Company: NEWTP
Filing Date: 2025-03-17
Form Type: 10-K
Source: 0001587987-25-000050
Chunk: 20

Company: NewtekOne, Inc.
Filing Date: 2025-03-17
Form: 10-K
Item: Item 7
Chunk 20
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,312 $176,772 $40,540 22.9 %

Net Loss on Loan Servicing Assets

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

The larger loss in Net loss on loan servicing assets is due to the decrease in NSBF’s total portfolio of loans during the wind-down.

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

December 31, 2024December 31, 2023Discount factorEffect on fair value of a 100 basis point adverse change$(831)$(1,050)Effect on fair value of a 200 basis point adverse change(1,604)(2,028)Cumulative prepayment rateEffect on fair value of a 100 basis point adverse change$(85)$(141)Effect on fair value of a 500 basis point adverse change(423)(706)Average cumulative default rateEffect on fair value of a 100 basis point adverse change$(72)$(149)Effect on fair value of a 500 basis point adverse change(358)(744)

The sensitivity analysis presents the hypothetical effect on fair value of the servicing assets due to the change in significant assumptions. Changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value is not linear. Additionally