NewtekOne (NEWT) risk factors, FY2025 10-K

RISKS RELATED TO OPERATION AS A FINANCIAL HOLDING COMPANY

1. 01The banking industry is highly regulated, and the regulatory framework, together with any future legislative or regulatory changes, may have a significant adverse effect on our operations
2. 02Changes in laws, regulations, or policies may adversely affect our business34% rewritten
3. 03We are subject to extensive regulation and supervision as a financial holding company, which may adversely affect our business
4. 04We may be adversely affected by increased governmental and regulatory scrutiny or negative publicity
5. 05Failure to comply with applicable laws, regulations or commitments, or to satisfy our regulators’ supervisory expectations, could subject us to, among other things, supervisory or enforcement action, which could adversely affect our business, financial condition and results of operations
6. 06Federal law may discourage certain acquisitions of our common stock which could have a material adverse effect on our shareholders
7. 07If we are deemed to be an investment company under the Investment Company Act of 1940, we will not be able to successfully execute our business strategy

RISKS RELATED TO THE ECONOMY

1. 08Any public health emergency, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us and the fair value of our investments, our subsidiaries and our clients
2. 09Economic recessions or downturns could impair our clients and our operating results
3. 10The occurrence of recessionary conditions and/or negative developments in the domestic and international credit markets may
4. 11Inflation and changes in interest rates may adversely affect our business, results of operations and financial condition
5. 12Terrorist attacks, acts of war, global health emergencies or natural disasters may impact the businesses in which we invest and harm our business, operating results and financial condition
6. 13A failure or the perceived risk of a failure to raise the statutory debt limit of the U.S. could have a material adverse effect on our business, financial condition and results of operations
7. 14If we cannot obtain additional capital because of either regulatory or market price constraints, we could be forced to curtail or cease our new lending activities and our level of distributions and liquidity could be affected adversely

RISKS RELATED TO OUR BUSINESS AND STRUCTURE

1. 15We are dependent upon our Senior Lending Team and our executive officers for our future success, and if we are unable to hire and retain qualified personnel or if we lose any member of our Senior Lending Team or our executive officers our business could be significantly harmed
2. 16We operate in a highly competitive market for clients, which could reduce returns and result in losses
3. 17We could be adversely affected by the soundness of other financial institutions
4. 18If we are unable to acquire and process clients effectively, we may be unable to achieve our objectives
5. 19Our business model depends to a significant extent upon strong referral relationships, and our inability to maintain or further develop these relationships, as well as the failure of these relationships to generate investment opportunities, could adversely affect our business
6. 20Indebtedness could adversely affect our business and financial results
7. 21We may expose ourselves to risks as we engage in hedging transactions
8. 22We are subject to stringent capital and liquidity regulations and requirements
9. 23An inability to maintain adequate liquidity could jeopardize our business and financial condition
10. 24Our acquisitions and other strategic transactions may not yield the intended benefits
11. 25In addition, we cannot assure you that any acquisition of new businesses or technology will lead to the successful development of new or enhanced products and services or that any new or enhanced products and services, if developed, will achieve market acceptance or prove to be profitable45% rewritten
12. 26newly created series of IPM non-voting preferred stock, the Series A Non-Voting Common Equivalent Stock (the “PreferredNew
13. 27Our development and use of AI presents risks that could adversely impact our business, financial condition and results of operationsNew
14. 28Our business may be adversely affected if our risk management framework does not effectively identify, assess and mitigate risk90% rewritten
15. 29Internal control deficiencies could impact the accuracy of our financial results or prevent the detection of fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock23% rewritten
16. 30Our business is subject to increasingly complex corporate governance, public disclosure and accounting requirements that are costly and could adversely affect our business and financial results
17. 31Our clients may be concentrated in a limited number of industries, which may subject us to a risk of significant loss if there is a downturn in a particular industry in which a number of our loans are concentrated
18. 32If we and our subsidiaries are unable to protect our intellectual property rights, our business and prospects could be harmed
19. 33The development and use of Artificial Intelligence (“AI”) present risks and challenges that may adversely impact our business

