Financial Data and Key Metrics Changes - For Q1 2023, the company generated revenue of $18 million, net income of $3.9 million, and diluted earnings per share of $0.29, compared to $6.5 million in net income for Q4 2022 and $9.4 million for Q1 2022 [10][25] - The return on average equity was 11.1% for the quarter, and the tangible value per common share increased to $11.26 from $10.95 in the previous quarter [10][10] - Net interest income for Q1 was $12.1 million, down from $12.6 million in Q4 2022 and $13 million in Q1 2022, with a net interest margin of 12.51%, which is lower than 14.27% in Q4 2022 and 13.37% in Q1 2022 [25][26] Business Line Data and Key Metrics Changes - Loan originations totaled $0.9 billion in Q1 2023, down from $1.2 billion in Q4 2022 and $2.5 billion in Q1 2022, primarily due to a contraction in capital markets and conservative underwriting [20][21] - Average loan balances were $290.4 million, an 11% increase from $261.4 million in Q4 2022, but a 2% decrease from $296.7 million in Q1 2022 [22] - Noninterest income was $4.5 million in Q1, significantly lower than $9.8 million in Q4 2022 and $11.7 million in Q1 2022, mainly due to a reduction in loan sales and strategic program fees [27] Market Data and Key Metrics Changes - Average interest-bearing deposits increased to $165.2 million in Q1 2023 from $126.1 million in Q4 2022 and $132.5 million in Q1 2022, driven by an increase in certificates of deposit [23][24] - The company reported that approximately 85% of deposits are insured by the FDIC or are its own capital, with a significant portion of uninsured deposits being its own capital [53] Company Strategy and Development Direction - The company aims to secure additional revenue growth opportunities and diversify income and funding streams, focusing on strategic programs and expanding its footprint in the Banking-as-a-Service ecosystem [12][14] - Investments in personnel and infrastructure are ongoing to position the company for future growth, with a focus on maintaining strong credit quality and risk management [15][18] - The company is committed to maximizing long-term shareholder value and is prepared to navigate economic headwinds while pursuing growth opportunities [19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macroeconomic environment but expressed confidence in the company's resilience and ability to maintain profitability [9][11] - The company anticipates that the industry-wide slowdown in loan originations may persist throughout 2023, but remains focused on long-term growth strategies [20][21] - Management emphasized the importance of disciplined underwriting and maintaining credit quality amid economic uncertainties [18][32] Other Important Information - The company's efficiency ratio increased to 52.5% in Q1 2023 from 45.6% in Q4 2022 and 36.7% in Q1 2022, reflecting ongoing investments in infrastructure [28] - The company implemented CECL credit accounting on January 1, 2023, which requires provisioning for estimated lifetime credit losses [30] Q&A Session Summary Question: What is the tone regarding strategic programs on origination volume? - Management indicated that origination levels were under pressure in Q1 and foresee a continuation of this trend throughout 2023, with Q1 potentially being the high point for the year [34] Question: How is SBA loan production trending? - Management noted that while there is growth in the market, demand for SBA loans may soften as rates rise, and there are no seasonal patterns affecting this growth [35] Question: Can you provide insights on expense trends and hiring? - Management confirmed that the decrease in bonuses impacted expenses, and they continue to hire professionals in the Banking-as-a-Service area, indicating a modest growth in expenses moving forward [36][58] Question: What are the drivers of the CECL model for the company? - Management highlighted that the high watermark methodology for the SP HFI portfolio is a significant driver, more so than general economic indicators [40][41] Question: What percentage of originations is driven by the largest partner? - Management did not disclose specific percentages but noted that there is greater diversification among partners compared to the previous year [50][51] Question: Can you discuss noninterest-bearing deposit growth? - Management explained that a significant portion of deposits is insured or consists of their own capital, with growth in noninterest-bearing deposits being correlated with strategic business volume [52][53]

