NewtekOne Inc
For the period ended Mar 31, 2025. Filed May 12, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 12, 2025
NEWT$10.70+0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001587987-24-000237
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-12.
0001587987-25-000084
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 283 previous paragraphs and 263 current paragraphs.
111 unchanged; 75 reworded; 76 added; 69 removed; 28 previous and 1 current paragraphs rearranged.
Tables are not compared: 35 previous and 26 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (76)
Current report
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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Forward-Looking Statements
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The matters discussed in this report, as well as in future oral and written statements by Company management that are forward-looking statements, are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our industry, our beliefs, and our assumptions. Words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or variations of these words and similar expressions are intended to identify forward-looking statements. Important assumptions include our ability to originate new investments, achieve certain margins and levels of profitability, the availability of additional capital, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, including recent economic and market events and unrelated bank failures and declines in depositor confidence in certain types of depository institutions, the inclusion of a projection or forward-looking statement in this report should not be regarded as a representation by us that our plans or objectives will be achieved. The forward-looking statements contained in this report, including the documents we incorporate by reference, involve risks and uncertainties, including statements as to:
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•our future operating results;
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•our business prospects and the prospects of our subsidiaries;
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•our contractual arrangements and relationships with third parties;
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•the dependence of our future success on the general economy and its impact on the industries in which we and our borrowers operate;
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•the ability of our business to achieve its objectives;
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•the impact of a protracted decline in the liquidity of credit markets on our business;
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•the adequacy of our cash resources and working capital;
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•our ability to operate as a financial holding company and our ability to operate our subsidiary Newtek Bank, a national bank regulated and supervised by the OCC, and the increased compliance and other costs associated with such operations;
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•our ability to adequately manage liquidity, deposits, capital levels and interest rate risk;
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•the timing of cash flows, if any, from the operations of our subsidiaries;
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These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in any and all of the forward-looking statements, including without limitation:
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•an economic downturn, which could impair our subsidiaries’ ability to continue to operate or repay their borrowings, which could adversely affect our results;
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•a contraction of available credit and/or an inability to access the equity markets could impair our lending and business activities;
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•impacts to financial markets and the global macroeconomic and geopolitical environment, including higher inflation, tariffs and their impacts;
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•higher interest rates and the impacts on macroeconomic conditions and our funding costs;
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•changes to the SBA 7(a) loan program, including recent revisions to SBA Standard Operating Procedure (“SOP”); and
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•the risks, uncertainties and other factors we identify in “Risk Factors” and elsewhere in this report and in our filings with the SEC, including the documents we incorporate by reference.
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The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this report. In addition to historical information, the following discussion and other parts of this report contain forward-looking information that involves risks and uncertainties. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include the ability of Newtek Bank to originate loans under the SBA 7(a) program, maintain PLP status, sell SBA guaranteed portions of SBA 7(a) loans at premiums and grow deposits; our ability to originate new loans; our subsidiaries’ ability to generate revenue and obtain and maintain certain margins and levels of profitability; and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this report, including the documents that we incorporate by reference herein, should not be regarded as a representation by us that our plans and objectives will be achieved. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under Part II “Item 1A. Risk Factors” of this quarterly report on Form 10-Q and “Item 1A. Risk Factors” of our 2024 Form 10-K, and in any subsequent filings we have made with the SEC that are incorporated by reference into this report.
Current report
You should not place undue reliance on these forward-looking statements, which apply only as of the date of this report. And while we believe such information forms, or will form, a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely on these statements. Any forward-looking statements made by or on behalf of the Company speak only as to the date they are made, and the Company does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made, except as required by applicable law.
Current report
We are a financial holding company owning a branchless OCC nationally chartered bank. In 2023, we converted to a financial holding company from a BDC and a non-bank lender (see below). Our target market is owners and prospective owners of SMBs and our services are offered online and in some cases delivered and fulfilled by our staff via video and voice calls. We offer lending products, FDIC insured deposit products and services, payments processing, payroll services and insurance brokerage services. We source our business through our alliance partner network and our marketing database, which is facilitated through our patented NewTracker® platform. Our loan products include SBA 7(a), ALP, SBA 504, and traditional C&I and CRE bank loans. Our deposit products primarily include consumer high yield savings accounts, high yield certificates of deposit, zero-fee business checking, and business money market accounts. We offer business and financial solutions under the Newtek® and NewtekOne® brands to the independent business owner (SMB) market.
Current report
Our process to extend credit to borrowers begins with technology but finishes with credit committee approval. We record CECL reserves on loans held for investment at amortized cost, which for unguaranteed SBA 7(a) loans exceeds 6%. For SBA7(a) loans, we hold the unguaranteed portion and sell the portion guaranteed by the SBA, typically within thirty to forty-five days of origination (or we may hold the guaranteed portions for longer periods), for premiums that have historically generally exceeded 10%, depending on loan characteristics and market conditions. Unlike traditional financial and bank holding companies, the majority of our income is driven and influenced by noninterest income, specifically gains on sales and market value adjustments on loans. We sell certain loans servicing retained, in which case we record a servicing asset that increases our gain on sale and provides a stream of future income to the extent the loan balance continues to be outstanding.
Current report
We fund our activities at Newtek Bank primarily through the aforementioned deposit products. We also offer loans outside of our bank (primarily ALP loans that have been funded by our JVs and our non-bank subsidiary Newtek ALP Holdings) that are initially funded with lines of credit and hedged until a sufficient volume is attained at which time the loans are securitized. We are required by law to hold risk retention in securitization transactions, and the majority of our interests in securitizations are designed to absorb first loss on the loans held in the securitization trusts. Historically, we have participated in joint ventures as additional sources of funding and risk diversification for our ALP loans, and these joint ventures have also securitized their loans. We have also continued to actively issue bonds in the public and private capital markets.
Current report
We are subject to the regulation and supervision of the Federal Reserve and the Federal Reserve Bank of Atlanta. In addition Newtek Bank is regulated by the OCC and we are required to follow SBA rules and guidelines in the origination, servicing and sale of our SBA loans. Complying with this level of regulation requires investments in technology and process and personnel costs.
Current report
We have observed and continue to observe commodity inflation, rising interest rates, unrelated bank failures and declines in depositor confidence in certain types of depository institutions. In addition, the conflicts in the Middle East and the war between Russia and Ukraine, and resulting market volatility, could adversely affect our business, financial condition or results of operations. The ongoing conflicts have negatively affected the global economy and business activity and could have a material adverse effect on our business, financial condition, cash flows and results of operations. The severity and duration of conflicts and their impact on global economic and market conditions are impossible to predict. In 2024, numerous elections were held globally, including the recent U.S. presidential election. The outcomes of the elections are expected to result in changes in policy, which could also have adverse effects on us or the business environment in which we operate more generally. For example, the new U.S. presidential administration has imposed or increased tariffs, including on imports from China, and proposed imposing or increasing tariffs on U.S. trading partners, which could adversely affect markets, the business environment and our business. Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our common shares and/or debt securities to decline. We monitor developments and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so.
Current report
Loans HFS, at fair value increased $175.7 million during the three months ended March 31, 2025. The overall increase was primarily the result of holding guaranteed portions of SBA 7(a) loans for longer periods of time as well as new loan originations during the first quarter of 2025, in the amount of $82.0 million for ALP loans and $93.7 million in SBA loans.
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1 Reclassified from Loans held for sale, at LCM.
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1 Reclassified to Loans held for sale, at fair value.
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The table below presents detail of the Company’s Goodwill and intangibles:
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2 At March 31, 2025 and December 31, 2024, the carrying amount of Newtek Bank’s FHLB borrowings includes a $0.03 million and $0.04 million purchase accounting adjustment, respectively.
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3 On March 31, 2025, the 2025 5.00% Notes matured.
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4 Effective December 11, 2024, the Company entered into the Agreements with each of the holders of the 2025 8.125% Notes, pursuant to which the Company and the holders of the 2025 8.125% Notes agreed to exchange the 2025 8.125% Notes for the 2027 Notes.
