Item 9A. Controls and Procedures
Item 9A.
Controls and Procedures
a) Evaluation of Disclosure Controls and Procedures
The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Report. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls
and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act
is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company did not, as of December 31, 2022, maintain effective disclosure controls and
procedures due to a material weakness in the Company’s internal control over financial reporting as described below.
Notwithstanding management’s conclusion regarding the effectiveness of the Company’s disclosure controls and procedures and the material weakness discussed below, the Company’s management, including
the Chief Executive Officer and Chief Financial Officer, has concluded that the Company’s financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, the Company’s financial position, results of
operations and cash flows for the periods presented in accordance with U.S. generally accepted accounting principles.
b) Report of Management ’ s Assessment of Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Our internal control
over financial reporting is a process designed by, or under the supervision, our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of specific controls or internal control over financial reporting overall to future periods are subject to the risk that controls may
become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
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With the supervision and participation of its Chief Executive Officer and its Chief Financial Officer, management evaluated the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2022, using the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013) . Based on
management’s assessment, we concluded that our internal control over financial reporting was not effective as of December 31, 2022, due to the material weakness, discussed below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the
Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
As of December 31, 2022, management identified a material weakness in the design and operating effectiveness of the Company’s internal control over financial
reporting. We determined that we did not have appropriate internal accounting expertise and capabilities to properly record in our financial statements complex accounting issues, particularly related to certain aspects of accounting for
transfers and servicing of financial instruments and the provision for income taxes. The material weakness also resulted in the Company not having adequate risk assessment and design of internal control activities surrounding the financial
close and reporting process to ensure formal processes exist for identifying, analyzing, and accounting for key contracts and complex, non-routine transactions.
c) Remediation Plan
In response to deficiencies noted in late 2022, the Company began taking remedial actions, including, but not limited to, the hiring of additional personnel with SEC reporting experience and GAAP knowledge to strengthen our financial
reporting capabilities. The Company will also undertake a review of existing internal controls surrounding the financial reporting process and enhance the design of controls over the accounting for key contracts and complex, non-routine
transactions.
d) Changes in Internal Control Over Financial Reporting
Other than the remediation discussed above, there have not been any changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B.
Other Information
Not applicable.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
The information required by Items 401, 405, 406 and 407 (c)(3); (d)(4) and (d)(5) of Regulation S-K is incorporated into this Form 10-K by reference to the Company’s definitive proxy statement for
its 2023 Annual Meeting of Shareholders (the “Definitive Proxy Statement”) to be filed within 120 days following December 31, 2022.
Item 11.
Executive Compensation
The information required by Item 402 of Regulation S-K is incorporated into this Form 10-K by reference to the Definitive Proxy Statement to be filed within 120 days following December 31, 2022.
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Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
The information required by Item 201(d) and Item 403 of Regulation S-K is incorporated into this Form 10-K by reference to the Definitive Proxy Statement, to be filed within 120 days following
December 31, 2022.
See Part II, Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities for “Securities Authorized for
Issuance Under Equity Compensation Plans”.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by Items 404 and 407(a) of Regulation S-K is incorporated into this Form 10-K by reference to the Definitive Proxy Statement to be filed within 120 days following December
31, 2022.
Item 14.
Principal Accountant Fees and Services
The information required by Item 9(e) of Schedule 14A is incorporated into this Form 10-K by reference to the Definitive Proxy Statement to be filed within 120 days following December 31, 2022.
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PART IV
Item 15.
Exhibits and Financial Statement Schedules
(a) Financial Statements
The following consolidated financial statements of FinWise Bancorp are filed as part of this Report under Item 8. Financial Statements and Supplementary Data:
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
(b) Exhibits.
Number
Description
3.1
Fourth Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the
Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July 30, 2021 (File No. 333-257929)).
3.2
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of the Registrant’s Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on July 30, 2021 (File No. 333-257929)).
4.1*
Specimen common stock certificate.