Financial Performance - Net income decreased to $25,115,000 in 2022 from $31,583,000 in 2021, a decline of 20.5%[648] - Earnings per share (diluted) fell to $1.87 in 2022 from $3.27 in 2021, a decrease of 42.7%[648] - Total revenues for the year ended December 31, 2022, were generated through Strategic Programs[414] - Non-interest income increased to $37,411,000 in 2022, up from $31,844,000 in 2021, representing an increase of 17.9%[648] - Cash provided by operating activities increased significantly to $61,153,000 from a cash used of $(9,232,000) in the previous year[654] - The company reported a net decrease in loans receivable of $(17,330,000) for the year, compared to an increase of $41,622,000 in 2021[654] - The company originated Strategic Program loans held-for-sale totaling $(6,974,133,000) in 2022, compared to $(6,335,194,000) in 2021, indicating a growth in loan origination activities[654] Asset and Liability Management - Total assets increased to $400,780,000 in December 2022 from $380,214,000 in December 2021, representing a growth of 4.2%[645] - Total liabilities decreased to $260,321,000 in December 2022 from $264,772,000 in December 2021, a decline of 1.7%[645] - Total shareholders' equity increased to $140,459,000 in December 2022 from $115,442,000 in December 2021, a growth of 21.7%[645] - The ending balance for the Allowance for Loan Losses was $9,855 thousand at the end of 2022, compared to $6,199 thousand at the end of 2021, indicating a rise of 59.5%[718] Regulatory and Compliance Risks - The company is subject to regulatory capital requirements, and failure to meet these could result in limitations on activities and adversely affect customer and investor confidence[372] - Legislative and regulatory changes may increase costs and impact the company's business operations and financial condition[380] - The Bank is subject to various laws and regulations, including the Community Reinvestment Act, which could result in sanctions for non-compliance[399] - Increased scrutiny of lending practices could lead to significant administrative burdens and potential liability for failures to comply with fair lending laws[404] - The Federal Trade Commission has increased scrutiny of financial technology companies' marketing practices, which could lead to regulatory actions and fines[391] Operational Risks - The company is subject to operational risks, including employee errors and misconduct, which could lead to financial losses or regulatory sanctions[362] - The company relies heavily on its executive management team, and the unexpected loss of key personnel could adversely affect its financial condition and results of operations[363] - Climate change poses risks that could disrupt operations and negatively impact the company's geographic markets, potentially increasing delinquency rates and credit losses[373] - The company may face challenges in managing joint ventures and strategic collaborations, which could expose it to financial penalties and reputational harm[440] Strategic Programs and Revenue Generation - Approximately $61.7 million, or 68.7% of total revenues for the year ended December 31, 2022, were generated through Strategic Programs[414] - Approximately $28.4 million, or 31.6% of total revenues for the year ended December 31, 2022, were generated from Strategic Programs with annual interest rates above 36%[422] - The Bank's relationships with Strategic Program service providers are non-exclusive, posing risks if providers choose to work with competitors[414] - The regulatory framework for Strategic Programs is evolving, with potential new laws and regulations that may negatively affect the business[418] Market and Economic Conditions - The company may recognize realized and/or unrealized losses in future periods due to changing economic and market conditions affecting interest rates and the financial condition of issuers[361] - Future special assessments or increases in FDIC insurance premiums could reduce profitability and limit business opportunities[407] - The risk-free interest rate increased to 3.10% in 2022 from a range of 0.4% - 1.3% in 2021[699] Stock and Shareholder Information - As of December 31, 2022, directors and executive officers beneficially owned approximately 21.5% of the issued and outstanding common stock, totaling 2,758,242 shares[446] - The common stock is not insured or guaranteed by the FDIC or any other government agency, and investment in the common stock is subject to investment risk, including possible loss[457] - The company’s governing documents may have an anti-takeover effect, potentially delaying or preventing acquisitions favored by shareholders[451] Accounting and Financial Reporting - The independent auditor's report states that the consolidated financial statements present fairly the financial position of the company as of December 31, 2022, and 2021, in conformity with GAAP[636] - The company adopted new accounting guidance under Accounting Standards Codification Topic 842, Leases, in 2022[640] - The company maintains an adequate allowance for loan losses (ALL), which may require future additions based on economic conditions[679] Miscellaneous - The company qualifies as an emerging growth company and intends to take advantage of reduced regulatory and reporting requirements for up to five years or until it exceeds $1.235 billion in total annual gross revenue[449] - The company is not required to provide information requested by Part II, Item 7A of the Report under the filer category of "smaller reporting company"[633]