Current report
The net decrease in net income before taxes was due to a $9.5 million increase of provision for credit losses, a $4.3 million increase of interest expense on deposits, and a $3.0 million decrease in noninterest income primarily related to the sale of NTS (refer to NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION: Sale of NTS), partially offset by a $9.5 million increase of interest income on loans. Below is a summary of changes in the components of Net income:
Current report
In response to market conditions and consistent with its business plan, Newtek Bank has been focused on increasing its liquidity position by raising additional deposits and maintaining a significant portion of its liquidity in the form of cash held at the Federal Reserve, approximately $259.3 million as of March 31, 2025, as opposed to long-term investments. In addition, Newtek Bank management continues to closely monitor market conditions with a focus on its asset liability management policies, as well as closely monitoring, among other things, capital levels, to ensure compliance with regulatory guidelines and the OCC Operating Agreement.
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2 On March 31, 2025, the 2025 5.00% Notes matured.
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3 Effective December 11, 2024, the Company entered into the Agreements with each of the holders of the 2025 8.125% Notes, pursuant to which the Company and the holders of the 2025 8.125% Notes agreed to exchange the 2025 8.125% Notes for the 2027 Notes.
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6 On September 16, 2024, the Company completed a public offering of $75.0 million aggregate principal amount of 8.625% notes due 2029. The Notes will mature on October 15, 2029. The Notes bear interest at a rate of 8.625% per year, payable quarterly on January 15, April 15, July 15, and October 15 each year, commencing on January 15, 2025.
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7 On March 19, 2025, the Company completed an exempt offering of $30.0 million aggregate principal amount of notes due 2030. The Notes will mature on April 1, 2030. The Notes bear interest at a rate of 8.375% per year, payable semiannually on April 1 and October 1 each year, commencing on October 1, 2025.
Showing the first 40 of 76 passages. Open the source sections for the rest.
Removed paragraphs (69)
Previous report
We have observed and continue to observe supply chain interruptions, significant labor and resource shortages, commodity inflation, rising interest rates, unrelated bank failures and declines in depositor confidence in certain types of depository institutions. Additionally geopolitical events, such as trade disruptions, the ongoing war between Russia and Ukraine, conflict in the Middle East, rising tensions in Asia, and elements of political, economic and financial market instability in the United States, the United Kingdom, the European Union and China have led to increased economic uncertainty. One or more of these factors may contribute to increased market volatility, may have long term effects in the United States and worldwide financial markets, and may cause economic uncertainties or deterioration in the United States and worldwide. Additionally, in the event that the U.S. economy enters into a protracted recession, it is possible that the businesses and industries in which our customers operate and to which we lend to could experience deterioration, which could ultimately lead to difficulty in meeting debt service requirements and an increase in defaults. While we are not seeing signs of an overall, broad deterioration in our operating results at this time, there can be no assurance that the performance of certain of our subsidiaries and our current and prospective borrowers will not be negatively impacted by economic conditions, which could have a negative impact on our future results.
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The Company’s Alternative Lending Program (ALP)
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Unfunded Commitments
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At September 30, 2024, the Company had $102.5 million of unfunded commitments consisting of $17.5 million in connection with its SBA 7(a) loans, $73.4 million in connection with its SBA 504 loans, and $11.6 million relating to commercial and industrial loans. The Company funds these commitments from the same sources it uses to fund its other loan commitments.
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1 As of September 30, 2024, the assets of the Technology segment are classified as held-for-sale. See NOTE 9—ASSETS AND LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS HELD FOR SALE for more information.
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Servicing Assets
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1 Net of deferred financing costs.
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Comparison of the nine months ended September 30, 2024 and 2023
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As disclosed in our 2023 Form 10-K, the Company’s prior year condensed, comparative financial statements have been adjusted to correct errors made in the Company’s financial statements previously issued for the first, second, and third quarters of 2023. Results for the nine months ended September 30, 2023 are presented as restated. Refer to our 2023 Form 10-K for further detail.
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For the nine months ended September 30, 2024, the Company reported net income of $32.5 million, or $1.26 per basic and diluted share, compared to net income of $36.5 million, or $1.46 per basic and diluted share, for the nine months ended September 30, 2023.
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The decrease in net income was attributable to income tax benefit on the realization of deferred tax assets in 2023 when the Company converted to an FHC. Below is a summary of changes in the components of Net income:
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For the nine months ended September 30, 2024 and 2023, there was a provision for credit losses of $16.7 million and $7.3 million, respectively. The increase was due to an increase in loans held for investment at amortized cost, specifically SBA 7(a) loans, as well as a sequential build of the ACL year over year due to higher growth in SBA 7(a) loans in the nine months ended September 30, 2024 versus the comparable period in 2023.
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Loan Servicing Asset Revaluation
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Servicing Income, Net of Amortization
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Net gains on sales of loans for the nine months ended September 30, 2024 and 2023 were as follows:
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Technology and IT support income decreased by $4.2 million from $18.5 million for the nine months ended September 30, 2023 to $14.3 million for the nine months ended September 30, 2024. The overall decrease was due to a decrease in web hosting and IT support revenue.
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The increase in salaries and employee benefits was primarily attributable to an increase in entity headcount from 529 employees at September 30, 2023 to 570 employees at September 30, 2024, as well as an increase in the bonus pool accrual.
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The increase in professional services expense period over period is primarily attributable to additional audit fees related to the completion of the Company’s first annual audit as a financial holding company after the Acquisition of NBNYC and related audit services, including internal and external audit of controls and procedures, as well as costs associated with the anticipated NTS disposition.
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Origination and loan processing expenses during the nine months ended September 30, 2024, was $9.4 million compared to $6.9 million for the nine months ended September 30, 2023. During the first quarter of 2024, the majority of loans were funded by Newtek Bank, which accounts for loans at amortized cost, net of deferred fees and costs, resulting in a portion of the loan origination fees being deferred and amortized over the life of the loan, compared to the first quarter of 2023, when most loans were funded by NSBF, which accounts for loans at fair value and expenses all origination fees at the time they are incurred.
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Technology (NTS) provides website hosting, dedicated server hosting, cloud hosting, web design and development, internet marketing, e-commerce, data storage, backup and disaster recovery, and other related services including consulting and implementing technology solutions for enterprise and commercial clients across the U.S. As a result of commitments made to the Federal Reserve, the Company will divest or otherwise terminate the activities conducted by NTS by January 6, 2025, subject to any extension.
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Results of Operations
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As disclosed in our 2023 Form 10-K, the Company’s prior year condensed, comparative financial statements have been adjusted to correct errors made in the Company’s financial statements previously issued for the first, second, and third quarters of 2023. Results for the three months ended September 30, 2023 are presented as restated. Refer to our 2023 Form 10-K for further detail.
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Summary
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The increase in net income was attributable to the following items:
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Net Interest Income
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Interest Income
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Other interest earning assets: The $0.7 million decrease in interest income from other interest earnings assets was attributable to a decrease in the average quarterly outstanding balance of interest-earning balances in other banks.
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Interest Expense
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The increase in interest expense period over period is primarily due to the Company’s continued growth in deposits that increased interest expense by $2.1 million. In addition, there was additional interest expense on the 2028, 2029 8.50%, and 2029 8.625% Notes of $0.6 million, $1.7 million and $0.3 million, respectively. The increase was partially offset by a reduction in Notes payable - Securitization Trusts of $1.7 million, the 2024 Notes of $0.4 million, and Bank notes payable interest of $0.9 million.
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Provision for Credit Losses
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Net Interest Income and Margin
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Rate/Volume Analysis
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Non-Interest Income
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Loan Servicing Asset Revaluation
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The increase in loan servicing asset revaluation is due to the runoff of the servicing asset since NSBF is no longer originating loans during its wind-down of operations.
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Servicing Income, Net of Amortization
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For the three months ended September 30, 2024, the average sale price as a percent of principal balance was 110.78% compared to 109.73% for the prior period. The increase in sales prices in 2024 resulted from higher demand. The increase in overall net gains on sales of loans resulted from higher volumes of sales at better market premiums compared to the prior year and the expectation of lower interest rates which would slow prepay speeds.
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Technology and IT Support Income
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Technology and IT support income decreased by $2.1 million from $5.4 million for the three months ended September 30, 2023 to $3.3 million for the three months ended September 30, 2024. The overall decrease was due to a decrease in web hosting and IT support revenue.
