FinWise Bancorp(FINW) - 2022 Q4 - Annual Report

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]