Utah
|
83-0356689
|
|
(State or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S. Employer Identification No.)
|
756 East Winchester, Suite 100, Murray, Utah
|
84107
|
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange
on which registered
|
||
Common Stock, par value $0.001 per share
|
FINW
|
The NASDAQ Stock Market LLC
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
Non-accelerated filer ☒
|
Smaller reporting company ☒
|
Emerging growth company ☒
|
Part I
|
||
Item 1.
|
5
|
|
Item 1A.
|
22
|
|
Item 1B.
|
50
|
|
Item 2.
|
50
|
|
Item 3.
|
50
|
|
Item 4.
|
50
|
|
Part II
|
||
Item 5.
|
51
|
|
Item 6.
|
53
|
|
Item 7.
|
54
|
|
Item 7A.
|
77
|
|
Item 8.
|
78
|
|
Item 9.
|
117
|
|
Item 9A.
|
117
|
|
Item 9B.
|
118
|
|
Part III
|
||
Item 10.
|
118
|
|
Item 11.
|
118
|
|
Item 12.
|
119
|
|
Item 13.
|
119
|
|
Item 14.
|
119
|
|
Part IV
|
||
Item 15.
|
120
|
|
123
|
• |
the success of the financial technology industry, the development and acceptance of which is subject to a high degree of uncertainty, as well as the continued evolution of the regulation of this industry;
|
• |
the ability of our Strategic Program service providers to comply with regulatory regimes, including laws and regulations applicable to consumer credit transactions, and our ability to adequately oversee and
monitor our Strategic Program service providers;
|
• |
our ability to maintain and grow our relationships with our Strategic Program service providers;
|
• |
changes in the laws, rules, regulations, interpretations or policies relating to financial institutions, accounting, tax, trade, monetary and fiscal matters, including the application of interest rate caps or
maximums;
|
• |
our ability to keep pace with rapid technological changes in the industry or implement new technology effectively;
|
• |
conditions relating to Covid-19, including the severity and duration of associated economic impacts either nationally or in our market areas;
|
• |
system failure or cybersecurity breaches of our network security;
|
• |
our reliance on third-party service providers for core systems support, informational website hosting, internet services, online account opening and other processing services;
|
• |
general economic conditions, either nationally or in our market areas (including interest rate environment, government economic and monetary policies, the strength of global financial markets and inflation and
deflation), that impact the financial services industry and/or our business;
|
• |
increased competition in the financial services industry, particularly from regional and national institutions and other companies that offer banking services;
|
• |
our ability to measure and manage our credit risk effectively and the potential deterioration of the business and economic conditions in our primary market areas;
|
•
|
the adequacy of our risk management framework;
|
• |
the adequacy of our allowance for loan losses (“ALL”);
|
• |
the financial soundness of other financial institutions;
|
• |
new lines of business or new products and services;
|
• |
changes in Small Business Administration (“SBA”) rules, regulations and loan products, including specifically the Section 7(a) program, changes in SBA standard operating procedures or changes to the status of
the Bank as an SBA Preferred Lender;
|
• |
changes in the value of collateral securing our loans;
|
• |
possible increases in our levels of nonperforming assets;
|
• |
potential losses from loan defaults and nonperformance on loans;
|
• |
our ability to protect our intellectual property and the risks we face with respect to claims and litigation initiated against us;
|
• |
the inability of small- and medium-sized businesses to whom we lend to weather adverse business conditions and repay loans;
|
• |
our ability to implement aspects of our growth strategy and to sustain our historic rate of growth;
|
• |
our ability to continue to originate, sell and retain loans, including through our Strategic Programs;
|
• |
the concentration of our lending and depositor relationships through Strategic Programs in the financial technology industry generally;
|
• |
our ability to attract additional merchants and retain and grow our existing merchant relationships;
|
• |
interest rate risk associated with our business, including sensitivity of our interest earning assets and interest-bearing liabilities to interest rates, and the impact to our earnings from changes in interest
rates;
|
• |
the effectiveness of our internal control over financial reporting and our ability to remediate any future material weakness in our internal control over financial reporting;
|
• |
potential exposure to fraud, negligence, computer theft and cyber-crime and other disruptions in our computer systems relating to our development and use of new technology platforms;
|
• |
our dependence on our management team and changes in management composition;
|
• |
the sufficiency of our capital, including sources of capital and the extent to which we may be required to raise additional capital to meet our goals;
|
• |
compliance with laws and regulations, supervisory actions, the Dodd-Frank Act, capital requirements, the Bank Secrecy Act, anti-money laundering laws, predatory lending laws, and other statutes and regulations;
|
• |
our ability to maintain a strong core deposit base or other low-cost funding sources;
|
• |
results of examinations of us by our regulators, including the possibility that our regulators may, among other things, require us to increase our ALL or to write-down assets;
|
• |
our involvement from time to time in legal proceedings, examinations and remedial actions by regulators;
|
• |
further government intervention in the U.S. financial system;
|
• |
natural disasters and adverse weather, acts of terrorism, pandemics, an outbreak of hostilities or other international or domestic calamities, and other matters beyond our control;
|
• |
compliance with requirements associated with being a public company;
|
• |
level of coverage of our business by securities analysts;
|
• |
future equity and debt issuances; and
|
• |
other factors that are discussed in the section entitled “Risk Factors,” beginning on page 22.
|
($ in thousands)
|
Total Loans
|
% of Loans in
Category of
Total Loans
|
||||||
SBA
|
$
|
145,172
|
55.8
|
%
|
||||
Commercial, non-real estate
|
11,484
|
4.4
|
%
|
|||||
Residential real estate
|
37,815
|
14.5
|
%
|
|||||
Strategic Program loans
|
47,848
|
18.4
|
%
|
|||||
Commercial real estate
|
12,063
|
4.7
|
%
|
|||||
Consumer
|
5,808
|
2.2
|
%
|
|||||
Total
|
$
|
260,190
|
100.0
|
%
|
• |
understanding the customer’s financial condition and ability to repay the loan;
|
• |
evaluating management performance and expertise and industry experience;
|
• |
verifying that the primary and secondary sources of repayment are adequate in relation to the amount and structure of the loan;
|
• |
observing appropriate loan-to-value guidelines for collateral secured loans;
|
• |
maintaining our targeted levels of diversification for the loan portfolio, both as to type of borrower and type of collateral; and
|
• |
ensuring that each loan is properly documented with perfected liens on collateral.
|
• |
whether the applicant has any other loans(s) (including through the PPP, SBA EIDL, other stimulus financing) that have repayment or contingent repayment requirements which could impact cash flow;
|
• |
for commercial applicants, whether the business revenue and staffing levels were impacted by the Covid-19 pandemic and whether the business has a contingency plan for revenues and operations for a minimum of the
next 18 months;
|
• |
for individual applicants, whether his or her source of income has been or may be impacted;
|
• |
whether historical financial information can be reasonably relied upon based on current market conditions; and
|
• |
the impact current market conditions have on collateral adequacy.
|
• |
Ensure the Safety of Principal—Bank investments are generally limited to investment-grade instruments that fully comply with all applicable regulatory guidelines and limitations. Allowable non-investment-grade
instruments must be approved by the board of directors.
|
• |
Income Generation—The Bank’s investment portfolio is managed to maximize income on invested funds in a manner that is consistent with the Bank’s overall financial goals and risk considerations.
|
• |
Provide Liquidity—The Bank’s investment portfolio is managed to remain sufficiently liquid to meet anticipated funding demands either through declines in deposits and/or increases in loan demand.
|
• |
Mitigate Interest Rate Risk—Portfolio strategies are used to assist the Bank in managing its overall interest rate sensitivity position in accordance with goals and objectives approved by our board of directors.
|
Item 1A. |
RISK FACTORS
|
• |
third-party service provider risk, including risks that we may be unable to maintain or increase loan originations facilitated through our Strategic Programs;
|
• |
legal, accounting and compliance risks, including risks related to the extensive state and federal regulation under which we operate and changes in such regulations;
|
• |
changes in the regulatory oversight environment impacting our Strategic Programs or non-compliance of federal and state consumer protection laws by our Strategic Program service providers;
|
• |
legal and regulatory risks associated with “true lender” statutes associated with our Strategic Programs;
|
• |
reputational risks, including the risk that we may be subject to negative publicity about us or our industry, including the transparency, fairness, user experience, quality, and reliability of our lending
products or distribution channels;
|
• |
legislative, regulatory, legal, and reputational risks related to our Strategic Programs, including those relating to our small dollar lending program;
|
• |
securities market, inflation and interest rate risks, including risks related to interest rate fluctuations and the monetary policies and regulations of the Board of Governors of the Federal Reserve System, or
the Federal Reserve;
|
• |
risks related to cybersecurity breaches and system failures;
|
• |
operational and strategic risks, including the risk that we may not be able to implement our growth strategy, our continued ability to establish relationships with Strategic Program service providers, and the
possible loss of key members of our senior leadership team;
|
• |
the impact and extent of Covid-19 (including the emergence of any new variants thereof) and the response of governmental authorities to Covid-19;
|
• |
credit risks, including risks related to the significance of SBA 7(a), Strategic Programs and construction loans in our portfolio, our relationship with BFG, our ability to effectively manage our credit risk and
the potential deterioration of the business and economic conditions in our markets;
|
• |
liquidity and funding risks, including the risk that we will not be able to meet our obligations due to risks relating to our funding sources; and
|
• |
investment risks, including volatility in the trading of our common stock and limitations on our ability to pay dividends.
|
• |
difficulty in estimating the value of any target company;
|
• |
investing time and incurring expense associated with identifying and evaluating potential investments or acquisitions and negotiating potential transactions, resulting in our attention being diverted from the
operation of our existing business;
|
• |
the lack of history among our management team in working together on acquisitions and related integration activities;
|
• |
obtaining necessary regulatory approvals, which we may have difficulty obtaining or be unable to obtain;
|
• |
the time, expense and difficulty of integrating the operations and personnel of any combined businesses;
|
• |
unexpected asset quality problems with acquired companies;
|
• |
inaccurate estimates and judgments used to evaluate credit, operations, management and market risks with respect to any target institution or assets;
|
• |
risks of impairment to goodwill or other-than-temporary impairment of investment securities;
|
• |
potential exposure to unknown or contingent liabilities of banks and businesses we acquire;
|
• |
an inability to realize expected synergies or returns on investment;
|
• |
potential disruption of our ongoing banking business;
|
• |
maintaining adequate regulatory capital; and
|
• |
loss of key employees, key customers or key business counterparties following our investment or acquisition.
