What changed in this filing

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Item 1A. Risk Factors

2025-03-17 compared with 2024-04-01 · 308 added, 533 removed, 504 unchanged (63% of the section changed)

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• Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.

• We are no longer subject to regulation under the 1940 Act.

• Loss of pass-through tax treatment substantially reduces net assets and income available for dividends.

• We are subject to extensive regulation and supervision as a financial holding company, which may adversely affect our business.

• We may be adversely affected by increased governmental and regulatory scrutiny or negative publicity.

• Failure 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.

• Federal law may discourage certain acquisitions of our common stock which could have a material adverse effect on our shareholders.

• The 2023 withdrawal of the Company’s election to be regulated as a BDC resulted in a significant change in our accounting and financial reporting requirements.

• If we are deemed to be an investment company under the Investment Company Act of 194, we will not be able to be successfully execute our business strategy.

Risks Related to the Economy

• Global economic, political, social and market conditions, including uncertainty about the financial stability of the United States could have a significant adverse effect on our business, operating results and financial condition.

• Any 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.

• Economic recessions or downturns could impair our clients and our operating results.

• Inflation may adversely affect our business, operating results and financial condition.

• Terrorist 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.

• If 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 the value of our loan portfolio value could decrease and our level liquidity and distributions could be affected adversely.

• Terrorist attacks, acts of war, global health emergencies or natural disasters may impact the businesses in which we lend to and/or operate, and harm our business, operating results and financial condition.

• If 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 the value of our loan portfolio value could decrease and our level of liquidity and distributions could be affected adversely.

Risks Related to Our Business and Structure

• We 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 ability to achieve our business could be significantly harmed.

• We 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 ability to execute on our business plan could be significantly harmed.

• We could be adversely affected by the soundness of other financial institutions.

• We operate in a highly competitive market for clients, which could reduce returns and result in losses.

• If we are unable to acquire and process clients effectively, we may be unable to achieve our investment objective.

• If we are unable to acquire and process clients effectively, we may be unable to achieve our business objectives.

• Our business may be adversely affected if our risk management framework does not effectively identify, assess and mitigate risk.

• Indebtedness could adversely affect our business and financial results.

• We may expose ourselves to risks as we engage in hedging transactions.

• An inability to maintain adequate liquidity could jeopardize our business and financial condition.

• Our acquisitions and other strategic transactions, including the Acquisition, may not yield the intended benefits.

• Our acquisitions and other strategic transactions, including the acquisition of Newtek Bank, may not yield the intended benefits.

• Internal 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 stock.

• During 2023 and 2024, we identified and remediated material weaknesses in our internal controls over financial reporting which, if not remediated, could have adversely affected our ability to report our financial condition and results of operations in a timely and accurate manner, investor confidence in our Company and, as a result the value of our common stock.

• Our business is subject to increasingly complex governance, public disclosure and accounting requirements that are costly and could adversely affect our business and financial results.

• Our 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.

• If we and our subsidiaries are unable to protect our intellectual property rights, our business and prospects could be harmed.

• The development and use of Artificial Intelligence (“AI”) present risks and challenges that may adversely impact our business.

Risks Related to U.S.

Federal Income Tax

• We cannot predict how new tax legislation will affect us, our investments, or our stockholders, and any such legislation could adversely affect our business.

Risks Related to SBA Lending

• Changes to the SBA 7(a) Program can negatively impact our SBA 7(a) loan origination volume.

• There can be no guarantee that Newtek Bank will be able to maintain its SBA 7(a) lending license and PLP status.

• NSBF will remain subject to SBA regulation as it winds down its operations.

• We have specific risks associated with our secondary market sales of the guaranteed portions of SBA loans.

• If 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.

• Curtailment of the government-guaranteed loan programs could adversely affect our results of operations.

• Our loans under the SBA 7(a) Program involve a high risk of default and such default could adversely impact our results of operations.

• The loans we make under the SBA 7(a) Program face competition.

• A governmental failure to fund the SBA could adversely affect Newtek Bank’s SBA 7(a) loan originations and our results of operations.

• We could be adversely affected by weakness in the residential housing and CRE markets.

Risks Related to Payment Processing

• We could be adversely affected if any bank sponsorship is terminated.

• If 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®.

• On 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.

• NMS is liable if its processing merchants refuse or cannot reimburse charge-backs resolved in favor of their customers.

• NMS has potential liability for customer or merchant fraud.

• NMS 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.

• Increased 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.

Risks Related to Newtek Bank

• If the credit decisioning, pricing, 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 affected.

• If 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

• Newtek Payroll and Benefit Solutions (“PMT”) is subject to risks surrounding Automated Clearing House (“ACH”) payments.

• PMT could incur unreimbursed costs or damages due to delays in processing inherent in the banking system.

Risks Related to our Capco Business

• The Capco programs and the tax credits they provided were created by state legislation and implemented through regulation, and such laws and rules are subject to possible action to repeal or retroactively revise the programs for political, economic or other reasons.

Such an attempted repeal or revision would create substantial difficulty for the Capco programs and could, if ultimately successful, cause us material financial harm.

• Because 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

• Future 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 shareholders.

• The authorization and issuance of “blank check” preferred shares could have an anti-takeover effect detrimental to the interests of our shareholders.

• Our 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.

• Provisions 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 our Outstanding Indebtedness

• We are subject to 150% asset coverage requirements due to covenants contained in certain of our outstanding debt.

Risks Related to Cybersecurity

• We could be adversely affected by information security breaches or cyber security attacks.

• The 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.

• We and our subsidiaries are subject to risks associated with “phishing” and other cyber-attack.

General Risk Factors

• Our common stock price may be volatile and may decrease substantially.

RISKS RELATED TO OPERATING AS A FINANCIAL HOLDING COMPANY

We have a limited operating history as a financial holding company.

Although we and our predecessor have operated since 1999, we converted to a financial holding company effective January 6, 2023.

Accordingly, we have a limited operating history upon which to evaluate our business and future prospects as a financial holding company.

Our lending prospects may significantly differ from our investment prospects as a BDC, and it is difficult to predict future operating results and to assess the likelihood of the success of our business as a financial holding company.

As a new financial holding company, we may be subject to risks and levels of risk that are often greater than those encountered by financial institutions with longer established operations and relationships.

We may also require significant capital from sources other than operations.

• We may experience fluctuations in our quarterly and annual results.

• We cannot predict how new tax legislation will affect us, our investments, or our stockholders, and any such legislation could adversely affect our business.

• We are subject to risks related to corporate social responsibility.

• The effect of global climate change may impact our operations and the operations of our subsidiaries and clients.

RISKS RELATED TO OPERATION AS A FINANCIAL HOLDING COMPANY

The 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.

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We are subject to regulation and supervision by the FDIC, OCC and Federal Reserve.

The laws and regulations applicable to us govern a variety of matters, including permissible types, amounts, and terms of loans and investments we may make, the maximum interest rate that may be charged, the amount of reserves we must hold against deposits we take, the types of deposits we may accept, maintenance of adequate capital and liquidity, changes in the control of Newtek Bank, N.A.

and us, restrictions on dividends, and establishment of new offices.

We must obtain approval from our regulators before engaging in certain activities or acquisitions, and there is the risk that such approvals may not be obtained, either in a timely manner or at all.

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The USA PATRIOT Act of 2001 and the Bank Secrecy Act, or the BSA, require financial institutions to design and implement programs to prevent financial institutions from being used for money laundering and terrorist activities.

If such activities are detected, financial institutions are obligated to file suspicious activity reports with FinCEN.

These rules require financial institutions to establish procedures for identifying and verifying the identity of customers and beneficial owners of certain legal entity customers seeking to open new financial accounts.

Federal and state bank regulators also have focused on compliance with Bank Secrecy Act and anti-money laundering regulations.

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Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us, which could have a material adverse effect on our business, financial condition or results of operations.

Any changes in the Presidential Administration or control of Congress also increases the likelihood of further changes to laws, regulations and supervisory practices affecting financial institutions, which could include more stringent requirements and greater scrutiny from regulatory authorities.

Changes in laws, regulations, or policies may adversely affect our business.

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The laws and regulations governing lending, servicing, and debt collection activities or the regulatory or enforcement environment at the federal level or in any of the states in which we anticipate operating may change at any time which may have an adverse effect on our current or anticipated business.

The level of regulatory scrutiny may also fluctuate over time based on numerous factors, including changes in the U.S.

presidential administrations or one or both houses of Congress and public sentiment regarding financial institutions (which can be influenced by scandals and other incidents that involve participants in the industry).

Recent political developments, including the new U.S.

presidential administration, have added additional uncertainty with respect to new laws or regulations or changes in the interpretations or enforcement of existing laws or regulations, including potential deregulation in some areas.

We are unable to predict the form or nature of any future changes to the laws, rules, regulations, or supervisory guidance and policies, including the interpretation or implementation thereof.

Changes in laws and regulations may increase our operating costs or reduce our revenues, limit the types of financial services and products we may offer, alter the investments we may make, affect the way we conduct our business and operations, increase our litigation and regulatory costs, and enhance the ability of others to offer more competitive financial services and products.

We continue to devote substantial time and resources to risk management, compliance, regulatory-change management, and cybersecurity and other technology initiatives, each of which—whether successful or not—also may adversely affect our ability to operate profitably or to pursue advantageous business opportunities.

For example, the federal banking agencies issued a final rule in October 2023 that largely begins to apply in January 2026 and may make it more challenging and/or costly for insured depository institutions to achieve an Outstanding or Satisfactory CRA rating.

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In addition, we will be required to serve as a “source of strength” to Newtek Bank.

Congress and federal regulatory agencies continually review banking laws, regulations, policies and other supervisory guidance for possible changes.

Other changes in the laws or regulations that will be applicable to us as a financial holding company, including changes in the interpretation or implementation of those regulations or policies, may negatively impact the profitability of our business activities, require us to change certain of our business practices, materially affect our business model, limit the activities in which we may engage, affect retention of key personnel, require us to raise additional regulatory capital, increase the amount of liquid assets that we hold, otherwise affect our funding profile or expose us to additional costs (including increased compliance costs).

Any such changes may also require us to invest significant management attention and resources to make any necessary changes and may adversely affect our ability to conduct our business as previously conducted or our results of operations or financial condition.

We may be adversely affected by increased governmental and regulatory scrutiny or negative publicity.

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If we do not comply with applicable laws, regulations or commitments, if we are deemed to have engaged in unsafe or unsound conduct, or if we do not satisfy our regulators’ supervisory expectations, then we may be subject to increased scrutiny, supervisory criticism, governmental or private litigation and/or a wide range of potential monetary penalties or consequences, enforcement actions, criminal liability and/or reputational harm.

Such actions could be public or of a confidential nature, and arise even if we are acting in good faith or operating under a reasonable interpretation of the law and could include, for example, monetary penalties, payment of damages or other monetary relief, restitution or disgorgement of profits, directives to take remedial action or to cease or modify practices, restrictions on growth or expansionary proposals, denial or refusal to accept applications, removal of officers or directors, prohibition on dividends or capital distributions, increases in capital or liquidity requirements and/or termination of Newtek Bank’s deposit insurance.

Such actions could be public or of a confidential nature, and arise even if we are acting in good faith or operating under a reasonable interpretation of the law and could include, for example, monetary penalties, payment of damages or other monetary relief, restitution or disgorgement of profits, directives to take remedial action or to cease or modify practices, restrictions on growth or expansionary proposals, denial or refusal to accept applications, removal of officers or directors, prohibition on dividends or capital distributions (both from Newtek Bank to its parent, NewtekOne, and/or from NewtekOne to its stockholders), increases in capital or liquidity requirements and/or termination of Newtek Bank’s deposit insurance.

Additionally, compliance with applicable laws, regulations and commitments requires significant investment of management attention and resources.

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These provisions could delay or prevent a third party from acquiring us, despite the possible benefit to our shareholders, or otherwise adversely affect the market price of our common stock.

We are no longer subject to regulation under the 1940 Act.

As of January 6, 2023, we are no longer regulated as a BDC and are no longer be subject to the regulatory provisions of the 1940 Act, which is designed to protect the interests of investors in investment companies, including certain laws and regulations related to insurance, custody, capital structure, composition of the Board, affiliated transactions, leverage limitations, and compensation arrangements.

We do, however, continue to be subject to certain 1940 Act provisions related to asset coverage in relation to the 2024 and 2026 Notes.

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 2024 and 2026 Notes were issued.”

The withdrawal of the Company’s election to be regulated as a BDC has resulted in a significant change in our accounting and financial reporting requirements.

Due to the Company’s withdrawal of its election to be regulated as a BDC on January 6, 2023, the Company is no longer subject to FASB Accounting Standards Codification Topic 946, Financial Services – Investment Companies, which has resulted in a significant change in our accounting and financial reporting requirements.

As a BDC, we were precluded from consolidating any entity other than another investment company that acted as an extension of our investment operations and facilitated the execution of our investment strategy or an investment in a controlled operating company that provided substantially all of its services to us.

Beginning with the first quarter of 2023, we were required to consolidate the financial statements of certain of our controlled or majority-owned investments (now consolidated subsidiaries), which is a significant change in our accounting and financial reporting requirements.

Our management has been and continues to be required to expend significant efforts in order to implement this change in accounting and financial reporting requirements, which could adversely affect the time and attention devoted to other aspects of our business and operations.

These significant changes in our accounting and financial reporting requirements resulted in failures by the Company to adequately and timely identify financial reporting risks and the associated identification of key controls in connection therewith.

As a result,we have identified material weaknesses in our internal controls that impacted the overall effectiveness of our internal controls over financial reporting.