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Other Noninterest Income
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Reworded paragraphs (75)
Previous wording
As of January 6, 2023, we are a financial holding company that, together with our consolidated subsidiaries, provides a wide range of business and financial solutions under the Newtek® and NewtekOne® brands to the independent business owner (SMB) market. Effective January 6, 2023, following authorization by our shareholders, we withdrew our previous election to be regulated as a BDC under the 1940 Act. Prior to such time, we operated as a BDC under the 1940 Act. Contemporaneously with withdrawing our election to be regulated as a BDC, on January 6, 2023, we completed the Acquisition of NBNYC, a national bank regulated and supervised by the OCC, pursuant to which we acquired from NBNYC’s shareholders all of the issued and outstanding stock of NBNYC. NBNYC has been renamed Newtek Bank and has become our wholly owned bank subsidiary. In connection with the completion of the Acquisition, we contributed to Newtek Bank $31 million of cash and two of our subsidiaries, NBL and SBL (subsequently, NBL was merged into SBL). As a result of the Acquisition, we are now a financial holding company subject to the regulation and supervision of the Federal Reserve and the Federal Reserve Bank of Atlanta. We no longer qualify as a RIC under Subchapter M of the Code for federal income tax purposes and no longer qualify for accounting treatment as an investment company. As a result, in addition to Newtek Bank and its consolidated subsidiary SBL, the following former portfolio companies and subsidiaries are now consolidated non-bank subsidiaries in our financial statements: NSBF; NMS; Mobil Money; NBC; PMT; NIA; TAM; NALH; NCL; NTS and POS. In addition, as a result of commitments made to the Federal Reserve, we agreed to divest or otherwise terminate the activities conducted by NTS by January 6, 2025, subject to any extension. As a result of the Company’s entry into the NTS Sale Agreement and the Company’s anticipation to divest of NTS, the Company has reported NTS as Held for Sale as of September 30, 2024. See“Item 1A. Risk Factors – Risks Related to Operating as a Financial Holding Company –We are subject to extensive regulation and supervision as a financial holding company, which may adversely affect our business.” See NOTE 9—ASSETS AND LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS HELD FOR SALE.
Current wording
As of January 6, 2023, we are a financial holding company that, together with our consolidated subsidiaries, provides a wide range of business and financial solutions under the Newtek® and NewtekOne® brands to the independent business owner (SMB) market. Effective January 6, 2023, following authorization by our shareholders, we withdrew our previous election to be regulated as a BDC under the 1940 Act. Contemporaneously with withdrawing our election to be regulated as a BDC, on January 6, 2023, we completed the Acquisition of NBNYC, a national bank regulated and supervised by the OCC, pursuant to which we acquired from NBNYC’s shareholders all of the issued and outstanding stock of NBNYC. NBNYC has been renamed Newtek Bank and has become our wholly owned bank subsidiary. As a result of the Acquisition, we are now a financial holding company subject to the regulation and supervision of the Federal Reserve and the Federal Reserve Bank of Atlanta. We no longer qualify as a RIC under Subchapter M of the Code for federal income tax purposes and no longer qualify for accounting treatment as an investment company. As a result, in addition to Newtek Bank and its consolidated subsidiary SBL, the following former portfolio companies and subsidiaries have been consolidated non-bank subsidiaries in our financial statements as of March 31, 2023: NSBF; NMS; Mobil Money; NBC; PMT; NIA; TAM; NALH; NCL; and POS. In addition, as a result of commitments made to the Federal Reserve, we divested of NTSon January 2, 2025, and, as a result, the assets, liabilities and operations of NTS were classified as held for sale as of December 31, 2024. See NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION: Sale of NTS.
Previous wording
On April 13, 2023, the Company, NSBF and the SBA entered into the Wind-down Agreement, pursuant to which NSBF has begun to wind-down its operations and NSBF’s SBA 7(a) pipeline of new loans was transitioned to Newtek Bank. During this wind-down process, NSBF will continue to own the SBA 7(a) loans and PPP Loans currently in its SBA loan portfolio to maturity, liquidation, charge-off or (subject to SBA’s prior written approval) sale or transfer. SBL will service and liquidate NSBF’s SBA loan portfolio pursuant to an SBA approved lender service provider agreement. In addition, during the wind-down process, NSBF will be subject to minimum capital requirements established by the SBA, be required to continue to maintain certain amounts of restricted cash available to meet any obligations to the SBA, have restrictions on its ability to make dividends and distributions to the Company, and remain liable to the SBA for post-purchase denials and repairs on the guaranteed portions of SBA 7(a) loans originated and sold by NSBF, from the proceeds generated by NSBF’s SBA loan portfolio. The Company has guaranteed certain of NSBF’s obligations to the SBA and has funded a $10 million account at Newtek Bank to secure these potential obligations.
Current wording
On April 13, 2023, the Company, NSBF and the SBA entered into the Wind-down Agreement, pursuant to which NSBF is winding-down its operations and NSBF’s SBA 7(a) pipeline of new loans was transitioned to Newtek Bank. During this wind-down process, NSBF continues to own the SBA 7(a) loans and PPP Loans currently in its SBA loan portfolio to maturity, liquidation, charge-off or (subject to SBA’s prior written approval) sale or transfer. SBL is servicing and liquidating NSBF’s SBA loan portfolio pursuant to an SBA approved lender service provider agreement. In addition, during the wind-down process, NSBF is subject to minimum capital requirements established by the SBA, required to continue to maintain certain amounts of restricted cash available to meet any obligations to the SBA, has restrictions on its ability to make dividends and distributions to the Company, and remains liable to the SBA for post-purchase denials and repairs on the guaranteed portions of SBA 7(a) loans originated and sold by NSBF, from the proceeds generated by NSBF’s SBA loan portfolio. The Company has guaranteed certain of NSBF’s obligations to the SBA and has funded a $10.0 million account to secure these potential obligations.
Previous wording
Prior to January 6, 2023, we operated as an internally managed non-diversified closed-end management investment company that elected to be regulated as a BDC under the 1940 Act. As a BDC under the 1940 Act we were not permitted to acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets, and we were not permitted to issue senior securities unless the ratio of our total assets (less total liabilities other than indebtedness represented by senior securities) to our total indebtedness represented by senior securities plus preferred stock, if any, was at least 150%. As of December 31 2022, our asset coverage was 169%. Although we are no longer regulated as a BDC, certain covenants in our outstanding 2026 Notes require us to maintain an asset coverage of at least 150% as long as the 2026 Notes are outstanding. See “Item 1A. Risk Factors – Risks Related to Our Notes – We are subject to 150% asset coverage requirements due to covenants contained in the indentures under which the 2026 Notes were issued.”
Current wording
Prior to January 6, 2023, we operated as an internally managed non-diversified closed-end management investment company that elected to be regulated as a BDC under the 1940 Act. As a BDC under the 1940 Act we were not permitted to acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets, and we were not permitted to issue senior securities unless the ratio of our total assets (less total liabilities other than indebtedness represented by senior securities) to our total indebtedness represented by senior securities plus preferred stock, if any, was at least 150%. As of December 31 2022, our asset coverage was 169%. Although we are no longer regulated as a BDC, certain covenants in our outstanding 2026 Notes require us to maintain an asset coverage of at least 150% as long as the 2026 Notes are outstanding. See 2024 Form 10-K, “ITEM 1A. RISK FACTORS – Risks Related to our Outstanding Indebtedness – We are subject to 150% asset coverage requirements due to covenants contained in certain of our outstanding debt.”
Previous wording
From 2012 through December 31, 2022, NSBF, a wholly-owned subsidiary, was consistently the largest non-bank SBA 7(a) lender in the U.S. based on dollar volume of loan approvals, and, as of December 31, 2022, was the third largest SBA 7(a) lender in the United States. Currently, Newtek Bank is ranked as the largest SBA 7(a) lender based on dollar volume of loans approved. Historically, NSBF structured its loans so that it could both sell the government guaranteed portions of SBA 7(a) loans and securitize the unguaranteed portions. This structure generally allowed NSBF to recover its capital and earn excess capital on each loan, typically within a year. Pursuant to the Wind-down Agreement described above, in April 2023 NSBF transitioned its SBA 7(a) loan originations to Newtek Bank and is in the process of winding down its operations and will continue to own the 7(a) Loans and PPP Loans in its SBA loan portfolio to maturity, liquidation, charge-off or (subject to SBA’s prior written approval) sale or transfer.
