What changed in this filing

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Item 1. Business

2025-03-26 compared with 2024-03-25 · 104 added, 103 removed, 389 unchanged (35% of the section changed)

In this Report, unless we state otherwise or the context otherwise requires, references to “we,” “our,” “us,” “the Company” and “FinWise Bancorp” refer to FinWise Bancorp and its wholly owned subsidiaries, FinWise Bank (which we sometimes refer to as “FinWise Bank,” “FinWise,” “the Bank” or “our Bank,”) and FinWise Investments, LLC.

References to “common stock” refer to our voting common stock.

We are FinWise Bancorp, a Utah bank holding company headquartered in Murray, Utah.

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The Company was formed in 2002 and acquired 100% of the stock of Utah Community Bank, a local community bank founded in 1999 focusing on real estate lending in and around the Salt Lake City, Utah MSA.

While the Bank is our primary asset we also have a 20% membership interest in BFG, a Connecticut limited liability company, a nationally significant referral source for SBA loans and a legal lending facilitator.

While the Bank is our primary asset we also have a 20% membership interest in BFG, a Connecticut limited liability company, a nationally

significant referral source for SBA loans and a legal lending facilitator.

As described below, we have a right of first refusal to purchase additional interests in BFG from any selling member along with an option to purchase all of the interests from the remaining members through January 1, 2028.

See “Our Relationship with Business Funding Group.”

See “Our Relationship with Business Funding Group” below.

We originate, sell or hold loans in four main lending areas:

(i) nationwide Strategic Programs, (ii) a multi-state SBA 7(a) lending program, (iii) residential and owner occupied commercial real estate lending, and (iv) multi-state equipment financing.

We have principally relied on core deposits, including Institutional Deposits, to fund our lending activities but also have used brokered deposits, Health Savings Account (HSA) sourced through a third party, and borrowings when we deem appropriate.

We have principally relied on wholesale funding sources (brokered deposits, health savings accounts, and institutional deposits) to fund our lending activities but also have core deposits, and have utilized borrowings when we deem appropriate.

FinWise Bancorp serves as a registered bank holding company with respect to the Bank, subject to regulation and examination by the Utah Department of Financial Institutions (“UDFI”) and the Federal Reserve Board.

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Such fees are disclosed on SBA Form 159 and filed with SBA for each funded loan.

Between March 2018 and July 2018, in exchange for cash proceeds, we sold 1,476,090 shares representing approximately 23.4% of our issued and outstanding common stock at the time of such sale to four individuals associated with BFG and one individual not associated with BFG pursuant to change in control applications filed with the Federal Reserve Bank and UDFI.

The Federal Reserve Bank determined that these five individuals were acting in concert, but that the shares purchased by the five individuals were not attributable to BFG for purposes of the Bank Holding Company Act of 1956, as amended.

In December of 2019, we acquired directly from four of the five individuals who acquired our shares in 2018, a 10% ownership interest in BFG in exchange for 950,784 newly issued shares of our common stock, representing 10.9% of the Company’s outstanding common stock at the time of purchase.

The UDFI approved the acquisition of the additional shares of our common stock in the exchange by the four individuals and the Federal Reserve Bank did not object, provided that no individual owns more than 9.9% of our issued and outstanding common stock (as calculated in accordance with the rules and regulations of the Federal Reserve Bank).

In January 2016, in contemplation of BFG acquiring voting securities of the Company, we entered into an agreement (the “Standstill Agreement”) with BFG whereby BFG agreed to abstain from certain actions that may evidence control of the Company.

However, BFG did not and has not ever directly acquired voting securities of the Company, although four individuals associated with BFG did acquire shares of the Company as described below.

The FRB determined that these five individuals were acting in concert, but that the shares purchased by the five individuals were not attributable to BFG for purposes of the Bank Holding Company Act of 1956, as amended.

In December of 2019, we acquired directly from four of the five individuals who acquired our shares in 2018, a 10% ownership interest in BFG in exchange for 950,784 newly issued shares of our common stock, representing 10.9% of our common stock outstanding at the time of purchase.