We have taken actions to enhance our internal controls over financial reporting relating to the

material weaknesses identified as of the date of this Annual Report, and are still in the process of implementing a comprehensive remediation plan.

See “Item 9A.

The 2023 withdrawal of the Company’s election to be regulated as a BDC resulted in a significant change in our accounting and financial reporting requirements.

Due to the Company’s withdrawal of its election to be regulated as a BDC on January 6, 2023, the Company is no longer subject to FASB Accounting Standards Codification Topic 946, Financial Services – Investment Companies, which resulted in a significant change in our accounting and financial reporting requirements;

for example, certain of our current subsidiaries were deemed portfolio (controlled or majority-owned) companies and were not consolidated in our financial statements prior to 2023.

However, beginning with the first quarter of 2023, we were required to consolidate the financial statements of these portfolio companies (now consolidated subsidiaries), which was a significant change in our accounting and financial reporting requirements.

As disclosed in Part II - Item 9A.

of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, these significant changes in our accounting and financial reporting requirements resulted in failures by the Company to adequately and timely identify financial reporting risks and the associated identification of key controls in connection therewith, resulting in material weaknesses in our internal controls that impacted the overall effectiveness of our internal controls over financial reporting (“ICFR”).

We have taken actions to enhance our ICFR relating to the material weaknesses identified and throughout the year ended December 31, 2024, our management executed upon its previously disclosed remediation plan (see “Item 9A.

Controls and Procedures.” and “Item 1A.

Risk Factors - Risks Related to Our Business and Structure - We have identified material weaknesses in our internal control over financial reporting which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, investor confidence in our company and, as a result, the value of our common stock.”

Our shareholders no longer have the protections of the 1940 Act, as the Company withdrew election to be regulated as a BDC.

Because the Company ceased to operate as a BDC, our shareholders no longer have the following protections of the 1940 Act:

• we are no longer subject to provisions of the 1940 Act prohibiting us from protecting any director or officer against any liability to the Company or our shareholders arising from willful malfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of that person’s office;

• we are no longer required to provide and maintain an investment company blanket bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement;

• while the majority of our directors are still required to be “independent” under applicable NASDAQ regulations, we are no longer required to ensure that a majority of our directors are persons who are not “interested persons,” as defined in the 1940 Act, and certain persons who were prevented from serving on our Board when we were a BDC are now able to serve on our Board;

• we are no longer subject to provisions of the 1940 Act regulating transactions between BDCs and certain affiliates;

• we are no longer subject to provisions of the 1940 Act restricting our ability to issue shares below net asset value or in exchange for services or to issue warrants and options;

• we are no longer required to disclose the Company’s net asset value per share in our financial statements;

• we are no longer subject to provisions of the 1940 Act restricting our ability to change the nature of our business or fundamental investment policies without having to obtain the approval of our shareholders;

• we are no longer subject to the provisions of the 1940 Act limiting our ability to grant stock based compensation to officers, directors and employees or to provide a profit sharing program for them;

• we are no longer subject to the other protective provisions set out in the 1940 Act and the rules and regulations promulgated under the 1940 Act.

In addition, we are very much affected by the legal, regulatory, tax and accounting regimes under which we operate.

We periodically evaluate whether those regimes and our existing corporate structure are the optimum means for the operation and capitalization of our business.

As a result of these evaluations, we may decide to proceed with structural and organizational changes (certain of which may require the approval of our shareholders), which could result in material dispositions of various assets, changes in our corporate form or other fundamental changes.

We may incur certain costs in completing these evaluations and may receive no benefit from these expenditures, particularly if we do not proceed with any changes.

Risk Factors - Risks Related to Our Business and Structure).

Based upon testing of the design and operating effectiveness of the re-designed control environment during the year ended December 31, 2024, management found them to be operating effectively.

As a result, management has concluded that the material weaknesses in ICFR have been remediated as of December 31, 2024.

Because of its inherent limitations, management does not expect that our disclosure controls and procedures or our ICFR will prevent or detect all error and fraud.

Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Ineffective internal controls over financial reporting could adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, investor confidence in our company and, as a result, the value of our common stock.”

If 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.

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Compliance with the 1940 Act, as a registered investment company, would require us to significantly alter our business and could impair our ability to operate as financial holding company, with potential adverse impacts on our business, and, thus, our shareholders.

The loss of pass-through tax treatment may substantially reduce net assets and income available for dividends and debt repayments.

Prior to January 6, 2023, we operated so as to qualify as a RIC, which generally allowed us to qualify for effective pass-through tax treatment.

Upon withdrawing our election to be regulated as a BDC, we have ceased to qualify for such pass-through tax treatment, and we will have to pay corporate-level taxes on all of our income whether or not we distribute it, which we expect will substantially reduce the amount of income available for distribution to our shareholders and to repay our borrowings.

The Company will no longer qualify as a RIC beginning with the 2023 taxable year.

For more information, see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Executive Summary” and “Risk Factors - Risks Related to Converting to a Financial Holding Company” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 1, 2022.

RISKS RELATED TO THE ECONOMY

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and difficulties in obtaining and/or enforcing legal judgments.

In addition, the war between Russia and Ukraine, and resulting market volatility, could adversely affect our business, financial condition or results of operations.

In response to the war between Russia and Ukraine, the United States have imposed sanctions or other restrictive actions against Russia.

The ongoing war and the measures in response could have a negative impact on the economy and business activity globally and could have a material adverse effect on our business, financial condition, cash flows and results of operations.

The severity and duration of the war and its impact on global economic and market conditions are impossible to predict.

In addition, sanctions could also result in Russia taking counter measures or retaliatory actions which could adversely impact our business, including, but not limited to, cyberattacks targeting private companies, individuals or other infrastructure upon which our business and the business of our clients rely.

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 has 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.

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• net worth and liquidity of the guarantors on our loans may decline, which could cause loan losses to increase;

• our risk management policies and practices may be negatively impacted by, among other things, changes in the SBA 7(a) loan program, including changes to SBA rules, regulations and SBA standard operating procedures;

• our risk management policies and practices may be negatively impacted by, among other things, changes in the SBA 7(a) Program, including changes to SBA rules, regulations and SBA standard operating procedures;

• increases in cyber risk as criminals may take advantage of the changes of business practices necessitated by a public health emergency.

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In particular, in past periods of instability, the financial services sector was negatively impacted by significant write-offs as the value of the assets held by financial firms declined, impairing their capital positions and abilities to lend and invest.

In addition, continued uncertainty surrounding the impact of trade deals between Britain and the European Union following the United Kingdom’s exit from the European Union, uncertainty in connection with economic sanctions resulting from the ongoing war between Russia and Ukraine, and uncertainty between the United States and other countries, including China, with respect to trade policies, treaties, and tariffs, among other factors, have caused disruption in the global markets.

There can be no assurance that market conditions will not worsen in the future.

In an economic downturn or a prolonged period of high interest rates, we may have non-performing assets or non-performing assets may increase, and the value of our portfolio is likely to decrease during these periods.

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financial condition.

Recent events in the banking sector may have an adverse effect on aspects of our results of operations and the price of our common stock .

During 2023 and more recently, concerns have arisen with respect to the financial condition of a number of banking organizations in the United States, in particular those with exposure to certain types of depositors and large portfolios of investment securities.

Silicon Valley Bank and Signature Bank were both placed into FDIC receivership resulting from significant and rapid deposit outflows and the Federal Reserve announced it will make available additional funding to eligible depository institutions to assist banking organizations with potential liquidity needs.

While our business, balance sheet and depositor profile differs substantially from the banking institutions that are the focus of the greatest scrutiny, the operating environment and public trading prices of financial services sector can be highly correlated, in particular in times of stress, which has, and may continue to adversely affect the trading price of our common stock.

In addition, there is uncertainty at the present time with respect to the effect that these events will have on the perceptions held by individual and commercial depositors as to the safety of deposited funds at smaller banking institutions, which could affect Newtek Bank’s ability to maintain its levels of deposit funding.

We believe that our client base and business model differs from those of the banking organizations which are under the most scrutiny at the present time, however no assurances can be given that the effects of recent events will not have an adverse effect on our results of operations and financial performance.

Changes in interest rates could adversely affect our results of operations and financial condition.

Our earnings depend substantially on our interest rate spread, which is the difference between (i) the rates Newtek Bank earns on loans, securities and other earning assets and (ii) the interest rates Newtek Bank pays on deposits and other borrowings, and its costs of capital.

These rates are highly sensitive to many factors beyond our control, including general economic conditions and the policies of various governmental and regulatory authorities.

If market interest rates continue to rise, especially at the pace they did in 2022 and 2023, we will continue to face competitive pressure to increase the rates Newtek Bank pays on deposits, which could negatively affect net interest margin.

However, we believe that our loan portfolio is less sensitive to a rising interest rate environment based on the fact that a material portion of our loan portfolio consists of SBA 7(a) loans, which are floating rate loans that bear interest at the prime rate plus a spread from 2.25% to 3.00%, which interest rates reset on a quarterly basis.

Moreover, in response to these 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, 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.

Inflation may adversely affect the business, results of operations and financial condition of companies.

Inflation and changes in interest rates may adversely affect our business, results of operations and financial condition.

Recent inflationary pressures have increased the costs of capital, labor, energy and raw materials and have adversely affected consumer spending, economic growth and our clients’ operations.

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Any deterioration in the quality of our assets could result in future unrealized losses and require increased loan loss reserves and therefore negatively impact our financial condition or results of operations.

The Federal Reserve raised interest rates in 2022 and 2023, and future changes to its monetary policy and the timing of them are not certain.

A meaningful rise in inflation during 2021 and through 2022 prompted the Federal Reserve to sharply increase the federal funds rate during 2022 and 2023 before it decreased the rate at the end of 2024.

The Federal Reserve may further raise or lower interest rates in response to economic conditions, particularly inflationary pressures and unemployment statistics.

Future changes to the Federal Reserve’s monetary policy and the timing of them are not certain.

These rates are highly sensitive to many factors, some of which are beyond our control (e.g., general economic conditions, geopolitical events, competition for loans and deposits, and the policies of various governmental and regulatory authorities) and others of which we can influence over time (e.g.

the amounts and mix of fixed and variable assets and liabilities and related durations).

We are increasingly exposed to varying levels and types of basis risk (e.g., Prime based assets partially funded with SOFR- and/or US Treasury-based liabilities).

In periods of rising interest rates, our cost of funds would increase, which could reduce our net interest margin.

Further, rising interest rates could also adversely affect our performance if we hold loans with floating interest rates, subject to specified minimum interest rates, while at the same time engaging in borrowings subject to floating interest rates not subject to such minimums.

In such a scenario, rising interest rates may increase our interest expense, even though our interest income is not increasing in a corresponding manner as a result of such minimum interest rates.

Rising interest rates could also cause clients to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults.

In addition, rising interest rates may increase pressure on us to provide fixed rate loans, which could adversely affect our net interest margin, as increases in our cost of borrowed funds would not be accompanied by increased interest income from such fixed-rate loans.

Also, an increase in interest rates available to investors could make an investment in our common stock less attractive if we are not able to increase our dividend rate, which could reduce the value of our common stock.

If the shape of the yield curve continues to twist towards an upward sloping yield curve, our net interest margin could be negatively impacted.

Refer to “Item 7, Management Discussion and Analysis of Financial Results” and “Item 7A, Quantitative and Qualitative Disclosures About Market Risk.” For risks related to SBA lending, see “We have specific risks associated with our secondary market sales of the guaranteed portions of SBA loans.”

While the United States and other developed economies have recently experienced higher-than-normal inflation rates, it remains uncertain whether substantial inflation will be sustained over an extended period of time or have a significant effect on the U.S.

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There can be no assurance that continued and more widespread inflation in the United States and/or other economies or the maintenance of higher interest rests in an effort to curb inflation will not become a serious problem in the future and have a material adverse impact on us.

In addition, concerns regarding the escalation in protectionist policies, including the imposition of punitive tariffs by the United States on foreign made goods, including those imported from China, Canada, Mexico, Russia and the EU among other countries, and the retaliatory tariffs imposed or threatened by China, Canada, Mexico, Russia and the EU on U.S.

made products could have a significantly negative impact on global trade and on the economic growth and prosperity of the countries involved.

In addition, these tariffs could cause significant economic damage to the specific businesses and industries being targeting with these punitive tariffs, and could in the long run result in higher consumer prices but it could also result in an increase in the cost of manufactured and imported goods.

Volatility in exchange rates of the major currencies, including that of China, and the price of crude oil and natural gas and of other commodity prices, among other factors, could adversely impact the financial and credit markets, including the availability of debt and equity capital.

Increases in U.S.

and global interest rates in response to accelerating economic growth in the United States and in Europe and Asia may also adversely impact credit markets and could make borrowing more costly.

Furthermore, many state and local governments in the United States are experiencing, and are expected to continue to experience, severe budgetary strain.

One or more states could default on their debt, or one or more significant local governments could default on their debt or seek relief from their debt under the Bankruptcy Code or by agreement with their creditors.

Any or all of the circumstances described above may lead to further volatility in or disruption of the credit markets at any time.

Terrorist 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.

Terrorist acts, acts of war, global health emergencies or natural disasters may disrupt our operations, as well as the operations of the businesses in which we invest.

Terrorist acts, acts of war, global health emergencies or natural disasters, including the recent Los Angeles wild fires, may disrupt our operations, as well as the operations of the businesses in which we invest.

Such acts have created, and continue to create, economic and political uncertainties and have contributed to global economic instability.