|
Item 1B. |
UNRESOLVED STAFF COMMENTS
|
Item 2. |
PROPERTIES
|
Location
|
Owned/
Leased
|
Lease
Expiration
|
Type of Office
|
|||
Murray, Utah
|
Leased
|
October 31, 2029
|
Corporate Headquarters
|
|||
Sandy, Utah
|
Leased
|
July 31, 2024
|
Retail Bank Branch
|
Item 3. |
LEGAL PROCEEDINGS
|
Item 4. |
MINE SAFETY DISCLOSURES
|
Item 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Period
|
Total Number of
Shares Purchased
|
Average Price
Paid
Per Share
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or Programs (1)
|
Maximum Number of
Shares that May
Yet Be Purchased
Under the Plans or
Programs (1)
|
|||||
October 1, 2022 -
October 31, 2022
|
—
|
—
|
—
|
624,241
|
|||||
November 1, 2022 -
November 30, 2022
|
57,882
|
$9.34
|
57,882
|
566,359
|
|||||
December 1, 2022 -
December 31, 2022
|
42,118
|
$8.99
|
42,118
|
524,241
|
|||||
Total
|
100,000
|
$9.19
|
100,000
|
524,241
|
(1) |
On August 18, 2022, the Company announced that the Board has authorized, effective August 16, 2022, a common stock repurchase program to purchase up to 644,241 shares of the Company’s common stock in the aggregate. The repurchase
program expires on August 31, 2024 but may be limited or terminated at any time without prior notice. The repurchase program authorizes the repurchase by the Company of its common stock in open market transactions, including pursuant to a
trading plan in accordance with Rule 10b-18 promulgated under the Exchange Act or privately negotiated transactions. The authorization permits management to repurchase shares of the Company’s common stock from time to time at management’s
discretion. Repurchases may also be made pursuant to a trading plan under Rule 10b5-1 under the Exchange Act, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so because of self-imposed
trading blackout periods or other regulatory restrictions. The actual means and timing of any shares purchased under the program will depend on a variety of factors, including the market price of the Company’s common stock, general market
and economic conditions, and applicable legal and regulatory requirements. The repurchase program does not obligate the Company to purchase any particular number of shares.
|
Plan Category
|
Number of Securities to be
Issued Upon Exercise of
Outstanding Options
or Restricted Stock Awards
|
Weighted-Average Exercise
Price of Outstanding Options
or Restricted Stock Awards
|
Number of Securities
Remaining Available for
Future Issuance under Equity
Compensation Plans (excluding
securities reflected in the first
column)
|
|||||||||
Equity compensation plans approved by security holders:
|
||||||||||||
FinWise Bancorp 2016 Stock Option Plan
|
132,018
|
$
|
5.23
|
894
|
||||||||
FinWise Bancorp 2019 Stock Option Plan
|
498,693
|
5.20
|
621,472
|
|||||||||
Equity compensation plans not approved by security holders (1)
|
250,914
|
5.43
|
NA
|
|||||||||
Total
|
881,625
|
622,366
|
(1) |
Reflects (a) a grant to Kent Landvatter of 40,914 non-qualified stock options, (b) a grant to Javvis Jacobson of 60,000 non-qualified stock options, (c) a grant to James Noone of 60,000 non-qualified stock
options, (d) grants to Howard Reynolds of an aggregate of 18,000 non-qualified stock options, (e) grants to Gerald E. Cunningham of an aggregate of 18,000 non-qualified stock options, (f) grants to Thomas E. Gibson of an aggregate of
18,000 non-qualified stock options, (g) grants to James N. Giordano of an aggregate of 18,000 non-qualified stock options, (h) grants to Jeana Hutchings of an aggregate of 9,000 non-qualified stock options and (i) grants to Lisa Ann
Nievaard of an aggregate of 9,000 non-qualified stock options.
|
Item 6. |
[RESERVED]
|
Item 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
For the Years Ended
December 31,
|
|||||||
($ in thousands)
|
2022
|
2021
|
||||||
Interest income
|
$
|
52,329
|
$
|
49,243
|
||||
Interest expense
|
(1,434
|
)
|
(1,265
|
)
|
||||
Provision for loan losses
|
(13,519
|
)
|
(8,039
|
)
|
||||
Non-interest income
|
37,411
|
31,844
|
||||||
Non-interest expense
|
(38,756
|
)
|
(29,511
|
)
|
||||
Provision for income taxes
|
(10,916
|
)
|
(10,689
|
)
|
||||
Net income
|
25,115
|
31,583
|
|
Years Ended December 31,
|
|||||||||||||||||||||||
|
2022
|
2021
|
||||||||||||||||||||||
($ in thousands)
|
Average
Balance
|
Interest
|
Average
Yield/Rate
|
Average
Balance
|
Interest
|
Average
Yield/Rate
|
||||||||||||||||||
Interest earning assets:
|
||||||||||||||||||||||||
Interest-bearing deposits with the Federal Reserve, non
|
||||||||||||||||||||||||
U.S. central banks and other banks
|
$
|
74,920
|
$
|
1,180
|
1.58
|
%
|
$
|
55,960
|
$
|
61
|
0.11
|
%
|
||||||||||||
Investment securities
|
12,491
|
208
|
1.67
|
%
|
3,298
|
47
|
1.43
|
%
|
||||||||||||||||
Loans held for sale
|
65,737
|
21,237
|
32.31
|
%
|
59,524
|
22,461
|
37.73
|
%
|
||||||||||||||||
Loans held for investment
|
209,352
|
29,704
|
14.19
|
%
|
198,992
|
26,674
|
13.40
|
%
|
||||||||||||||||
Total interest earning assets
|
362,500
|
52,329
|
14.44
|
%
|
317,774
|
49,243
|
15.50
|
%
|
||||||||||||||||
Less: ALL
|
(10,816
|
)
|
(7,548
|
)
|
||||||||||||||||||||
Non-interest earning assets
|
30,141
|
17,002
|
||||||||||||||||||||||
Total assets
|
$
|
381,825
|
$
|
327,228
|
||||||||||||||||||||
Interest bearing liabilities:
|
||||||||||||||||||||||||
Demand
|
$
|
17,564
|
$
|
531
|
3.02
|
%
|
$
|
6,060
|
$
|
53
|
0.87
|
%
|
||||||||||||
Savings
|
7,310
|
7
|
0.10
|
%
|
7,897
|
10
|
0.13
|
%
|
||||||||||||||||
Money market accounts
|
26,054
|
116
|
0.45
|
%
|
21,964
|
75
|
0.34
|
%
|
||||||||||||||||
Certificates of deposit
|
71,661
|
778
|
1.09
|
%
|
72,311
|
1,000
|
1.38
|
%
|
||||||||||||||||
Total deposits
|
122,589
|
1,432
|
1.17
|
%
|
108,232
|
1,138
|
1.05
|
%
|
||||||||||||||||
Other borrowings
|
566
|
2
|
0.35
|
%
|
36,363
|
127
|
0.35
|
%
|
||||||||||||||||
Total interest bearing liabilities
|
123,155
|
1,434
|
1.16
|
%
|
144,595
|
1,265
|
0.87
|
%
|
||||||||||||||||
Non-interest bearing deposits
|
114,174
|
107,481
|
||||||||||||||||||||||
Non-interest bearing liabilities
|
15,781
|
11,392
|
||||||||||||||||||||||
Shareholders’ equity
|
128,715
|
63,760
|
||||||||||||||||||||||
Total liabilities and shareholders’ equity
|
$
|
381,825
|
$
|
327,228
|
||||||||||||||||||||
Net interest income and interest rate spread
|
$
|
50,895
|
13.28
|
%
|
$
|
47,978
|
14.63
|
%
|
||||||||||||||||
Net interest margin
|
14.04
|
%
|
15.10
|
%
|
||||||||||||||||||||
Ratio of average interest-earning assets to average interest- bearing liabilities
|
294.34
|
%
|
219.77
|
%
|
Years Ended December 31,
|
||||||||||||||||||||||||
|
2022
|
2021
|
||||||||||||||||||||||
|
Increase (Decrease) Due to
|
Increase (Decrease) Due to
|
||||||||||||||||||||||
($ in thousands)
|
Rate
|
Volume
|
Total
|
Rate
|
Volume
|
Total
|
||||||||||||||||||
Interest income:
|
|
|||||||||||||||||||||||
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks
|
$
|
1,092
|
$
|
27
|
$
|
1,119
|
$
|
(219
|
)
|
$
|
79
|
$
|
(140
|
)
|
||||||||||
Investment securities
|
9
|
152
|
161
|
(6
|
)
|
19
|
13
|
|||||||||||||||||
Loans held-for-sale
|
(4,460
|
)
|
3,236
|
(1,224
|
)
|
(1,990
|
)
|
13,891
|
11,901
|
|||||||||||||||
Loans held for investment
|
1,603
|
1,427
|
3,030
|
6,735
|
1,228
|
7,963
|
||||||||||||||||||
Total interest income
|
(1,756
|
)
|
4,842
|
3,086
|
4,520
|
15,217
|
19,737
|
|||||||||||||||||
Interest expense:
|
||||||||||||||||||||||||
Demand
|
270
|
208
|
478
|
15
|
(24
|
)
|
(9
|
)
|
||||||||||||||||
Savings
|
(2
|
)
|
(1
|
)
|
(3
|
)
|
(13
|
)
|
7
|
(6
|
)
|
|||||||||||||
Money market accounts
|
25
|
16
|
41
|
(113
|
)
|
84
|
(29
|
)
|
||||||||||||||||
Certificates of deposit
|
(213
|
)
|
(9
|
)
|
(222
|
)
|
(992
|
)
|
591
|
(401
|
)
|
|||||||||||||
Other borrowings
|
—
|
(125
|
)
|
(125
|
)
|
(2
|
)
|
(44
|
)
|
(46
|
)
|
|||||||||||||
Total interest bearing liabilities
|
80
|
89
|
169
|
(1,105
|
)
|
614
|
(491
|
)
|
||||||||||||||||
Net interest income
|
$
|
(1,836
|
)
|
$
|
4,753
|
$
|
2,917
|
$
|
5,625
|
$
|
14,603
|
$
|
20,228
|
|
For the Years Ended
December 31,
|
Change
|
||||||||||||||
($ in thousands)
|
2022
|
2021
|
$ |
|
%
|
|||||||||||
Noninterest income:
|
||||||||||||||||
Strategic Program fees