Current wording
From 2012 through December 31, 2022, NSBF was consistently the largest non-bank SBA 7(a) lender in the U.S. based on dollar volume of loan approvals, and, as of December 31, 2022, was the third largest SBA 7(a) lender in the United States. Currently, Newtek Bank is ranked as the second largest SBA 7(a) lender based on dollar volume of loans approved. Historically, NSBF structured its loans so that it could both sell the government guaranteed portions of SBA 7(a) loans and securitize the unguaranteed portions. This structure generally allowed NSBF to recover its capital and earn excess capital on each loan, typically within a year. Pursuant to the Wind-down Agreement described above, in April 2023 NSBF transitioned its SBA 7(a) loan originations to Newtek Bank and is in the process of winding down its operations and will continue to own the 7(a) Loans and PPP Loans in its SBA loan portfolio to maturity, liquidation, charge-off or (subject to SBA’s prior written approval) sale or transfer.
Previous wording
Additionally, we and our subsidiaries have historically provided a wide range of business and financial solutions to independent business owner relationships, including Business Lending, which includes SBA 7(a) loans, SBA 504 loans and our ALP loans, Electronic Payment Processing, Managed Technology Solutions (Cloud Computing), Technology Consulting, eCommerce, Accounts Receivable and Inventory Financing, personal and commercial lines Insurance Services, Web Services, Data Backup, Storage and Retrieval, and Payroll and Benefits Solutions to independent business owner relationships nationwide across all industries. We support the operations of our subsidiaries by providing access to our proprietary and patented technology platform, including NewTracker®, our patented prospect management software. We have historically defined independent business owners (SMBs) as companies having revenues of $1 million to $100 million, and we have generally estimated the SMB market to be over 33 million businesses in the United States. We have historically made loans and provided business and financial solutions to the SMB market through NSBF and our controlled portfolio companies (now subsidiaries). In addition, we have begun to offer the Newtek Advantage®, the One Dashboard for All of Your Business Needs®, which provides independent business owners with instant access to a team of NewtekOne business and financial solutions experts in the areas of Business Lending, Electronic Payment Processing, Managed Technology Solutions, personal and commercial lines Insurance Services and Payroll and Benefits Solutions. Moreover, we believe the Newtek Advantage provides our independent business owner clients with analytics on their businesses, as well as transactional capabilities, including free unlimited document storage, free real-time updated traffic analytics, free real-time credit card processing and chargeback batch information for merchant solutions clients and the ability for PMT clients to make payroll directly from the Newtek Advantage business portal.
Current wording
Additionally, we and our subsidiaries provide a wide range of business and financial solutions to independent business owner relationships, including Business Lending, which includes SBA 7(a) loans, SBA 504 loans, ALP loans, C&I loans, CRE loans and ABL loans; Electronic Payment Processing, personal and commercial lines Insurance Services, and Payroll and Benefits Solutions to independent business owner relationships nationwide across all industries. With the divestiture of NTS, we will no longer provide Managed Technology Solutions to our clients, however, we anticipate referring our clients to IPM for its offering of Managed Technology Solutions, and earning a finders fee pursuant to a referral promotion agreement. We support the operations of our subsidiaries by providing access to our proprietary and patented technology platform, including NewTracker®, our patented prospect management software. We have historically defined independent business owners (SMBs) as companies having revenues of $1 million to $100 million, and we have generally estimated the SMB market to be over 34 million businesses in the United States. We make loans and provide business and financial solutions to the SMB market through our bank and non-bank subsidiaries. In addition, we now offer the Newtek Advantage®, the One Dashboard for All of Your Business Needs®, which provides independent business owners with instant access to a team of NewtekOne business and financial solutions experts in the areas of Business Lending, Electronic Payment Processing, personal and commercial lines Insurance Services and Payroll and Benefits Solutions. Moreover, we believe the Newtek Advantage provides our independent business owner clients with analytics on their businesses, as well as transactional capabilities, including free unlimited document storage, free real-time updated traffic analytics, free real-time credit card processing and chargeback batch information for merchant solutions clients and the ability for PMT clients to make payroll directly from the Newtek Advantage business portal.
Previous wording
The Company has originated loans under its ALP since 2019. These loans have terms between 10 and 25 years, bear fixed interest rates that reset every five years, and have prepayment penalties. The criteria evaluated in underwriting ALP loans and the terms of these loans have been generally consistent over the ALP’s existence. Prior to July 1, 2024, the Company originated ALP loans with the intent to sell to a JV. While the Company continues to source JV partners to participate in this program, the Company could also originate ALP loans designated as HFI. The Company does not expect any significant changes to the underwriting or terms of loans in its ALP.
Current wording
The Company has originated loans under its ALP since 2019. These loans have terms between 10 and 25 years, bear fixed interest rates that reset every five years, and have prepayment penalties. The criteria evaluated in underwriting ALP loans and the terms of these loans have been generally consistent over the ALP’s existence. Prior to July 1, 2024, the Company originated ALP loans with the intent to sell the loans to a JV. While the Company continues to source JV partners to participate in this program, during the third quarter of 2024, we made the decision to originate with the intent to securitize ALP loans with our subsidiary Newtek ALP Holdings as the originator and sponsor. The Company could also originate ALP loans designated as HFI. The Company does not expect any significant changes to the underwriting or terms of loans in its ALP.
Previous wording
TSO JV: On August 5, 2022, NCL and TSO II Booster Aggregator, L.P. (“TSO II”) entered into a joint venture, TSO JV, governed by the Amended and Restated Limited Partnership Agreement for the TSO JV. NCL and TSO II each committed to contribute an equal share of equity funding to the TSO JV and each have equal voting rights on all material matters. The TSO JV intends to deploy capital over the course of time with additional leverage supported by a warehouse line of credit for the purpose of investing in ALP loans made to middle-market companies as well as small businesses. TSO JV began making investments in ALP loans during the fourth quarter of 2022. On July 23, 2024, TSO JV closed a securitization backed by ALP loans, selling $137.2 million of Class A Notes and $17.2 million of Class B Notes (collectively, the “TSO Notes”) issued by NALP Business Loan Trust 2024-1. The TSO Notes are backed by $190.5 million of collateral, consisting of Company originated ALP loans. The Class A and Class B Notes received Morningstar DBRS ratings of “A (sf)” and “BBB (high) (sf),” respectively. TSO JV ceased investing in new ALP loans in July 2024. Refer to NOTE 4—INVESTMENTS for selected financial information and a schedule of investments of TSO JV as of September 30, 2024.
Current wording
TSO JV: On August 5, 2022, NCL and TSO II Booster Aggregator, L.P. (“TSO II”) entered into a joint venture, TSO JV, with NCL and TSO II each committed to contribute an equal share of equity funding to the TSO JV and each have equal voting rights on all material matters. The TSO JV deployed capital with additional leverage supported by a warehouse line of credit for the purpose of investing in ALP loans made to middle-market companies as well as small businesses. TSO JV began making investments in ALP loans during the fourth quarter of 2022 and on July 23, 2024, closed a securitization backed by Company originated ALP loans, selling $137.2 million of Class A Notes and $17.2 million of Class B Notes issued by NALP Business Loan Trust 2024-1. The Class A and Class B Notes received Morningstar DBRS ratings of “A (sf)” and “BBB (high) (sf),” respectively. TSO JV ceased investing in new ALP loans in July 2024. Refer to NOTE 3—INVESTMENTS for selected financial information and a schedule of investments of TSO JV as of March 31, 2025.
Previous wording
Following the Acquisition, there can be no assurance regarding our continued lending prospects or operations as a financial holding company. See “Item 1A. Risk Factors – Risks Related to Operating as a Financial Holding Company – We have a limited operating history as a financial holding company.”
Current wording
Following the Acquisition, there can be no assurance regarding our continued lending prospects or operations as a financial holding company. See “ITEM 1A. RISK FACTORS – Risks Related to Operation as a Financial Holding Company – We are subject to extensive regulation and supervision as a financial holding company, which may adversely affect our business.”