4.2
Form of Warrant to BFG Members to Purchase Common Stock of FinWise Bancorp (incorporated by reference to
Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July 15, 2021 (File No. 333-257929)).
4.3*
Description of Securities Registered
Under Section 12 of the Securities Exchange Act of 1934, as amended.
10.1+
FinWise Bancorp 2019 Stock Option Plan (incorporated by reference to Exhibit 10.1 of the Registrant’s
Current Report on Form 8-K filed with the Securities and Exchange Commission on June 14, 2022).
10.2+
Form of Stock Option Agreement under the FinWise Bancorp 2019 Stock Option Plan (incorporated by
reference to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July 15, 2021 (File No. 333-257929)).
10.3+
FinWise Bancorp 2016 Stock Option Plan (incorporated by reference to Exhibit 10.3 of the Registrant’s
Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July 30, 2021 (File No. 333-257929)).
10.4+
Form of Stock Option Agreement under the FinWise Bancorp 2016 Stock Option Plan (incorporated by
reference to Exhibit 10.4 of the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July 15, 2021 (File No. 333-257929)).
10.5+
Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.5 of the Registrant’s
Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July 15, 2021 (File No. 333-257929)).
10.6+
Non-qualified Stock Option Agreement with Javvis Jacobson (incorporated by reference to Exhibit 4.6 of the
Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
10.7+
Non-qualified Stock Option Agreement with Jim Noone (incorporated by reference to Exhibit 4.7 of the
Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
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10.8+
Non-qualified Stock Option Agreement with Kent Landvatter (incorporated by reference to Exhibit 4.8 of the
Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
10.9+
Non-qualified Stock Option Agreement with Fred Healey for 2020 service (incorporated by reference to
Exhibit 4.9 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
10.10+
Non-qualified Stock Option Agreement with Fred Healey for 2021 service (incorporated by reference to
Exhibit 4.10 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
10.11+
Non-qualified Stock Option Agreement with Howard Reynolds for 2020 service (incorporated by reference to
Exhibit 4.11 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
10.12+
Non-qualified Stock Option Agreement with Howard Reynolds for 2021 service (incorporated by reference to
Exhibit 4.12 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
10.13+
Non-qualified Stock Option Agreement with Jerry Cunningham for 2020 service (incorporated by reference to
Exhibit 4.13 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
10.14+
Non-qualified Stock Option Agreement with Jerry Cunningham for 2021 service (incorporated by reference to
Exhibit 4.14 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
10.15+
Non-qualified Stock Option Agreement with Tom Gibson for 2020 service (incorporated by reference to
Exhibit 4.15 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
10.16+
Non-qualified Stock Option Agreement with Tom Gibson for 2021 service (incorporated by reference to
Exhibit 4.16 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
10.17+
Non-qualified Stock Option Agreement with Jim Giordano for 2020 service (incorporated by reference to
Exhibit 4.17 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
10.18+
Non-qualified Stock Option Agreement with Jim Giordano for 2021 service (incorporated by reference to
Exhibit 4.18 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
10.19+
Non-qualified Stock Option Agreement with Jeana Hutchings for 2020 service (incorporated by reference to
Exhibit 4.19 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
10.20+
Non-qualified Stock Option Agreement with Jeana Hutchings for 2021 service (incorporated by reference to
Exhibit 4.20 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
10.21+
Non-qualified Stock Option Agreement with Lisa Chapman for 2020 service (incorporated by reference to
Exhibit 4.21 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
10.22+
Non-qualified Stock Option Agreement with Lisa Chapman for 2021 service (incorporated by reference to
Exhibit 4.22 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on February 4, 2022 (File No. 333-262531)).
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Index
10.23+*
Form of Employee Restricted Stock
Agreement under the FinWise Bancorp 2019 Stock Option Plan.
10.24+*
Form of Employee Incentive Stock
Option Agreement under the FinWise Bancorp 2019 Stock Option Plan.
