.50 % | | | | Cumulative prepayment rate | 25.00 % | 25.00 % | 25.00 % | | | | Average cumulative default rate | 25.00 % | 25.00 % | 25.00 % | - Servicing fee income for Q1 2023 was **$4.4 million**, up from $3.2 million in Q1 2022[149](index=149&type=chunk) [NOTE 8—GOODWILL AND INTANGIBLE ASSETS](index=39&type=section&id=NOTE%208%E2%80%94GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note details goodwill and intangible assets arising from acquisitions and consolidations Goodwill (in thousands) | Item | March 31, 2023 | December 31, 2022 | |:---|:---|:---| | NBNYC acquisition | $1,279 | — | | Other goodwill | $19,910 | — | | Total goodwill | $21,189 | — | Intangible Assets (in thousands) | Item | March 31, 2023 Net Carrying Amount | December 31, 2022 Net Carrying Amount | |:---|:---|:---| | Core Deposits | $989 | — | | Customer lists | $5,923 | — | | Total intangible assets | $6,912 | — | - Amortization expense for intangible assets was **$0.4 million** for Q1 2023[151](index=151&type=chunk) - The remaining estimated aggregate future amortization expense for intangible assets is **$6.912 million**, with $1.207 million expected in the remainder of 2023[152](index=152&type=chunk) [NOTE 9—FAIR VALUE MEASUREMENTS](index=40&type=section&id=NOTE%209%E2%80%94FAIR%20VALUE%20MEASUREMENTS) This note details the company's fair value measurements using a three-level hierarchy - Fair value is defined as the exit price in an orderly transaction between market participants, categorized into **Level 1** (quoted active markets), **Level 2** (observable inputs other than Level 1), and **Level 3** (unobservable inputs)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) Fair Value Measurements at March 31, 2023 (in thousands) | Assets | Total Fair Value | Level 1 | Level 2 | Level 3 | |:---|:---|:---|:---|:---| | Debt securities available-for-sale | $32,905 | $29,102 | $3,803 | — | | Loans held for sale, at fair value | $125,639 | — | $125,639 | — | | Loans held for investment, at fair value | $532,788 | — | — | $532,788 | | Servicing assets | $33,351 | — | — | $33,351 | | Total assets | $754,581 | $29,102 | $129,442 | $571,015 | | Liabilities: | | | | | | Derivative instruments | $624 | — | $624 | — | - The change in net gain/loss on Level 3 loans accounted for under the fair value option included **$6.1 million in gains** on SBA unguaranteed non-affiliate investments and **$0.9 million in unrealized depreciation** on servicing assets for Q1 2023[162](index=162&type=chunk) - The Company's investments in TSO JV and NCL JV are measured at fair value using **NAV** and are not classified within the fair value hierarchy[162](index=162&type=chunk)[163](index=163&type=chunk) [NOTE 10—DEPOSITS](index=45&type=section&id=NOTE%2010%E2%80%94DEPOSITS) This note details the company's deposit liabilities following the acquisition of Newtek Bank Deposits by Type (in thousands) | Deposit Type | March 31, 2023 | |:---|:---| | Non-interest-bearing: | | | Demand | $22,878 | | Interest-bearing: | | | Checking | $784 | | Money market | $25,770 | | Savings | $16,700 | | Time deposits | $181,442 | | Total interest-bearing | $224,696 | | Total deposits | $247,574 | - Time deposits, money market, and interest-bearing checking obtained through brokers totaled **$106.763 million**[169](index=169&type=chunk) - Aggregate amount of deposit accounts that exceeded the FDIC limit was **$13.357 million**[169](index=169&type=chunk) - Scheduled maturities for time deposits show **$104.922 million** maturing in the remainder of 2023[171](index=171&type=chunk) [NOTE 11—BORROWINGS](index=46&type=section&id=NOTE%2011%E2%80%94BORROWINGS) This note details the company's borrowings, which increased due to new notes and credit lines Borrowings by Type (in thousands) | Borrowing Type | March 31, 2023 Outstanding | Weighted Average Interest Rate | December 31, 2022 Outstanding | Weighted Average Interest Rate | |:---|:---|:---|:---|:---| | Bank Lines of Credit | $147,797 | 7.90 % | $55,885 | 7.25 % | | FHLB Advances | $24,531 | 2.20 % | — | — | | 2024 Notes | $37,958 | 5.75 % | $37,903 | 5.75 % | | 2025 5.00% Notes | $29,365 | 5.00 % | $29,306 | 5.00 % | | 2025 8.125% Notes | $49,040 | 8.13 % | — | — | | 2026 Notes | $113,025 | 5.50 % | $112,846 | 5.50 % | | Notes payable - Securitization Trusts | $248,577 | 6.85 % | $279,136 | 