|
$
|
22,467
|
$
|
17,959
|
$
|
4,508
|
25.1
|
%
|
||||||||
Gain on sale of loans, net
|
13,550
|
9,689
|
3,861
|
39.8
|
%
|
|||||||||||
SBA loan servicing fees
|
1,603
|
1,156
|
447
|
38.7
|
%
|
|||||||||||
Change in fair value on investment in BFG
|
(478
|
)
|
2,991
|
(3,469
|
)
|
(116.0
|
%)
|
|||||||||
Other miscellaneous income
|
269
|
49
|
220
|
449.0
|
%
|
|||||||||||
Total noninterest income
|
$
|
37,411
|
$
|
31,844
|
$
|
5,567
|
17.5
|
%
|
($ in thousands)
|
For the Years Ended
December 31,
|
Change
|
||||||||||||||
|
2022
|
2021
|
$ |
|
%
|
|||||||||||
Noninterest expense:
|
||||||||||||||||
Salaries and employee benefits
|
$
|
24,489
|
$
|
21,744
|
$
|
2,745
|
12.6
|
%
|
||||||||
Professional services
|
5,454
|
1,670
|
3,784
|
226.6
|
%
|
|||||||||||
Occupancy and equipment expenses
|
2,204
|
882
|
1,322
|
149.9
|
%
|
|||||||||||
Impairment of SBA servicing asset
|
1,728
|
800
|
928
|
116.0
|
%
|
|||||||||||
Other operating expenses
|
4,881
|
4,415
|
466
|
10.6
|
%
|
|||||||||||
Total noninterest expense
|
$
|
38,756
|
$
|
29,511
|
$
|
9,245
|
31.3
|
%
|
As of
December 31,
|
Change
|
|||||||||||||||
($ in thousands)
|
2022
|
2021
|
$ |
|
%
|
|||||||||||
Total assets
|
$
|
400,780
|
$
|
380,214
|
$
|
20,566
|
5.4
|
%
|
||||||||
Investment securities held to maturity, at cost
|
14,292
|
11,423
|
2,869
|
25.1
|
%
|
|||||||||||
Loans receivable, net
|
224,217
|
198,102
|
26,115
|
13.2
|
%
|
|||||||||||
Deposits
|
242,998
|
251,892
|
(8,894
|
)
|
(3.5
|
%)
|
||||||||||
PPP Liquidity Facility
|
314
|
1,050
|
(736
|
)
|
(70.1
|
%)
|
||||||||||
Total shareholders' equity
|
140,459
|
115,442
|
25,017
|
21.7
|
%
|
|||||||||||
Total equity to total assets
|
34.9
|
%
|
30.4
|
%
|
15.0
|
%
|
||||||||||
Weighted average shares outstanding, basic
|
12,740,933
|
10,169,005
|
25.3
|
%
|
||||||||||||
Weighted average shares outstanding, diluted
|
13,218,403
|
10,818,984
|
22.2
|
%
|
|
As of December 31,
|
|||||||||||||||
|
2022
|
2021
|
||||||||||||||
|
Amount
|
% of
total
loans
|
Amount
|
% of
total
loans
|
||||||||||||
SBA
|
$
|
145,172
|
55.8
|
%
|
$
|
142,392
|
53.6
|
%
|
||||||||
Commercial, non real estate
|
11,484
|
4.4
|
%
|
3,428
|
1.3
|
%
|
||||||||||
Residential real estate
|
37,815
|
14.5
|
%
|
27,108
|
10.2
|
%
|
||||||||||
Strategic Program loans
|
47,848
|
18.4
|
%
|
85,850
|
32.3
|
%
|
||||||||||
Commercial real estate
|
12,063
|
4.7
|
%
|
2,436
|
0.9
|
%
|
||||||||||
Consumer
|
5,808
|
2.2
|
%
|
4,574
|
1.7
|
%
|
||||||||||
Total
|
$
|
260,190
|
100.0
|
%
|
$
|
265,788
|
100.0
|
%
|
At December 31, 2022
|
Remaining Contractual Maturity Held for Investment
|
|||||||||||||||||||||||
($ in thousands)
|
One Year
or Less
|
Average
Yield/Rate
|
After
One
Year and
Through
Five
Years
|
Average
Yield/Rate
|
After Five
Years and
Through
Fifteen
Years
|
Average
Yield/Rate
|
||||||||||||||||||
Fixed rate loans:
|
||||||||||||||||||||||||
SBA
|
$ |
272
|
1.00
|
%
|
$
|
354
|
1.00
|
%
|
$
|
—
|
—
|
%
|
||||||||||||
Commercial, non-real estate
|
2,683
|
4.97
|
%
|
8,395
|
4.96
|
%
|
394
|
4.79
|
%
|
|||||||||||||||
Residential real estate
|
3,924
|
5.40
|
%
|
3,590
|
5.50
|
%
|
61
|
4.27
|
%
|
|||||||||||||||
Strategic Program loans
|
16,589
|
113.89
|
%
|
7,669
|
51.27
|
%
|
1
|
24.56
|
%
|
|||||||||||||||
Commercial real estate
|
1,689
|
5.39
|
%
|
1,102
|
5.80
|
%
|
29
|
3.87
|
%
|
|||||||||||||||
Consumer
|
1,838
|
7.57
|
%
|
3,597
|
7.80
|
%
|
62
|
10.31
|
%
|
|||||||||||||||
|
||||||||||||||||||||||||
Variable rate loans:
|
||||||||||||||||||||||||
SBA
|
9,335
|
8.53
|
%
|
36,741
|
8.53
|
%
|
61,545
|
8.38
|
%
|
|||||||||||||||
Commercial, non-real estate
|
—
|
—
|
%
|
—
|
—
|
%
|
—
|
—
|
%
|
|||||||||||||||
Residential real estate
|
29,242
|
8.08
|
%
|
550
|
9.28
|
%
|
445
|
9.23
|
%
|
|||||||||||||||
Strategic Program loans
|
—
|
—
|
%
|
—
|
—
|
%
|
—
|
—
|
%
|
|||||||||||||||
Commercial real estate
|
957
|
8.72
|
%
|
2,525
|
8.32
|
%
|
3,909
|
8.27
|
%
|
|||||||||||||||
Consumer
|
82
|
4.56
|
%
|
229
|
1.38
|
%
|
—
|
—
|
%
|
|||||||||||||||
Total
|
$
|
66,611
|
34.10
|
%
|
$
|
64,752
|
12.81
|
%
|
$
|
66,446
|
8.36
|
%
|
At December 31, 2022
|
Remaining Contractual Maturity Held for Investment
|
|||||||||||||||
($ in thousands)
|
After
Fifteen
Years
|
Average
Yield/Rate
|
Total
|
Average
Yield/Rate
|
||||||||||||
Fixed rate loans:
|
||||||||||||||||
SBA
|
$ |
—
|
—
|
%
|
$
|
626
|
1.00
|
%
|
||||||||
Commercial, non-real estate
|
12
|
3.78
|
%
|
11,484
|
4.96
|
%
|
||||||||||
Residential real estate
|
3
|
4.43
|
%
|
7,578
|
5.44
|
%
|
||||||||||
Strategic Program loans
|
—
|
—
|
%
|
24,259
|
94.10
|
%
|
||||||||||
Commercial real estate
|
8
|
3.50
|
%
|
2,828
|
5.53
|
%
|
||||||||||
Consumer
|
—
|
—
|
%
|
5,497
|
7.75
|
%
|
||||||||||
|
||||||||||||||||
Variable rate loans:
|
||||||||||||||||
SBA
|
36,925
|
8.20
|
%
|
144,546
|
8.38
|
%
|
||||||||||
Commercial, non-real estate
|
—
|
—
|
%
|
—
|
—
|
%
|
||||||||||
Residential real estate
|
—
|
—
|
%
|
30,237
|
8.12
|
%
|
||||||||||
Strategic Program loans
|
—
|
—
|
%
|
—
|
—
|
%
|
||||||||||
Commercial real estate
|
1,844
|
8.15
|
%
|
9,235
|
8.31
|
%
|
||||||||||
Consumer
|
—
|
—
|
%
|
311
|
2.22
|
%
|
||||||||||
Total
|
$
|
38,792
|
8.20
|
%
|
$
|
236,601
|
16.80
|
%
|
|
As of December 31,
|
|||||||||||||||||||||||
|
2022
|
2021
|
||||||||||||||||||||||
($ in thousands)
|
ALL to
Total
Loans
|
Nonaccrual
to Total
Loans
|
ALL to
Nonaccrual
Loans
|
ALL to
Total
Loans
|
Nonaccrual
to Total
Loans
|
ALL to
Nonaccrual
loans
|
||||||||||||||||||
SBA
|
3.0
|
%
|
—
|
%
|
—
|
%
|
1.9
|
%
|
0.5
|
%
|
401.6
|
%
|
||||||||||||
Commercial, non-real estate
|
3.5
|
%
|
—
|
%
|
—
|
%
|
3.9
|
%
|
—
|
%
|
—
|
%
|
||||||||||||
Residential real estate
|
1.3
|
%
|
—
|
%
|
—
|
%
|
1.3
|
%
|
—
|
%
|
—
|
%
|
||||||||||||
Strategic program loans(1)
|
14.0
|
%
|
—
|
%
|
—
|
%
|
7.6
|
%
|
—
|
%
|
—
|
%
|
||||||||||||
Commercial real estate
|
0.2
|
%
|
—
|
%
|
—
|
%
|
0.9
|
%
|
—
|
%
|
—
|
%
|
||||||||||||
Consumer
|
1.1
|
%
|
—
|
%
|
—
|
%
|
1.4
|
%
|
—
|
%
|
—
|
%
|
||||||||||||
Total
|
4.6
|
%
|
—
|
%
|
—
|
%
|
3.7
|
%
|
0.3
|
%
|
1,445.1
|
%
|
|
Years Ended December 31,
|
|||||||||||||||||||||||
|
2022
|
2021
|
||||||||||||||||||||||
($ in thousands)
|
Net
Charge-
Offs
|
Average
Loans
|
NCO to
Average
Loans
|
Net
Charge-
Offs
|
Average
Loans
|
NCO to
Average
Loans
|
||||||||||||||||||
SBA
|
$
|
326
|
$
|
132,199
|
0.2
|
%
|
$
|
109
|
$
|
149,285
|
0.1
|
%
|
||||||||||||
Commercial, non-real estate
|
(2
|
)
|
7,562
|
0.0
|
%
|
(40
|
)
|
3,945
|
(1.0
|
%)
|
||||||||||||||
Residential real estate
|
—
|
27,937
|
—
|
%
|
—
|
23,171
|
—
|
%
|
||||||||||||||||
Strategic program loans(1)
|
11,063
|
93,115
|
11.9
|
%
|
4,311
|
75,171
|
5.7
|
%
|
||||||||||||||||
Commercial real estate
|
—
|
8,912
|
—
|
%
|
—
|
2,082
|
—
|
%
|
||||||||||||||||
Consumer
|
2
|
5,364
|
0.0
|
%
|
3
|
4,862
|
0.1
|
%
|
||||||||||||||||
Total
|
$
|
11,389
|
$
|
275,089
|
4.1
|
%
|
$
|
4,383
|
$
|
258,516
|
1.7
|
%
|
|
December 31, 2022
|
|||||||
($ in thousands)
|
Amount
|
% of
Total
Allowance
|
||||||
SBA
|
$
|
4,294
|
35.8
|
%
|
||||
Commercial, non real estate
|
401
|
3.4
|
%
|
|||||
Residential real estate
|
497
|
4.2
|
%
|
|||||
Strategic Program loans
|
6,701
|
55.9
|
%
|
|||||
Commercial real estate
|
27
|
0.2
|
%
|
|||||
Consumer
|
65
|
0.5
|
%
|
|||||
Total
|
$
|
11,985
|
100.0
|
%
|
|
December 31, 2021
|
|||||||
($ in thousands)
|
Amount
|
% of
Total
Allowance
|
||||||
SBA
|
$
|
2,739
|
27.8
|
%
|
||||
Commercial, non real estate
|
132
|
1.3
|
%
|
|||||
Residential real estate
|
352
|
3.6
|
%
|
|||||
Strategic Program loans
|
6,549
|
66.5
|
%
|
|||||
Commercial real estate
|
21
|
0.2
|
%
|
|||||
Consumer
|
62
|
0.6
|
%
|
|||||
Total
|
$
|
9,855
|
100.0
|
%
|
|
At December 31, 2022
|
|||||||||||||||||||
|
After Five to Ten Years Weighted
|
After Ten Years Weighted
|
||||||||||||||||||
($ in thousands)
|
Amortized
Cost
|
Weighted
Average Yield
|
Amortized
Cost
|
Weighted
Average Yield
|
Total
Amortized
Cost
|
|||||||||||||||
Mortgage-backed securities
|
$
|
3,388
|
3.0
|
%
|
$
|
10,904
|
3.4
|
%
|
$
|
14,292
|
For the Years Ended December 31,
|
||||||||||||||||
|
2022
|
2021
|
||||||||||||||
($ in thousands)
|
Total
|
Percent
|
Total
|
Percent