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could have a material adverse effect on our business, financial condition and results of operations.

In June 2023, the U.S.

federal government suspended the federal debt limit until 2025.

If Congress does not raise the debt ceiling prior to 2025, the United States could default on its obligations, including Treasury securities that play an integral role in financial markets.

In recent years, the U.S.

government has approached its statutory debt limit, which required specific measures taken by the U.S.

Treasury Department to prevent the U.S.

government’s default on its payment obligations.

In the future, delays to raise or suspend the federal debt ceiling in similar circumstances could have severe repercussions within the United States and to global credit and financial markets and could result in a variety of adverse effects for our business, results of operations, liquidity and financial condition.

A default by the United States could result in unprecedented market volatility and illiquidity, heightened operational risks relating to the clearance and settlement of transactions, margin and other disputes with clients and counterparties, an adverse impact to investors including money market funds that invest in U.S.

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We operate in a highly competitive market for clients, which could reduce returns and result in losses.

The commercial lending market to independent business owners is very competitive and is served by a variety of entities, including banks, savings and loan associations, credit unions, independent finance companies, and nonbank lenders, including financial technology companies.

The lending market to independent business owners is also highly fragmented, with a small number of lenders capturing large shares of each market and many smaller lenders competing for the remaining market share.

The commercial lending market and the electronic payment processing market to independent business owners is very competitive and is served by a variety of entities, including commercial banks, savings and loan associations, credit unions, independent finance companies, and nonbank lenders, including financial technology companies.

The lending market and the electronic payment processing market to independent business owners are also highly fragmented, with a small number of players capturing large shares of each market and many smaller players competing for the remaining market share.

We compete for clients with other financial institutions and various SMB lenders, as well as other sources of funding.

Additionally, competition for clients has emerged among alternative investment vehicles, such as CLOs, some of which are sponsored by other alternative asset investors, as these entities have begun to focus on making investments in SMBs.

Additionally, competition for clients has emerged among alternative investment vehicles, such as collateralize loan obligations (CLOs), some of which are sponsored by other alternative asset investors, as these entities have begun to focus on making investments in SMBs.

As a result of these new entrants, competition for our clients may intensify.

Many of our competitors will be substantially larger and have considerably greater financial, technical and marketing resources than us.

Many of our competitors will be substantially larger and have considerably greater financial and marketing resources than us.

For example, some competitors may have a lower cost of capital and access to funding sources that will not be available to us.

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These characteristics could allow our competitors to establish more relationships and offer better pricing and more flexible structuring than we will be able to offer.

We may lose clients if we do not match our competitors’ pricing, terms and structure.

If we are forced to match our competitors’ pricing, terms and structure, we may not be able to achieve acceptable returns or may bear substantial risk of capital loss.

The introduction of new technologies could dramatically change the competitive environment and require significant changes and costs for us to remain competitive.

We may lose clients if we do not match our competitors’ pricing, terms, structure or service.

If we are forced to match our competitors’ pricing, terms, structure and service, we may not be able to achieve acceptable returns or may bear substantial risk of capital loss.

We may encounter greater competition as we expand our operations, and competition may also increase in more stable or favorable economic conditions.

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In the past, we have had a significant amount of indebtedness.

If our debt service obligations increase, whether due to the increased cost of existing indebtedness or the incurrence of additional indebtedness, more of our cash flow from operations would need to be allocated to the payment of principal of, and interest on, our indebtedness, which would reduce the funds available for other purposes.

If our debt service obligations increase, whether due to the increased cost of existing indebtedness or the incurrence of additional indebtedness, more of our cash flow from operations, including dividends our holding company receives from its subsidiaries, would need to be allocated to the payment of principal of, and interest on, our indebtedness, which would reduce the funds available for other purposes.

Our indebtedness also could limit our ability to execute our business plans and withstand competitive pressures and could reduce our flexibility in responding to changing business and economic conditions.

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This, to a certain extent, is subject to financial, competitive, legislative, regulatory and other factors that are beyond our control.

In addition, if we cannot service our indebtedness, we may have to take actions such as utilizing available capital, limiting the origination of loans, selling assets, selling equity or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances, any of which could impede the implementation of our business strategy, prevent us from entering into transactions that would otherwise benefit our business and/or adversely affect our business and financial results.

In addition, if we cannot service our indebtedness, we may have to take actions such as utilizing available capital, limiting the origination of loans, selling assets, selling equity or reducing, delaying, or eliminating capital expenditures or returns of capital, strategic acquisitions, investments and alliances, any of which could impede the implementation of our business strategy, prevent us from entering into transactions that would otherwise benefit our business and/or adversely affect our business and financial results.

We also may not be able to refinance our indebtedness or take such other actions, if necessary, on commercially reasonable terms, or at all.

To the extent we borrow money to originate new loans, changes in interest rates will affect our cost of capital and net interest margin.

To the extent we borrow money to finance client loans, our net interest margin will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we lend those funds.

General interest rate fluctuations may also have an impact on the value of our stock and our rate of return.

As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net interest margin in the event we borrow money to finance our loans.

In periods of rising interest rates, our cost of funds would increase, which could reduce our net interest margin.

In such a scenario, rising interest rates may increase our interest expense, even though our interest income is not increasing in a corresponding manner as a result of such minimum interest rates .

We may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations.

Such techniques may include various interest rate hedging activities.

If we do not implement these techniques properly, we could experience losses on our hedging positions, which could be material.

In addition, depending on the frequency and magnitude of rising interest rates, these interest rate increases could negatively impact premiums received on the sale of guaranteed SBA loans, and further, could increase prepayment speeds on outstanding SBA loans, potentially negatively impacting the Company’s financial results.

We may expose ourselves to risks as we engage in hedging transactions.

In the second half of 2021, we began using derivatives to hedge interest rate exposure on specific fixed rate loans originated by us or our subsidiaries until such fixed rate loans are sold or securitized.

We use derivatives to hedge interest rate exposure on specific fixed rate loans originated by us or our subsidiaries until such fixed rate loans are sold or securitized.

We may continue to enter into such hedging transactions in an effort to mitigate our exposure to adverse fluctuations in interest rates and we may increase our floating rate investments to position the portfolio for rate increases.

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Additionally, applicable laws and regulations may restrict what NewtekOne is able to do with the liquidity it does possess, which may adversely affect our business and results of operations.

Further, pursuant to the Operating Agreement we have made certain commitments to the OCC which requires Newtek Bank to hold capital incremental to the minimum required under the applicable standards, which could also impact the Company’s ability to invest in assets.

Further, pursuant to the Operating Agreement we have made certain commitments to the OCC which requires Newtek Bank to hold capital incremental to the “well capitalized” thresholds under the applicable standards, which could also impact the Company’s ability to invest in and grow assets.

From time to time, regulators may implement changes to these capital adequacy and liquidity requirements.

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Accordingly, we may be unable to raise additional capital if needed or on acceptable terms, which may adversely affect our liquidity, business, financial condition and results of operations.

Our acquisitions and other strategic transactions, including the Acquisition, may not yield the intended benefits.

Our acquisitions and other strategic transactions may not yield the intended benefits.

We have historically and may continue to evaluate and consider strategic transactions, combinations, acquisitions, dispositions or alliances.

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If we are able to identify an appropriate business opportunity, we may not be successful in negotiating favorable terms and/or consummating the transaction and, even if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such transaction.

In particular, on January 6, 2023, we completed the Acquisition of NBNYC.

We anticipate that the Acquisition will continue to be transformational for the Company from both a financial and strategic perspective.

However, any acquisition (including the Acquisition), disposition or other strategic transactions involves risks, including:

• difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, products and services of the acquired business, which may require ongoing investment in development and enhancement of additional operational and reporting processes and controls;

• inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits;

• difficulties in retaining, training, motivating and integrating key personnel;

• diversion of management’s time and resources from our normal daily operations;

• difficulties in successfully incorporating licensed or acquired technology and rights into our platform;

• difficulties in maintaining uniform standards, controls, procedures and policies within the combined organization;

• difficulties in retaining relationships with customers, employees and suppliers of the acquired business;

• risks of entering markets in which we have no or limited direct prior experience;

• regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business;

• assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights or increase our risk for liability;

• failure to successfully further develop any acquired technology;

• liability for activities of the acquired or disposed of business before the acquisition or disposition, including patent and trademark infringement claims, violations of laws, regulatory actions, commercial disputes, tax liabilities and other known and unknown liabilities;

• difficulty in separating assets and replacing shared services;

• assumption of exposure to performance of any acquired loan portfolios;

• potential disruptions to our ongoing businesses;

• unexpected costs and unknown risks and liabilities associated with the acquisition.

Accordingly, any acquisition, disposition or other strategic transaction may not be successful, may not benefit our business strategy, may not generate sufficient revenue to offset the associated costs or may not otherwise result in the intended benefits.

Additionally, it may take us longer than expected to fully realize the anticipated benefits and synergies of these transactions (including the Acquisition), and those benefits and synergies may ultimately be smaller than anticipated or may not be realized at all, which could adversely affect our business and operating results.

Any acquisition, disposition or other strategic transaction involve risks and may not be successful, may not benefit our business strategy, may not generate sufficient revenue to offset the associated costs or may not otherwise result in the intended benefits.

Additionally, it may take us longer than expected to fully realize the anticipated benefits and synergies of these transactions, and those benefits and synergies may ultimately be smaller than anticipated or may not be realized at all, which could adversely affect our business and operating results.

Any transactions, combinations, acquisitions, dispositions or alliances may also require us to issue additional equity securities, spend our cash, or incur debt (and increased interest expense), liabilities and amortization expenses related to intangible assets or write-offs of goodwill, which could adversely affect our results of operations and dilute the economic and voting rights of our stockholders and the interests of holders of our indebtedness.

In 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 profitable.

Finally, we may also choose to divest certain businesses or product lines that no longer fit with our strategic objectives.

Finally, we may also choose to divest certain businesses or product lines that no longer fit with our strategic objectives or whose divestiture are required by regulators.

If we decide to sell assets or a business, we may have difficulty obtaining terms acceptable to us in a timely manner, or at all.

Additionally, the terms of such potential transactions may expose us to ongoing obligations and liabilities.

As a result of commitments made to the Federal Reserve, the Company divested of NTS on January 2, 2025.

The divestiture of

NTS may negatively impact the Company’s revenue and income and our ability to effectively manage our information

technology systems and infrastructure and cybersecurity risk.

See also “ITEM I.C Cybersecurity.”

In addition, pursuant to the terms of Agreement to sell NTS to IPM, we received $4.0 million in cash and 4.0 million shares of a

newly created series of IPM non-voting preferred stock, the Series A Non-Voting Common Equivalent Stock (the “Preferred

Refer to “Subsequent Events - Sale of NTS.” We currently anticipate retaining the Preferred Stock and our

investment in the Preferred Stock will be reflected on our balance sheet and valued on a quarterly basis in accordance with ASC

321, beginning in the first quarter of 2025.

IPM common shares have historically been thinly traded and may not be easily sold

or exchanged without a significant change in price, which can lead to volatile changes in the market price for IPM common

Volatile changes in the market price for IPM common shares could have a material impact on the value of the Preferred

Stock, up or down, as reflected on our balance sheet on a quarter to quarter basis.

Also pursuant to the terms of the Agreement to sell NTS to IPM, we received the right to receive additional cash or shares of IPM in the future, provided that IPM earns certain levels of “Adjusted EBITDA” over a two to three year period following the sale (“IPM Earnout”).

We will be required to recognize an estimate of value associated with the IPM Earnout in 2025 and

remeasure it value on a recurring basis, which could positively or negatively impact our earnings and further compound the

volatility associated with the value of IPM stock referenced above.

Additionally, while we are IPM’s largest customer, there

can be no assurances that IPM will earn the levels of Adjusted EBITDA.

In the event IPM fails to earn such levels, our

earnings and capital could be negatively impacted.

Our business may be adversely affected if our risk management framework does not effectively identify, assess and mitigate risk.

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In addition, the information we use may be inaccurate or incomplete, both of which may be difficult to detect and avoid.

Additionally, there may be risks that exist, or that develop in the future, that we have not appropriately anticipated, identified or mitigated.

Inaccuracies in the input data as well as issues with the quality and effectiveness of our data or parameters used in our models may further increase the risks to which we are subject.

These risks may be amplified to the extent our models utilize Artificial Intelligence, machine learning or other emerging technologies, to among other things, gather and analyze customer data.

Weaknesses or inaccuracies in the algorithms or datasets underlying our models could result in deficient or biased data outputs or other unintended consequences, including ineffective decision making or reporting errors.

There may also be risks that exist, or that develop in the future, that we have not appropriately anticipated, identified or mitigated.

Finally, our risk management framework may be deemed insufficient or inadequate by our regulators, which have in the past required, and we expect to continue to require, that we invest additional resources into remediating any deficiencies and adversely impact our ability to operate our business until such time as the revised framework is deemed sufficient and adequate by our regulators.

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In the event that we are unable to maintain or achieve compliance with Section 404 of the SOX and related rules, the market price of our common stock may be adversely affected.

We have identified material weaknesses in our internal controls over financial reporting which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, investor confidence in our Company and, as a result, the value of our common stock.

During 2023 and 2024, we identified and remediated material weaknesses in our internal controls over financial reporting which, if not remediated, could have adversely affected our ability to report our financial condition and results of operations in a timely and accurate manner, investor confidence in our Company and, as a result, the value of our common stock.

We have assessed the effectiveness of our internal controls over financial reporting based upon the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013).