6.19 % | | Total | $697,395 | 6.69 % | $539,326 | 6.11 % | - Total borrowings increased by **$158.069 million** from December 31, 2022, to March 31, 2023[172](index=172&type=chunk)[248](index=248&type=chunk) - The Company completed a private placement of **$50.0 million** aggregate principal amount of 8.125% notes due 2025 in January 2023, with net proceeds of approximately $48.94 million[172](index=172&type=chunk) - Total interest expense related to borrowings for Q1 2023 was **$11.1 million**, compared to $26.3 million in Q1 2022[176](index=176&type=chunk) [NOTE 12—DERIVATIVE INSTRUMENTS](index=47&type=section&id=NOTE%2012%E2%80%94DERIVATIVE%20INSTRUMENTS) This note describes the use of interest rate futures to manage fair value variability - The Company uses **interest rate futures** to economically manage fair value variability of fixed rate assets[177](index=177&type=chunk) Derivative Instruments Outstanding (in thousands) | Contract Type | March 31, 2023 Fair Value Liability | Remaining Maturity (years) | |:---|:---|:---| | 5-year Swap Futures | $624 | 0.25 | Net Realized Gains (Losses) and Unrealized Appreciation (Depreciation) on Derivatives (in thousands) | Contract Type | Q1 2023 Unrealized Appreciation/(Depreciation) | Q1 2023 Realized Gain/(Loss) | Q1 2022 Unrealized Appreciation/(Depreciation) | Q1 2022 Realized Gain/(Loss) | |:---|:---|:---|:---|:---| | 5-year Swap Futures | $197 | $(693) | $183 | $445 | [NOTE 13—COMMITMENTS AND CONTINGENCIES](index=48&type=section&id=NOTE%2013%E2%80%94COMMITMENTS%20AND%20CONTINGENCIES) This note outlines operating commitments, legal matters, guarantees, and unfunded commitments Operating and Employment Commitments (in thousands) | Year | Operating Leases | Employment Agreements | Total | |:---|:---|:---|:---| | 2023 | $2,163 | $2,131 | $4,294 | | 2024 | $2,820 | $363 | $3,183 | | 2025 | $2,585 | — | $2,585 | | 2026 | $2,035 | — | $2,035 | | 2027 | $479 | — | $479 | | Total | $10,082 | $2,494 | $12,576 | - The Company is a guarantor on several credit facilities, including SPV I Capital One (**$19.3 million** owed), SPV II Deutsche Bank (**$7.1 million** owed), SPV III One Florida Bank (**$13.7 million** owed), and the Webster Facility (**$39.9 million** outstanding)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) - Unfunded commitments as of March 31, 2023, totaled **$110.4 million**, comprising $14.3 million in SBA 7(a) loans, $81.7 million in SBA 504 loans, and $14.4 million in commercial and industrial loans[189](index=189&type=chunk) [NOTE 14—STOCK BASED COMPENSATION](index=49&type=section&id=NOTE%2014%E2%80%94STOCK%20BASED%20COMPENSATION) This note details the company's stock-based compensation plan and related expenses - The Company accounts for equity-based compensation using the **fair value method** (ASC Topic 718)[190](index=190&type=chunk) - As of March 31, 2023, **$5.1 million** of total unrecognized compensation expense related to unvested restricted shares is expected to be recognized over a weighted-average period of approximately **2.3 years**[192](index=192&type=chunk) - Total stock-based compensation expense for Q1 2023 was **$0.7 million**, compared to $0.8 million for Q1 2022[193](index=193&type=chunk) - The Equity Incentive Plan was **terminated in April 2023**, with a new plan to be considered by shareholders[192](index=192&type=chunk) [NOTE 15—EARNINGS PER SHARE](index=51&type=section&id=NOTE%2015%E2%80%94EARNINGS%20PER%20SHARE) This note presents the earnings per share calculations using the two-class method Earnings Per Share Calculation (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Net income | $11,718 | $9,652 | | Net income available to common shareholders | $11,469 | $9,652 | | Basic EPS | $0.46 | $0.40 | | Weighted average shares outstanding | 24,609 | 24,156 | | Total adjustments to weighted average shares outstanding | 628 | — | | Diluted weighted average shares outstanding | 25,237 | n/a | | Diluted EPS | $0.46 | n/a | - The Company issued 20,000 shares of Series A Convertible Preferred Stock for **$20.0 million**, convertible into 47.54053782 shares of Common Stock per preferred share[195](index=195&type=chunk) - Warrants were issued to purchase **47,540 shares** of Common Stock at $21.03468 per share[195](index=195&type=chunk) [NOTE 16—LEASES](index=51&type=section&id=NOTE%2016%E2%80%94LEASES) This