|
||||||||||||
Period end:
|
||||||||||||||||
Noninterest-bearing demand deposits
|
$
|
78,817
|
32.5
|
%
|
$
|
110,548
|
43.9
|
%
|
||||||||
Interest-bearing deposits:
|
||||||||||||||||
Demand
|
50,746
|
20.8
|
%
|
5,399
|
2.1
|
%
|
||||||||||
Savings
|
8,289
|
3.4
|
%
|
6,685
|
2.7
|
%
|
||||||||||
Money markets
|
10,882
|
4.5
|
%
|
31,076
|
12.3
|
%
|
||||||||||
Time certificates of deposit
|
94,264
|
38.8
|
%
|
98,184
|
39.0
|
%
|
||||||||||
Total period end deposits
|
$
|
242,998
|
100.0
|
%
|
$
|
251,892
|
100.0
|
%
|
Years Ended
|
||||||||||||||||||||||||
|
December 31, 2022
|
December 31, 2021
|
||||||||||||||||||||||
($ in thousands)
|
Total
|
Weighted
average
rate paid
|
Percent
of total
|
Total
|
Weighted
average
rate paid
|
Percent
of total
|
||||||||||||||||||
Average:
|
||||||||||||||||||||||||
Noninterest-bearing demand deposits
|
$
|
114,174
|
0.00
|
%
|
48.2
|
%
|
$
|
107,481
|
0.00
|
%
|
49.8
|
%
|
||||||||||||
Interest-bearing deposits:
|
||||||||||||||||||||||||
Demand
|
17,564
|
3.02
|
%
|
7.4
|
%
|
6,060
|
0.87
|
%
|
2.8
|
%
|
||||||||||||||
Savings
|
7,310
|
0.10
|
%
|
3.1
|
%
|
7,897
|
0.13
|
%
|
3.7
|
%
|
||||||||||||||
Money market
|
26,054
|
0.45
|
%
|
11.0
|
%
|
21,965
|
0.34
|
%
|
10.2
|
%
|
||||||||||||||
Time certificates of deposit
|
71,661
|
1.09
|
%
|
30.3
|
%
|
72,311
|
1.38
|
%
|
33.5
|
%
|
||||||||||||||
Total average deposits
|
$
|
236,763
|
0.60
|
%
|
100.0
|
%
|
$
|
215,713
|
0.53
|
%
|
100.0
|
%
|
($ in thousands)
|
Three
months
or less
|
More than
three
months
to six
months
|
More than
six months
to twelve
months
|
More than
twelve
months
|
Total
|
|||||||||||||||
Time deposits, uninsured
|
$
|
—
|
$
|
65
|
$
|
37
|
$
|
1,627
|
$
|
1,729
|
|
December 31,
|
|||||||||||
Capital Ratios
|
2022
|
2021
|
Well-
Capitalized
Requirement
|
|||||||||
Leverage Ratio (under CBLR)
|
25.1
|
%
|
17.7
|
%
|
9.0
|
%(1)
|
($ in thousands)
|
Total
|
Less
than
One
Year
|
One to
Three
Years
|
Three to
Five
Years
|
More
Than
Five
Years
|
|||||||||||||||
Contractual Obligations
|
||||||||||||||||||||
Deposits without stated maturity
|
$
|
129,563
|
$ |
129,563
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||
Time deposits
|
94,264
|
57,721
|
26,828
|
9,715
|
—
|
|||||||||||||||
Long term borrowings(1)
|
314
|
—
|
314
|
—
|
—
|
|||||||||||||||
Operating lease obligations
|
7,513
|
850
|
2,190
|
2,270
|
2,203
|
|||||||||||||||
Total
|
$
|
231,654
|
$
|
188,134
|
$
|
29,332
|
$
|
11,985
|
$
|
2,203
|
|
As of December 31,
|
|||||||
($ in thousands)
|
2022
|
2021
|
||||||
Revolving, open-end lines of credit
|
$
|
1,683
|
$
|
1,259
|
||||
Commercial real estate
|
17,886
|
15,402
|
||||||
Other unused commitments
|
253
|
377
|
||||||
Total commitments
|
$
|
19,822
|
$
|
17,038
|
• |
Expected Term. The expected term represents the period that our awards are expected to be outstanding. We calculated the expected term using a permitted simplified
method, which is based on the vesting period and contractual term for each tranche of awards.
|
• |
Expected Volatility. Prior to our initial public offering, the expected volatility was based on the historical share volatility of several comparable publicly traded
companies over a period of time equal to the expected term of the awards, as we did not have any trading history to use the volatility of our own common shares. After the completion of our initial public offering, it is no longer
necessary to utilize the volatility of comparable publicly traded companies as we now have historical trading volatility data on our own common shares.
|
• |
Risk-Free Interest Rate. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life.
|
• |
Expected Dividend Yield. We have not paid dividends on our common shares nor do we expect to pay dividends in the foreseeable future. Therefore, we used an expected
dividend yield of zero.
|
• |
Our financial performance, capital structure and stage of development;
|
• |
Our management team and business strategy;
|
• |
External market conditions affecting our industry, including competition and regulatory landscape;
|
• |
Our financial position and forecasted operating results;
|
• |
The lack of an active public or private market for our equity shares;
|
• |
Historical discussions we have had with potential private investors;
|
• |
The likelihood of achieving a liquidity event, such as a sale of the Company or an initial public offering of our equity shares; and
|
• |
Market performance analyses, including with respect to share price valuation, of similar companies in our industry.
|
• |
“Tangible book value per share” is defined as book value per share less goodwill and other intangible assets, divided by the outstanding number of common shares at the end of each period. The most directly
comparable GAAP financial measure is book value per share. We had no goodwill or other intangible assets as of any of the dates indicated. We have not considered loan servicing rights or loan trailing fee asset as intangible assets for
purposes of this calculation. As a result, tangible book value per share is the same as book value per share as of each of the dates indicated.
|
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk
|
Page
|
|
78
|
|
79
|
|
80
|
|
81 |
|
82 |
|
83
|
|
December 31,
|
|||||||
|
2022
|
2021
|
||||||
ASSETS
|
||||||||
Cash and cash equivalents
|
||||||||
Cash and due from banks
|
$
|
386
|
$
|
411
|
||||
Interest-bearing deposits
|
100,181
|
85,343
|
||||||
Total cash and cash equivalents
|
100,567
|
85,754
|
||||||
Investment securities held-to-maturity, at cost
|
14,292
|
11,423
|
||||||
Investment in Federal Home Loan Bank (FHLB) stock, at cost
|
449
|
378
|
||||||
Strategic Program loans held-for-sale, at lower of cost or fair value
|
23,589 | 60,748 | ||||||
Loans receivable, net
|
224,217
|
198,102
|
||||||
Premises and equipment, net
|
9,478
|
3,285
|
||||||
Accrued interest receivable
|
1,818
|
1,548
|
||||||
Deferred taxes, net
|
1,167
|
1,823
|
||||||
SBA servicing asset, net
|
5,210
|
3,938
|
||||||
Investment in Business Funding Group (BFG), at fair value
|
4,800
|
5,900
|
||||||
Operating lease right-of-use (“ROU”) assets
|
5,041
|
—
|
||||||
Other assets
|
10,152
|
7,315
|
||||||
Total assets
|
$
|
400,780
|
$
|
380,214
|
||||
|
||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Liabilities
|
||||||||
Deposits
|
||||||||
Noninterest bearing
|
$
|
78,817
|
$
|
110,548
|
||||
Interest-bearing
|
164,181
|
141,344
|
||||||
Total deposits
|
242,998
|
251,892
|
||||||
Accrued interest payable
|
54
|
48
|
||||||
Income taxes payable
|
1,077
|
233
|
||||||
PPP Liquidity Facility
|
314
|
1,050
|
||||||
Operating lease liabilities
|
7,020 | — | ||||||
Other liabilities
|
8,858
|
11,549
|
||||||
Total liabilities
|
260,321
|
264,772
|
||||||
|
||||||||
Commitments and contingencies (Note 8)
|
||||||||
|
||||||||
Shareholders’ equity
|
||||||||
Preferred stock, $0.001 par value, 4,000,000 authorized; no
shares issued and outstanding as of December 31, 2022 and December 31, 2021
|
—
|
—
|
||||||
Common stock, $0.001 par value, 40,000,000 shares authorized; 12,831,345
and 12,772,010 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively
|
13
|
13
|
||||||
Additional paid-in-capital
|
54,614
|
54,836
|
||||||
Retained earnings
|
85,832
|
60,593
|
||||||
Total shareholders’ equity
|
140,459
|
115,442
|
||||||
Total liabilities and shareholders’ equity
|
$
|
400,780
|
$
|
380,214
|
|
For the Years Ended December 31,
|
|||||||
|
2022
|
2021
|
||||||
Interest income
|
||||||||
Interest and fees on loans
|
$
|
50,941
|
$
|
49,135
|
||||
Interest on securities
|
208
|
47
|
||||||
Other interest income
|
1,180
|
61
|
||||||
Total interest income
|
52,329
|
49,243
|
||||||
|
||||||||
Interest expense
|
||||||||
Interest on deposits
|
1,432
|
1,138
|
||||||
Interest on PPP Liquidity Facility
|
2
|
127
|
||||||
Total interest expense
|
1,434
|
1,265
|
||||||
Net interest income
|
50,895
|
47,978
|
||||||
|
||||||||
Provision for loan losses
|
13,519
|
8,039
|
||||||
Net interest income after provision for loan losses
|
37,376
|
39,939
|
||||||
|
||||||||
Non-interest income
|
||||||||
Strategic Program fees
|
22,467
|
17,959
|
||||||
Gain on sale of loans, net