Previous wording
Newtek Bank is a national bank and nationally licensed SBA lender under the federal Section 7(a) loan program, and originates, sells and services SBA 7(a) loans. Newtek Bank has been granted PLP status and is authorized to place SBA guarantees on loans without seeking prior SBA review and approval. Being a national lender with PLP status allows Newtek Bank to expedite the origination of loans since Newtek Bank is not required to present applications to the SBA for concurrent review and approval. The loss of PLP status would adversely impact our marketing efforts and ultimately our loan origination volume, which would negatively impact our results of operations. See “Item 1A. Risk Factors - Risks Related to SBA Lending - There can be no guarantee that Newtek Bank and NSBF will be able to maintain their SBA 7(a) lending licenses” and “Item 1A. Risk Factors - Risks Related to SBA Lending - A governmental failure to fund the SBA could adversely affect NSBF’s and Newtek Bank’s SBA 7(a) loan originations and our results of operations.”
Current wording
Newtek Bank is a national bank and nationally licensed SBA lender under the SBA 7(a) Program, and originates, sells and services SBA 7(a) loans. Newtek Bank has been granted PLP status and is authorized to place SBA guarantees on loans without seeking prior SBA review and approval. Being a national lender with PLP status allows Newtek Bank to expedite the origination of loans since Newtek Bank is not required to present applications to the SBA for concurrent review and approval. The loss of PLP status would adversely impact our marketing efforts and ultimately our loan origination volume, which would negatively impact our results of operations. See “ITEM 1A. RISK FACTORS - Risks Related to SBA Lending - There can be no guarantee that Newtek Bank will be able to maintain its SBA 7(a) lending license and PLP status.” and “ITEM 1A. RISK FACTORS - Risks Related to SBA Lending - A governmental failure to fund the SBA could adversely affect Newtek Bank’s SBA 7(a) loan originations and our results of operations.”
Previous wording
For the quarterly period ended September 30, 2024, we generated income in the form of interest, net gains on the sales of loans originated (which primarily include sales of SBA 7(a) and ALP loans) and related servicing assets on such sales, dividends, electronic payment processing income, technology and IT support income, servicing income, and other fee income generated by loan originations and by our subsidiaries. We originated loans that typically have terms of 10 to 25 years and bear interest at prime plus a margin. In some instances, we received payments on our loans based on scheduled amortization of the outstanding balances. In addition, we received repayments of some of our loans prior to their scheduled maturity date. The frequency or volume of these repayments fluctuated significantly from period to period. Our portfolio activity for the quarterly period ended September 30, 2024, also reflects the proceeds of sales of guaranteed portions of SBA 7(a) loans we originated. In addition, we received servicing income related to the guaranteed portions of SBA 7(a) loans which we originated and sold into the secondary market as well as on the portfolios of ALP loans owned by NCL JV and TSO JV. These recurring fees were earned daily and recorded when earned. In addition, we generated revenue in the form of loan packaging, loan prepayment, legal and late fees. We recorded such fees related to loans as other income. Distributions of earnings from our joint ventures were evaluated to determine if the distribution was income, return of capital or realized gain.
Current wording
For the quarterly period ended March 31, 2025, we generated income in the form of interest, net gains on the sales of loans originated (which primarily include sales of SBA 7(a) and ALP loans) and related servicing assets on such sales, dividends, electronic payment processing income, technology and IT support income, servicing income, and other fee income generated by loan originations and by our subsidiaries. We originated loans that typically have terms of 10 to 25 years and bear interest at prime plus a margin. In some instances, we received payments on our loans based on scheduled amortization of the outstanding balances. In addition, we received repayments of some of our loans prior to their scheduled maturity date. The frequency or volume of these repayments fluctuated significantly from period to period. Our portfolio activity for the quarterly period ended March 31, 2025, also reflects the proceeds of sales of guaranteed portions of SBA 7(a) loans we originated. In addition, we received servicing income related to the guaranteed portions of SBA 7(a) loans which we originated and sold into the secondary market as well as on the portfolios of ALP loans owned and then securitized by NCL JV and TSO JV. These recurring fees are outlined in servicing agreements and were recorded when earned. In addition, we generated revenue in the form of loan origination fees (packaging and legal fees) as well as loan prepayment and late fees. We recorded such fees related to loans held for sale as other income. Distributions of earnings from our joint ventures were evaluated to determine if the distribution was income, return of capital or realized gain.
Previous wording
We recognized realized gains or losses on loans based on the difference between (1) the net proceeds from the disposition and any servicing assets recognized and (2) the cost basis of the loan without regard to unrealized gains or losses previously recognized. We recorded current period changes in fair value of loans and assets that were measured at fair value as a component of the net change in unrealized appreciation (depreciation) on the loans or servicing assets, as appropriate, in the consolidated statements of operations.
Current wording
We recognized realized gains or losses on loans based on the difference between (1) the net proceeds from the disposition and any servicing assets recognized and (2) the cost basis of the loan without regard to unrealized gains or losses previously recognized. We recorded current period changes in fair value of loans and assets that were measured at fair value as a component of the net change in unrealized appreciation (depreciation) on the loans or servicing assets, as appropriate, as well as amortization and impairment, if any, of LCM servicing rights in the consolidated statements of operations.
Previous wording
For the quarterly period ended September 30, 2024, our primary operating expenses were salaries and benefits, interest expense including interest on deposits, electronic payment processing expense, technology services expense, origination and servicing, and other general and administrative costs, such as professional fees, marketing, referral fees, servicing costs and rent.
Current wording
For the quarterly period ended March 31, 2025, our primary operating expenses were salaries and benefits, interest expense including interest on deposits, electronic payment processing expense, loan origination and servicing expenses, and other general and administrative costs, such as professional fees, marketing, referral fees, servicing costs and rent.
Previous wording
Total assets at September 30, 2024 were $1.7 billion, an increase of $244.7 million, or 17.1%, compared to total assets of $1.4 billion at December 31, 2023.
Current wording
Total assets at March 31, 2025 were $2.1 billion, an increase of $76.8 million, or 3.7%, compared to total assets of $2.1 billion at December 31, 2024. As of December 31, 2024, the Company held the assets and liabilities of NTS for sale. Refer to NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION: Sale of NTS.
Previous wording
Loans HFS, at fair value increased $123.4 million during the nine months ended September 30, 2024, while loans HFS, at LCM increased $3.6 million during the same period. The overall increase was primarily the result of new loan originations during 2024.
Current wording
Loans HFS, at LCM decreased $23.0 million during the same period. The overall decrease was primarily the result of new loan originations during 2025, net of sales.
Previous wording
At Fair value: Loans HFI, at fair value was $394.5 million at September 30, 2024 compared to $469.8 million at December 31, 2023. The balance consists primarily of SBA 7(a) loans as well as $6.8 million of loans that the Company owns 100% as a result of originating the loan and subsequently repurchasing the guaranteed portion from the SBA. As previously discussed, NSBF ceased originating loans during 2023, resulting in the decrease in the balance of loans held for investment from December 31, 2023 to September 30, 2024, primarily due to the principal payments of existing loans held by NSBF.
Current wording
At Fair value: Loans HFI, at fair value were $346.8 million at March 31, 2025 compared to $369.7 million at December 31, 2024. The balance consists primarily of SBA 7(a) loans as well as $6.7 million of loans that the Company owns 100% as a result of originating the loan and subsequently repurchasing the guaranteed portion from the SBA. As previously discussed, NSBF ceased originating loans during 2023, resulting in the decrease in the balance of loans held for investment from December 31, 2024 to March 31, 2025, primarily due to the principal payments of existing loans held by NSBF.
Previous wording
At Amortized Cost: Loans HFI, at amortized cost consists of loans originated at Newtek Bank. The $182.2 million increase in loans HFI, at amortized cost is the result of an increase in originations for the nine months ended September 30, 2024 over 2023.
Current wording
At Amortized Cost: Loans HFI, at amortized cost consist of loans originated at or purchased by Newtek Bank. The $89.5 million increase in loans HFI, at amortized cost is the result of an increase in originations for the three months ended March 31, 2025 over 2024.
Previous wording
The Company’s loan portfolio consists of loans to independent business owners (SMBs). The Company’s Loans HFI at amortized cost and Loans HFS at LCM include a total of $284.8 million of loans, including unfunded commitments, backed by CRE and considered non-owner occupied as of September 30, 2024. The average loan-to-value for this CRE portfolio was 56.2%. The table below presents a detail of the loans considered non-owner occupied CRE that are not carried at fair value:
Current wording
The Company’s loan portfolio consists of loans to independent business owners (SMBs). The Company’s Loans HFI at amortized cost and Loans HFS at LCM include a total of $315.0 million of loans, including unfunded commitments, backed by CRE and considered non-owner occupied as of March 31, 2025. The average loan-to-value for this CRE portfolio was 57.9%.