Financial Data and Key Metrics Changes - Total revenue for Q4 2022 was $23.0 million, compared to $20.5 million in Q3 2022 and $29.0 million in Q4 2021 [75] - Net income for Q4 2022 was $6.5 million, an increase from $3.7 million in Q3 2022 but a decrease from $10.1 million in Q4 2021 [16][75] - Net interest margin for Q4 2022 was 14.27%, down from 14.93% in Q3 2022 and 16.62% in Q4 2021 [25] - Return on average equity was 19.1% for Q4 2022, reflecting strong profitability measures [30] Business Line Data and Key Metrics Changes - Loan originations totaled $1.2 billion in Q4 2022, down from $1.5 billion in Q3 2022 and $2.3 billion in Q4 2021 [90] - Non-interest income was $9.8 million in Q4 2022, up from $7.5 million in Q3 2022 but slightly down from $9.1 million in Q4 2021 [17] - The provision for loan losses was $3.2 million in Q4 2022, a decrease from $4.5 million in Q3 2022 and an increase from $2.5 million in Q4 2021 [18] Market Data and Key Metrics Changes - Average interest-bearing deposits were $126.1 million in Q4 2022, compared to $104.8 million in Q3 2022 and $148 million in Q4 2021 [79] - Credit quality remained solid with non-performing loans to total loans at 0.1% at the end of Q4 2022, down from 0.25% in Q4 2021 [18] Company Strategy and Development Direction - The company plans to focus on expanding its banking-as-a-service offerings, particularly in deposits and payments, while continuing to develop its lending capabilities [60][68] - Management emphasized the importance of maintaining strong credit quality and prudent underwriting standards despite the challenging macro environment [64][70] - The company intends to remain opportunistic in hiring and investments to support growth and capitalize on future opportunities [13][89] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the potential for further economic deterioration but expressed confidence in the company's ability to navigate challenges and maximize long-term shareholder value [14][59] - The company expects continued pressure on loan originations due to macroeconomic factors but remains committed to its strategic programs and partnerships [24][31] Other Important Information - The efficiency ratio increased to 45.6% in Q4 2022, up from 42.3% in Q3 2022 and 34.3% in Q4 2021, reflecting higher expenses related to infrastructure and staffing [82] - The company repurchased 120,000 shares for approximately $1.1 million during 2022, indicating a commitment to capital return strategies [30][61] Q&A Session Summary Question: What is the outlook for loan originations and held for sale portfolio? - Management indicated that loan originations are expected to remain challenged due to macroeconomic conditions, with the held for sale portfolio likely to continue declining [46][84] Question: How does the company plan to grow its franchise in the coming years? - Management highlighted a focus on building infrastructure and expanding banking-as-a-service offerings, while maintaining strong credit quality [51][60] Question: What are the company's thoughts on capital return and share buybacks? - Management expressed a strong commitment to share buybacks, especially when trading below tangible book value, while ensuring sufficient capital for future opportunities [61][30]

Financial Performance - Net income for the three months ended September 30, 2022, was $3.7 million, a decrease of $4.7 million or 56.7% from $8.4 million for the same period in 2021[180]. - For the nine months ended September 30, 2022, net income was $18.6 million, a decrease of $2.9 million or 13.5% from $21.5 million for the same period in 2021[181]. - The company reported a net interest income decrease of $855,000 for the three months ended September 30, 2022, compared to a net increase of $595,000 for the same period in 2021[192]. - Total noninterest income for the three months ended September 30, 2022, decreased by $1.0 million, or 11.2%, to $7.5 million compared to the same period in 2021, primarily due to a decrease in gain on sale of loans[196]. - For the nine months ended September 30, 2022, total noninterest income increased by $4.9 million, or 21.7%, to $27.6 million, driven by a 51.4% increase in Strategic Program fees and a 19.2% increase in gain on sale of loans[197]. Loan Losses and Provisions - Provision for loan losses increased by $1.1 million or 32.4% to $4.5 million for the three months ended September 30, 2022, compared to $3.4 million for the same period in 2021[180]. - For the nine months ended September 30, 2022, the provision for loan losses was $10.3 million, an increase from $5.5 million in the same period of 2021, primarily due to higher net charge-offs and