Based on this assessment, we have concluded that we did not maintain effective internal controls over financial reporting as of December 31, 2023, as a result of the material weaknesses described in “Item 9A.

Based on this assessment, we concluded that we did not maintain effective internal controls over financial reporting as of December 31, 2023, as a result of the material weaknesses described in “Item 9A.

Controls and Procedures,” herein.

We have taken actions to enhance our internal controls over financial reporting relating to the material weaknesses identified as of the date of this Annual Report.

We hired a new Chief Financial Officer in May 2023 and appointed a new Chief Accounting Officer in March 2024, and hired a Chief Risk Officer, each with recent and significant financial holding company experience.

We are still in the process of implementing other remediation measures as part of a comprehensive remediation plan.

The material weaknesses identified herein cannot be considered remediated until each control has been appropriately designed, has operated for a sufficient period of time, and until management has concluded, through testing, that the control is operating effectively.

See “Item 9A.

Controls and Procedures.” We can give no assurance that a comprehensive remediation plan will remediate the material weakness in internal control, or that additional material weaknesses or significant deficiencies in our internal controls over financial reporting will not be identified in the future.

A failure by us to timely and effectively remediate the material weaknesses could prevent us from accurately and timely reporting our financial results and could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

During 2024, we took actions to enhance our internal controls over financial reporting relating to the material weaknesses identified as of December 31, 2023, and have remediated each of the material weaknesses as set forth in “Item 9A.

Controls and Procedures.” We can give no assurance that additional material weaknesses or significant deficiencies in our internal controls over financial reporting will not be identified in the future.

A failure by us to timely and effectively remediate any future material weaknesses or significant deficiencies in our internal controls could prevent us from accurately and timely reporting our financial results and could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

Our 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.

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If we and our subsidiaries are unable to protect our intellectual property rights, our business and prospects could be harmed.

The proprietary software essential to our business and that of our subsidiaries is owned by us and made available to them for their use.

The proprietary software and trademarks essential to our business, including NewTracker (R) and Newtek Advantage (R) , and that of our subsidiaries, is owned by us and made available to them for their use.

Our future success and competitive position will depend in part upon our ability to maintain and protect proprietary technology used in our products and services.

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Such litigation could result in substantial costs and diversion of resources.

The development and use of Artificial Intelligence (“AI”) present risks and challenges that may adversely impact our business.

We or our third-party vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services or products.

The development and use of AI present a number of risks and challenges to our business.

The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the United States and internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment and other laws applicable to the use of AI.

These evolving laws and regulations could require changes in our implementation of AI technology and increase our compliance costs and the risk of non-compliance.

AI models, particularly generative AI models, may produce output or take action that is incorrect, that result in the release of private, confidential or proprietary information, that reflect biases included in the data on which they are trained, infringe on the intellectual property rights of others, or that is otherwise harmful.

In addition, the complexity of many AI models makes it challenging to understand why they are generating particular outputs.

This limited transparency increases the challenges associated with assessing the proper operation of AI models, understanding and monitoring the capabilities of the AI models, reducing erroneous output, eliminating bias and complying with regulations that require documentation or explanation of the basis on which decisions are made.

Further, we may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models, and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which we may have limited visibility.

Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures.

In addition to our use of AI technologies, we are exposed to risks arising from the use of AI technologies by bad actors to commit fraud and misappropriate funds and to facilitate cyberattacks.

Generative AI, if used to perpetrate fraud or launch cyberattacks, could create panic at a particular financial institution or exchange, which could pose a threat to financial stability.

RISKS RELATED TO SBA LENDING

Changes to the SBA Section 7(a) Program can negatively impact our SBA 7(a) loan origination volume.

Changes to the SBA Section 7(a) Program, including recent revisions to SBA Standard Operating Procedure SOP 50 10 7.1 (“SOP 7.1”), shifted to the SBA a PLP lender’s delegated authority in making determinations of a borrower’s satisfaction of certain eligibility requirements to participate in the Section 7(a) Program.

Potential impacts of the SOP 7.1 revisions remain unclear, including the SBA’s ability to demonstrate that it can timely and appropriately make these eligibility determinations;

and therefore, there can be no assurance that these and future SOP revisions will not negatively impact, among other things, the volume of SBA 7(a) loans originated by PLP lenders, including Newtek Bank, which could have an adverse impact on the Company’s business, financial condition and/or operating results.

There can be no guarantee that Newtek Bank and NSBF will be able to maintain their SBA 7(a) lending licenses.

Both Newtek Bank, N.A.

and NSBF have been granted SBA 7(a) lending licenses.

Additionally, prior to the Acquisition, NSBF had been granted PLP status, which allowed it to place SBA guarantees on loans without seeking prior SBA review and approval.

Newtek Bank obtained PLP status in April 2023.

PLP status allows NSBF and Newtek Bank to expedite loans since they are not required to present applications to the SBA for concurrent review and approval.

While the Company intends that NBSF will continue to service its current portfolio of SBA 7(a) loans, and that new SBA 7(a) loan originations will be made by Newtek Bank, there can be no guarantee that Newtek Bank and NSBF will be able to maintain their SBA 7(a) lending licenses.

Changes to the SBA 7(a) Program can negatively impact our SBA 7(a) loan origination volume.

Changes to the SBA 7(a) Program, including revisions to SBA Standard Operating Procedures (“SOP”), may negatively impact, among other things, the volume of SBA 7(a) loans originated by PLP lenders, including Newtek Bank, which could have an adverse impact on the Company’s business, financial condition and/or operating results.

There can be no guarantee that Newtek Bank will be able to maintain its SBA 7(a) lending license and PLP status.

Newtek Bank has been granted an SBA 7(a) lending license and PLP status, which allows it to place SBA guarantees on loans without seeking prior SBA review and approval.

PLP status allows Newtek Bank to expedite loans since they are not required to present applications to the SBA for concurrent review and approval.

There can be no guarantee that Newtek Bank will be able to maintain its SBA 7(a) lending license.

The loss Newtek Bank’s SBA 7(a) lending license would negatively impact our results of operations.

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Newtek Bank’s loss of PLP status would adversely impact our marketing efforts and ultimately loan origination volume which would negatively impact our results of operations.

NSBF and Newtek Bank, our wholly-owned subsidiaries, are subject to regulation by the SBA, which has specific risks.

NSBF is licensed by the SBA as an SBLC.

In order to operate as an SBLC, a licensee is required to maintain a minimum regulatory capital (as defined by SBA regulations) of the greater of (1) 10% of its outstanding loans receivable and other investments or (2) $1.0 million.

Moreover, before consenting to a securitization, NSBF and other securitizers must, among other things, be considered well capitalized by the SBA.

For NSBF and other SBLC securitizers, the SBA will consider it well capitalized if it maintains a minimum unencumbered paid in capital and paid in surplus equal to at least 10% of its assets, excluding the guaranteed portion of 7(a) loans.

In addition, an SBLC is subject to certain other regulatory restrictions.

Among other things, SBLCs are required to:

establish, adopt, and maintain a formal written capital plan;

submit to the SBA for review a credit policy that demonstrates the SBLC’s compliance with the applicable regulations and the SBA’s Standard Operating Procedures for origination, servicing and liquidation of 7(a) loans;

submit to the SBA for review and approval annual validation, with supporting documentation and methodologies, demonstrating that any scoring model used by the SBLC is predictive of loan performance;

obtain SBA approval for loan securitization and borrowings;

and adopt and fully implement an internal control policy which provides adequate direction for effective control over and accountability for operations, programs, and resources.

Additionally, in connection with our 2018 examination by the SBA, NSBF entered into a voluntary agreement with the SBA to meet certain other requirements and conditions.

See “Item 1A.

Risk Factors - Risks Related to SBA Lending - If 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.”

NSBF will remain subject to SBA regulation as it winds down its operations.

As a result of the Acquisition, all SBA 7(a) loan originations are being transitioned to Newtek Bank in April 2023, and NSBF has ceased origination of SBA 7(a) loans, relinquished its PLP status and is winding-down its operations.

During this wind down process, NSBF will be required to continue to own the 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.

NSBF will be required to continue to service and liquidate its SBA Loan Portfolio, including processing forgiveness and loan reviews for PPP Loans, pursuant to an SBA approved lender service provider agreement with SBL.

During the wind down process NSBF will be required to maintain minimum capital requirements established by the SBA, will be required to maintain certain amounts of restricted cash available to meet any obligations to the SBA, will have restrictions on its ability to make dividends and distributions to its parent, and will remain liable to SBA for post-purchase denials and repairs, from the proceeds generated by NSBF’s SBA loan portfolio.

Any future post-purchase denials and repairs demands on NSBF could negatively impact our results of operations.

As a result of the Acquisition, all SBA 7(a) loan originations were transitioned to Newtek Bank in April 2023, and NSBF has ceased origination of SBA 7(a) loans, relinquished its PLP status and is winding-down its operations.

During this wind down process, NSBF is required to continue to own the 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.

NSBF is required to continue to service and liquidate its SBA Loan Portfolio, including processing forgiveness and loan reviews for PPP Loans, pursuant to an SBA approved lender service provider agreement with SBL.

During the wind down process NSBF is required to maintain minimum capital requirements established by the SBA, required 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 its parent, and remains liable to SBA for post-purchase denials and repairs, from the proceeds generated by NSBF’s SBA loan portfolio.

Any post-purchase denials and repairs demands on NSBF could negatively impact our results of operations.

In addition, the Company has agreed to guarantee NSBF’s obligations to the SBA and has deposited $ 10.0 million at Newtek Bank to secure NSBF’s potential obligations to the SBA.

We have specific risks associated with SBA loans.

We have generally sold the guaranteed portion of SBA loans in the secondary market.

We have specific risks associated with our secondary market sales of the guaranteed portions of SBA loans.

The SBA regulates an SBA lender’s, including Newtek Bank’s, participation in the secondary market for sales of the guaranteed portions of SBA 7(a) loans.

The SBA secondary market consists of the sale of certificates, representing either a fractional undivided interest in some or all of the guaranteed portion of an individual SBA 7(a) guaranteed loan or a fractional undivided interest in a pool consisting of the SBA guaranteed portions of a number of 7(a) guaranteed loans.

For example, when a lender such as Newtek Bank sells the guaranteed portion of a SBA 7(a) loan in the secondary market, the lender must perform all necessary servicing and liquidation actions for such loan even after SBA has purchased the guaranteed portion of such loan from a purchaser of a guaranteed portion, i.e., a registered holder.

In the event that SBA purchases a guaranteed portion of such a loan from the registered holder, the lender must provide SBA with a loan status report within 15 business days of such purchase.

This report typically includes, but is not limited to, a status report on the borrower and current condition of the collateral, plans for any type of loan workout or loan restructuring, existing liquidation activities including the sale of loan collateral, or the status of ongoing foreclosure proceedings.

Moreover, the lender is required to provide documentation that SBA deems sufficient to be able to review the lender’s administration of the SBA 7(a) loan under the SBA Loan Program Requirements.

Newtek Bank’s failure to provide sufficient documentation may constitute a material failure to comply with SBA Loan Program Requirements, and may lead to initiation of an action for recovery from Newtek Bank of all or some of the moneys SBA paid to a registered holder on a guarantee.

SBA also has the ability evaluate Newtek Bank’s continued participation in the secondary market and may restrict further sale of guaranteed portions into the secondary market until SBA determines that Newtek Bank has provided sufficient documentation for purchases.

Newtek Bank generally sells the guaranteed portion of SBA loans in the secondary market.

Such sales have resulted in our earning premiums and creating a stream of servicing income.

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A reduction in the price of guaranteed SBA 7(a) loans could negatively impact our business.

There can be no assurance that we will be able to continue originating these loans, or that a secondary market will exist for, or that we will continue to realize premiums upon the sale of the guaranteed portions of the SBA 7(a) loans.

Moreover, there can be no assurance that we will be able to continue originating these loans, or that a secondary market will exist for, that we will continue to realize premiums upon the sale of the guaranteed portions of the SBA 7(a) loans, that Newtek Bank will continue to sell the guaranteed portions of the SBA 7(a) loans or that the SBA will not place constraints on Newtek Bank’s ability to access the secondary market.

We may hold the guaranteed portions of the SBA 7(a) loans for longer periods, which may reduce or delay any future sales of guaranteed SBA 7(a) and related premiums, which could reduce or delay future investment in new assets, adversely impact liquidity and capital, and produce lower returns.

If 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.

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In connection with NSBF’s 2018 examination by the SBA, NSBF entered into a voluntary agreement with the SBA pursuant to which NSBF established a segregated restricted cash account in the amount of $ 10.0 million to account for potential post-purchase repairs and denials of guaranteed portions of SBA 7(a) loans, and take certain actions to demonstrate the sufficiency of NSBF’s liquidity and establish certain additional reporting and compliance procedures.

In addition, if we fail to comply with SBA Loan Program Requirements in connection with the origination and servicing of SBA 7(a) loans, the SBA could restrict, in whole or part, our ability to sell the guaranteed portions of the SBA 7(a) loans in the secondary market, which could negatively impact our future results of operations.

Curtailment of the government-guaranteed loan programs could adversely affect our results of operations.

Although the SBA 7(a) Program has been in existence since 1953, there can be no assurance that the federal government will maintain the SBA 7(a) program, or that it will continue to guarantee loans at current levels.

Although the SBA 7(a) Program has been in existence since 1953, there can be no assurance that the federal government will maintain the SBA 7(a) Program or the SBA 504 loan program, or that it will continue to guarantee loans at current levels.