note details the company's operating lease liabilities recognized under ASC 842 - Operating lease expense is recognized on a **straight-line basis** over the lease term (ASC 842)[196](index=196&type=chunk) Operating Lease Information | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | |:---|:---|:---| | Cash paid for amounts included in lease liabilities | $709 | $461 | | Weighted-average remaining lease term | 3.63 years | 4.91 years | | Weighted-average discount rate | 5.64 % | 4.76 % | | Total lease costs | $949 | $239 | Maturity of Lease Liabilities (in thousands) | Year | Amount | |:---|:---| | 2023 | $2,163 | | 2024 | $2,820 | | 2025 | $2,585 | | 2026 | $2,035 | | 2027 | $479 | | Thereafter | — | | Total future minimum lease payments | $10,082 | | Less: Imputed interest | $(938) | | Present value of future minimum lease payments | $9,144 | [NOTE 17—DIVIDENDS AND DISTRIBUTIONS](index=52&type=section&id=NOTE%2017%E2%80%94DIVIDENDS%20AND%20DISTRIBUTIONS) This note summarizes the company's dividend declarations and distributions for the quarter Dividend Declarations and Distributions | Period | Date Declared | Amount Per Share | Cash Distribution (in thousands) | DRIP Shares Issued | DRIP Shares Value (in thousands) | |:---|:---|:---|:---|:---|:---| | Three months ended March 31, 2023 | February 27, 2023 | $0.18 | $4,291 | 6 | $72 | | Three months ended March 31, 2022 | December 20, 2021 | $0.65 | $15,361 | 9 | $225 | - An additional **$0.1 million** in shares were issued for dividends on unvested restricted stock awards in both Q1 2023 and Q1 2022[200](index=200&type=chunk) [NOTE 18—INCOME TAXES](index=52&type=section&id=NOTE%2018%E2%80%94INCOME%20TAXES) This note explains the significant change in the company's income tax status - The Company ceased to be a RIC and became subject to **corporate-level income tax** as a financial holding company starting January 1, 2023[204](index=204&type=chunk)[348](index=348&type=chunk) - The effective tax rate for Q1 2023 was **(71.41)%**, differing from the 21% federal rate due to subsidiary net operating losses and other discrete items[207](index=207&type=chunk) - At December 31, 2022, the Company had **$34.2 million** in federal net operating losses (NOLs), with $4.6 million expiring between 2029-2037 and $29.6 million having indefinite lives[208](index=208&type=chunk) - Deferred tax liabilities were **$3.5 million** at March 31, 2023, down from $19.2 million at December 31, 2022, reflecting the accounting change[346](index=346&type=chunk) [NOTE 19—SEGMENTS](index=53&type=section&id=NOTE%2019%E2%80%94SEGMENTS) This note outlines the company's four reportable operating segments and their financial results - The Company operates four reportable segments: **Banking, Non-Bank SBA 7(a) Lending (NSBF), Payments, and Technology**[211](index=211&type=chunk) - The Banking segment includes Newtek Bank, NBL, and SBL, originating and servicing various loans and offering depository services[211](index=211&type=chunk)[288](index=288&type=chunk) - The NSBF segment relates to legacy SBA 7(a) loan portfolios held outside the bank, with **no new origination activity**[212](index=212&type=chunk) Segment Net Income (Loss) for Q1 2023 (in thousands) | Segment | Net Income (Loss) | |:---|:---| | Banking | $(2,483) | | Technology | $182 | | NSBF | $13,547 | | Payments | $2,664 | | Corporate and other | $(2,193) | | Consolidated net income | $11,718 | [NOTE 20—SUBSEQUENT EVENTS](index=55&type=section&id=NOTE%2020%E2%80%94SUBSEQUENT%20EVENTS) This note details the NSBF Wind-down Agreement and Newtek Bank's new lending status - On April 13, 2023, NSBF and the SBA entered an agreement for NSBF to **wind down its SBA 7(a) loan originations**, transitioning them to Newtek Bank[219](index=219&type=chunk) - NSBF will continue to own, service, and liquidate its existing SBA 7(a) and PPP loan portfolio, subject to SBA approval for sales/transfers[219](index=219&type=chunk) - Newtek Bank received **Preferred Lenders Program (PLP) status** on April 27, 2023, granting it delegated authority for SBA-guaranteed loans[219](index=219&type=chunk) - The Company has guaranteed NSBF's obligations to the SBA and agreed to fund a **$10 million** account to secure these obligations[219](index=219&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results, highlighting