Item 1A. Risk Factors
Item 1A. Risk Factors
Except as set forth below there have been no material changes in our risk factors from those previously disclosed in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022.
RISKS RELATING TO OUR BUSINESS
Our new lending business has limited history.
Our Non-Bank Lending business (our “Lending Business”) is recently formed and has no operating history and has generated no revenues through September 30, 2023. This lack of operating history makes it difficult to evaluate our future prospects and the risks and challenges we may encounter. There is no assurance that we can generate significant revenues in the non-bank lending marketplace, and even if revenues are generated there is no assurance that we can earn a profit from this new business. Because our Lending Business’s activities are in a very early stage, we can neither predict all potential risks nor assess the potential effects of those risks on our Lending Business’s, operating results, and financial condition or how much any factor, or combination of factors, could have an adverse effect on our business, results of operations and financial condition.
Non-bank lending involves a substantial risk of loss.
Our Lending Business intends to assume the ultimate credit risk of borrower defaults on its future planned loan assets, and our Lending Business’s earnings, which come from net interest income and fees on those assets, depend significantly on their performance. Widespread and sustained repayment shortfalls on loans in our Lending Business’s portfolio could result in losses, particularly if the value of the available collateral does not cover our Lending Business’s exposure, and could materially and adversely affect our Lending Business’s, operations, operating results, financial condition, liquidity, or capital levels.
RISKS RELATING TO ECONOMY AND MARKET CONDITIONS
Market conditions may restrict or delay desirable non-bank lending opportunities.
Our Lending Business’s operating results, financial condition, and capital levels may be materially and adversely affected by external factors that may affect the price or marketability of our Lending Business’s planned products and services or our Lending Business’s ability to offer its products and services, including, but not limited to:
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disruptions in the debt or equity capital markets;
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competitive pressures in our Lending Business’s loan;
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changes in interest rates that may increase our Lending Business’s funding costs; and
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market or customer perception of our Lending Business’s reputation.
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OPERATIONAL RISKS
Our Lending Business and related operations require development of new processes and controls.
Our Lending Business is exposed to operational risk due to the complex nature of its planned business operations and the processes and systems used to undertake its business activities and comply with regulatory requirements. Operational risks specific to our Lending Business include the risks of loss resulting from:
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inadequate or failed internal processes, systems, cybersecurity program, or infrastructure;
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our Lending Business’s inability to successfully implement enhancements to any of these or migrate to new systems or infrastructure;
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failed execution, including based on human error;
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inadequate or failed internal controls or processes to detect or prevent fraud or other violations of law or regulations; or
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external events, including a disruption involving physical site access, cyber incidents, catastrophic events, natural disasters, terrorist activities, or disease pandemics.
Any of the foregoing could have an adverse effect on our ability to conduct our Lending Business, and our results of operations and financial condition.
The success of our Lending Business initially will depend on one or a small number of employees.
Our Lending Business will rely on its employee’s breadth and depth of knowledge of lending businesses and related industries to run its planned business operations successfully. If our Lending Business cannot retain and attract motivated and qualified employees or does not have adequate human capital to achieve its business objectives, our Lending Business’s performance, operations, financial condition, or reputation could be materially adversely affected.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.