growth in unguaranteed loans[194]. - The provision for loan losses for the three months ended September 30, 2022, was $4.5 million, compared to $3.4 million for the same period in 2021[259]. - The ALL (Allowance for Loan Losses) was $12.0 million as of September 30, 2022, an increase of $2.1 million, or 21.4%, from $9.9 million at December 31, 2021, primarily due to higher net charge-offs and increased unguaranteed loan balances[257]. Asset and Liability Management - Total assets increased to $384.46 million in 2022 from $308.58 million in 2021, with shareholders' equity rising to $126.45 million from $55.18 million[189]. - The average interest-bearing liabilities decreased to $122.05 million in 2022 from $142.97 million in 2021, with a corresponding interest expense of $810,000 compared to $984,000 in 2021[189]. - The ratio of average interest-earning assets to average interest-bearing liabilities improved to 299.25% in 2022 from 210.51% in 2021, indicating better asset utilization[189]. - Total deposits decreased to $232.8 million as of September 30, 2022, down from $251.9 million at December 31, 2021, a decrease of $19.1 million or 7.6%[278]. Loan Portfolio Composition - As of September 30, 2022, total SBA 7(a) loans amounted to $126.8 million, representing 49.3% of total loans, down from $141.3 million or 53.2% a year earlier[204]. - Total commercial non-real estate loans increased to $13.0 million as of September 30, 2022, representing 5.1% of total loans, compared to $3.4 million or 1.3% a year earlier[206]. - Total residential real estate loans reached $34.5 million as of September 30, 2022, accounting for 13.4% of total loans, up from $27.1 million or 10.2% a year earlier[207]. - The total loan portfolio as of September 30, 2022, was $256.8 million, a decrease from $265.8 million as of December 31, 2021[217]. Nonperforming Assets - Total nonperforming assets and troubled debt restructurings as of September 30, 2022, were $0.1 million, down from $0.8 million as of December 31, 2021[228]. - Total nonperforming loans to total loans ratio was 0.0% as of September 30, 2022, compared to 0.2% as of December 31, 2021[228]. - Total accruing loans past due 90 days or more increased to $254,000 as of September 30, 2022, from $54,000 as of December 31, 2021[228]. Capital and Equity - Shareholders' equity increased by $18.9 million to $134.3 million at September 30, 2022, compared to $115.4 million at December 31, 2021[289]. - Average common equity to average assets was 35.2% for the three months ended September 30, 2022, compared to 20.7% for the same period in 2021[290]. - Return on average equity was 11.0% for the three months ended September 30, 2022, down from 52.2% for the same period in 2021[292]. Operational Changes and Strategies - The company plans to retain a greater amount of the guaranteed portion of certain SBA loans on its balance sheet to enhance interest income and offset declines in gain-on-sale revenue[204]. - The company actively engages with borrowers to provide loan modifications when necessary, particularly during economic downturns[233]. - The company focuses on industries with historically lower loss rates, such as professional services and e-commerce, to mitigate economic shifts[215]. - The company launched a new HSA deposit product sourced through Lively, Inc. in 2022[285].

Financial Data and Key Metrics Changes - Total revenue for Q3 2022 was $20.3 million, with loan originations of $1.5 billion [7] - Net income decreased to $3.7 million in Q3 2022 from $5.5 million in Q2 2022 and $8.4 million in Q3 2021, primarily due to a one-time tax expense correction and higher provision for loan losses [18] - Net interest income for Q3 was $12.5 million, down from $12.8 million in Q2 2022 and $13.5 million in Q3 2021 [19] - The efficiency ratio improved to 42.3% from 52% in the previous quarter [9][26] - The tangible book value per common share increased by 32% year-over-year to $10.44 [7] Business Line Data and Key Metrics Changes - Average loan balances for held for sale and held for investment loans were $263.6 million in Q3 2022, down from $279.3 million in Q2 2022 [15] - Non-interest income was $7.5 million in Q3 2022, compared to $8.4 million in Q2 2022 and $8.5 million in Q3 2021, driven by lower strategic program fees [23] - The provision for loan losses increased to $4.5 million in Q3 2022 from $2.9 million in Q2 2022 [28] Market Data and Key Metrics Changes - Average interest-earning assets were $335.4 million in Q3 2022, down from $373.2 million in Q2 2022 [16] - Average interest-bearing deposits were $104.8 million in Q3 2022, compared to $127.2 million in Q2 2022 [17] Company Strategy and Development Direction - The company plans to retain a higher portion of guaranteed SBA loans due to decreasing gain on sale premiums and increasing variable loan rates, which is expected to enhance interest income [8][24] - Management remains