its transformation [Forward-Looking Statements](index=56&type=section&id=Forward-Looking%20Statements) This section cautions that the report contains forward-looking statements involving risks - Statements in the report that are not historical facts are **forward-looking** and involve substantial risks and uncertainties[221](index=221&type=chunk) - Forward-looking statements relate to future operating results, business prospects, contractual arrangements, economic dependence, ability to achieve objectives, liquidity, and compliance costs as a financial holding company[222](index=222&type=chunk) - Risks include economic downturns, credit market contractions, interest rate volatility, and impacts from global macroeconomic and geopolitical environments[222](index=222&type=chunk) [Executive Overview](index=57&type=section&id=Executive%20Overview) The company became a financial holding company after acquiring Newtek Bank in January 2023 - As of January 6, 2023, NewtekOne became a **financial holding company**, providing business and financial solutions to the SMB market, following the acquisition of NBNYC (Newtek Bank)[224](index=224&type=chunk) - The Company withdrew its BDC election and ceased to be a RIC, now subject to **Federal Reserve supervision** and corporate income tax[224](index=224&type=chunk)[227](index=227&type=chunk) - NSBF, historically a top SBA 7(a) lender, is winding down operations, with originations transitioning to Newtek Bank, which has **PLP status** for expedited loan processing[228](index=228&type=chunk)[229](index=229&type=chunk) [Economic Developments](index=59&type=section&id=Economic%20Developments) The company faces risks from supply chain issues, inflation, and financial market instability - The Company observes supply chain interruptions, labor shortages, commodity inflation, rising interest rates, and financial market instability[230](index=230&type=chunk) - Concerns about banking organizations' financial condition, including recent bank failures (e.g., **Silicon Valley Bank, Signature Bank**), may increase market volatility and adversely affect the Company's stock and operations[231](index=231&type=chunk) - A protracted recession could impair subsidiaries' operations and borrowers' ability to repay, potentially increasing defaults[230](index=230&type=chunk) [Income and Expenses](index=59&type=section&id=Income%20and%20Expenses) Income is generated from interest, loan sales, dividends, and fees from various services - Income for Q1 2023 was generated from interest, net gains on SBA 7(a) loan sales, dividends, electronic payment processing, servicing, and other fees[232](index=232&type=chunk) - Primary operating expenses for Q1 2023 included salaries and benefits, interest expense (including deposits), electronic payment processing, technology services, and other general and administrative costs[234](index=234&type=chunk) - Realized gains or losses on investments were recognized based on the difference between net proceeds and cost basis, while fair value changes were recorded as unrealized appreciation/depreciation[233](index=233&type=chunk) [Guarantees](index=59&type=section&id=Guarantees) The company provides guarantees on several credit facilities for its special purpose vehicles - As of March 31, 2023, the Company was a guarantor on the Receivable and Inventory Facility at NBC, with **$2.2 million** principal owed (facility repaid in April 2023)[235](index=235&type=chunk) - The Company guarantees the SPV I Capital One Facility (**$19.3 million** owed), SPV II Deutsche Bank Facility (**$7.1 million** owed), SPV III One Florida Bank Facility (**$13.7 million** owed), and the Webster Facility (**$39.9 million** outstanding)[236](index=236&type=chunk)[237](index=237&type=chunk) - As of March 31, 2023, the Company determined it was **not probable** that payments would be required under these guarantees[236](index=236&type=chunk)[237](index=237&type=chunk) [Non-Conforming Conventional Commercial Loan Program](index=60&type=section&id=Non-Conforming%20Conventional%20Commercial%20Loan%20Program) The company participates in non-conforming commercial lending through joint ventures - NCL JV, a 50/50 joint venture, **ceased funding new non-conforming conventional commercial and industrial term loans** in 2020[238](index=238&type=chunk) - TSO