Furthermore, in an effort to support our communities during the pandemic, we participated in the PPP under the CARES Act whereby we made loans to small businesses and those loans are subject to the regulatory requirements that require forbearance of loan payments for a specified time or limit our ability to pursue all available remedies in the event of a loan default.

If the borrower under the PPP loan fails to qualify for loan forgiveness, we may be at the heightened risk of holding these loans at unfavorable interest rates as compared to the loans to customers that we would have otherwise extended credit.

If we cannot continue originating and selling government-guaranteed loans, we will generate fewer origination fees and our ability to generate gains on the sale of loans will

If we cannot continue originating and selling government-guaranteed loans, we will generate fewer origination fees and our ability to generate gains on the sale of loans will decrease.

From time-to-time, the government agencies that guarantee these loans reach their internal budgeted limits and cease to guarantee loans for a stated time period.

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If these changes occur, the volume of loans to SMBs and industrial borrowers of the types that now qualify for government-guaranteed loans could decline, as could the profitability of these loans.

Our loans under the Section 7(a) Loan Program involve a high risk of default and such default could adversely impact our results of operations.

Our loans under the SBA 7(a) Program involve a high risk of default and such default could adversely impact our results of operations.

Loans to small businesses involve a high risk of default.

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Because these businesses frequently have highly leveraged capital structures, reduced cash flow resulting from economic downturns can severely impact the businesses’ ability to meet their obligations, which could impact our results of operations.

The portions of Section 7(a) loans to be retained by us do not benefit directly from any SBA guarantees;

The unguaranteed portions of SBA 7(a) loans to be retained by us do not benefit directly from any SBA guarantees;

in an event of default, however, we and the SBA typically cooperate in collateral foreclosure or other work-out efforts and share in any resulting collections.

The loans we make under the Section 7(a) Loan Program face competition.

There are a large number of banks and several non-bank lenders that participate in the SBA Section 7(a) Loan Program.

The loans we make under the SBA 7(a) Program face competition.

There are a large number of banks and several non-bank lenders that participate in the SBA 7(a) Program.

All of these participants compete for the business of eligible borrowers.

Accordingly, we may be at a competitive disadvantage with regard to other lenders or financial institutions that may be able to achieve greater leverage at a lower cost.

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.

A governmental failure to fund the SBA could adversely affect Newtek Bank’s SBA 7(a) loan originations and our results of operations.

We are dependent upon the Federal government to maintain the SBA 7(a) Program.

NSBF’s and Newtek Bank’s lending business could be materially and adversely affected by circumstances or events limiting the availability of funds for this program.

Newtek Bank’s lending business could be materially and adversely affected by circumstances or events limiting the availability of funds for this program.

In October 2013, Congress failed to approve a budget, which, in turn, eliminated availability of funds for the SBA 7(a) program.

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More recently, the government shut down in January 2018 due to a lapse in appropriations, and the SBA closed all non-disaster related programs and activities, including the SBA 7(a) program.

The government could again fail to fund the SBA which would affect NSBF’s and Newtek Bank’s ability to originate government guaranteed loans and to sell the government guaranteed portions of those loans in the secondary market.

Any failure to fund the SBA could adversely affect NSBF’s SBA 7(a) loan originations and our results of operations.

As a participating lender in the SBA Paycheck Protection Program (“PPP”), the Company and NSBF are subject to risks that the SBA may not fund some or all PPP loan guaranties.

On March 27, 2020, President Trump signed the CARES Act, which included a $349 billion loan program administered through the SBA referred to as the PPP.

Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria.

On or about April 16, 2020, the SBA notified lenders that the $349 billion earmarked for the PPP was exhausted.

Congress approved additional funding for the PPP of approximately $320 billion on April 24, 2020.

NSBF is participating as a lender in the PPP.

The PPP opened on April 3, 2020; however, because of the short timeframe between the passing of the CARES Act and the opening of the PPP, there had been some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which may expose the Company and NSBF to risks relating to noncompliance with the PPP.

During the duration of the PPP, NSBF funded approximately 10,570 PPP loans totaling $1.19 billion.

NSBF also has credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which a PPP loan was originated, funded, or serviced by NSBF, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the PPP or additional or new laws, rules, and guidance.

In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by NSBF, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Company.

In addition, in order to facilitate NSBF’s involvement as an authorized lender in the PPP, during the second quarter of 2020, NSBF entered into PPP loan participation agreements where NSBF originated PPP loans and sold participating interests to four banks.

See “PPP Loan Participations.” In accordance with the terms of the PPP participation agreements and SBA regulations and guidance, NSBF, as the originating lender, must continue to hold the PPP loan note, the PPP loan documents and service the PPP loan (i.e., retain all servicing rights).

Moreover, as the originating lender, NSBF is the party responsible to the SBA with respect to all servicing actions, including requests for advance purchases and loan forgiveness, and will be the party eligible for the guarantee purchase of the PPP loan.

NSBF has agreed that it will repurchase from the Participants on demand the Participants’ Percentage of any outstanding principal and interest under the applicable PPP Loan under certain standard representations and warranties, including in the event of a loss due to fraud, gross negligence or willful misconduct on the part of NSBF or any failure to recover under the SBA guarantee as a result of any deficiency in documenting or servicing such PPP Loan by NSBF.

We could be adversely affected by weakness in the residential housing and commercial real estate markets.

Weakness in residential home and commercial real estate values could impair our ability to collect on defaulted SBA loans as real estate is pledged in many of our SBA loans as part of the collateral package.

The development and use of Artificial Intelligence (AI) present risks and challenges that may adversely impact our business.

We or our third-party vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services or products.

The development and use of AI present a number of risks and challenges to our business.

These evolving laws and regulations could require changes in our implementation of AI technology and increase our compliance costs and the risk of non-compliance.

In addition, the complexity of many AI models makes it challenging to understand why they are generating particular outputs.

In addition to our use of AI technologies, we are exposed to risks arising from the use of AI technologies by bad actors to commit fraud and misappropriate funds and to facilitate cyberattacks.

Generative AI, if used to perpetrate fraud or launch cyberattacks, could create panic at a particular financial institution or exchange, which could pose a threat to financial stability.

RISKS RELATED TO U.S.

FEDERAL INCOME TAX

We cannot predict how new tax legislation will affect us, our investments, or our stockholders, and any such legislation could adversely affect our business.

Legislative or other actions relating to taxes could have a negative effect on us.

The rules dealing with U.S.

federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S.

Treasury Department.

The current U.S.

presidential administration has enacted significant changes to the existing U.S.

tax rules, and there are a number of proposals in Congress that would similarly modify the existing U.S.

The likelihood of any such legislation being enacted is uncertain, but new legislation and any U.S.

Treasury regulations, administrative interpretations or court decisions interpreting such legislation could significantly and negatively affect the U.S.

federal income tax consequences to us and our stockholders of such qualification, or could have other adverse consequences.

Stockholders are urged to consult with their tax advisor regarding tax legislative, regulatory, or administrative developments and proposals and their potential effect on an investment in our securities.

RISKS RELATED TO OUR SUBSIDIARIES - NEWTEK MERCHANT SOLUTIONS (NMS)

We could be adversely affected if either of NMS’ two bank sponsorships is terminated.

The government could again fail to fund the SBA which would affect Newtek Bank’s ability to originate government guaranteed loans and to sell the government guaranteed portions of those loans in the secondary market.

Any failure to fund the SBA could adversely affect Newtek Bank’s SBA 7(a) loan originations and our results of operations.

We could be adversely affected by weakness in the residential housing and CRE markets.

Weakness in residential home and CRE values could impair our ability to collect on defaulted loans, as real estate is pledged in many of our loans as part of the collateral package.

Weakness in real estate markets could result in higher net charge-offs, nonperforming assets, provision for credit losses, and losses on loans accounted for at fair value in addition to delayed and/or lower reinvestment of proceeds into earning assets or repayment of debt or other obligations.

RISKS RELATED TO PAYMENT PROCESSING

We could be adversely affected if any bank sponsorship is terminated.

Newtek Merchant Solutions (NMS) relies on bank sponsorships for payment processing.

Because NMS is not a bank, it is unable to belong to and directly access the Visa ® and Mastercard ® bankcard associations.

The Visa and Mastercard operating regulations require NMS to be sponsored by a bank in order to process bankcard transactions.

A bank sponsorship is an agreement under which a financial institution that has a membership with MasterCard®, Visa® or American Express sponsors an independent sales organization, like NMS, that markets credit card processing services to merchants who accept credit cards as a form of payment, gains access to the Visa®, MasterCard®, and American Express networks.

NMS is currently sponsored by two banks.

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If it cannot pass along these increases to its merchants, its profit margins will be reduced.

NMS pays interchange fees or assessments to bankcard associations for each transaction it processes using their credit, debit and gift cards.

NMS pays interchange fees or assessments to bankcard associations for each transaction it processes using their credit and debit cards.

From time to time, the bankcard associations increase the interchange fees that they charge processors and the sponsoring banks, which generally pass on such increases to NMS.

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If NMS is not able to pass these fee increases along to merchants through corresponding increases in its processing fees, its profit margins in this line of business will be reduced.

Unauthorized disclosure of merchant or cardholder data, whether through breach of our computer systems or otherwise, could expose us to liability and business losses.

Through NMS, we collect and store sensitive data about merchants and cardholders, and we maintain a database of cardholder data relating to specific transactions, including payment, card numbers and cardholder addresses, in order to process the transactions and for fraud prevention and other internal processes.

If anyone penetrates our network security or otherwise misappropriates sensitive merchant or cardholder data, we could be subject to liability or business interruption.

While we subject these systems to periodic independent testing and review, we cannot guarantee that our systems will not be penetrated in the future.

If a breach of our system occurs, we may be subject to liability, including claims for unauthorized purchases with misappropriated card information, impersonation or other similar fraud claims.

Similar risks exist with regard to the storage and transmission of such data by our processors.

In the event of any such a breach, we may also be subject to a class action lawsuit.

SMBs are less prepared for the complexities of safeguarding cardholder data than their larger counterparts.

In the event of noncompliance by a customer of card industry rules, we could face fines from payment card networks.

There can be no assurance that we would be able to recover any such fines from such customer.

NMS is liable if its processing merchants refuse or cannot reimburse charge-backs resolved in favor of their customers.

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Because their sales are card-not-present transactions, these merchants are more vulnerable to customer fraud than larger merchants, and NMS could experience charge-backs arising from cardholder fraud more frequently with these merchants.

Merchant fraud occurs when a merchant, rather than a customer, knowingly uses a stolen or counterfeit card or card number to record a false sales transaction or intentionally fails to deliver the merchandise or services sold in an otherwise valid transaction.

Anytime a merchant is unable to satisfy a charge-back, NMS is ultimately responsible for that charge-back unless it has required that a cash reserve be established.

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Failure to effectively manage risk and prevent fraud could increase NMS charge-back liability and adversely affect its results of operations.

NMS payment processing systems may fail due to factors beyond its control, which could interrupt its business or cause it to lose business and likely increase costs.

NMS depends on the uninterrupted operations of our computer network systems, software and our processors’ data centers.

Defects in these systems or damage to them due to factors beyond its control could cause severe disruption to NMS’ business and other material adverse effects on its payment processing businesses.

The electronic payment processing business is undergoing very rapid technological changes which may make it difficult or impossible for NMS to compete effectively.

The introduction of new technologies, primarily mobile payment capabilities, and the entry into the payment processing market of new competitors, Apple, Inc., for example, could dramatically change the competitive environment and require significant changes and costs for NMS to remain competitive.

There is no assurance that NMS will have the capability to stay competitive with such changes.

NMS 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.

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As a result of a litigation brought by the FTC in October 2012, NMS voluntarily entered into, and is presently operating under, a permanent injunction with respect to certain of its business practices.

NMS’s failure to comply with the terms of the permanent injunction could result in FTC seeking penalties against NMS and/or negatively impact NMS’ ability to conduct its business.

Increased 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.

Regulation of the payments industry has increased significantly in recent years.

Regulation of the payments industry has increased significantly in recent years, with regulations covering privacy, data security, anti-money laundering and money transfer rules at both the state and federal level.

Complying with these and other regulations increases costs and can reduce revenue opportunities.

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Any of these occurrences can materially and adversely affect NMS’ business, prospects for future growth, financial condition and results of operations.

Examples include:

• Data Protection and Information Security .

Aspects of NMS’ operations and business are subject to privacy and data protection regulation.

NMS’ financial institution clients are subject to similar requirements under the guidelines issued by the federal banking agencies.

In addition, many individual states have enacted legislation requiring consumer notification in the event of a security breach.

• Anti-Money Laundering and Anti-Terrorism Financing .

PATRIOT Act requires NMS to maintain an anti-money laundering program.

Sanctions imposed by the U.S.

Treasury Office of Foreign Assets Control, or OFAC, restrict NMS from dealing with certain parties considered to be connected with money laundering, terrorism or narcotics.

NMS has controls in place designed to ensure OFAC compliance, but if those controls should fail, it could be subject to penalties, reputational damage and loss of business.

• Money Transfer Regulations.

As NMS expands its product offerings, it may become subject to money transfer regulations, increasing regulatory oversight and costs of compliance.

• Formal Investigation.

If NMS is suspected of violating government statutes, such as the Federal Trade Commission Act or the Telemarketing and Consumer Fraud and Abuse Prevention Act, governmental agencies may formally investigate NMS.

If NMS is suspected of violating government statutes, governmental agencies may formally investigate NMS.

As a result of such a formal investigation, criminal or civil charges could be filed against NMS and it could be required to pay significant fines or penalties in connection with such investigation or other governmental investigations.