RISKS RELATED TO SBA LENDING

1. 34Changes to the SBA 7(a) Program can negatively impact our SBA 7(a) loan origination volume
2. 35There can be no guarantee that Newtek Bank will be able to maintain its SBA 7(a) lending license and PLP status
3. 36NSBF will remain subject to SBA regulation as it winds down its operations21% rewritten
4. 37We have specific risks associated with our secondary market sales of the guaranteed portions of SBA loans
5. 38If NSBF or Newtek Bank fail to comply with SBA regulations in connection with the origination, servicing, or liquidation of an SBA 7(a) loan, liability on the SBA guaranty, in whole or in part, could be transferred to NSBF or Newtek Bank
6. 39Curtailment of the government-guaranteed loan programs could adversely affect our results of operations40% rewritten
7. 40Our loans under the SBA 7(a) Program involve a high risk of default and such default could adversely impact our results of operations
8. 41The loans we make under the SBA 7(a) Program face competition
9. 42A governmental failure to fund the SBA could adversely affect Newtek Bank’s SBA 7(a) loan originations and our results of operations
10. 43We could be adversely affected by weakness in the residential housing and CRE markets

RISKS RELATED TO PAYMENT PROCESSING

1. 44We could be adversely affected if any bank sponsorship is terminated
2. 45If NMS or its processors or bank sponsors fail to adhere to the standards of the Visa® and Mastercard® bankcard associations, its registrations with these associations could be terminated and it could be required to stop providing payment processing services for Visa® and Mastercard®
3. 46On occasion, NMS experiences increases in interchange and sponsorship fees. If it cannot pass along these increases to its merchants, its profit margins will be reduced
4. 47NMS is liable if its processing merchants refuse or cannot reimburse charge-backs resolved in favor of their customers
5. 48NMS has potential liability for customer or merchant fraud
6. 49NMS and others in the payment processing industry have come under increasing pressures from various regulatory agencies seeking to use the leverage of the payment processing business to limit or modify the practices of merchants which could lead to increased costs
7. 50Increased regulatory focus on the payments industry may result in costly new compliance burdens on NMS’ clients and on NMS itself, leading to increased costs and decreased payments volume and revenues
8. 51If the credit loss forecasting and scoring models we use contain errors, do not adequately assess risk, or are otherwise ineffective, our reputation and relationships with customers could be harmed, our market share could decline and the value of loans held on our balance sheet may be adversely affectedNew
9. 52If collection efforts on delinquent loans are ineffective or unsuccessful, the return on investment for investors in those loans would be adversely affected and investors may not find investing through our marketplace bank desirable

RISKS RELATED TO PAYROLL PROCESSING

1. 53Newtek Payroll and Benefit Solutions (“PMT”) is subject to risks surrounding Automated Clearing House (“ACH”) payments
2. 54PMT could incur unreimbursed costs or damages due to delays in processing inherent in the banking system

RISKS RELATED TO OUR CAPCO BUSINESS

1. 55Because our Capcos are subject to requirements under state law, a failure of any of them to meet these requirements could subject the Capco and our shareholders to the loss of one or more Capcos

RISKS RELATED TO OUR SECURITIES

1. 56Future issuances of our common stock or other securities, including preferred shares, may dilute the per share book value of our common stock or have other adverse consequences to our common shareholders28% rewritten
2. 57We may also issue additional securities, through public or private offerings, in order to raise capital. Future issuances of our common stock will dilute the percentage of ownership interest of current shareholders and could decrease the per share book value of our common stock
3. 58The authorization and issuance of “blank check” preferred shares could have an anti-takeover effect detrimental to the interests of our shareholders
4. 59Our business and operation could be negatively affected if we become subject to any securities litigation or shareholder activism, which could cause us to incur significant expense, hinder execution of investment strategy and impact our stock price
5. 60Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock

RISKS RELATED TO CYBERSECURITY

1. 61We and our third party IT servicer could be adversely affected by information security breaches or cyber security attacks
2. 62Additionally, the increased use of mobile and cloud technologies due to the increased amount of remote work could heighten these and other operational risks as certain aspects of the security of such technologies may be complex and unpredictable
3. 63The failure in cyber-security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning could impair our ability to conduct business effectively
4. 64We and our subsidiaries are subject to risks associated with “phishing” and other cyber-attack
5. 65Our common stock price may be volatile and may decrease substantially
6. 66We may experience fluctuations in our quarterly and annual results
7. 67We cannot predict how new tax legislation will affect us, our investments, or our stockholders, and any such legislation could adversely affect our business
8. 68We are subject to risks related to corporate social responsibility
9. 69The effect of global climate change may impact our operations and the operations of our subsidiaries and clients