10.25+*
Form of Employee Incentive Stock
Option Agreement under the FinWise Bancorp 2016 Stock Option Plan and the FinWise Bancorp 2019 Stock Option Plan.
10.26+*
Form of Director Restricted Stock
Agreement under the FinWise Bancorp 2019 Stock Option Plan.
10.27
Standstill Agreement dated January 19, 2016, by and between FinWise Bancorp and Business Funding Group (incorporated by reference to Exhibit 10.7 of the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July
15, 2021 (File No. 333-257929)).
10.28
Right of First Refusal and Option Agreement dated March 31, 2020, by and among FinWise Bancorp and the
members of Business Funding Group (incorporated by reference to Exhibit 10.8 of the Registrant’s Registration Statement on Form S-1 filed with the
Securities and Exchange Commission on July 15, 2021 (File No. 333-257929)).
10.29
Membership Interest Purchase Agreement dated December 31, 2019 by and among FinWise Bancorp, Business
Funding Group and certain members of Business Funding Group (incorporated by reference to Exhibit 10.9 of the Registrant’s Registration Statement on Form
S-1 filed with the Securities and Exchange Commission on July 15, 2021 (File No. 333-257929)).
10.30
Sublease dated December 7, 2018, between Motorola Solutions, Inc. and FinWise Bancorp (incorporated by reference to Exhibit 10.10 of the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July
15, 2021 (File No. 333-257929)).
10.31
Lease dated January 27, 1999, between FPA Sandy Mall Associates, LLC and FinWise Bancorp (incorporated by reference to Exhibit 10.11 of the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July
15, 2021 (File No. 333-257929)).
10.32
First Amendment to Lease dated June 3, 2009, between FPA Sandy Mall Associates, LLC and FinWise Bancorp (incorporated by reference to Exhibit 10.12 of the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July
15, 2021 (File No. 333-257929)).
10.33
Second Amendment to Lease dated April 25, 2014, between FPA Sandy Mall Associates, LLC and FinWise
Bancorp (incorporated by reference to Exhibit 10.13 of the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on July 15, 2021 (File No. 333-257929)).
10.34
Lease dated December 2017, between North Village Centre, Inc. and FinWise Bancorp (incorporated by reference to Exhibit 10.14 of the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July
15, 2021 (File No. 333-257929)).
10.35
Lease dated July 30, 2021, between Mountain View Business Center, LLC and FinWise Bancorp (incorporated
by reference to Exhibit 10.15 of the Registrant’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 4, 2021 (File No. 333-257929)).
10.36+
Letter Agreement, dated May 17, 2022, by and between FinWise Bank and James Noone (incorporated by
reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 23, 2022).
10.37
Secured Promissory Note, dated as of June 1, 2022, by and between Alan Weichselbaum in favor of FinWise
Bancorp (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q filed November 14, 2022).
10.38
Security Agreement, dated June 16, 2022, by and between Alan Weichselbaum and FinWise Bancorp (incorporated by reference to Exhibit 10.4 to Form 10-Q filed November 14, 2022).
10.39+
Separation and Consulting Agreement, dated as of June 1, 2022, by and
among FinWise Bancorp, FinWise Bank and David Tilis (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 22, 2022).
21.1*
Subsidiaries of FinWise Bancorp
23.1*
Consent of Moss Adams LLP
31.1*
Rule 13a-14(a) Certification of the Principal Executive Officer.
31.2*
Rule 13a-14(a) Certification of the Principal Financial Officer.
32.1*
Section 1350 Certification of Chief Executive Officer and Chief Financial
Officer.
101*
Inline XBRL Interactive Data
104*
Cover Page Interactive Data File (embedded within the Inline XBRL document in Exhibit 101)
+ Management contract or compensation plan, contract or arrangement.
* Filed herewith
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FINWISE BANCORP
Date:
March 30, 2023
By:
/s/ Kent Landvatter
Kent Landvatter
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
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
123