The UDFI approved the acquisition of the additional shares of our common stock in the exchange by the four individuals and the FRB did not object, provided that no individual owns more than 9.9% of our issued and outstanding common stock (as calculated in accordance with the rules and regulations of the FRB).

To strengthen our relationship with BFG, we negotiated a right of first refusal and an option to acquire 100% of BFG.

an earnings multiple of 10 to 15 times BFG’s net profit based on the fiscal year ended immediately prior to the exercise of the option.

Subject to the terms of that certain Right of First Refusal and Option Agreement, dated as of March 31, 2020, we were granted an option to acquire all of the ownership interests in BFG at any time from January 1, 2021, to January 1, 2028, at an earnings multiple of 10 to 15 times BFG’s net profit based on the fiscal year ended immediately prior to the exercise of the option.

In addition, we have a right of first refusal, prior to our exercise of our option, to acquire any ownership interests that any individual owner of BFG wishes to sell.

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Other than the Right of First Refusal and Option Agreement and the Standstill Agreement, there are no other agreements between us and BFG or among our respective shareholders.

On July 25, 2023, the Company entered into a Membership Purchase Agreement, as amended (the "Purchase Agreement") with BFG and four members of BFG ("Sellers").

Pursuant to the Purchase Agreement, the Company acquired an additional 10% non-voting ownership interest in BFG (the "Transaction").

On February 5, 2024, the Transaction was consummated and the Company issued in the aggregate 339,176 shares of Common Stock of the Company, par value $0.001 per share, in a private placement to the Sellers in exchange for their 10% aggregate non-voting ownership interest in BFG When combined with the Company’s existing 5.3% non-voting ownership interest and 4.7% voting ownership interest in BFG, the Company has a 20% ownership interest in BFG comprising a 4.7% voting ownership and a 15.3% nonvoting ownership interest.

On July 25, 2023, the Company entered into a definitive agreement, as amended, to purchase from certain members of BFG an additional 10% membership interest in exchange for shares of the Company’s common stock.

On February 5, 2024, the transaction was consummated and the Company issued an aggregate 339,176 shares of the Company’s common

stock in a private placement to the sellers in exchange for the additional membership interest in BFG.

The second transaction increased the Company’s total ownership interest in BFG to 20%.

The ownership interest consists of Class A Voting Units representing 4.7% of the aggregate membership interests of BFG and Class B Non-Voting Units representing 15.3% of the aggregate membership interests of BFG.

BFG is not an affiliate of the Bank as defined under the Federal Reserve Act and Regulation W promulgated thereunder.

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We maintain a diversified loan portfolio in terms of the types of loan products it contains and customer characteristics, with a focus on individual consumers and small businesses.

The following table presents the composition of our loan held for investment portfolio by lending program, as of December 31, 2023:

The following table presents the composition of our loans held-for-investment portfolio by lending program, as of December 31, 2024:

($ in thousands) Total Loans % of Loans in

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Fees are not paid based on the secondary market premium received or the amount sold.

Strategic Programs .

We have established Strategic Programs with various third-party consumer and commercial loan origination platforms that use technology to streamline the origination of consumer and small commercial loans.

We currently have twelve Strategic Program relationships.

The terms of our Strategic Programs generally require each Strategic Program platform to establish a reserve deposit account with the Bank or another financial institution, intended to protect the Bank in the event a purchaser of loan receivables originated through our Strategic Programs cannot meet its contractual obligation to purchase.

This amount is usually set at a 1:1 ratio but may be restructured in certain circumstances as the relationship seasons or if the Strategic Program platform is an established company.

Collateral may include deposits held at the Bank, at another institution where the Bank has control of the account or a combination of deposits and other vehicles such as letters of credit.

Our Strategic Programs also cover a wide range of borrower credit profiles, loan terms and interest rates.

Loan terms range from 1 month to 72 months.

Interest rates currently range from 8% to 160%.