focused on prudent expense management while preparing for potential economic downturns [12][13] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate challenging economic conditions while maintaining sound credit quality [11][12] - The company anticipates that loan origination growth may be pressured if the current economic environment continues to deteriorate [16][46] Other Important Information - The company did not have any non-performing loans in the current quarter, compared to 0.3% in the previous quarter [10][27] - The effective tax rate for Q3 was 48.7%, significantly higher than previous quarters due to a correction of an immaterial error in tax provision calculations [32] Q&A Session Summary Question: What was the normalized tax rate impact this quarter? - The tax expense correction was due to an understatement of 2021's tax expense of approximately $939,000, with an expected impact of less than 5% on 2022 [34][35] Question: What is the appetite for retaining guaranteed SBA loans? - The company does not have a specific target but intends to retain a meaningful amount of guaranteed loans based on current market conditions [37] Question: How do the current charge-offs compare to expectations? - Net charge-offs for the quarter were in line with expectations, with no specific weaknesses identified in the portfolios [53]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=8&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited Q2 2022 financials show decreased assets and quarterly net income, but increased six-month net income from strong revenue growth [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $366.0 million by June 30, 2022, primarily due to reduced loans held-for-sale, while shareholders' equity increased to $130.5 million Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$365,987** | **$380,214** | | Cash and cash equivalents | $96,528 | $85,754 | | Strategic Program loans held-for-sale | $31,599 | $60,748 | | Loans receivable, net | $189,670 | $198,102 | | **Total Liabilities** | **$235,450** | **$264,772** | | Total deposits | $219,359 | $251,892 | | **Total Shareholders' Equity** | **$130,537** | **$115,442** | [Consolidated Statements of Income](index=9&type=section&id=Consolidated%20Statements%20of%20Income) Q2 2022 net income decreased to $5.5 million due to higher provisions and expenses, while six-month net income increased to $14.9 million from strong revenue growth Quarterly Income Statement Highlights (in thousands) | Metric | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | Net Interest Income | $12,769 | $10,802 | | Provision for loan losses | $2,913 | $1,536 | | Non-interest Income | $8,431 | $8,161 | | Non-interest Expense | $11,019 | $7,079 | | **Net Income** | **$5,482** | **$7,739** | | **Diluted EPS** | **$0.41** | **$0.84** | Six-Month Income Statement Highlights (in thousands) | Metric | 6M 2022 | 6M 2021 | | :--- | :--- | :--- | | Net Interest Income | $25,730 | $19,236 | | Provision for loan losses | $5,860 | $2,169 | | Non-interest Income | $20,113 | $14,240 | | Non-interest Expense | $20,067 | $13,742 | | **Net Income** | **$14,916** | **$13,030** | | **Diluted EPS** | **$1.10** | **$1.45** | [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities significantly improved to $37.5 million for the six months ended June 30, 2022, leading to a $10.8 million increase in cash and equivalents Six-Month Cash Flow Summary (in thousands) | Cash Flow Category | 6M 2022 | 6M 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $37,491 | $(25,494) | | Net cash provided by investing activities | $6,450 | $67,172 | | Net cash used in financing activities | $(33,167) | $(49,195) | | **Net change in cash and cash equivalents** | **$10,774** | **$(7,517)** | [Notes to Unaudited Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Notes detail accounting policies, including ASC 842 adoption, loan portfolio composition, allowance for loan losses, investment portfolio, and capital adequacy - The company operates through its subsidiary, FinWise Bank, providing a full range of banking services, with a primary revenue source from consumer, SBA, commercial, and real estate loans, as well as Strategic Programs with third-party loan origination platforms[37](index=37&type=chunk)[39](index=39&type=chunk) - On January 1, 2022, the Company adopted the new lease accounting standard, ASU 2016-02 (Topic 842), which resulted in the recognition of right-of-use (ROU) assets and lease liabilities of **$7.4 million** on the consolidated financial statements[51](index=51&type=chunk) - The company plans to adopt the Current Expected Credit Loss (CECL) model (ASU 2016-13) on January 1, 2023, which will change how it measures expected credit losses[53](index=53&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion highlights a 14.5% increase in six-month net income driven by strong revenue growth, despite higher expenses and loan loss