JV, a new joint venture formed in August 2022, intends to invest in non-conforming conventional commercial and industrial term loans to middle-market and small businesses[239](index=239&type=chunk) [Unfunded Commitments](index=60&type=section&id=Unfunded%20Commitments) The company had over $110 million in unfunded commitments at the end of the quarter - As of March 31, 2023, the Company had **$110.4 million** in unfunded commitments[240](index=240&type=chunk) - These commitments include **$14.3 million** for SBA 7(a) loans, **$81.7 million** for SBA 504 loans, and **$14.4 million** for commercial and industrial loans[240](index=240&type=chunk) [Discussion and Analysis of Financial Condition](index=60&type=section&id=Discussion%20and%20Analysis%20of%20Financial%20Condition) Total assets, deposits, and borrowings increased significantly due to the company's transformation - Total assets increased by **$250.8 million (25.1%)** to $1.2 billion at March 31, 2023, primarily due to the conversion to a financial holding company and the acquisition of Newtek Bank[241](index=241&type=chunk)[242](index=242&type=chunk) - Loans held for sale increased by **$106.5 million**, and loans held for investment at amortized cost increased by **$164.6 million**, reflecting new originations and the acquisition of Newtek Bank loans[243](index=243&type=chunk)[244](index=244&type=chunk) - Goodwill and intangibles increased by **$28.1 million**, comprising $2.3 million from the Newtek Bank acquisition and $25.8 million from consolidating previously unconsolidated portfolio companies[245](index=245&type=chunk) - Total deposits were **$247.6 million** at March 31, 2023, with no deposits at December 31, 2022, due to the Newtek Bank acquisition[247](index=247&type=chunk) - Borrowings increased by **$158.069 million** to $697.4 million, driven by increased Capital One lines of credit, consolidated bank borrowings, and new 2025 8.125% Notes[248](index=248&type=chunk) [Results of Operation](index=63&type=section&id=Results%20of%20Operation) Net income grew year-over-year, driven by higher noninterest income from consolidated entities - Net income for Q1 2023 was **$11.72 million ($0.46 diluted EPS)**, up from $9.65 million ($0.40 diluted EPS) in Q1 2022[251](index=251&type=chunk) - Net interest income increased by **$1.507 million** to $4.583 million, driven by a $10.4 million increase in loan portfolio interest income[253](index=253&type=chunk)[254](index=254&type=chunk) - Total noninterest income increased by **$20.559 million (92.5%)** to $42.787 million, largely due to consolidated technology, IT support, and electronic payment processing income[265](index=265&type=chunk)[269](index=269&type=chunk) - Total noninterest expense increased by **$24.488 million** to $39.197 million, primarily due to the consolidation of subsidiaries' salaries, benefits, and electronic payment processing costs[252](index=252&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk) - Net realized gains on sales of SBA loans decreased to **$6.5 million** in Q1 2023 from $15.3 million in Q1 2022, despite higher loan origination volume[276](index=276&type=chunk)[278](index=278&type=chunk) - Net unrealized appreciation (depreciation) on joint ventures was **$2.002 million** in Q1 2023, a significant improvement from a $(2.321) million loss in Q1 2022[284](index=284&type=chunk) [Liquidity and Capital Resources](index=71&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains liquidity through credit facilities, notes, and cash flows - Liquidity is derived from Capital One Facility, various Notes, securitization transactions, and cash flows from operations[292](index=292&type=chunk) - As of March 31, 2023, unused liquidity sources included **$8.2 million** from the Capital One facility, **$97.2 million** in interest-bearing deposits, and **$27.3 million** in unrestricted cash[314](index=314&type=chunk) - Operating activities used **$10.4 million** in cash in Q1 2023, while financing activities provided **$81.0 million**, primarily from preferred stock issuance, bank borrowings, and new 2025 8.125% Notes[317](index=317&type=chunk)[319](index=319&type=chunk) Consolidated Capital Ratios (in thousands) | Capital Ratio (March 31, 2023) | Actual Amount | Ratio | Minimum Requirement Amount | Ratio | |:---|:---|:---|:---|:---| | Tier 1 