During the year ended December 31, 2023, we originated approximately $4.1 billion in Strategic Program loans and had approximately $19.4 million in Strategic Program loans held for investment on our balance sheet at December 31, 2023.

Business checking and money market demand accounts associated with Strategic Program relationships held balances of approximately $68.1 million (including $29.8 million held as collateral) as of December 31, 2023.

As of December 31, 2023, our Strategic Program held-for-investment loans comprised of 5.2% of the Bank’s loan portfolio.

Commercial Leases .

Underwriting is generally based on commercial credit metrics where the primary repayment source is borrower cash flow, secondary is personal guarantor cash flow (when applicable) and tertiary is the sale of collateral pledged.

These leases are generally secured by liens on business assets.

Historically, we have retained these leases on our balance sheet for investment.

As of December 31, 2024, our commercial leases comprised 15.1% of the Bank’s loans held-for-investment portfolio.

Commercial Non-Real Estate Loans .

Commercial non-real estate includes loans made to commercial enterprises that are not secured by real estate.

Any loan, line of credit, or letter of credit (including any unfunded commitments), and any interest the Bank obtains in such loans made by another lender, to individuals, sole proprietorships, partnerships, corporations, or other business enterprises for commercial, industrial, agricultural, or professional purposes, but not for personal expenditure purposes are included in this category.

These loans are generally secured by liens on business assets.

Historically, we have retained these loans on our balance sheet for investment.

As of December 31, 2024, our commercial non-real estate loans comprised 0.8% of the Bank’s loans held-for-investment portfolio.

Residential and Commercial Real Estate Loans .

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As of December 31, 2024, our branch-based banking operations consisted of approximately $67.7 million in loans (including approximately $64.2 million of residential and commercial real estate loans).

Strategic Programs .

We have selectively retained a portion of the Strategic Program loans or receivables based on the capacity and risk appetite of the Bank with the majority of Strategic Program originations being sold to investors.

Our Strategic Programs loans held-for-investment cover a wide range of borrower credit profiles, loan terms and interest rates.

During the year ended December 31, 2024, we originated approximately $4.9 billion in Strategic Program loans and had approximately $20.1 million in Strategic Program loans held-for-investment on our balance sheet at December 31, 2024.

As of December 31, 2024, our Strategic Program held-for-investment loans comprised of 4.3% of the Bank’s loan portfolio.

Primarily, our loans secured by real estate are made to established builders to construct residential properties, loans to developers of commercial real estate investment properties and residential developments and loans to individual consumers for construction of single-family homes in our market areas.

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Loans are typically structured with an interest only construction period and mature at the completion of construction.

Commercial Leases .

These leases are generally secured by liens on business assets.

Historically, we have retained these leases on our balance sheet for investment.

As of December 31, 2023, our commercial leases comprised 10.2% of the Bank’s loans held for investment portfolio.

Commercial Non-Real Estate Loans .

Commercial non-real estate includes loans made to commercial enterprises that are not secured by real estate.

personal expenditure purposes are included in this category.

These loans are generally secured by liens on business assets.

Historically, we have retained these loans on our balance sheet for investment.

As of December 31, 2023, our commercial non-real estate loans comprised 0.7% of the Bank’s loans held for investment portfolio.

Consumer Loans .

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The majority of the approximately $22.2 million in consumer loans outstanding as of December 31, 2024, that were not generated through our Strategic Programs were originated in connection with our POS lending program.

During the year ended December 31, 2023, we originated approximately $8.4 million in POS loans and held approximately $9.7 million of POS loans on our balance sheet as of December 31, 2023.

During the year ended December 31, 2024, we originated approximately $19.2 million in POS loans and held approximately $21.2 million of POS loans on our balance sheet as of

December 31, 2024.

As of December 31, 2024, our consumer loans comprised 4.8% of the Bank’s total loans held-for-investment portfolio.

Strategic Program Loans held-for-sale .

The majority of originations of Strategic Program loans are not maintained by the Company as loans held for investment.

At December 31, 2023, the Company had $47.5 million in Strategic Program loans held-for-sale.