|
13,550
|
9,689
|
||||||
SBA loan servicing fees
|
1,603
|
1,156
|
||||||
Change in fair value on investment in BFG
|
(478
|
)
|
2,991
|
|||||
Other miscellaneous income
|
269
|
49
|
||||||
Total non-interest income
|
37,411
|
31,844
|
||||||
|
||||||||
Non-interest expense
|
||||||||
Salaries and employee benefits
|
24,489
|
21,744
|
||||||
Professional services
|
5,454 | 1,670 | ||||||
Occupancy and equipment expenses
|
2,204
|
882
|
||||||
Impairment of SBA servicing asset
|
1,728
|
800
|
||||||
Other operating expenses
|
4,881
|
4,415
|
||||||
Total non-interest expense
|
38,756
|
29,511
|
||||||
Income before income tax expense
|
36,031
|
42,272
|
||||||
|
||||||||
Provision for income taxes
|
10,916
|
10,689
|
||||||
Net income
|
$
|
25,115
|
$
|
31,583
|
||||
|
||||||||
Earnings per share, basic
|
$ |
1.96 | $ |
3.44 | ||||
Earnings per share, diluted
|
$ |
1.87 | $ |
3.27 | ||||
|
||||||||
Weighted average shares outstanding, basic
|
12,729,898
|
8,669,724
|
||||||
Weighted average shares outstanding, diluted
|
13,357,022
|
9,108,163
|
|
Common Stock
|
|||||||||||||||||||
|
Shares
|
Amount |
Additional
Paid-In
Capital
|
Retained
Earnings
|
Total
Shareholders’
Equity
|
|||||||||||||||
Balance at December 31, 2020
|
8,660,334
|
$ | 9 |
$
|
16,853
|
$
|
29,010
|
$
|
45,872
|
|||||||||||
Stock-based compensation expense
|
—
|
—
|
2,100
|
—
|
2,100
|
|||||||||||||||
Issuance of common stock
|
4,025,000
|
4
|
35,572
|
—
|
35,576
|
|||||||||||||||
Stock options exercised
|
86,676
|
—
|
311
|
—
|
311
|
|||||||||||||||
Net income
|
—
|
—
|
—
|
31,583
|
31,583
|
|||||||||||||||
Balance at December 31, 2021
|
12,772,010
|
$ | 13 |
$
|
54,836
|
$
|
60,593
|
$
|
115,442
|
|||||||||||
Stock-based compensation expense
|
123,055
|
—
|
778
|
—
|
778
|
|||||||||||||||
Stock options exercised
|
56,280
|
—
|
260
|
—
|
260
|
|||||||||||||||
Repurchase of common stock
|
(120,000 | ) | — | (1,260 | ) | 124 | (1,136 | ) | ||||||||||||
Net income
|
—
|
—
|
— |
25,115
|
25,115
|
|||||||||||||||
Balance at December 31, 2022
|
12,831,345
|
$ | 13 |
$
|
54,614
|
$
|
85,832
|
$
|
140,459
|
|
For the Years Ended
December 31,
|
|||||||
|
2022
|
2021
|
||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$
|
25,115
|
$
|
31,583
|
||||
Adjustments to reconcile net income to net cash from operating activities
|
||||||||
Depreciation and amortization
|
2,107
|
1,038
|
||||||
Provision for loan losses
|
13,519
|
8,039
|
||||||
Noncash operating lease cost
|
2,339 | — | ||||||
Net amortization in securities discounts and premiums
|
28
|
25
|
||||||
Capitalized servicing assets
|
(4,087
|
)
|
(3,048
|
)
|
||||
Capitalized loan trailing fee asset
|
(2,347 | ) | — | |||||
Gain on sale of SBA loans, net
|
(13,550
|
)
|
(9,689
|
)
|
||||
Originations of Strategic Program loans held-for-sale
|
(6,974,133
|
)
|
(6,335,194
|
)
|
||||
Proceeds on Strategic Program loans held-for-sale
|
7,011,292
|
6,295,394
|
||||||
Change in fair value of BFG
|
478
|
(2,991
|
)
|
|||||
Impairment of SBA servicing asset
|
1,728
|
800
|
||||||
Stock-based compensation expense
|
778
|
2,100
|
||||||
Deferred income tax benefit (expense)
|
656
|
(1,371
|
)
|
|||||
Net changes in:
|
||||||||
Accrued interest receivable
|
(270
|
)
|
81
|
|||||
Accrued interest payable
|
6
|
(147
|
)
|
|||||
Other assets
|
(299
|
)
|
(1,669
|
)
|
||||
Operating lease liabilities
|
(360 | ) | — | |||||
Other liabilities
|
(1,847
|
)
|
5,817
|
|||||
Net cash provided by (used in) operating activities
|
61,153
|
(9,232
|
)
|
|||||
|
||||||||
Cash flows from investing activities:
|
||||||||
Net increase (decrease) in loans receivable
|
(17,330
|
)
|
41,622
|
|||||
Purchase of loan pools
|
(8,754
|
)
|
(6,000
|
)
|
||||
Investments in FinWise Investments, LLC
|
(191
|
)
|
(80
|
)
|
||||
Distributions from BFG
|
622
|
861
|
||||||
Purchase of bank premises and equipment
|
(7,213
|
)
|
(2,334
|
)
|
||||
Proceeds from maturities and paydowns of securities held-to-maturity
|
1,954
|
678
|
||||||
Purchases of securities held-to-maturity
|
(4,851
|
)
|
(10,317
|
)
|
||||
Purchase of FHLB stock
|
(71
|
)
|
(173
|
)
|
||||
Net cash provided by (used in) investing activities
|
(35,834
|
)
|
24,257
|
|||||
|
||||||||
Cash flows from financing activities:
|
||||||||
Net increase (decrease) in deposits
|
(8,894
|
)
|
87,416
|
|||||
Proceeds from initial public offering, net
|
—
|
35,576
|
||||||
Common stock repurchased
|
(1,136 | ) | — | |||||
Proceeds from exercise of stock options
|
260
|
311
|
||||||
Proceeds from PPP Liquidity Facility
|
—
|
5,558
|
||||||
Repayment of PPP Liquidity Facility
|
(736
|
)
|
(105,515
|
)
|
||||
Net cash provided by (used in) financing activities
|
(10,506
|
)
|
23,346
|
|||||
|
||||||||
Net change in cash and cash equivalents
|
14,813
|
38,371
|
||||||
Cash and cash equivalents, beginning of the period
|
85,754
|
47,383
|
||||||
Cash and cash equivalents, end of the period
|
$
|
100,567
|
$
|
85,754
|
||||
|
||||||||
Supplemental disclosures of cash flow information:
|
||||||||
Cash paid during the period
|
||||||||
Income taxes
|
$ | 9,360 |
$
|
10,473
|
||||
Interest
|
$
|
1,428
|
$
|
1,412
|
||||
Supplemental disclosures of noncash activities: |
||||||||
Operating cash flows from operating leases |
$ |
1,928 | $ |
— | ||||
Right-of-use assets obtained in exchange for operating lease liabilities |
$ |
7,380 | $ |
— |
|
2022
|
2021
|
||||||
Risk-free interest rate
|
3.10
|
%
|
0.4% - 1.3
|
%
|
||||
Expected term in years
|
5.5 - 6.5
|
5.0 - 7.5
|
||||||
Expected volatility
|
45.8% - 46.7
|
%
|
45.7% - 47.6
|
%
|
||||
Expected dividend yield
|
-
|
-
|
|
December 31, 2022
|
|||||||||||||||
($ in thousands)
|
Amortized
Cost
|
Unrealized
Gain
|
Unrealized
Loss
|
Estimated
Fair Value
|
||||||||||||
Mortgage-backed securities
|
$
|
14,292
|
$
|
5
|
$
|
(1,569
|
)
|
$
|
12,728
|
|
December 31, 2021
|
|||||||||||||||
($ in thousands)
|
Amortized
Cost
|
Unrealized
Gain
|
Unrealized
Loss
|
Estimated
Fair Value
|
||||||||||||
Mortgage-backed securities
|
$
|
11,423
|
$
|
23
|
$
|
(114
|
)
|
$
|
11,332
|
|
December 31, 2022
|
|||||||||||||||||||||||
Less than 12 months
|
12 Months or More
|
Total
|
||||||||||||||||||||||
($ in thousands)
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
||||||||||||||||||
Mortgage-backed securities
|
$
|
5,126
|
$
|
(286
|
)
|
$
|
6,671
|
$
|
(1,283
|
)
|
$
|
11,797
|
$
|
(1,569
|
)
|
December 31, 2021
|
||||||||||||||||||||||||
Less than 12 months
|
12 Months or More
|
Total
|
||||||||||||||||||||||
($ in thousands)
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
||||||||||||||||||
Mortgage-backed securities
|
$
|
8,961
|
$
|
(114
|
)
|
$
|
—
|
$ | — |
$
|
8,961
|
$
|
(114
|
)
|
December 31, 2022 | December 31, 2021 | |||||||||||||||
($ in thousands)
|
Amortized
Cost
|
Estimated
Fair Value
|
Amortized
Cost
|
Estimated
Fair Value
|
||||||||||||
Securities held-to-maturity
|
||||||||||||||||
Due in one year or less
|
$ | — | $ | — |
$
|
—
|
$
|
—
|
||||||||
Due after one year through five years
|
— | — |
—
|
—
|
||||||||||||
Due after five years through ten years
|
3,388 | 3,202 |
1,541
|
1,548
|
||||||||||||
Due after ten years
|
10,904 | 9,526 |
9,882
|
9,784
|
||||||||||||
Total Securities held-to-maturity
|
$ |
14,292 | $ |
12,728 |
$
|
11,423
|
$
|
11,332
|
|
December 31,
|
|||||||
|
2022
|
2021
|
||||||
($ in thousands)
|
||||||||
SBA
|
$
|
145,172
|
$
|
142,392
|
||||
Commercial, non-real estate
|
11,484
|
3,428
|
||||||
Residential real estate
|
37,815
|
27,108
|
||||||
Strategic Program loans
|
47,848
|
85,850
|
||||||
Commercial real estate
|
12,063
|
2,436
|
||||||
Consumer
|
5,808
|
4,574
|
||||||
Total loans
|
$
|
260,190
|
$
|
265,788
|
||||
Loans held-for-sale
|
(23,589
|
)
|
(60,748
|
)
|
||||
Total loans held for investment
|
$
|
236,601
|
$
|
205,040
|
||||
Deferred loan costs (fees), net
|
(399
|
)
|
2,917
|
|||||
Allowance for loan losses
|
(11,985
|
)
|
(9,855
|
)
|
||||
Net loans
|
$
|
224,217
|
$
|
198,102
|
|
December 31,
|
|||||||
|
2022
|
2021
|
||||||
($ in thousands)
|
||||||||
Retained Strategic Program loans
|
$
|
24,259
|
$
|
25,102
|
||||
Strategic Program loans held-for-sale
|
23,589
|
60,748
|
||||||
Total Strategic Program loans
|
$
|
47,848
|