Any criminal or civil charges by a governmental agency, including any fines or penalties, could materially harm NMS’ business, results of operations, financial position and cash flows.

Currently, NMS is operating under an order for injunctive relief it voluntarily entered into with the Federal Trade Commission.

RISKS RELATED TO OUR SUBSIDIARIES - NEWTEK BANK

Currently, NMS is operating under an order for injunctive relief it voluntarily entered into with the FTC.

ADDITIONAL RISKS RELATED TO NEWTEK BANK

If the credit decisioning, pricing, 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 affected.

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Many of our loan products are unsecured obligations of borrowers, and they are not secured by any collateral.

None of the loans facilitated on our platform are guaranteed or insured by any third party or backed by any governmental authority in any way.

We are the loan servicer for all loans supporting notes, all certificates and certain secured borrowings, and we are the loan servicer for most, though not all, loans sold as whole loans.

None of the non-SBA loans facilitated on our platform are guaranteed or insured by any third party or backed by any governmental authority in any way.

We are the loan servicer for all non-SBA loans supporting notes, all certificates and certain secured borrowings, and we are the loan servicer for most, though not all, loans sold as whole loans.

The ability to collect on the loans is dependent on the borrower’s continuing financial stability, and consequently, collections can be adversely affected by a number of factors, including bankruptcy or the economic and/or social factors.

Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on these loans.

Accordingly, we and our designated third-party servicers and collection agencies are limited in our ability to collect loans.

In addition, most investors must depend on us or our third-party servicers and collection agents to pursue collection on delinquent borrower loans.

Because we make payments ratably on an investor’s investment only if we receive the borrower’s payments on the corresponding loan, if we, or third parties on our behalf, cannot adequately perform collection services, the investor will not be entitled to any payments under the terms of the investment.

Further, if collection action must be taken in respect of a loan, we or the collection agency may charge a collection fee on any amounts that are obtained (excluding litigation).

These fees will correspondingly reduce the amounts of any payments received by an investor.

Similarly, the returns to investors may be impacted by declines in market rates for sales of charged-off loans to third-party purchasers.

Ultimately, if delinquencies impair our ability to offer attractive risk-adjusted returns for investors, they may seek alternative investments and our business may suffer.

Accordingly, we are limited in our ability to collect loans.

In addition, because our servicing fees depend on the collectability of the loans, if we experience a significant increase in the number of delinquent or charged-off loans we will be unable to collect our entire servicing fee for such loans and our revenue could be adversely affected.

RISKS RELATED TO OUR SUBSIDIARIES - NEWTEK TECHNOLOGY SOLUTIONS (NTS)

We have agreed to terminate the activities conducted by NTS.

As a result of commitments made to the Federal Reserve, the Company will divest or otherwise terminate the activities conducted by Newtek Technology Solutions, Inc., which includes the entities of SIDCO, LLC d/b/a/ Cloud Nine Services and Excel WebSolutions, LLC after a December 31, 2023 merger, within two years of becoming a financial holding company, subject to any extension of the two-year period.

The divestiture of NTS may negatively impact the Company’s revenue and income and our ability to effectively manage our information technology systems and infrastructure and cybersecurity risk.

See “ITEM I.C Cybersecurity.”

NTS operates in a highly competitive industry in which technological change can be rapid.

The information technology business and its related technology involve a broad range of rapidly changing technologies.

NTS equipment and the technologies on which it is based may not remain competitive over time, and others may develop superior technologies that render its products non-competitive, without significant additional capital expenditures.

Some of NTS’ competitors are significantly larger and have substantially greater market presence as well as greater financial, technical, operational, marketing and other resources and experience than NTS.

In the event that such a competitor expends significant sales and marketing resources in one or several markets, NTS may not be able to compete successfully in such markets.

We believe that competition will continue to increase, placing downward pressure on prices.

Such pressure could adversely affect NTS gross margins if it is not able to reduce its costs commensurate with such price reductions.

There can be no assurances that NTS will remain competitive.

NTS’ technology solutions business depends on the efficient and uninterrupted operation of its computer and communications hardware systems and infrastructure.

Despite precautions taken by NTS against possible failure of its systems, interruptions could result from natural disasters, power loss, the inability to acquire fuel for its backup generators, telecommunications failure, terrorist attacks and similar events.

NTS also leases telecommunications lines from local, regional and national carriers whose service may be interrupted.

NTS’ business, financial condition and results of operations could be harmed by any damage or failure that interrupts or delays its operations.

There can be no assurance that NTS’ insurance will cover all of the losses or compensate NTS for the possible loss of clients occurring during any period that NTS is unable to provide service.

NTS’ inability to maintain the integrity of its infrastructure and the privacy of confidential information would materially affect its business.

The NTS infrastructure is potentially vulnerable to physical or electronic break-ins, viruses or similar problems.

If its security measures are circumvented, it could jeopardize the security of confidential information stored on NTS’ systems, misappropriate proprietary information or cause interruptions in NTS’ operations.

We may be required to make significant additional investments and efforts to protect against or remedy security breaches.

Security breaches that result in access to confidential information could damage our reputation and expose us to a risk of loss or liability.

The security services that NTS offers in connection with customers’ networks cannot assure complete protection from computer viruses, break-ins and other disruptive problems.

The occurrence of these problems may result in claims against NTS or us or liability on our part.

These claims, regardless of their ultimate outcome, could result in costly litigation and could harm our business and reputation and impair NTS’ ability to attract and retain customers.

NTS could be adversely affected by information security breaches or cyber security attacks.

NTS’ web and cloud services involve the storage and transmission of our customers’ and employees’ proprietary information.

NTS’ business relies on its digital technologies, computer and email systems, software, and networks to conduct its operations.

NTS’ technologies, systems and networks may become the target of criminal cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of NTS or third parties with whom NTS deals, or otherwise disrupt our or our customers’ or other third parties’ business operations.

It is critical to NTS’ business strategy that its facilities and infrastructure remain secure and are perceived by the marketplace to be secure.

Although NTS believes it employs appropriate security technologies, NTS cannot guarantee that the security technologies (including data encryption processes, intrusion detection systems) it employs or, the comprehensive risk assessments it conducts, or its other internal control procedures will assure the security of its customers’ data.

If NTS’ security measures are breached as a result of third-party action, employee error or otherwise, and as a result, its customers’ data becomes available to unauthorized parties, NTS and our other subsidiaries could incur liability and its reputation would be damaged, which could lead to the loss of current and potential customers.

In addition, NTS will be required to expend significant capital and other resources to detect, remedy, protect against or alleviate breaches of its network and security, and it may not be able to remedy these problems in a timely manner, or at all.

Because techniques used by outsiders to obtain unauthorized network access or to sabotage systems change frequently and generally are not recognized until launched against a target, NTS may be unable to anticipate these techniques or implement adequate preventative measures.

For example, in early 2018 following an unauthorized third party misappropriating three of NTS’ domain names, NTS’ management and forensic investigators determined that attackers compromised a portion of its shared webhosting system, and may have acquired certain customer information limited to its shared webhosting customers, and/or gained access to certain of its shared webhosting servers.

In response, NTS took a range of steps designed to further secure its systems, enhance its security protections, enhance access controls, and prevent future unauthorized activity.

For more information on risks relating to cybersecurity, see “Risks Related to Cybersecurity.”

NTS’ business depends on Microsoft Corporation and others for the licenses to use software as well as other intellectual property in the managed technology solutions business.

NTS’ managed technology business is built on technological platforms relying on the Microsoft Windows® products and other intellectual property that NTS currently licenses.

As a result, if NTS is unable to continue to have the benefit of those licensing arrangements or if the products upon which its platform is built become obsolete, its business could be materially and adversely affected.

RISKS RELATED TO OUR SUBSIDIARIES - NEWTEK INSURANCE AGENCY (NIA)

NIA depends on third parties, particularly property and casualty insurance companies, to supply the products marketed by its agents.

NIA contracts with property and casualty insurance companies typically provide that the contracts can be terminated by the supplier without cause.

NIA’s inability to enter into satisfactory arrangements with these suppliers or the loss of these relationships for any reason would adversely affect the results of its insurance business.

Also, NIA’s inability to obtain these products at competitive prices could make it difficult for it to compete with larger and better capitalized providers of such insurance services.

If NIA fails to comply with government regulations, its insurance agency business would be adversely affected.

NIA insurance agency business is subject to comprehensive regulation in the various states in which it conducts business.

NIA’s success will depend in part upon its ability to satisfy these regulations and to obtain and maintain all required licenses and permits.

NIA’s failure to comply with any statutes and regulations could have a material adverse effect on it.

Furthermore, the adoption of additional statutes and regulations, changes in the interpretation and enforcement of current statutes and regulations could have a material adverse effect on it.

NIA does not have any control over the commissions it earns on the sale of insurance products which are based on premiums and commission rates set by insurers and the conditions prevalent in the insurance market.

NIA earns commissions on the sale of insurance products.

Commission rates and premiums can change based on the prevailing economic and competitive factors that affect insurance underwriters.

In addition, the insurance industry has been characterized by periods of intense price competition due to excessive underwriting capacity and periods of favorable premium levels due to shortages of capacity.

We cannot predict the timing or extent of future changes in commission rates or premiums or the effect any of these changes will have on the operations of NIA.

If NIA fails to comply with government regulations, its insurance agency business would be adversely affected.

NIA insurance agency business is subject to comprehensive regulation in the various states in which it conducts business.

NIA’s success will depend in part upon its ability to satisfy these regulations and to obtain and maintain all required licenses and permits.

NIA’s failure to comply with any statutes and regulations could have a material adverse effect on it.

Furthermore, the adoption of additional statutes and regulations, changes in the interpretation and enforcement of current statutes and regulations could have a material adverse effect on it.

RISKS RELATED TO OUR SUBSIDIARIES - NEWTEK PAYROLL AND BENEFIT SOLUTIONS (PMT)

Unauthorized disclosure of employee data, whether through a cyber-security breach of our computer systems or otherwise, could expose PMT to liability and business losses.

PMT collects and stores sensitive data about individuals in order to process the transactions and for other internal processes.

If anyone penetrates its network security or the security of the third-party payroll processing platform in utilizes, or otherwise misappropriates sensitive individual data, PMT could be subject to liability or business interruption.

PMT is subject to laws and rules issued by different agencies concerning safeguarding and maintaining the confidentiality of this information.

Its activities have been, and will continue to be, subject to an increasing risk of cyber-attacks, the nature of which is continually evolving.

Cyber-security risks include unauthorized access to privileged and sensitive customer information, including passwords and account information of PMT’ customers.

While it subjects its data systems to periodic independent testing and review, PMT cannot guarantee that its systems or the systems of the third-party payroll processing platform in utilizes will not be penetrated in the future.

Experienced computer programmers and hackers may be able to penetrate PMT’ network security or the security of its third-party payroll processing platform, and misappropriate or compromise our confidential information, create system disruptions, or cause shutdowns.

As a result, PMT’ customers’ information may be lost, disclosed, accessed or taken without its customers’ consent.

If a breach of these systems occurs, PMT may be subject to liability, including claims for impersonation or other similar fraud claims.

In the event of any such breach, PMT may also be subject to a class action lawsuit.

Any significant violations of data privacy could result in the loss of business, litigation and regulatory investigations and penalties that could damage PMT’ reputation, and the growth of its business could be adversely affected.

For more information on risks relating to cybersecurity, see “Risks Related to Cybersecurity.”

PMT is subject to risks surrounding Automated Clearing House (“ACH”) payments.

RISKS RELATED TO PAYROLL PROCESSING

Newtek Payroll and Benefit Solutions (“PMT”) is subject to risks surrounding Automated Clearing House (“ACH”) payments.

PMT provides payroll and benefit solutions services.

Credit risk in ACH payments arises when a party to a contract fails to deposit funds required to settle the contract.

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In such an event, PMT could bear the financial burden of settling the customer’s contract.

PMT’s systems may be subject to disruptions that could adversely affect its business and reputation.

PMT’s payroll business relies heavily on its payroll, financial, accounting and other data processing systems.

If any of these systems or any of the vendors which supply them fails to operate properly or becomes disabled even for a brief period of time, PMT could suffer financial loss, a disruption of its business, liability to clients, regulatory intervention or damage to its reputation.

PMT has disaster recovery plans in place to protect its businesses against natural disasters, security breaches, military or terrorist actions, power or communication failures or similar events.

Despite PMT’ preparations, its disaster recovery plans may not be successful in preventing the loss of client data, service interruptions, and disruptions to its operations or damage to its important facilities.

If PMT fails to adapt its technology to meet client needs and preferences, the demand for its services may diminish.

PMT operates in industries that are subject to rapid technological advances and changing client needs and preferences.

In order to remain competitive and responsive to client demands, PMT continually upgrades, enhances and expands its existing solutions and services.

If PMT fails to respond successfully to technological challenges, the demand for its services may diminish.

PMT could incur unreimbursed costs or damages due to delays in processing inherent in the banking system.

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In addition, PMT could incur unreimbursed costs or damages due to delays in processing customer payrolls or payroll taxes in a timely manner.

RISKS RELATED TO OUR SUBSIDIARIES - NEWTEK BUSINESS CREDIT SOLUTIONS (NBC)

An unexpected level of defaults in NBC’s accounts receivables or inventory portfolios would reduce its income and increase its expenses.

If NBC’s level of non-accrual assets in its receivable financing or inventory financing business rises in the future, it could adversely affect its revenue, earnings and cash flow.

Non-accrual assets primarily consist of receivables for which the customer has not made timely payment.

In certain situations, NBC may restructure the receivable to permit such a customer to have smaller payments over a longer period of time.