provisions, with the bank remaining well-capitalized [Results of Operations](index=43&type=section&id=Results%20of%20Operations) Six-month net income increased 14.5% to $14.9 million, driven by strong growth in net interest and non-interest income, partially offset by higher expenses and loan loss provisions Net Income Comparison (in thousands) | Period | Net Income | Change (%) | | :--- | :--- | :--- | | Q2 2022 vs Q2 2021 | $5,482 vs $7,739 | -29.2% | | 6M 2022 vs 6M 2021 | $14,916 vs $13,030 | +14.5% | - The increase in non-interest income for the first six months of 2022 was primarily due to a **$5.9 million (86.3%)** increase in Strategic Program fees and a **$2.5 million (49.3%)** increase in gain on sale of loans[193](index=193&type=chunk) - Non-interest expense for the first six months of 2022 rose by **$6.3 million (46.0%)**, driven by a **$3.9 million** increase in salaries and benefits from headcount growth and a **$1.1 million** impairment of the SBA servicing asset due to rising interest rates[197](index=197&type=chunk) - The provision for loan losses for the six months ended June 30, 2022, increased by **$3.7 million (170.2%)** compared to the prior year, primarily due to substantial growth in unguaranteed loans[179](index=179&type=chunk)[190](index=190&type=chunk) [Financial Condition](index=50&type=section&id=Financial%20Condition) As of June 30, 2022, the company maintained a strong financial condition with a diversified loan portfolio, low nonperforming assets, and increased allowance for loan losses Loan Portfolio Composition (in thousands) | Loan Program | June 30, 2022 | % of Total | | :--- | :--- | :--- | | SBA | $124,477 | 53.6% | | Strategic Program loans | $59,066 | 25.5% | | Residential real estate | $30,965 | 13.3% | | Commercial, non real estate | $7,847 | 3.4% | | Consumer | $5,062 | 2.2% | | Commercial real estate | $4,722 | 2.0% | | **Total** | **$232,139** | **100.0%** | Nonperforming Assets (in thousands) | Metric | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total nonperforming loans | $633 | $657 | | Total nonperforming assets and TDRs | $728 | $763 | | Total nonperforming assets to total assets | 0.2% | 0.2% | - The Allowance for Loan Losses (ALL) for Strategic Program loans was **$6.4 million**, representing **60.8%** of the total ALL, while these loans only constitute **25.5%** of the total loan portfolio, indicating a higher provision for this segment[258](index=258&type=chunk)[259](index=259&type=chunk) - Total deposits decreased by **$32.5 million**, or **12.9%**, to **$219.4 million** at June 30, 2022, from year-end 2021, primarily due to a decline in the Strategic Program loan program[275](index=275&type=chunk)[276](index=276&type=chunk) [Liquidity and Capital Resources](index=67&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $96.5 million in liquid assets and remains well-capitalized, with shareholders' equity growing to $130.5 million - Shareholders' equity increased by **$15.1 million** to **$130.5 million** at June 30, 2022, compared to December 31, 2021, primarily due to **$14.9 million** in net income[285](index=285&type=chunk) Bank Capital Ratios | Capital Ratio | June 30, 2022 | Well-Capitalized Requirement | | :--- | :--- | :--- | | Leverage Ratio (under CBLR) | 21.4% | 9.0% | - The company has various sources of liquidity, including **$10.0 million** from the Federal Reserve's Discount Window, a **$1.0 million** line of credit with Zions Bank, and a **$3.2 million** line with the Federal Home Loan Bank[283](index=283&type=chunk) Commitments to Extend Credit (in thousands) | Type | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total commitments | $25,764 | $17,038 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a 'smaller reporting company,' the Company is exempt from providing quantitative and qualitative disclosures about market risk - The Company is not required to provide information for this item as it qualifies as a "smaller reporting company" under Exchange Act Rule 12b-2[309](index=309&type=chunk) [Item 4. Controls and Procedures](index=70&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls over financial reporting during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2022[310](index=310&type=chunk) - There were no changes in the Company's internal controls over financial reporting during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[311](index=311&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=71&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings, with ordinary course claims deemed unlikely to have a material adverse effect - The Company is not currently subject to any material legal proceedings but is subject to claims and litigation arising in the ordinary course of business[314](index=314&type=chunk) [Item 1A. Risk Factors](index=71&type=section&id=Item%201A.