$
|
85,850
|
December 31, 2022
|
||||||||||||||||||||||||||||
($ in thousands)
|
SBA
|
Commercial,
Non-Real
Estate
|
Residential
Real Estate
|
Strategic
Program Loans
|
Commercial
Real Estate
|
Consumer
|
Total
|
|||||||||||||||||||||
Beginning balance
|
$
|
2,739
|
$
|
132
|
$
|
352
|
$
|
6,549
|
$
|
21
|
$
|
62
|
$
|
9,855
|
||||||||||||||
Charge-offs
|
(392
|
)
|
—
|
—
|
(11,948
|
)
|
—
|
(66
|
)
|
(12,406
|
)
|
|||||||||||||||||
Recoveries
|
66
|
2
|
—
|
885
|
—
|
64
|
1,017
|
|||||||||||||||||||||
Provision for loan and lease losses
|
1,881 | 267 | 145 | 11,215 | 6 | 5 | 13,519 | |||||||||||||||||||||
Balance at end of year
|
$
|
4,294
|
$
|
401
|
$
|
497
|
$
|
6,701
|
$
|
27
|
$
|
65
|
$
|
11,985
|
||||||||||||||
Ending balance individually evaluated for impairment
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||
Ending balance collectively evaluated for impairment
|
$
|
4,294
|
$
|
401
|
$
|
497
|
$
|
6,701
|
$
|
27
|
$
|
65
|
$
|
11,985
|
||||||||||||||
Loans receivable
|
$
|
145,172
|
$
|
11,484
|
$
|
37,815
|
$
|
24,259
|
$
|
12,063
|
$
|
5,808
|
$
|
236,601
|
||||||||||||||
Ending balance individually evaluated for impairment
|
450
|
—
|
—
|
—
|
—
|
—
|
450
|
|||||||||||||||||||||
Ending balance collectively evaluated for impairment
|
$
|
144,722
|
$
|
11,484
|
$
|
37,815
|
$
|
24,259
|
$
|
12,063
|
$
|
5,808
|
$
|
236,151
|
December 31, 2021
|
||||||||||||||||||||||||||||
($ in thousands)
|
SBA
|
Commercial,
Non-Real
Estate
|
Residential
Real Estate
|
Strategic
Program Loans
|
Commercial
Real Estate
|
Consumer
|
Total
|
|||||||||||||||||||||
Beginning balance
|
$
|
920
|
$
|
232
|
$
|
855
|
$
|
4,111
|
$
|
19
|
$
|
62
|
$
|
6,199
|
||||||||||||||
Charge-offs
|
(154
|
)
|
(63
|
)
|
—
|
(4,684
|
)
|
—
|
(4
|
)
|
(4,905
|
)
|
||||||||||||||||
Recoveries
|
46
|
103
|
—
|
372
|
—
|
1
|
522
|
|||||||||||||||||||||
Provision (recapture) for loan and lease losses
|
1,927
|
(140
|
)
|
(503
|
)
|
6,750
|
2
|
3
|
8,039
|
|||||||||||||||||||
Balance at end of year
|
$
|
2,739
|
$
|
132
|
$
|
352
|
$
|
6,549
|
$
|
21
|
$
|
62
|
$
|
9,855
|
||||||||||||||
Ending balance individually evaluated for impairment
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||||
Ending balance collectively evaluated for impairment
|
$
|
2,739
|
$
|
132
|
$
|
352
|
$
|
6,549
|
$
|
21
|
$
|
62
|
$
|
9,855
|
||||||||||||||
Loans receivable
|
$
|
142,392
|
$
|
3,428
|
$
|
27,108
|
$
|
25,102
|
$
|
2,436
|
$
|
4,574
|
$
|
205,040
|
||||||||||||||
Ending balance individually evaluated for impairment
|
972
|
—
|
—
|
—
|
—
|
—
|
972
|
|||||||||||||||||||||
Ending balance collectively evaluated for impairment
|
$
|
141,420
|
$
|
3,428
|
$
|
27,108
|
$
|
25,102
|
$
|
2,436
|
$
|
4,574
|
$
|
204,068
|
December 31, 2022
|
||||||||||||||||||||
|
Recorded
Investment
|
Unpaid
Principal
Balance
|
Related
Allowance
|
Average
Recorded
Investment
|
Interest Income
Recognized
|
|||||||||||||||
($ in thousands)
|
||||||||||||||||||||
With no related allowance recorded
|
||||||||||||||||||||
SBA
|
$
|
450
|
$
|
450
|
$
|
—
|
$
|
711
|
$
|
36
|
||||||||||
Commercial, non-real estate
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Residential real estate
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Strategic Program loans
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Commercial real estate
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Consumer
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Total
|
$
|
450
|
$
|
450
|
$
|
—
|
$
|
711
|
$
|
36
|
December 31, 2021
|
||||||||||||||||||||
|
Recorded
Investment
|
Unpaid
Principal
Balance
|
Related
Allowance
|
Average
Recorded
Investment
|
Interest Income
Recognized
|
|||||||||||||||
($ in thousands)
|
||||||||||||||||||||
With no related allowance recorded
|
||||||||||||||||||||
SBA
|
$
|
972
|
$
|
972
|
$
|
—
|
$
|
945
|
$
|
47
|
||||||||||
Commercial, non-real estate
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Residential real estate
|
—
|
—
|
—
|
189
|
—
|
|||||||||||||||
Strategic Program loans
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Commercial real estate
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Consumer
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Total
|
$
|
972
|
$
|
972
|
$
|
—
|
$
|
1,134
|
$
|
47
|
December 31, 2022
|
||||||||||||||||||||||||||||
($ in thousands)
|
Current
|
30-59 Days
Past Due
|
60-89 Days
Past Due
|
90+ Days
Past Due &
Still Accruing
|
Total
Past Due
|
Non-Accrual
|
Total
|
|||||||||||||||||||||
|
||||||||||||||||||||||||||||
SBA
|
$
|
144,803
|
$
|
369
|
$
|
—
|
$
|
—
|
$
|
369
|
$
|
—
|
$
|
145,172
|
||||||||||||||
Commercial, non-real estate
|
11,484
|
—
|
—
|
—
|
—
|
—
|
11,484
|
|||||||||||||||||||||
Residential real estate
|
37,387
|
428
|
—
|
—
|
428
|
—
|
37,815
|
|||||||||||||||||||||
Strategic Program loans
|
45,669
|
1,184
|
802
|
193
|
2,179
|
—
|
47,848
|
|||||||||||||||||||||
Commercial real estate
|
12,063
|
—
|
—
|
—
|
—
|
—
|
12,063
|
|||||||||||||||||||||
Consumer
|
5,776
|
32
|
—
|
—
|
32
|
—
|
5,808
|
|||||||||||||||||||||
Total
|
$
|
257,182
|
$
|
2,013
|
$
|
802
|
$
|
193
|
$
|
3,008
|
$
|
—
|
$
|
260,190
|
December 31, 2021
|
||||||||||||||||||||||||||||
($ in thousands)
|
Current
|
30-59 Days
Past Due
|
60-89 Days
Past Due
|
90+ Days
Past Due &
Still Accruing
|
Total
Past Due
|
Non-Accrual
|
Total
|
|||||||||||||||||||||
SBA
|
$
|
141,488
|
$
|
247
|
$
|
—
|
$
|
—
|
$
|
247
|
$
|
657
|
$
|
142,392
|
||||||||||||||
Commercial, non-real estate
|
3,428
|
—
|
—
|
—
|
—
|
—
|
3,428
|
|||||||||||||||||||||
Residential real estate
|
27,108
|
—
|
—
|
—
|
—
|
—
|
27,108
|
|||||||||||||||||||||
Strategic Program loans
|
84,065
|
1,041
|
690
|
54
|
1,785
|
—
|
85,850
|
|||||||||||||||||||||
Commercial real estate
|
2,436
|
—
|
—
|
—
|
—
|
—
|
2,436
|
|||||||||||||||||||||
Consumer
|
4,554
|
20
|
—
|
—
|
20
|
—
|
4,574
|
|||||||||||||||||||||
Total
|
$
|
263,079
|
$
|
1,308
|
$
|
690
|
$
|
54
|
$
|
2,052
|
$
|
657
|
$
|
265,788
|
December 31, 2022
|
||||||||||||||||
($ in thousands)
|
Pass
Grade 1-4
|
Special Mention
Grade 5
|
Classified/
Doubtful/Loss
Grade 6-8
|
Total
|
||||||||||||
SBA
|
$
|
144,149
|
$
|
573
|
$
|
450
|
$
|
145,172
|
||||||||
Commercial, non-real estate
|
11,484
|
—
|
—
|
11,484
|
||||||||||||
Residential real estate
|
37,815
|
—
|
—
|
37,815
|
||||||||||||
Commercial real estate
|
12,063
|
—
|
—
|
12,063
|
||||||||||||
Consumer
|
5,808
|
—
|
—
|
5,808
|
||||||||||||
Not Risk Graded
|
||||||||||||||||
Strategic Program loans
|
47,848
|
|||||||||||||||
Total at December 31, 2022
|
$
|
211,319
|
$
|
573
|
$
|
450
|
$
|
260,190
|
December 31, 2021
|
||||||||||||||||
($ in thousands)
|
Pass
Grade 1-4
|
Special Mention
Grade 5
|
Classified/
Doubtful/Loss
Grade 6-8
|
Total
|
||||||||||||
SBA
|
$
|
139,985
|
$
|
1,435
|
$
|
972
|
$
|
142,392
|
||||||||
Commercial, non-real estate
|
3,382
|
46
|
—
|
3,428
|
||||||||||||
Residential real estate
|
27,108
|
—
|
—
|
27,108
|
||||||||||||
Commercial real estate
|
2,436
|
—
|
—
|
2,436
|
||||||||||||
Consumer
|
4,574
|
—
|
—
|
4,574
|
||||||||||||
Not Risk Graded
|
||||||||||||||||
Strategic Program loans
|
85,850
|
|||||||||||||||
Total at December 31, 2021
|
$
|
177,485
|
$
|
1,481
|
$
|
972
|
$
|
265,788
|
($ in thousands)
|
Number of
Contracts
|
Pre-
Modification
Outstanding
Recorded
Investment
|
Post-
Modification
Outstanding
Recorded
Investment
|
|||||||||
December 31, 2022
|
||||||||||||
SBA
|
1
|
$
|
94
|
$
|
94
|
|||||||
December 31, 2021
|
||||||||||||
SBA
|
2
|
$
|
106
|
$
|
106
|
|||||||
Non-Accrual
|
||||||||||||
SBA
|
1 |
$
|
25
|
$
|
25
|
|
December 31,
|
|||||||
|
2022
|
2021
|
||||||
($ in thousands)
|
||||||||
Leasehold improvements
|
$
|
3,720
|
$
|
80
|
||||
Furniture, fixtures, and equipment (1)
|
6,501
|
2,219
|
||||||
Construction in progress
|
1,514
|
2,333
|
||||||
Total premises and equipment
|
$
|
11,735
|
$
|
4,632
|
||||
Less accumulated depreciation
|
(2,257
|
)
|
(1,347
|
)
|
||||
Premises and equipment, net
|
$
|
9,478
|
$
|
3,285
|
(1)
|
The Furniture, fixtures, and equipment include commercial operating leases of $2.8
million issued during the year ended 2022. Net book value of the operating leases as of December 31, 2022 was $2.7
million.