Capital (to Average Assets) | $184,667 | 16.5 % | $46,207 | 4.0 % | | Common Equity Tier 1 (to Risk-Weighted Assets) | $184,667 | 18.3 % | $45,479 | 4.5 % | | Tier 1 Capital (to Risk-Weighted Assets) | $184,667 | 18.3 % | $60,639 | 6.0 % | | Total Capital (to Risk-Weighted Assets) | $206,594 | 20.4 % | $80,852 | 8.0 % | Bank Capital Ratios (in thousands) | Capital Ratio (March 31, 2023) | Actual Amount | Ratio | Minimum Requirement Amount | Ratio | |:---|:---|:---|:---|:---| | Tier 1 Capital (to Average Assets) | $77,076 | 27.2 % | $11,325 | 4.0 % | | Common Equity Tier 1 (to Risk-Weighted Assets) | $77,076 | 34.1 % | $10,176 | 4.5 % | | Tier 1 Capital (to Risk-Weighted Assets) | $77,076 | 34.1 % | $13,568 | 6.0 % | | Total Capital (to Risk-Weighted Assets) | $79,265 | 35.1 % | $18,090 | 8.0 % | [Critical Accounting Policies and Estimates](index=78&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key estimates include fair value measurements, CECL adoption, and servicing asset valuation - **Fair value measurements** are critical, especially for investments without readily available market values, requiring significant management judgment and independent valuation firms[326](index=326&type=chunk)[331](index=331&type=chunk) - The adoption of **CECL** for allowance for credit losses is a critical policy, requiring estimates of expected credit losses over the life of loans based on past events, current conditions, and forecasts[337](index=337&type=chunk)[338](index=338&type=chunk) - Valuation of **servicing assets** at fair value involves considerable judgment, incorporating assumptions like servicing costs, discount rates, prepayment rates, and default rates[339](index=339&type=chunk) - Income recognition policies for loans, servicing income, and various fees are critical, as is the accounting for deferred tax assets and liabilities following the change in tax status[340](index=340&type=chunk)[342](index=342&type=chunk)[343](index=343&type=chunk)[346](index=346&type=chunk) [Off Balance Sheet Arrangements](index=82&type=section&id=Off%20Balance%20Sheet%20Arrangements) The company had no off-balance sheet arrangements as of the reporting date - There were **no off-balance sheet arrangements** as of March 31, 2023[355](index=355&type=chunk) [Recent Developments](index=83&type=section&id=Recent%20Developments) NSBF is winding down its SBA loan originations, which are transitioning to Newtek Bank - On April 13, 2023, NSBF and the SBA entered into an agreement for NSBF to **wind down its SBA 7(a) loan originations**, transitioning them to Newtek Bank[357](index=357&type=chunk) - NSBF will continue to own, service, and liquidate its existing SBA 7(a) and PPP loan portfolio, with the Company guaranteeing NSBF's obligations to the SBA[357](index=357&type=chunk) - Newtek Bank began funding and servicing SBA 7(a) loans in April 2023 and received **Preferred Lenders Program (PLP) status** on April 27, 2023[357](index=357&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=84&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate fluctuations and SBA secondary market availability - Principal market risks include fluctuations in **interest rates** and the availability of the **secondary market for SBA loans**[359](index=359&type=chunk) - The Company's lending rates (prime plus margin) are matched to its cost of funds (prime or LIBOR plus margin) to manage interest rate risk[360](index=360&type=chunk) - A significant change in market interest rates will materially affect income; rising rates could improve net investment income, while falling rates could reduce it more quickly than interest expense[360](index=360&type=chunk) - Secondary market conditions, especially higher interest rates, could negatively impact sale prices and premiums for guaranteed portions of SBA 7(a) loans[361](index=361&type=chunk) Estimated Changes in Net Interest Income (NII) and Economic Value of Equity (EVE) as of March 31, 2023 | Basis Point ("bp") Change in Interest Rates | Estimated Increase/Decrease in Net Interest Income (12 months beginning March 31, 2023) | Estimated Increase/Decrease in Net Interest Income (12 months beginning March 31, 2024) | Estimated Percentage Change in EVE (As of March 31, 2023) | |:---|:---|:---|:---| | +200 | 2.7% | 6.0% | 2.5% | | +100 | 1.3% | 2.8% | 1.8% | | -100 | (1.1)% | (2.8)% | 