%20Risk%20Factors) This section supplements and updates previously disclosed risk factors from the 2021 Form 10-K and Q1 2022 Form 10-Q - This section supplements and updates risk factors from the 2021 Form 10-K and the Q1 2022 Form 10-Q, incorporating information known since those filings[316](index=316&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=72&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales or repurchases of the company's equity securities during the second quarter of 2022 - There were no unregistered sales of the Company's stock during the second quarter of 2022[318](index=318&type=chunk) - The Company did not repurchase any of its shares during the second quarter of 2022 and does not have an authorized share repurchase program[318](index=318&type=chunk) [Item 6. Exhibits](index=73&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including required certifications and XBRL data files

Financial Data and Key Metrics Changes - Total revenue for Q2 2022 was $21.4 million, driven by loan originations of $2.1 billion, down from $2.5 billion in the prior quarter but up from $1.4 billion in Q2 2021 [8][21] - Net income for Q2 2022 was $5.5 million or $0.41 per diluted share, a decrease from $9.4 million in Q1 2022 and $7.7 million in Q2 2021 [9][30] - Net interest income for Q2 was $12.8 million, slightly down from $13 million in Q1 2022 but up from $10.8 million in Q2 2021 [31] - Non-interest income was $8.4 million in Q2 2022, down from $11.7 million in Q1 2022 but slightly up from $8.2 million in Q2 2021 [32] Business Line Data and Key Metrics Changes - Loan originations decreased to $2.1 billion in Q2 2022 from $2.5 billion in Q1 2022, but increased from $1.4 billion in Q2 2021 [21] - Average loan balances were $279.3 million, a decrease of 5.9% from $296.7 million in Q1 2022 but an increase of 11.8% from $249.7 million in Q2 2021 [21] - Non-performing loans declined to $0.6 million as of June 30, 2022, compared to $0.7 million at March 31, 2022 [12] Market Data and Key Metrics Changes - Average interest-bearing deposits declined 4% to $127.2 million during Q2 compared to $132.5 million in Q1 2022, but increased 41% compared to $90.2 million during Q2 2021 [24][25] - Total average interest-earning assets declined 3.8% to $373.2 million during Q2, compared to $387.8 million for Q1 2022, but increased 24% from $301.1 million for Q2 2021 [22] Company Strategy and Development Direction - The company remains focused on generating sustainable net interest income growth over the long term, driven by continued loan growth [10] - The management emphasized maintaining tight underwriting standards and prudent risk management to sustain sound credit quality through varying credit cycles [14] - The company is committed to exploring ways to deploy capital into opportunities that allow it to remain well-positioned for growth when the environment improves [19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging economic environment and indicated that the seasonal rebound in loan originations traditionally seen in the second half of the year could be tempered this year [18] - The company plans to continue investing in strategic foundational aspects while being cautious with production-related expenses [52] - Management expressed confidence in the portfolio underwriting and overall risk management, with strong capital levels providing a cushion against economic uncertainties [41] Other Important Information - The efficiency ratio for Q2 was 52%, compared to 36.7% for Q1 2022 and 37.3% for Q2 2021, indicating increased expenses [35] - The provision for loan losses was $2.9 million for Q2, reflecting growth in unguaranteed loans held for investment [36] Q&A Session Summary Question: Can you provide details on origination volumes by month throughout the quarter? - Management did not disclose monthly run rates but suggested looking at general economic conditions for trends [43] Question: Should we expect origination volumes to decline from the current $2.1 billion level in the back half of the year? - Management indicated uncertainty due to rapidly changing economic conditions but did not rule out the possibility [44] Question: What would need to happen to increase the retention rate on loans? - Stabilization in capital markets would be a key indicator for increasing retention rates [45] Question: Can you provide trends in SBA loans and expectations for sold production volume? - Management noted good origination volumes in the SBA product line but indicated conditions are slightly deteriorating regarding premium amounts [47][48] Question: What investments are prioritized despite falling revenue growth? - Continued investment in compliance, IT, and foundational aspects of the bank are prioritized, while production-related expenses may be reduced [52] Question: What are the expectations for the efficiency ratio in the near term? - The efficiency ratio is expected to remain between mid to upper 30s, but current levels are higher due to increased expenses [54]