|
Year Ended December 31, 2023
|
$
|
850
|
||
Year Ended December 31, 2024
|
1,104
|
|||
Year Ended December 31, 2025
|
1,086
|
|||
Year Ended December 31, 2026
|
1,118
|
|||
Year Ended December 31, 2027
|
1,152
|
|||
Thereafter
|
2,203
|
|||
Total
|
$
|
7,513
|
||
Less present value discount | (493 | ) | ||
Operating lease liabilities | $ |
7,020 |
|
Year Ended
|
|||
|
December 31, 2022
|
|||
|
||||
Weighted-average remaining lease term – operating leases (in years)
|
6.7
|
|||
Weighted-average discount rate – operating leases
|
1.9
|
%
|
|
Year Ended
December 31, 2022
|
|||
(in thousands)
|
||||
Operating leases
|
||||
Operating lease cost
|
$
|
1,044
|
||
Variable lease cost
|
16
|
|||
Operating lease expense
|
1,060
|
|||
Short-term lease rent expense
|
38
|
|||
Net rent expense
|
$
|
1,098
|
|
December 31,
|
|||||||
|
2022
|
2021
|
||||||
($ in thousands)
|
||||||||
Demand
|
$
|
129,563
|
$
|
115,947
|
||||
Savings
|
8,289
|
6,685
|
||||||
Money markets
|
10,882
|
31,076
|
||||||
Time certificates of deposit
|
94,264
|
98,184
|
||||||
Total deposits
|
$
|
242,998
|
$
|
251,892
|
Year Ended December 31, 2023
|
$
|
57,721
|
||
Year Ended December 31, 2024
|
17,514
|
|||
Year Ended December 31, 2025
|
9,314
|
|||
Year Ended December 31, 2026
|
8,160
|
|||
Year Ended December 31, 2027
|
1,555
|
|||
Thereafter
|
—
|
|||
Total
|
94,264
|
|
For the Years Ended December 31,
|
|||||||
($ in thousands)
|
2022
|
2021
|
||||||
Beginning balance
|
$
|
3,938
|
$
|
2,415
|
||||
Additions to servicing asset
|
4,087
|
3,048
|
||||||
Impairment of SBA servicing asset
|
(1,728
|
)
|
(800
|
)
|
||||
Amortization of servicing asset
|
(1,087
|
)
|
(725
|
)
|
||||
Ending balance
|
$
|
5,210
|
$
|
3,938
|
|
Actual
|
Well-Capitalized
Requirement
|
||||||||||||||
($ in thousands)
|
Amount
|
Ratio
|
Amount
|
Ratio
|
||||||||||||
December 31, 2022
|
||||||||||||||||
Leverage ratio (CBLR election)
|
$
|
91,674
|
25.1
|
%
|
$
|
32,898
|
*
|
9.0
|
%
|
|||||||
December 31, 2021
|
||||||||||||||||
Leverage ratio (CBLR election)
|
$
|
65,503
|
17.7
|
%
|
$
|
31,442
|
*
|
8.5
|
%
|
|
December 31,
|
|||||||
($ in thousands)
|
2022
|
2021
|
||||||
Revolving, open-end lines of credit
|
$
|
1,683
|
$
|
1,259
|
||||
Commercial real estate
|
17,886
|
15,402
|
||||||
Other unused commitments
|
253
|
377
|
||||||
|
$
|
19,822
|
$
|
17,038
|
|
Stock Options
|
Weighted
Average
Exercise Price
|
Weighted
Average
Remaining
Contractual
Life (in years)
|
Aggregate
Intrinsic Value
|
||||||||||||
Outstanding at December 31, 2020
|
638,664
|
$
|
3.54
|
8.6
|
$
|
653,991
|
||||||||||
Options granted
|
906,600
|
6.27
|
3.3
|
|
||||||||||||
Options exercised
|
(86,676
|
)
|
3.6
|
511,339
|
||||||||||||
Options forfeited
|
(596,100
|
)
|
6.42
|
1,460,581
|
||||||||||||
Outstanding at December 31, 2021
|
862,488
|
$
|
4.41
|
8.2
|
$
|
8,088,660
|
||||||||||
Options granted
|
89,415
|
13.04
|
9.9
|
|||||||||||||
Options exercised
|
(56,280
|
)
|
4.62
|
393,534
|
||||||||||||
Options forfeited
|
(13,998
|
)
|
4.40
|
124,874
|
||||||||||||
Outstanding at December 31, 2022
|
881,625
|
$
|
5.27
|
7.5
|
$
|
3,871,667
|
||||||||||
Options vested and exercisable at December 31, 2022
|
600,396
|
$
|
4.47
|
7.3
|
$
|
2,878,478
|
|
Number of
Shares
|
Weighted
Average
Grant
Price
|
||||||
Unvested as of December 31, 2020
|
621,666
|
$
|
3.64
|
|||||
Vested
|
(621,666
|
)
|
3.64
|
|||||
Unvested as of December 31, 2021
|
—
|
$
|
—
|
|||||
Granted
|
123,055
|
$ |
12.28
|
|||||
Unvested as of December 31, 2022
|
123,055
|
$
|
12.28
|
|
For the Years
Ended December 31,
|
|||||||
($ in thousands)
|
2022
|
2021
|
||||||
Beginning balance
|
$
|
5,900
|
$
|
3,770
|
||||
Distributions from BFG
|
(622
|
)
|
(861
|
)
|
||||
Change in fair value of BFG
|
(478
|
)
|
2,991
|
|||||
Ending balance
|
$
|
4,800
|
$
|
5,900
|
|
December 31, 2022
|
December 31, 2021
|
||||||||||||||||||
($ in thousands)
|
Level
|
Carrying
Amount
|
Estimated Fair
Value
|
Carrying
Amount
|
Estimated Fair
Value
|
|||||||||||||||
Financial assets:
|
||||||||||||||||||||
Cash and cash equivalents
|
1
|
$
|
100,567
|
$
|
100,567
|
$
|
85,754
|
$
|
85,754
|
|||||||||||
Investment securities held-to-maturity
|
2
|
14,292
|
12,728
|
11,423
|
11,332
|
|||||||||||||||
Investment in FHLB stock
|
2
|
449
|
449
|
378
|
378
|
|||||||||||||||
Loans held for investment
|
3
|
224,217
|
237,225
|
198,102
|
197,412
|
|||||||||||||||
Loans held-for-sale
|
2
|
23,589
|
23,586
|
60,748
|
60,743
|
|||||||||||||||
Accrued interest receivable
|
2
|
1,818
|
1,818
|
1,548
|
1,548
|
|||||||||||||||
SBA servicing asset
|
2
|
5,210
|
5,210
|
3,938
|
3,938
|
|||||||||||||||
Investment in BFG
|
3
|
4,800
|
4,800
|
5,900
|
5,900
|
|||||||||||||||
Financial liabilities:
|
||||||||||||||||||||
Total deposits
|
2
|
242,998
|
221,287
|
251,892
|
249,488
|
|||||||||||||||
Accrued interest payable
|
2
|
54
|
54
|
48
|
48
|
|||||||||||||||
PPP Liquidity Facility
|
2
|
314
|
314
|
1,050
|
1,050
|
($ in thousands)
|
Fair Value Measurements Using
|
|||||||||||||||
Description of Financial Instrument
|
Fair Value
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
December 31, 2022
|
||||||||||||||||
Nonrecurring assets
|
||||||||||||||||
Impaired loans
|
$
|
450
|
$
|
—
|
$
|
—
|
$
|
450
|
||||||||
December 31, 2021
|
||||||||||||||||
Nonrecurring assets
|
||||||||||||||||
Impaired loans
|
$
|
972
|
$
|
—
|
$
|
—
|
$
|
972
|
($ in thousands)
|
Fair Value
|
Valuation
Technique
|
Unobservable
Input
|
Range
(Weighted Average)
|
||||||
December 31, 2022
|
||||||||||
Impaired loans
|
$
|
450
|
Market
comparable
|
Adjustment to
appraisal value
|
0.20
|
%
|
||||
|
||||||||||
December 31, 2021
|
||||||||||
Impaired loans
|
$
|
972
|
Market
comparable
|
Adjustment to
appraisal value
|
0.50
|
%
|
December 31, 2022
|
December 31, 2021
|
|||||||
($ in thousands)
|
Range
(Weighted Average)
|
Range
(Weighted Average)
|
||||||
Discounted Cash Flows
|
||||||||
Revenue growth rate
|
10.8
|
%
|
16.6
|
%
|
||||
Expense growth rate
|
11.5
|
%
|
16.3
|
%
|
||||
Discount rate
|
30.0
|
%
|
25.0
|
%
|
||||
Guideline Public Company
|
||||||||
Multiples of enterprise value
|
3.0x to 5.0x
|
4.0x to 6.0x
|
|
For the Years Ended December 31,
|
|||||||
($ in thousands)
|
2022
|
2021
|
||||||
Current tax expense
|
||||||||
Federal
|
$
|
8,315
|
$
|
9,589
|
||||
State
|
1,945
|
2,471
|
||||||
Deferred tax expense (benefit)
|
||||||||
Federal
|
553
|
(1,156
|
)
|
|||||
State
|
103
|
(215
|
)
|
|||||
Income tax expense
|
$
|
10,916
|
$
|
10,689
|
|
December 31,
|
|||||||
($ in thousands)
|
2022
|
2021
|
||||||
Deferred tax assets
|
||||||||
Operating lease liabilities
|
$ | 1,749 | $ | — | ||||
Allowance for loan losses
|
1,639
|
1,630
|
||||||
Accrued bonuses
|
61
|
72
|
||||||
Nonqualified stock options
|
124
|
156
|
||||||
Restricted stock
|
114 | — | ||||||
Other
|
290
|
250
|
||||||
Total deferred tax assets
|
3,977
|
2,108
|
||||||
Deferred tax liabilities
|
||||||||
ROU asset
|
(1,256
|
)
|
—
|
|||||
Intangibles
|
(3
|
)
|
(3
|
)
|
||||
Net book value of fixed assets
|
(1,230
|
)
|
(217
|
)
|
||||
Other
|
(321
|
)
|
(65
|
)
|
||||
Total deferred tax liabilities
|
(2,810
|
)
|
(285
|
)
|
||||
Net deferred tax asset
|
$
|
1,167
|
$
|
1,823
|
|
For the Years Ended December 31,
|
|||||||
($ in thousands)
|
2022
|
2021
|
||||||
Federal income tax expense at statutory rates
|
$
|
7,567
|
$
|
8,877
|
||||
Effect of permanent differences
|
811
|
50
|
||||||
State income tax expense, net
|
1,560
|
1,662
|
||||||
Other
|
978
|
100
|
||||||
Income tax expense
|
$
|
10,916
|
$
|
10,689
|
|
For the Years Ended December 31,
|
|||||||
|
2022
|
2021
|
||||||
Numerator:
|
||||||||
Net income
|
$
|
25,115
|
$
|
31,583
|
||||
Amount allocated to participating common shareholders(1)
|
(193
|
)
|
(1,780
|
)
|
||||
Net income allocate to common shareholders
|
$
|
24,922
|
$
|
29,803
|
||||
Denominator:
|
||||||||
Weighted average shares outstanding, basic
|
12,729,898
|
8,669,724
|
||||||
Weighted average effect of dilutive securities:
|
||||||||
Stock options
|
508,056
|
371,240
|
||||||
Warrants
|
119,068
|
67,199
|
||||||
Weighted average shares outstanding, diluted
|
13,357,022
|
9,108,163
|
||||||
Earnings per share, basic
|
$
|
1.96
|
$ |
3.44 | ||||
Earnings per share, diluted
|
$
|
1.87
|
$ | 3.27 |
|
For the Years Ended December 31,
|
|||||||
($ in thousands)
|
2022
|
2021
|
||||||
Interest income
|
||||||||
Interest income, not-in-scope
|
||||||||
Interest and fees on loans
|
$
|
50,941
|
$
|
49,135
|
||||
Interest on securities
|
208
|
47
|
||||||
Other interest income
|
1,180
|
61
|
||||||
Total interest income
|
$
|
52,329
|
$
|
49,243
|
||||
Non-interest income
|
||||||||
Non-interest income, in-scope
|
||||||||
Service charges on deposit accounts
|
$
|
30
|
$
|
31
|
||||
Strategic Program set up fees
|
195
|
96
|
||||||
Strategic Program fees
|
21,438 | 17,119 | ||||||
Non-interest income, not in-scope
|
||||||||
Gain on sale of loans, net
|
13,550
|
9,689
|
||||||
SBA loan servicing fees
|
1,603
|
1,156
|
||||||
Unrealized gain on investment in BFG
|
(478
|
)
|
2,991
|
|||||
Other miscellaneous income
|
239
|
18
|
||||||
Strategic Program service charges
|
834
|
744
|
||||||
Total non-interest income