Such a restructuring or non-payment by a receivables or inventory customer will result in lower revenue and less cash available for NBC’ operational activities.

NBC’s reserve for credit losses may not be sufficient to cover unexpected losses.

NBC’s business depends on the behavior of its customers.

In addition to its credit practices and procedures, NBC maintains a reserve for credit losses on its accounts receivable and inventory portfolios, which it has judged to be adequate given the receivables it purchases.

NBC periodically reviews its reserve for adequacy considering current economic conditions and trends, charge-off experience and levels of non-accrual assets, and adjusts its reserve accordingly.

However, because of recent unstable economic conditions, its reserves may prove inadequate, which could have a material adverse effect on its financial condition and results of operations.

RISKS RELATED TO OUR CAPCO BUSINESS

The Capco programs and the tax credits they provide are created by state legislation and implemented through regulation, and such laws and rules are subject to possible action to repeal or retroactively revise the programs for political, economic or other reasons.

The Capco programs and the tax credits they provided were created by state legislation and implemented through regulation, and such laws and rules are subject to possible action to repeal or retroactively revise the programs for political, economic or other reasons.

Such an attempted repeal or revision would create substantial difficulty for the Capco programs and could, if ultimately successful, cause us material financial harm.

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A major regulatory violation, while not fatal to our Capco business, would materially increase the cost of operating the Capcos.

We know of no other publicly-held company that sponsors and operates Capcos as a part of its business.

As such, there are, to our knowledge, no other companies against which investors may compare our Capco business and its operations, results of operations and financial and accounting structures.

In the absence of any meaningful peer group comparisons for our Capco business, investors may have a difficult time understanding and judging the strength of our business.

This, in turn, may have a depressing effect on the value of our stock.

RISKS RELATED TO OUR SECURITIES

As of December 31, 2023, our CEO beneficially owns and has shared voting power over approximately 5.3% of our common stock, and may be able to exercise significant influence over the outcome of most shareholder actions.

Because of his ownership of and shared voting power over our stock, Barry Sloane, our Chairman, Chief Executive Officer and President, may be able to exercise significant influence over actions requiring shareholder approval, including the election of directors, the adoption of amendments to the certificate of incorporation, approval of stock incentive plans and approval of major transactions such as a merger or sale of assets.

This could delay or prevent a change in control of the Company, deprive our shareholders of an opportunity to receive a premium for their common stock as part of a change in control and have a negative effect on the market price of our common stock.

Our common stock price may be volatile and may decrease substantially.

The trading price of our common stock may fluctuate substantially.

The price of our common stock may be higher or lower depending on many factors, some of which are beyond our control and may not be directly related to our operating performance.

These factors include, but are not limited to, the following:

• price and volume fluctuations in the overall stock market from time to time;

• investor demand for our stock;

• significant volatility in the market price and trading volume of securities of other companies in our sector, which are not necessarily related to the operating performance of these companies;

• changes in regulatory policies or tax guidelines with respect to financial holding companies;

• any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;

• changes, or perceived changes, in the value of our investments;

• departures of key Company personnel;

• operating performance of companies comparable to us;

• general economic conditions and trends and other external factors.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company.

Due to the potential volatility of our stock price once a market for our stock is established, we may become the target of securities litigation in the future.

Securities litigation could result in substantial costs and divert management’s attention and resources from our business.

Future 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 shareholders.

Our Board has the authority, without the action or vote of our shareholders, to issue all or part of the approximately 175,319,600 authorized but unissued shares of our common stock.

Our business strategy relies in part upon the acquisitions of businesses using the resources available to us, including our common stock.

Additionally, we anticipate granting additional options or restricted stock awards to our employees and directors in the future pursuant to the 2023 Stock Incentive Plan, which was approved by the Board in April 2023 and the Company’s shareholders on June 14, 2023.

The 2023 Stock Incentive Plan reserved a maximum of 3,000,000 shares of common stock for issuance to our employees and directors, and 2,917,523 shares of common stock remain available for issuance as of December 31, 2023.

Option holders may exercise their options at a time when we would otherwise be able to obtain additional equity capital on more favorable terms.

Our Board has the authority, without the action or vote of our shareholders but subject to applicable exchange listing rules , to issue all or part of the approximately 173,709,332 authorized but unissued shares of our common stock.

Our business strategy relies in part upon the originations of loans using the resources available to us, including our common stock.

Additionally, we anticipate granting additional options or restricted stock awards to our employees and directors in the future pursuant to the 2023 Stock Incentive Plan, which has reserved a maximum of 3,000,000 shares of common stock for issuance to our employees and directors, and 2,420,966 shares of common stock remain available for issuance as of December 31, 2024.

We may also issue additional securities, through public or private offerings, in order to raise capital.

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Pursuant to our amended and restated charter, our Board is authorized to classify any unissued shares of stock and reclassify any previously classified but unissued shares of stock of any class or series from time to time, into one or more classes or series of stock, including preferred stock.

If we issue preferred stock, the preferred stock would rank “senior” to common stock in our capital structure, preferred shareholders would have separate voting rights on certain matters and might have other rights, preferences, or privileges more favorable than those of our common shareholders, and the issuance of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in your best interest.

If we issue preferred stock, the preferred stock would rank “senior” to common stock in our capital structure, preferred shareholders could have separate voting rights on certain matters and might have other rights, preferences, or privileges more favorable than those of our common shareholders, and the issuance of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in your best interest.

If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage ownership of our shareholders at that time will decrease, and shareholders may experience dilution.

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If we amend our Bylaws to repeal the exemption from the Maryland Control Share Acquisition Act, the Maryland Control Shares Acquisition Act may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such a transaction.

We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our charter classifying our Board in three classes serving staggered three-year terms and authorizing our Board to classify or reclassify shares of our stock in one or more classes or series, to cause the issuance of additional shares of our stock, to amend our charter without shareholder approval and to increase or decrease the number of shares of stock that we have authority to issue.

We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our charter classifying our Board in three classes serving staggered three-year terms and authorizing our Board to classify or reclassify shares of our stock in one or more classes or series, to cause the issuance of additional shares of our stock and to increase or decrease the number of shares of stock that we have authority to issue.

These provisions, as well as other provisions of our charter and bylaws, may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of our shareholders.

Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.

All of the common stock held by our executive officers and directors, represents approximately 1,663,000 shares, or approximately 7% of our total outstanding shares as of December 31, 2023.

Such shares are generally freely tradable in the public market.

Sales of substantial amounts of our common stock, or the availability of such common stock for sale, could adversely affect the prevailing market prices for our common stock.

If this occurs and continues, it could impair our ability to raise additional capital through the sale of securities should we desire to do so.

RISKS RELATED TO OUR NOTES

The 2024 Notes, the 2025 Notes the 2026 Notes, and the 2028 Note, together, the “Notes,” are unsecured and therefore are effectively subordinated to any secured indebtedness we have outstanding or may incur in the future.

In July 2019, February 2021 and May 2021, we issued $63.25 million, $5.0 million and $10.0 million in aggregate principal amount of the 2024 Notes, respectively.

In December 2021, we redeemed $40.0 million in aggregate principal amount of the 2024 Notes.

In January 2021, we issued $115.0 million in aggregate principal amount of the 2026 Notes.

In November 2020, we issued $5.0 million in aggregate principal amount of the 2025 6.85% Notes and in January 2021 we issued an additional $10.0 million in aggregate principal amount of the 2025 6.85% Notes.

In May 2022, we redeemed $15.0 million in aggregate principal amount of the 2025 6.85% Notes.

In March 2022, we issued $15.0 million in aggregate principal amount of the 2025 5.00% Notes and in May 2022 we issued an additional $15.0 million in aggregate principal amount of the 2025 5.00% Notes.

In January 2023, we issued $50.0 million aggregate principal amount of the 2025 8.125% Notes.

In August 2023, we issued $40.0 million in aggregate principal amount of the 2028 8.00% Notes.

The Notes are not secured by any of our assets or any of the assets of our subsidiaries.

As a result, the Notes are effectively subordinated to any secured indebtedness we or our subsidiaries have outstanding or may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security).

In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the existing or future secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes.

The Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

The Notes are obligations exclusively of the Company and not of any of our subsidiaries.

None of our subsidiaries is a guarantor of the Notes and the Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future.

Any assets of our subsidiaries will not be directly available to satisfy the claims of our creditors, including holders of the Notes.

Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors (including trade creditors) and holders of preferred stock, if any, of our subsidiaries will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries.

Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims.

Consequently, the Notes are structurally subordinated to all indebtedness and other liabilities (including trade payables) of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish as financing vehicles or otherwise.

The indentures under which the Notes were issued contains limited protection for holders of the Notes.

The indentures under which the Notes were issued offers limited protection to holders of the Notes.

The terms of the indentures and the Notes generally do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have a material adverse impact on your investment in the Notes.

In particular, the terms of the indentures and the Notes generally do not place any restrictions on our or our subsidiaries’ ability to:

• issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, but giving effect to any exemptive relief granted to us by the SEC, pursuant to the indentures under which the 2024 and 2026 Notes were issued.

Currently, these provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowings.

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 2024 and 2026 Notes were issued;”

• pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes, including subordinated indebtedness;

• sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);

• enter into transactions with affiliates;

• create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;

• make investments;

• create restrictions on the payment of dividends or other amounts to us from our subsidiaries.

In addition, the indentures do not require us to offer to purchase the Notes in connection with a change of control, asset sale or any other event.

Furthermore, the terms of the indentures and the Notes do not protect holders of the Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow or liquidity.

Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the Notes may have important consequences for holders of the Notes, including making it more difficult for us to satisfy our obligations with respect to the Notes or negatively affecting the trading value of the Notes.

Other debt we issue or incur in the future could contain more protections for its holders than the indentures and the Notes, including additional covenants and events of default.

The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of the Notes.

If we default on our obligations to pay other indebtedness that we may incur in the future, we may not be able to make payments on the Notes.

In the future, we may enter into agreements to incur additional indebtedness, including a secured credit facility.

A default under such agreements to which we may be a party that is not waived by the required lenders or holders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the Notes and substantially decrease the market value of the Notes.

If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on such future additional indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing such future additional indebtedness, we could be in default under the terms of the agreements governing such indebtedness.

In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders of other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation.

If we are unable to repay debt, lenders having secured obligations could proceed against the collateral securing the debt.

Because any future credit facilities likely will have customary cross-default provisions, if the indebtedness under any future credit facility is accelerated, we may be unable to repay or finance the amounts due.

We may choose to redeem the Notes when prevailing interest rates are relatively low.

We may choose to redeem the remaining 2024 Notes, as well as the 2025 5.0% Notes, 2026 Notes and 2028 Notes outstanding, especially if prevailing interest rates are lower than the respective interest rates on the 2024 Notes, 2025 Notes, 2026 Notes or 2028 Notes.

If prevailing rates are lower at the time of redemption, holders of the Notes may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the interest rate on the Notes being redeemed.

Our redemption right also may adversely impact your ability to sell the Notes as the optional redemption date or period approaches.

On February 22, 2021, the Company redeemed all $57.5 million in aggregate principal amount of the 2023 Notes on the redemption date at 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon from December 31, 2020 through, but excluding, the redemption date.

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

On March 31, 2022, the Company redeemed all $15.0 million in aggregate principal amount of the 2025 6.85% Notes on the redemption date at 100% of their principal amount ($25 per Note), plus the accrued and unpaid interest thereon from February 28, 222 through, but excluding, the redemption date.

The trading market or market value of our publicly traded debt securities may fluctuate.

The 2024, 2026 and 2028 Notes are new issues of debt securities listed on the Nasdaq Global Market under the symbols “NEWTL,” “NEWTZ,” and “NEWTI,” respectively.

Although the Notes are listed on Nasdaq, we cannot assure you that a trading market for our publicly issued debt securities will be maintained.

In addition to our creditworthiness, many factors may materially adversely affect the trading market for, and market value of, our publicly issued debt securities.

These factors include, but are not limited to, the following:

• the time remaining to the maturity of these debt instruments;

• the outstanding principal amount of debt securities with terms identical to these debt securities;

• the ratings assigned by the national statistical rating agencies;

• the general economic environment;

• the supply of debt securities trading in the secondary market, if any;

• the level, direction and volatility of market interest rates generally;

• market rates of interest higher or lower than rates borne by the debt securities.

You should be aware that there may be a limited number of buyers should holders of the Notes decide to sell the securities.

This too may materially adversely affect the market value of the debt securities of the trading market for the debt securities.

We are subject to 150% asset coverage requirements due to covenants contained in the indentures under which the 2024 and 2026 Notes were issued.

The 2024 and 2026 Notes were issued pursuant to a base indenture, dated as of September 23, 2015 (the “Base Indenture”), and a fourth supplemental indenture (the “Fourth Supplemental Indenture”), dated as of July 29, 2019, and a Seventh Supplemental Indenture dated as of January 22, 2021, respectively, each between us and U.S.

Bank National Association, as trustee.

The Fourth Supplemental Indenture and Seventh Supplemental Indenture include covenants requiring us to comply with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) of the 1940 Act as modified by Section 61(a) of the 1940 Act (or any successor provisions), to comply with (regardless of whether we are subject to) the restrictions on dividends, distributions and purchase of capital stock set forth in Section 18(a)(1)(B) of the 1940 Act as modified by Section 61(a) of the 1940 Act and to provide financial information to the holders of the Notes and the Trustee if we should no longer be subject to the reporting requirements under the Exchange Act.

As a result, we are subject to 150% asset coverage requirements under the 1940 Act even though, effective January 6, 2023, we are not regulated as a BDC.