Financial Performance - Net income for Q1 2022 was $9.4 million, an increase of 78.3% from $5.3 million in Q1 2021, driven by a $5.6 million increase in non-interest income and a $4.4 million increase in interest income [171]. - Interest income for Q1 2022 was $13.2 million, up 50.2% from $8.8 million in Q1 2021, while interest expense decreased to $0.3 million from $0.4 million [169][171]. - Net interest income for the three months ended March 31, 2022, was $4,527 thousand, an increase of $836 thousand or 22.7% compared to the previous period [177]. - Total noninterest income rose to $11,682 thousand for the three months ended March 31, 2022, reflecting a 92.2% increase from $6,079 thousand in 2021, primarily driven by Strategic Program fees and gains on loan sales [181]. - Total noninterest expense increased to $9,048 thousand for the three months ended March 31, 2022, a rise of 35.8% from $6,663 thousand in 2021, mainly due to higher salaries and employee benefits [184]. - Shareholders' equity increased by $9.5 million to $125.0 million as of March 31, 2022, compared to $115.4 million at December 31, 2021, primarily due to net income of $9.4 million [268]. Loan Portfolio and Asset Management - The company’s diversified loan portfolio has helped sustain growth despite challenges from the Covid-19 pandemic [166]. - The bank's primary lending focuses on SBA 7(a) loans, strategic programs, residential and commercial real estate, and consumer lending [162]. - Total assets reached $401,574 thousand in 2022, compared to $312,778 thousand in 2021, marking a 28.4% increase [175]. - The total loan portfolio reached $272.6 million as of March 31, 2022, compared to $265.8 million as of December 31, 2021 [200]. - As of March 31, 2022, total SBA 7(a) loans amounted to $126.8 million, representing 46.5% of total loans, down from $141.3 million (53.2%) as of December 31, 2021 [187]. - Strategic Program loans rose to $101.8 million (37.4% of total loans) as of March 31, 2022, up from $85.9 million (32.3%) as of December 31, 2021 [191]. - The total amount of fixed rate loans was $1.648 billion as of March 31, 2022, with significant contributions from various categories including Strategic Program loans [203]. Loan Loss Provisions and Asset Quality - The provision for loan losses increased to $2.9 million in Q1 2022 from $0.6 million in Q1 2021, reflecting a 365.6% rise [171]. - The allowance for loan losses (ALL) increased to $10.0 million at March 31, 2022, compared to $9.9 million at December 31, 2021, reflecting a 1.3% increase [241]. - The total charge-offs for Strategic Program loans in March 2022 were $2.878 million, compared to $0.741 million in March 2021 [242]. - The company actively monitors nonperforming assets and engages with borrowers to mitigate risks, especially during economic downturns like the Covid-19 pandemic [217]. - The total nonperforming loans to total loans ratio remained stable at 0.2% as of March 31, 2022, consistent with the previous period [211]. - The ratio of ALL to nonperforming loans was 1,517.8% as of March 31, 2022, compared to 1,499.1% as of December 31, 2021 [246]. Deposits and Funding - Total deposits rose to $277.5 million at March 31, 2022, an increase of $25.6 million or 10.2% from $251.9 million at December 31, 2021 [258]. - Interest-bearing deposits in other banks increased to $116.2 million at March 31, 2022, up by $30.9 million or 36.2% from $85.3 million at December 31, 2021 [248]. - The company’s interest-bearing deposits included $53.4 million in money market accounts, representing 19.3% of total deposits as of March 31, 2022 [258]. - Total uninsured deposits were $187.9 million for the three months ended March 31, 2022, compared to $106.4 million for the same period in 2021 [259]. Strategic Initiatives and Future Plans - The company plans to adopt the CECL model in the 2023 calendar year, which may impact future loan loss provisions [233]. - The company plans to market commercial checking accounts and expand deposit products targeted at SBA borrowers in 2022 [264]. - The company raised approximately $36.1 million in net proceeds from its IPO completed on November 23, 2021 [262].

FinWise Bancorp (NASDAQ:FINW) Q1 2022 Earnings Conference Call April 28, 2022 5:00 PM ET Company Participants Kent Landvatter - Chief Executive Officer & President Javvis Jacobson - Chief Financial Officer David Tilis - Chief Strategy Officer & Senior Vice President Jim Noone - Chief Credit Officer & Executive Vice President Conference Call Participants Michael Hultquist - Piper Sandler Samuel Varga - Stephens Operator Greetings. Welcome to the FinWise Bancorp First Quarter 2022 Earnings Conference Call. At ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-40721 FINWISE BANCORP (Exact Name of Registrant as Specified in its Charter) Utah 83-0356689 | --- | --- | |------------------------------------- ...