Previous wording
1 Construction and land development includes first and second lien loans. The LTV on first lien is generally 65%. Second liens are typically taken out by the SBA following project completion and occupancy by the borrower. The LTV calculated is based on total exposure.
Current wording
1 Construction and land development includes SBA 504 first and second lien loans. The LTV on first lien is generally 65%. Second liens are typically taken out by the SBA following project completion and occupancy by the borrower. The LTV calculated is based on total exposure.
Previous wording
The change in goodwill and intangible assets for the Payments segment and NBNYC acquisition relates to amortization of intangible assets during the nine months ended September 30, 2024.
Current wording
The change in goodwill and intangible assets for the Payments segment and NBNYC Acquisition relates to amortization of intangible assets during the three months ended March 31, 2025.
Previous wording
A sensitivity analysis of the current fair value of servicing assets to adverse changes in significant assumptions as of September 30, 2024 and December 31, 2023 is as follows:
Current wording
A sensitivity analysis of the loan servicing assets at fair value to adverse changes in significant assumptions as of March 31, 2025 and December 31, 2024 is as follows:
Previous wording
Settlement receivables were $62.1 million as of September 30, 2024, a decrease of $0.1 million compared to December 31, 2023. The settlement receivable arises from the guaranteed portions of SBA 7(a) loans that were traded in the period but did not settle during the current period end and the cash was not received from the purchasing broker during the current period; the amount varies depending on loan origination volume and timing of sales at quarter end.
Current wording
Settlement receivables were $6.1 million as of March 31, 2025, a decrease of $46.4 million compared to December 31, 2024. The settlement receivable arises from the guaranteed portions of SBA 7(a) loans that were traded in the period but did not settle during the current period end and the cash was not received from the purchasing broker during the current period; the amount varies depending on loan origination volume and timing of sales at quarter end. The reduction in the settlement receivable was primarily the result of our holding guaranteed portions of SBA 7(a) loans for longer periods of time.
Previous wording
Total liabilities at September 30, 2024, were $1.4 billion, an increase of $211.9 million, or 18.0%, compared to total liabilities of $1.2 billion at December 31, 2023.
Current wording
Total liabilities at March 31, 2025, were $1.8 billion, an increase of $70.8 million, or 4.0%, compared to total liabilities of $1.8 billion at December 31, 2024.
Previous wording
Total deposits were $649.5 million at September 30, 2024, consisting of $11.0 million in non-interest bearing deposits and $638.4 million in interest bearing deposits, a $185.0 million increase from the balance as of December 31, 2023.
Current wording
Total deposits were $966.3 million at March 31, 2025, consisting of $11.9 million in non-interest bearing deposits and $954.4 million in interest bearing deposits, a $7.0 million decrease from the balance as of December 31, 2024. As of March 31, 2025 and December 31, 2024, insured deposits represent 79.1% and 80.3%, respectively.
Previous wording
Borrowings were $655.8 million at September 30, 2024, compared to $644.1 million at December 31, 2023. This increase was primarily due to a $69.5 million issuance of the 2029 8.50% Notes and a $72.5 million issuance of the 2029 8.625% Notes. These increases were partially offset by a $67.9 million reduction in the notes payable on securitization trusts, a $38.1 million redemption of the 2024 5.75% Notes, a $8.5 million paydown of the SPV I facility, a $6.5 million paydown on the SPV II facility, and a $7.4 million paydown of FHLB advances.
Current wording
Borrowings were $774.0 million at March 31, 2025, compared to $708.0 million at December 31, 2024. This increase was primarily due to a $29.3 million issuance of the 2030 Notes and $9.0 million of additional borrowings under the NMS Webster Note, as well as additional borrowings of $73.5 million, and $6.6 million on the SPV II and III facilities, respectively. These increases were partially offset by the maturity of $29.9 million of the 2025 5.00% Notes, $15.8 million reduction in the notes payable on securitization trusts, a $3.7 million repayment of borrowings on the SPV I facility, and $3.5 million in maturities of FHLB advances.
Previous wording
Comparison of the three months ended September 30, 2024 and 2023
Current wording
Set forth below is a comparison of the results of operations for the three months ended March 31, 2025 and 2024.
Previous wording
For the three months ended September 30, 2024, the Company reported net income of $11.9 million, or $0.45 per basic and diluted share, compared to net income of $10.9 million, or $0.43 per basic and diluted share, for the three months ended September 30, 2023.
Current wording
For the three months ended March 31, 2025, the Company reported net income of $9.4 million, or $0.36 per basic and $0.35 per diluted share, compared to net income of $9.7 million, or $0.38 per basic and $0.38 per diluted share, for the three months ended March 31, 2024.
Previous wording
Loans and fees on loans: The $20.0 million increase in interest income on the Company’s loan portfolio was attributable to increases in the average balances of loans HFI and HFS, which increased $170.9 million and $96.3 million, respectively, as well as the average outstanding accrual portfolio of loans held for investment increasing to $1.1 billion from $687.2 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in the average balance of loans HFS was attributable to originations of SBA 504 and ALP loans, and the increase in the average outstanding accrual loan portfolio resulted from the origination of new SBA 7(a) loans period over period.
Current wording
Loans and fees on loans: The $9.5 million increase in interest income on the Company’s loan portfolio was attributable to increases in the average balances of loans HFI and HFS, which increased $98.2 million and $255.7 million, respectively, as well as the average outstanding accrual portfolio of loans held for investment increasing to $558.8 million from $275.1 million for the three months ended March 31, 2025 and 2024, respectively. The increase in the average balance of loans HFS was attributable to originations of SBA 504 and ALP loans, and the increase in the average outstanding accrual loan portfolio resulted from the origination of new SBA 7(a) loans period over period.
Previous wording
Other interest earning assets: The $0.4 million decrease in interest income from other interest earnings assets was attributable to lower interest rates on cash and due from banks, as well as interest bearing deposits in banks, including Newtek Bank earning interest on Federal Reserve Bank cash deposits.
Current wording
Other interest earning assets: The $1.5 million increase in interest income from other interest earnings assets was attributable to higher interest rates on cash and due from banks, as well as interest bearing deposits in banks, including Newtek Bank earning interest on Federal Reserve Bank cash deposits.
Previous wording
(1) On August 1, 2024, the 2024 Notes matured.
Current wording
1 On August 1, 2024, the 2024 Notes matured.
Previous wording
(2) On August 31, 2023, the Company completed a public offering of $40.0 million aggregate principal amount of 8.00% notes due 2028. The Notes will mature on September 1, 2028. The Notes bear interest at a rate of 8.000% per year, payable quarterly on March 1, June 1, September 1, and December 1 each year, commencing on December 1, 2023.
Current wording
4 On August 31, 2023, the Company completed a public offering of $40.0 million aggregate principal amount of 8.00% notes due 2028. The Notes will mature on September 1, 2028. The Notes bear interest at a rate of 8.000% per year, payable quarterly on March 1, June 1, September 1, and December 1 each year, commencing on December 1, 2023.
Previous wording
(3) On May 30, 2024, the Company completed a public offering of $62.5 million aggregate principal amount of 8.500% notes due 2029. On June 3, 2024, the underwriters exercised their option to purchase an additional $9.4 million in aggregate principal amount of the 2029 Notes. The Notes will mature on June 1, 2029. The Notes bear interest at a rate of 8.500% per year, payable quarterly on March 1, June 1, September 1, and December 1 each year, commencing on September 1, 2024.
Current wording
5 On May 30, 2024, the Company completed a public offering of $62.5 million aggregate principal amount of 8.500% notes due 2029. On June 3, 2024, the underwriters exercised their option to purchase an additional $9.4 million in aggregate principal amount of the 2029 Notes. The Notes will mature on June 1, 2029. The Notes bear interest at a rate of 8.500% per year, payable quarterly on March 1, June 1, September 1, and December 1 each year, commencing on September 1, 2024.