RISKS RELATED TO OUR OUTSTANDING INDEBTEDNESS

We are subject to 150% asset coverage requirements due to covenants contained in certain of our outstanding debt.

Certain of our outstanding debt include covenants requiring us to comply with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) of the 1940 Act as modified by Section 61(a) of the 1940 Act (or any successor provisions), to comply with (regardless of whether we are subject to) the restrictions on dividends, distributions and purchase of capital stock set forth in Section 18(a)(1)(B) of the 1940 Act as modified by Section 61(a) of the 1940 Act and to provide financial information to the holders of the Notes and the Trustee if we should no longer be subject to the reporting requirements under the Exchange Act.

As a result, we are subject to 150% asset coverage requirements under the 1940 Act even though we are not regulated as a BDC.

Under these requirements we are only permitted to issue multiple classes of indebtedness and one class of shares senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance.

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Our business operations and our subsidiaries’ business operations rely upon secure information technology systems for data processing, storage and reporting.

Despite security and controls design, implementation and updating, such information technology systems could become subject to cyber-attacks.

Such information technology systems could become subject to cyber-attacks.

Network, system, application and data breaches could result in operational disruptions or information misappropriation, which could have a material adverse effect on our business, results of operations and financial condition.

In addition, our business operations involve the storage and transmission of Newtek, customer and employee proprietary information.

For example, we collect and store sensitive data about borrowers, merchants and cardholders, and we collect and store sensitive employee and payroll data.

If anyone penetrates our network security or otherwise misappropriates sensitive customer, merchant or cardholder data, we could be subject to liability or business interruption.

In addition, our business operations involve the storage and transmission of Company, customer and employee proprietary information.

Our businesses rely on our digital technologies, computer and email systems, software, and networks to conduct operations.

Our technologies, systems and networks may become the target of criminal cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of us or third parties with whom we deal, or otherwise disrupt our or our customers’ or other third parties’ business operations.

In the event of any breach of any third-party data processors’ system, we may also be subject to class action lawsuits or other liability.

SMBs are less prepared for the complexities of safeguarding cardholder data than their larger counterparts.

In the event of noncompliance by a customer or other third-party of data safety and data privacy laws and regulations, we could face fines from governmental or non-governmental agencies.

Further, the use of AI by cybercriminals may increase the frequency and severity of cyber-attacks against us or our third-party vendors and clients.

It is critical to our business strategy that our facilities and infrastructure remain secure and are perceived by the marketplace to be secure.

Although we believe we and our IT providers employ appropriate security technologies (including data encryption processes, intrusion detection systems), and conduct comprehensive risk assessments and other internal control procedures to assure the security of our and our customers’ data, we cannot guarantee that these measures will be sufficient for this purpose.

Although we believe we and our IT providers employ security technologies (including data encryption processes, intrusion detection systems), and conduct comprehensive risk assessments and other internal control procedures designed to assure the security of our and our customers’ data, we cannot guarantee that these measures will be sufficient for this purpose.

If our and our IT provider’s security measures are breached as a result of third-party action, employee error or otherwise, and as a result our or our customers’ data becomes available to unauthorized parties, we could incur liability and our reputation would be damaged, which could lead to the loss of current and potential customers.

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Because techniques used by outsiders to obtain unauthorized network access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures.

Additionally, the increased use of mobile and cloud technologies due to the increased amount of remote work resulting from the COVID-19 pandemic could heighten these and other operational risks as certain aspects of the security of such technologies may be complex and unpredictable.

We maintain a cybersecurity risk management program that is overseen by the Chief Information Security Officer (“CISO”) of NTS.

The CISO is chiefly responsible for developing, maintaining, and enforcing cybersecurity and cyber risk-related policies;

ensuring the Company and its subsidiaries satisfy requirements of relevant regulations, industry standards, and third-party risk assessment requirements;

keeping abreast of developing security threats, and helping both the Board and the board of directors of Newtek Bank understand potential security problems that might arise from the changing threat landscape;

and overseeing and implementing regular security awareness training of all employees on cybersecurity, and supporting effective communication with users to limit security vulnerabilities.

The CISO regularly reports to the Risk Committee of the Board and the risk committee of the board of directors of Newtek Bank on the state of our cybersecurity risk management program and provides updates on cybersecurity matters.

See “ITEM I.C Cybersecurity.”

Additionally, 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.

Prior to the January 2025 divestiture of NTS to IPM, we relied on our subsidiary NTS to manage our IT, including software, hardware and cybersecurity.

In connection with the sale of NTS to IPM, we entered into an agreement for IPM to continue to manage the Company’s IT.

There can be no assurance that IPM will continue to provide the Company with the same level of service or cybersecurity as a third-party provider that NTS provided as a wholly owned subsidiary.

As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

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If unauthorized parties gain access to such information and technology systems, they may be able to steal, publish, delete or modify private and sensitive information, including nonpublic personal information related to stockholders (and their beneficial owners) and material nonpublic information.

The systems we have implemented to manage risks relating to these types of events could prove to be inadequate and, if compromised, could become inoperable for extended periods of time, cease

to function properly or fail to adequately secure private information.

The systems we have implemented to manage risks relating to these types of events could prove to be inadequate and, if compromised, could become inoperable for extended periods of time, cease to function properly or fail to adequately secure private information.

Breaches such as those involving covertly introduced malware, impersonation of authorized users and industrial or other espionage may not be identified even with sophisticated prevention and detection systems, potentially resulting in further harm and preventing them from being addressed appropriately.

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While we engage in actions to reduce our exposure resulting from outsourcing, ongoing threats may result in unauthorized access, loss, exposure, destruction, or other cybersecurity incident that affects our data, resulting in increased costs and other consequences as described above.

Any failure or interruption of the systems we rely on, including as a result of the termination of an agreement with any such third party service provider, could cause delays or other problems in our activities.

This, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our securities and our ability to make distributions to our shareholders.

In addition, cybersecurity has become a top priority for regulators around the world, and some jurisdictions have enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data.

For example, the SEC recently enacted rules, effective as of December 18, 2023, requiring public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on annual basis material information regarding their cybersecurity risk management, strategy, and governance.

For example, the SEC enacted rules, effective as of December 18, 2023, requiring public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on annual basis material information regarding their cybersecurity risk management, strategy, and governance.

If we fail to comply with the relevant laws and regulations, we could suffer financial losses, a disruption of our businesses, liability to investors, regulatory intervention or reputational damage.

We and our service providers continue to be impacted by the increase in remote work in response to the global COVID-19 pandemic.

We and our service providers continue to be impacted by the increase in remote work.

Policies of extended periods of remote working, whether by us or by our service providers, could strain technology resources, introduce operational risks and otherwise heighten the risks described above.

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GENERAL RISK FACTORS

Our common stock price may be volatile and may decrease substantially.

The trading price of our common stock may fluctuate substantially.

The price of our common stock may be higher or lower depending on many factors, some of which are beyond our control and may not be directly related to our operating performance.

These factors include, but are not limited to, the following:

• price and volume fluctuations in the overall stock market from time to time;

• investor demand for our stock;

• significant volatility in the market price and trading volume of securities of other companies in our sector, which are not necessarily related to the operating performance of these companies;

• changes in regulatory policies or tax guidelines with respect to financial holding companies;

• any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;

• changes, or perceived changes, in the value of our loan portfolios;

• departures of key Company personnel;

• operating performance of companies comparable to us;

• general economic conditions and trends and other external factors.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company.

Due to the potential volatility of our stock price, we may become the target of securities litigation in the future.

Securities litigation could result in substantial costs and divert management’s attention and resources from our business.

We may experience fluctuations in our quarterly and annual results.

We may experience fluctuations in our quarterly and annual operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate payable on the debt securities we acquire, the default rate of such securities, the level of portfolio dividend and fee income, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions.

We may experience fluctuations in our quarterly and annual operating results due to a number of factors, including our ability or inability to make loans that meet our investment criteria, the default rate of such loans, the level of dividend, interest and fee income, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions.

As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.

We and our subsidiaries are subject to regulation by laws at the local, state, and federal levels.

These laws and regulations, as well as their interpretation, could change from time to time, including as the result of interpretive guidance or other directives from the U.S.

President and others in the executive branch, and new laws, regulations and interpretations could also come into effect.

For example, the current U.S.

presidential administration could support an enhanced regulatory agenda that imposes greater costs on all sectors and on financial services companies in particular.

Any such new or changed laws or regulations could have a material adverse effect on our business, and political uncertainty could increase regulatory uncertainty in the near term.

Changes to the laws and regulations governing our permitted investments may require a change to our investment strategy.

Such changes could differ materially from our strategies and plans as set forth in this report and may shift our investment focus from the areas of expertise of our Adviser.

Thus, any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment in us.

We are highly dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our securities and our ability to make distributions to our shareholders.

Our business is highly dependent on our communications and information systems.

Certain of these systems are provided to us by third-party service providers.

Any failure or interruption of such systems, including as a result of the termination of an agreement with any such third party service provider, could cause delays or other problems in our activities.

This, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our securities and our ability to make distributions to our shareholders.

We cannot predict how new tax legislation will affect us, our investments, or our stockholders, and any such legislation could adversely affect our business.

Legislative or other actions relating to taxes could have a negative effect on us.

The rules dealing with U.S.

federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S.

Treasury Department.Significant changes to the existing U.S.

tax rules have been enacted in recent years, and there are a number of proposals in Congress that would similarly modify the existing U.S.

The likelihood of any such legislation being enacted is uncertain, but new legislation and any U.S.

Treasury regulations, administrative interpretations or court decisions interpreting such legislation could significantly and negatively affect the U.S.

federal income tax consequences to us and our stockholders of such qualification, or could have other adverse consequences.

We are subject to risks related to corporate social responsibility.

Our business faces increasing public scrutiny related to environmental, social and governance (“ESG”) activities.

We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as environmental stewardship, corporate governance and transparency and considering ESG factors in our investment processes.

Our business may continue to face increasing public scrutiny related to environmental, social and governance (“ESG”) activities.

We may risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as environmental stewardship, corporate governance and transparency and considering ESG factors in our investment processes.

Adverse incidents with respect to ESG activities could impact the value of our brand, the cost of our operations and relationships with investors, all of which could adversely affect our business and results of operations.

A variety of organizations measure

the performance of companies on ESG topics, and the results of these assessments are widely publicized.

A variety of organizations measure the performance of companies on ESG topics, and the results of these assessments are widely publicized.

In addition, investment in funds that specialize in companies that perform well in such assessments are increasingly popular, and major institutional investors have publicly emphasized the importance of such ESG measures to their investment decisions.

Additionally, new regulatory initiatives related to ESG could adversely affect our business.

The SEC has proposed rules that,

among other matters, would establish a framework for reporting of climate-related risks.

At this time, there is uncertainty regarding the scope of such proposals or when they would become effective (if at all).

Compliance with any new laws or regulations increases our regulatory burden and could make compliance more difficult and expensive, affect the manner in which we or our subsidiaries conduct our businesses and adversely affect our profitability.

Views about ESG are diverse, dynamic and rapidly changing, with a number of competing constituencies, and there has been an increased focus by investors and other stakeholders on topics related to corporate policies and approaches regarding ESG and diversity, equity and inclusion issues.

Due to divergent stakeholder views on these matters, we are at increased risk that any action, or lack thereof, concerning these matters will be perceived negatively by some stakeholders.

If our ESG practices, oversight and disclosures were perceived to be inadequate or inappropriate by governmental officials, supervisory authorities, investors, customers or other constituencies with the ability to affect our business and financial results, we could suffer reputational damage, a loss of customer and investor confidence, increased litigation risk and regulatory scrutiny, and adverse effects on our results of operations and prospects.

The effect of global climate change may impact our operations and the operations of our subsidiaries and clients.

Climate change is widely considered to be a significant threat to the global economy.

Climate change creates physical and financial risk and some we, or subsidiaries or our clients may be adversely affected by climate change.

Climate change creates physical and financial risk and we, our subsidiaries or our clients may be adversely affected by climate change.

For example, the needs of customers of energy companies vary with weather conditions, primarily temperature and humidity.

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Extreme weather conditions in general require more system backup, adding to costs, and can contribute to increased system stresses, including service interruptions.

In December 2015 the United Nations, of which the U.S.

is a member, adopted a climate accord (the "Paris Agreement") with the long-term goal of limiting global warming and the short-term goal of significantly reducing greenhouse gas emissions.

On November 4, 2016, the past administration announced that the U.S.

would cease participation in the Paris Agreement with the withdrawal taking effect on November 4, 2020.

However, on January 20, 2021, President Joseph R.

Biden signed an executive order to rejoin the Paris Agreement.

As a result, some we, our subsidiaries or our clients may become subject to new or strengthened regulations or legislation, which could increase their operating costs and/or decrease their revenues.

Governments and policymakers at the federal, state and international levels are increasingly focused on climate change and related environmental, social and governance issues, and the potential for climate-related risks to impact the safety and soundness of large financial institutions.

For example, in March 2024, the SEC finalized a rule requiring certain public issuers to provide certain climate-related disclosures in their SEC filings beginning in 2026 with respect to fiscal year 2025;

however, the rule is currently stayed by the SEC pending the completion of judicial review of litigation challenging the rule.

The risks associated with climate change are rapidly changing and evolving in an escalating fashion, making them difficult to assess due to limited data.

We, our subsidiaries or our clients may become subject to new or strengthened regulations or legislation, which could increase their operating costs and/or decrease their revenues.

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What changed 10-K

Item 1A. Risk Factors