0.3% | | -200 | (2.2)% | (5.5)% | (0.6)% | [Item 4. Controls and Procedures](index=86&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023 - As of March 31, 2023, disclosure controls and procedures were evaluated and deemed **effective**, providing reasonable assurance of timely and accurate information reporting[371](index=371&type=chunk) - **No material changes** in internal controls over financial reporting occurred during the period covered by the report[372](index=372&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=87&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any litigation expected to have a material financial impact - The Company is not currently involved in any litigation matters expected to have a **material impact** on its financial condition[375](index=375&type=chunk) - Holdco 5 obtained a **$6.2 million** non-dischargeable judgment against Kerri Agee in January 2022, related to a former controlled portfolio company (BSP)[376](index=376&type=chunk) - NMS operates under a permanent injunction from the Federal Trade Commission (FTC) since October 2012 regarding certain business practices[377](index=377&type=chunk) [Item 1A. Risk Factors](index=87&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors disclosed in the 2022 Form 10-K - Readers should carefully consider risk factors discussed in the **Annual Report on Form 10-K** for the year ended December 31, 2022[378](index=378&type=chunk) - **No material changes** to the risk factors have occurred since the Annual Report on Form 10-K[378](index=378&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=87&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on unregistered equity sales through the Dividend Reinvestment Plan - The Company issues common stock not subject to Securities Act registration requirements through its **DRIP**[379](index=379&type=chunk) - For Q1 2023, **5,800 shares** valued at $0.1 million were issued under the DRIP, compared to 8,900 shares valued at $0.2 million in Q1 2022[379](index=379&type=chunk) - Additionally, **4,700 shares** valued at $0.1 million were issued in Q1 2023 for dividends on unvested restricted stock awards, compared to 4,108 shares valued at $0.1 million in Q1 2022[380](index=380&type=chunk) [Item 3. Defaults Upon Senior Securities](index=87&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - **No defaults** upon senior securities occurred[381](index=381&type=chunk) [Item 4. Mine Safety Disclosures](index=87&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company - No mine safety disclosures are **applicable**[382](index=382&type=chunk) [Item 5. Other Information](index=87&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item for the period - **No other information** to report[383](index=383&type=chunk) [Item 6. Exhibits](index=88&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q report - Exhibits include Amended and Restated Articles of Incorporation, Bylaws, Articles Supplementary, Investor Rights Agreement, and Registration Rights Agreement[384](index=384&type=chunk) - Certifications by the Principal Executive Officer and Principal Financial Officer are filed herewith (31.1*, 31.2*, 32.1**, 32.2**)[384](index=384&type=chunk) - **Interactive Data Files (XBRL)** for financial statements and notes are included[384](index=384&type=chunk) [Signatures](index=89&type=section&id=Signatures) The report is certified by the company's authorized officers as of May 11, 2023 - The report is signed by **Barry Sloane**, Chief Executive Officer, President and Chairman of the Board (Principal Executive Officer)[388](index=388&type=chunk) - The report is signed by **Nicholas Leger**, Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer)[388](index=388&type=chunk) - The report was signed on **May 11, 2023**[388](index=388&type=chunk)

NewtekOne, Inc. (NASDAQ:NEWT) Q1 2023 Earnings Conference Call May 9, 2023 8:30 AM ET Company Participants Barry Sloane - President and Chief Executive Officer Nicholas Leger - Chief Accounting Officer Conference Call Participants Crispin Love - Piper Sandler Christopher Nolan - Ladenburg Thalmann & Co Bryce Rowe - B. Riley Paul Johnson - KBW Scott Sullivan - RJ Sean-Paul Adams - Raymond James Steven Nemo - Private Investor Operator Good day, welcome to the Newtek One, Inc. First Quarter 2023 Earnings Confe ...