Previous wording
The increase in interest expense period over period is primarily from additional interest expense on deposits of $9.0 million. The Company also completed a public offering in August 2023, resulting in an additional $2.4 million of interest relating to the 2028 Notes, and public offerings in May and September 2024, resulting in an additional $2.2 million and $0.3 million, respectively, of interest relating to the 2029 Notes. The increase is partially offset by a $0.4 million reduction in interest due to the payoff of the 2024 Notes at maturity, as well as a $4.6 million reduction in interest on bank and FHLB borrowings.
Current wording
The increase in interest expense period over period is primarily from additional interest expense on deposits of $4.3 million. The Company also completed an exempt offering in March 2019, resulting in an additional $0.1 million of interest relating to the 2030 Notes. The increase is partially offset by a $2.6 million reduction in interest due to securitization payoffs, as well as a $1.4 million reduction in interest on bank and FHLB borrowings.
Previous wording
For the three months ended September 30, 2024 and 2023, there was a provision for loan credit losses of $6.9 million and $3.4 million, respectively. The increase was due to an increase in loans held for investment at amortized cost, specifically SBA 7(a) loans, as well as a sequential build of the provision year over year.
Current wording
For the three months ended March 31, 2025 and 2024, there was a provision for credit losses of $13.5 million and $4.0 million, respectively. The increase was due to increases in net charge-offs, specific reserves on impaired loans, and balances of loans held for investment at amortized cost, across all products but specifically SBA 7(a) loans.
Previous wording
The Company accounts for servicing assets in accordance with ASC Topic 860-50 - Transfers and Servicing - Servicing Assets and Liabilities. The Company earns servicing fees from the guaranteed portions of SBA 7(a) loans it originates and sells and from servicing the ALP portfolios of NCL JV and TSO JV. Servicing assets for loans originated by the Company’s nonbank subsidiaries are measured at FV at each reporting date and the Company reports changes in the FV of servicing assets in earnings in the period in which the changes occur. The valuation model for servicing assets incorporates assumptions including, but not limited to, servicing costs, discount rate, prepayment rate, and default rate. Considerable judgment is required to estimate the fair value of servicing assets and, as such, these assets are classified as Level 3 in our fair value hierarchy. Servicing assets for loans originated by Newtek Bank are measured at LCM and amortized based on their estimated life, and impairment is recorded to the extent the amortized cost exceeds the asset’s FV.
Current wording
The Company accounts for servicing assets in accordance with ASC Topic 860-50 - Transfers and Servicing - Servicing Assets and Liabilities. The Company earns servicing fees from the guaranteed portions of SBA 7(a) loans it originates and sells, from the SBA 7(a) loan securitizations sponsored by NSBF, and from servicing the ALP portfolios in securitizations sponsored by NCL JV and TSO JV. Servicing assets for loans originated by the Company’s nonbank subsidiaries are measured at FV at each reporting date and the Company reports changes in the FV of servicing assets in earnings in the period in which the changes occur. The valuation model for servicing assets incorporates assumptions including, but not limited to, servicing costs, discount rate, prepayment rate, and default rate. Considerable judgment is required to estimate the fair value of servicing assets and, as such, these assets are classified as Level 3 in our fair value hierarchy. Servicing assets for loans originated by Newtek Bank are measured at LCM and amortized based on their estimated life, and impairment is recorded to the extent the amortized cost exceeds the asset’s FV. Net loss on loan servicing assets is shown net of amortization expense.
Previous wording
The decrease in loan servicing asset revaluation is due to the decrease in NSBF’s total portfolio of investments during the wind-down.
Current wording
The larger loss in Net loss on loan servicing assets is due to the decrease in NSBF’s total portfolio of loans during the wind-down.
Previous wording
The increase in servicing income was related to an increase of $195.1 million in the average total loan portfolio for which we earn servicing income period over period.
Current wording
The increase in servicing income was related to an increase of $49.8 million in the average total loan portfolio for which we earn servicing income period over period.
Previous wording
For the nine months ended September 30, 2024, the average sale price as a percent of principal balance was 111.00% compared to 110.17% for the prior period. The increase in sales prices in 2024 resulted from higher demand. The increase in overall net gains on sales of loans resulted from higher volumes of sales compared to the prior year at better market premiums than the prior year and the expectation of lower interest rates which would slow prepay speeds.
Current wording
For the three months ended March 31, 2025, the average sale price on SBA 7(a) loans as a percent of principal balance was 111.16% compared to 111.23% for the prior period. The decrease in sales prices in 2025 resulted from lower demand. The decrease in overall net gains on sales of loans resulted from lower volumes of sales compared to the prior year at lower market premiums than the prior year. Additionally, the decrease in SBA 7(a) guaranteed loans sold is primarily due to management holding the loans for a longer period of time.
Previous wording
During the wind-down of NSBF’s operations, NSBF will be required to continue to own its SBA 7(a) loans and PPP Loans in its SBA loan portfolio to maturity, liquidation, charge-off, or (subject to SBA’s prior written approval) sale or transfer. In addition, SBL will continue to service and liquidate NSBF’s SBA Loan Portfolio, including processing forgiveness and loan reviews for PPP Loans pursuant to an SBA approved lender service provider agreement with SBL. The Company will continue to measure NSBF’s SBA 7(a) loan portfolio at fair value until the portfolio is completely runoff. The Company will report both realized and unrealized gains and losses relating to the fair value adjustments on the legacy NSBF SBA 7(a) portfolio.
Current wording
During the wind-down of NSBF’s operations, NSBF is required to continue to own its SBA 7(a) loans and PPP Loans in its SBA loan portfolio to maturity, liquidation, charge-off, or (subject to SBA’s prior written approval) sale or transfer. In addition, SBL will service and liquidate NSBF’s SBA Loan Portfolio, including processing forgiveness and loan reviews for PPP Loans pursuant to an SBA approved lender service provider agreement with SBL. The Company will continue to measure NSBF’s SBA 7(a) loan portfolio at fair value until the portfolio is completely runoff. The Company will report both realized and unrealized gains and losses relating to the fair value adjustments on the legacy NSBF SBA 7(a) portfolio.
Previous wording
Net Gain (Loss) on Loans Accounted for under the Fair Value Option
Current wording
Net Gain (Loss) on Loans under the Fair Value Option
Previous wording
Net gain (loss) on loans accounted for under the fair value option relates to the guaranteed portions of SBA loans made which the Company sells into a secondary market, the unguaranteed portions of SBA loans made which the Company holds, SBA 504 loans that are held for sale, and ALP loans that are held for sale. This gain (loss) represents the fair value adjustment of loans. The amount of the gain (loss) is determined by the quantity of loans held for sale at quarter end, the change in secondary market pricing conditions, and the valuation of the loans that are not held for sale.
Current wording
Net unrealized gain (loss) on loans accounted for under the fair value option relates to the guaranteed portions of SBA loans made which the Company sells into a secondary market, the unguaranteed portions of SBA loans made which the Company holds, SBA 504 loans that are held for sale, and ALP loans that are held for sale. This gain (loss) represents the fair value adjustment of loans. The amount of the unrealized gain (loss) is determined by the quantity of loans held for sale at quarter end, the change in secondary market pricing conditions, and the valuation of the loans that are not held for sale.
Showing the first 40 of 75 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The table below presents detail of the loans considered non-owner occupied CRE that are not carried at fair value:
Rearranged previous paragraphs (28)
Previous report — wording carried elsewhere
The following is a summary of interest expense by facility for the nine months ended September 30, 2024 and 2023:
Previous report — wording carried elsewhere
(4) On September 16, 2024, the Company completed a public offering of $75.0 million aggregate principal amount of 8.625% notes due 2029. The Notes will mature on October 15, 2029. The Notes bear interest at a rate of 8.625% per year, payable quarterly on January 15, April 15, July 15, and October 15 each year, commencing on January 15, 2025.
Previous report — wording carried elsewhere
Net gain (loss) on loans accounted for under the fair value option for the nine months ended September 30, 2024 and 2023 were as follows:
Previous report — wording carried elsewhere
The banking segment includes Newtek Bank as well as its consolidated subsidiary SBL. The financial results include the origination, sale, and servicing of SBA 7(a) loans, 504 loans, C&I loans, CRE loans and ABL loans. In addition, the bank offers depository services. The results include $28.2 million of net interest income during the nine months ended September 30, 2024 compared to $11.1 million of net interest income during the nine months ended September 30, 2023. During the first three quarters of 2024, the majority of loans were funded by Newtek Bank compared to the first three quarters of 2023, when all SBA 7(a) loans were funded by NSBF until it went into wind-down on April 13, 2023.