|
$
|
37,411
|
$
|
31,844
|
|
December 31,
|
|||||||
($ in thousands)
|
2022
|
2021
|
||||||
ASSETS
|
||||||||
Cash and cash equivalents
|
$
|
36,321
|
$
|
38,697
|
||||
Investment in subsidiary bank
|
100,276
|
71,186
|
||||||
Investment in Business Funding Group (BFG), at fair value
|
4,800
|
5,900
|
||||||
Investment in FinWise Investments, LLC
|
271
|
80
|
||||||
Deferred taxes, net
|
127
|
82
|
||||||
Other assets
|
37
|
322
|
||||||
Total assets
|
$
|
141,832
|
$
|
116,267
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Income taxes payable
|
1,077
|
233
|
||||||
Other liabilities
|
296
|
592
|
||||||
Shareholders’ equity
|
140,459
|
115,442
|
||||||
Total liabilities and shareholders’ equity
|
$
|
141,832
|
$
|
116,267
|
|
For the Years Ended December 31,
|
|||||||
($ in thousands)
|
2022
|
2021
|
||||||
Non-interest income
|
||||||||
Change in fair value on investment in BFG
|
$
|
(478
|
)
|
$
|
2,991
|
|||
Equity in undistributed earnings of subsidiary
|
29,090
|
30,469
|
||||||
Total non-interest income
|
28,612
|
33,460
|
||||||
Non-interest expense
|
||||||||
Salaries and employee benefits
|
2,316
|
742
|
||||||
Professional services
|
1,990 | 320 | ||||||
Other operating expenses
|
470
|
360
|
||||||
Total non-interest expense
|
4,776
|
1,422
|
||||||
Income before income tax expense
|
23,836
|
32,038
|
||||||
Provision for income taxes
|
(1,279
|
)
|
455
|
|||||
Net income
|
$
|
25,115
|
$
|
31,583
|
|
For the Years Ended December 31,
|
|||||||
($ in thousands)
|
2022
|
2021
|
||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$
|
25,115
|
$
|
31,583
|
||||
Adjustments to reconcile net income to net cash from operating activities
|
||||||||
Change in fair value of BFG
|
478
|
(2,991
|
)
|
|||||
Stock-based compensation expense
|
778
|
2,100
|
||||||
Deferred income tax expense
|
844
|
222
|
||||||
Net changes in:
|
||||||||
Income tax receivable
|
(45
|
)
|
(128
|
)
|
||||
Other assets
|
285
|
(217
|
)
|
|||||
Other liabilities
|
(296
|
)
|
(288
|
)
|
||||
Net cash provided by operating activities
|
27,159
|
30,281
|
||||||
Cash flows from investing activities:
|
||||||||
Investment in subsidiary bank
|
(29,090
|
)
|
(30,469
|
)
|
||||
Investment in FinWise Investments, LLC
|
(191
|
)
|
(80
|
)
|
||||
Distributions of BFG
|
622
|
861
|
||||||
Net cash used in investing activities
|
(28,659
|
)
|
(29,688
|
)
|
||||
Cash flows from financing activities:
|
||||||||
Proceeds from exercise of stock options
|
260
|
311
|
||||||
Proceeds from initial public offering, net
|
—
|
35,576
|
||||||
Common stock repurchased
|
(1,136
|
)
|
—
|
|||||
Net cash provided by (used in) financing activities
|
(876
|
)
|
35,887
|
|||||
Net change in cash and cash equivalents
|
(2,376
|
)
|
36,480
|
|||||
Cash and cash equivalents, beginning of year
|
38,697
|
2,217
|
||||||
Cash and cash equivalents, end of year
|
$
|
36,321
|
$
|
38,697
|
Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
|
Item 9A. |
Controls and Procedures
|
Item 9B. |
Other Information
|
Item 9C. |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
|
Item 10. |
Directors, Executive Officers and Corporate Governance
|
Item 11. |
Executive Compensation
|
Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
|
Item 13. |
Certain Relationships and Related Transactions, and Director Independence
|
Item 14. |
Principal Accountant Fees and Services
|
Item 15. |
Exhibits and Financial Statement Schedules
|
Page
|
|
Report of Independent Registered Public Accounting Firm (PCAOB ID 173)
|
78
|
Consolidated Balance Sheet
|
79
|
Consolidated Statements of Income
|
80
|
Consolidated Statements of Changes in Shareholders’ Equity
|
81
|
Consolidated Statements of Cash Flows
|
82
|
Notes to Consolidated Financial Statements
|
83
|
Number
|
Description
|
|
3.1
|
||
3.2
|
||
4.1*
|
||
4.2
|
||
4.3* | ||
10.1+
|
||
10.2+
|
||
10.3+
|
||
10.4+
|
||
10.5+
|
10.6+
|
||
10.7+
|
10.8+
|
||
10.9+
|
||
10.10+
|
||
10.11+
|
||
10.12+
|
||
10.13+
|
||
10.14+
|
||
10.15+
|
||
10.16+
|
||
10.17+
|
||
10.18+
|
||
10.19+
|
||
10.20+
|
||
10.21+
|
||
10.22+
|
10.23+*
|
||
10.24+*
|
||
10.25+*
|
||
10.26+*
|
||
10.27
|
||
10.28
|
||
10.29
|
||
10.30
|
||
10.31
|
||
10.32
|
||
10.33
|
||
10.34
|
||
10.35
|
||
10.36+
|
||
10.37
|
||
10.38
|
||
10.39+
|
||
21.1*
|
||
23.1*
|
||
31.1*
|
||
31.2*
|
||
32.1*
|
||
101*
|
Inline XBRL Interactive Data
|
|
104*
|
Cover Page Interactive Data File (embedded within the Inline XBRL document in Exhibit 101)
|
FINWISE BANCORP
|
|||
Date:
|
March 30, 2023
|
By:
|
/s/ Kent Landvatter
|
Kent Landvatter
|
|||
President and Chief Executive Officer
|
Signature
|
Title
|
Date
|
||||
By:
|
/s/ Kent Landvatter
|
President, Chief Executive Officer and Director
(Principal Executive Officer)
Chairman of the Board
|
March 30, 2023
|
|||
Kent Landvatter
|
||||||
By:
|
/s/ Javvis Jacobson
|
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
|
March 30, 2023
|
|||
Javvis Jacobson
|
||||||
By:
|
/s/ Howard I. Reynolds
|
Vice Chairman of the Board
|
March 30, 2023
|
|||
Howard I. Reynolds
|
||||||
By:
|
/s/ Alan Weichselbaum
|
Director
|
March 30, 2023
|
|||
Alan Weichselbaum
|
||||||
By:
|
/s/ James N. Giordano
|
Director
|
March 30, 2023
|
|||
James N. Giordano
|
||||||
By:
|
/s/ Thomas E. Gibson, Jr.
|
Director
|
March 30, 2023
|
|||
Thomas E. Gibson, Jr.
|
||||||
By:
|
/s/ Lisa Ann Nievaard
|
Director
|
March 30, 2023
|
|||
Lisa Ann Nievaard
|
||||||
By:
|
/s/ Jeana Hutchings
|
Director
|
March 30, 2023
|
|||
Jeana Hutchings
|
||||||
By:
|
/s/ Gerald E. Cunningham
|
Director
|
March 30, 2023
|
|||
Gerald E. Cunningham
|
• |
prior to the date of the transaction that resulted in the shareholder becoming an interested shareholder, our board approved the business combination or the
transaction that resulted in the shareholder becoming an interested shareholder;
|
• |
upon consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of our voting
stock (other than certain excluded shares) outstanding at the time the transaction commenced;
|
• |
on or subsequent to the date of the transaction that resulted in the shareholder becoming an interested shareholder, the business combination is approved by the board
and authorized at an annual or special meeting of shareholders by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested shareholder; or
|
• |
the shareholder is the owner of 15% or more of the outstanding voting stock of the Company at the time of the consummation of this offering.
|
FINWISE BANCORP, a Utah corporation
|
||
By:
|
||
Name:
|
||
Title:
|
|
|
[Name]
|
Grant Date:
|
|
||
Exercise Price per Share:
|
$
|
||
Number of Option Shares:
|
|
||
Expiration Date:
|
|
FINWISE BANCORP
|
||
By:
|
||
Name:
|
||
Title:
|
EXECUTIVE
|
|
|
|
[Name]
|
Grant Date:
|
|||
Exercise Price per Share:
|
$ | ||
Number of Option Shares:
|
|||
Expiration Date:
|
FINWISE BANCORP
|
||
By:
|
||
Name:
|
||
Title:
|
EMPLOYEE
|
|
|
|
[Name]
|
FINWISE BANCORP, a Utah corporation
|
||
By:
|
||
Name:
|
||
Title:
|
[Name]
|
Name
|
Jurisdiction of Organization
|
FinWise Bank
|
Utah
|
FinWise Investments, LLC | Utah |
1.
|
I have reviewed this annual report on Form 10-K of FinWise Bancorp;
|
2.
|
Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this Report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this Report;
|
4.
|
The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
|
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this Report based on such evaluation; and
|
|
(d)
|
disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the Audit Committee of the
Registrant’s Board of Directors (or persons performing the equivalent functions):
|
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to
record, process, summarize and report financial information; and
|
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
FINWISE BANCORP
|
|||
Date:
|
March 30, 2023
|
By:
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/s/ Kent Landvatter
|
Kent Landvatter
|
|||
President and Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-K of FinWise Bancorp;
|
2.
|
Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of
operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
|
4.
|
The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to
the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
|
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this Report based on such evaluation; and
|
|
(d)
|
disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
|
5.
|
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the
Audit Committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):
|
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
Registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
|
FINWISE BANCORP
|
|||
Date:
|
March 30, 2023
|
By:
|
/s/ Javvis Jacobson
|
Javvis Jacobson
|
|||
Executive Vice President and Chief Financial Officer
|
(1)
|
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
FINWISE BANCORP
|
|||
Date:
|
March 30, 2023
|
By:
|
/s/ Kent Landvatter
|
Kent Landvatter
|
|||
President and Chief Executive Officer
|
|||
Date:
|
March 30, 2023
|
By:
|
/s/ Javvis Jacobson
|
Javvis Jacobson
|
|||
Executive Vice President and Chief Financial Officer
|