Previous report — wording carried elsewhere
Payments includes NMS, POS and Mobil Money. Within the segment’s results are $39.1 million of noninterest income for the nine months ended September 30, 2024 resulting from marketing credit and debit card processing services, check approval services, processing equipment, and software, compared to $35.0 million during the nine months ended September 30, 2023. The net income also included $24.4 million and $24.0 million of noninterest expense for the nine months ended September 30, 2024 and 2023, respectively.
Previous report — wording carried elsewhere
Corporate and Other represents operations not considered to be reportable segments and/or general operating expenses of the Company, and includes the parent company, other non-bank subsidiaries including NIA, PMT, non-bank lending, including NALH (Newtek ALP Holdings) and our joint ventures, and elimination adjustments to reconcile the results of the operating segments to the consolidated financial statements prepared in conformity with GAAP.
Previous report — wording carried elsewhere
Loans and fees on loans: The $5.4 million increase in interest income on the Company’s loan portfolio was attributable to an increase in interest rates as well as the average outstanding accrual portfolio of loans held for investment increasing to $1.2 billion from $788.2 million for the three months ended September 30, 2024 and 2023, respectively. The increase in the average outstanding accrual loan portfolio resulted from the origination of new SBA 7(a) loans period over period.
Previous report — wording carried elsewhere
(1) On August 31, 2023, the Company completed a public offering of $40.0 million aggregate principal amount of 8.00% notes due 2028. The Notes will mature on September 1, 2028. The Notes bear interest at a rate of 8.000% per year, payable quarterly on March 1, June 1, September 1, and December 1 each year, commencing on December 1, 2023.
Previous report — wording carried elsewhere
(2) On May 30, 2024, the Company completed a public offering of $62.5 million aggregate principal amount of 8.50% notes due 2029, and on June 3, 2024, the underwriters exercised their option to purchase an additional $9.4 million in aggregate principal amount of the 2029 Notes. The Notes will mature on June 1, 2029. The Notes bear interest at a rate of 8.500% per year, payable quarterly on March 1, June 1, September 1, and December 1 each year, commencing on September 1, 2024.
Previous report — wording carried elsewhere
(3) On September 16, 2024, the Company completed a public offering of $75.0 million aggregate principal amount of 8.625% notes due 2029. The Notes will mature on October 15, 2029. The Notes bear interest at a rate of 8.625% per year, payable quarterly on January 15, April 15, July 15, and October 15 each year, commencing on January 15, 2025.
Previous report — wording carried elsewhere
The provision for loan and lease credit losses represents the amount necessary to be charged against the current period’s earnings to maintain the ACL on loans at a level that the Company believes is appropriate in relation to the estimated losses inherent in the loan portfolio.
Previous report — wording carried elsewhere
Average Balances and Yields. The following table presents information regarding average balances for assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amount of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing the income or expense by the average balances for assets or liabilities, respectively, for the periods presented and annualizing that result. Loan fees are included in interest income on loans.
Previous report — wording carried elsewhere
The following table sets forth the effects of changing rates and volumes on net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, increases or decreases attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.
Previous report — wording carried elsewhere
The Company accounts for servicing assets in accordance with ASC Topic 860-50 - Transfers and Servicing - Servicing Assets and Liabilities. The Company earns servicing fees from the guaranteed portions of SBA 7(a) loans it originates and sells and from servicing the ALP portfolios owned by NCL JV and TSO JV. Servicing assets for loans originated by the Company’s nonbank subsidiaries are measured at FV at each reporting date and the Company reports changes in the FV of servicing assets in earnings in the period in which the changes occur. The valuation model for servicing assets incorporates assumptions including, but not limited to, servicing costs, discount rate, prepayment rate, and default rate. Considerable judgment is required to estimate the fair value of servicing assets and as such these assets are classified as Level 3 in our fair value hierarchy. Servicing assets for loans originated by Newtek Bank are measured at LCM and amortized based on their estimated life and impairment is recorded to the extent the amortized cost exceeds the asset’s FV.
Previous report — wording carried elsewhere
The increase in servicing income was related to an increase of $143.6 million in the average total loan portfolio for which we earn servicing income period over period.
Previous report — wording carried elsewhere
Net Gains on Sales of Loans
Previous report — wording carried elsewhere
1 Realized gains greater than 110.00% must be split 50/50 with the SBA in accordance with SBA regulations. The realized gains recognized above reflect amounts net of split with the SBA.
Previous report — wording carried elsewhere
During the wind-down of NSBF’s operations, NSBF will be required to continue to own its SBA 7(a) loans and PPP Loans in its SBA loan portfolio to maturity, liquidation, charge-off, or (subject to SBA’s prior written approval), sale or transfer. In addition, SBL will continue to service and liquidate NSBF’s SBA Loan Portfolio, including processing forgiveness and loan reviews for PPP Loans, pursuant to an SBA approved lender service provider agreement. The Company will continue to measure NSBF’s SBA 7(a) loan portfolio at fair value until the portfolio is completely runoff. The Company will report both realized and unrealized gains and losses relating to the fair value adjustments on the legacy NSBF SBA 7(a) portfolio.
Previous report — wording carried elsewhere
Net Gain (Loss) on Loans Accounted for Under the Fair Value Option
Previous report — wording carried elsewhere
Net gain (loss) on loans accounted for under the fair value option relates to the guaranteed portions of SBA loans made which the Company sells into a secondary market, the unguaranteed portions of SBA loans made which the Company holds, SBA 504 loans that are HFS, and ALP loans that are HFSh. This gain (loss) represents the fair value adjustment of loans. The amount of the gain (loss) is determined by the quantity of loans HFS at quarter end, the change in secondary market pricing conditions, and the valuation of the loans that are not HFS. During the three months ended September 30, 2024, there was an increase in the gain-on-sale pricing as compared to the prior period.
Previous report — wording carried elsewhere
The $0.9 million decrease in technology services expenses for the three months ended September 30, 2024 corresponded with the $2.1 million decrease in technology and IT support income.
Previous report — wording carried elsewhere
Other Loan Origination and Maintenance Expense
Previous report — wording carried elsewhere
The decrease in depreciation and amortization period over period is primarily attributable to the full amortization of intangible assets during the second half of 2023, which results in less amortization in 2024 as compared to the prior year.
Previous report — wording carried elsewhere
The Company has four reportable segments Banking, Technology, NSBF, and Payments. A description of each segment and the methodologies used to measure financial performance is described in NOTE 19—SEGMENTS in the accompanying Notes to the Unaudited Condensed Consolidated Financial Statements. Net income (loss) by operating segment is presented below:
Previous report — wording carried elsewhere
NSBF relates to NSBF’s legacy portfolio of SBA 7(a) loans held outside Newtek Bank. The decrease in net income is due to the wind-down of NSBF’s operations.
Previous report — wording carried elsewhere
In January 2021, the Company and the Trustee entered into the Seventh Supplemental Indenture to the Base Indenture between the Company and the Trustee, relating to the Company’s issuance, offer and sale of $115.0 million aggregate principal amount of 5.50% 2026 Notes, including $15.0 million in aggregate principal amount sold pursuant to a fully-exercised overallotment option. The sale of the 2026 Notes generated proceeds of approximately $111.3 million, net of underwriter's fees and expenses. The 2026 Notes are the Company’s direct unsecured obligations and rank: (i)pari passu with the Company’s other outstanding and future unsecured indebtedness; (ii) senior to any of the Company’s future indebtedness that expressly provides it is subordinated to the 2026 Notes; (iii) effectively subordinated to all the Company’s existing and future secured indebtedness (including indebtedness that is initially unsecured to which the Company subsequently grants security), to the extent of the value of the assets securing such indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries.
Previous report — wording carried elsewhere
The 2024 Notes traded on the Nasdaq Global Market under the trading symbol “NEWTL” until the 2024 Notes matured on August 1, 2024. The 2024 Notes were also subject to BDC Covenants.
Previous report — wording carried elsewhere
Due to the inherent uncertainty of determining the fair value of our instruments that do not have a readily available market value, the fair value of the instruments may differ significantly from the values that would have been used had a readily available market value existed for such instruments and may differ materially from values that may ultimately be received or settled.