The majority of originations of Strategic Program loans as described above are not maintained by us as loans held-for-investment.

This amount is usually set at a 1:1 ratio but may be restructured in certain circumstances as the relationship seasons or if the Strategic Program platform is an established company.

Collateral may include deposits held at the Bank, at another institution where the Bank has control of the account or a combination of deposits and other vehicles such as letters of credit.

Business checking and money market demand accounts associated with Strategic Program relationships held balances of approximately $113.6 million (including $54.0 million held as collateral) as of December 31, 2024.

At December 31, 2024, we had $91.6 million in Strategic Program loans held-for-sale.

Credit Administration and Loan Review

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Authority limits are based on the total exposure of the borrower, the loan product, and are conditioned on the loan conforming to the standards contained in the loan policy.

Any loan policy exceptions are appropriately monitored and fully disclosed to the approving authority.

Any loan policy

exceptions are appropriately monitored and fully disclosed to the approving authority.

We believe that our credit approval process provides for thorough underwriting and efficient decision making.

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As credit quality for Strategic Program loans have been highly correlated with delinquency levels, Strategic Program loans are evaluated collectively by program.

Pursuant to our credit policy, our loan committee is required to consider loan grade updates at our quarterly meetings

Our loan committee and board members are updated on a regular basis on all servicing and liquidation efforts.

We believe such routine and recurring discussions amongst our loan committee members and board of directors help prevent oversight errors that may occur in improperly managed loan portfolios.

Pursuant to our credit policy, our loan committee is required to consider loan grade updates at our quarterly meetings.

The Bank analyzes each loan application in a reasonable manner, consistent with prudent lending standards.

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Our lending activities are subject to a variety of lending limits imposed by state and federal law.

In general, the Bank is subject to a legal lending limit on loans to a single borrower based on the Bank’s capital level as dictated by the State of

In general, the Bank is subject to a legal lending limit on loans to a single borrower based on the Bank’s capital level as dictated by the State of Utah.

The dollar amounts of the Bank’s lending limit increases or decreases as the Bank’s capital increases or decreases.

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We currently source most of our loan originations through our Strategic Programs.

Our Strategic Programs include a broad array of products for both prime and subprime borrowers including both consumer and commercial loans that may be secured or unsecured, and open- or closed-end products, depending on the particular market targeted by the Bank and the specific Strategic Program service provider.

Minimum and maximum loan amounts range from $500 to $2.0 million and loan terms range from 6 to 72 months.

The Bank’s current Strategic Program service providers include OppFi, Reach Financial (formerly Liberty Lending), LendingPoint, American First Finance, Elevate, Upstart, Mulligan Funding, Great American Finance, Edly, Empower, Stride, and Earnest.

Bank and the specific Strategic Program service provider.

We offer strategic program loans for loan amounts up to $2.0 million with terms not to exceed 72 months.

The Bank’s current Strategic Program service providers include Upstart, Elevate, Reach (formerly Liberty Lending), Plannery, Empower, Earnest, PowerPay, Stride, LendingPoint, OppFi, Mulligan Funding, American First Finance.

From time to time, we expect the number and composition of our Strategic Program service providers to change as the business develops, contract terms expire or agreements with service providers are otherwise terminated.

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Such purchase transactions typically require the purchaser to maintain a reserve account with the Bank or another financial institution to secure the purchaser’s contractual obligations to purchase.

Some of our Strategic Program service providers may also securitize the loans originated through the program and the Bank may choose

to participate in such securitizations for liquidity reasons.

Some of our Strategic Program service providers may also securitize the loans originated through the program and the Bank may choose to participate in such securitizations for liquidity reasons.

The Bank may also hold a portion of the loans or receivables for investment.

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Some Strategic Programs require the service provider pay a fee to the Bank if it enters into a similar strategic relationship with another bank or financial institution.

On October 13, 2021, we formed FinWise Investments, LLC, a limited liability company, as a wholly owned subsidiary of the Company to hold and manage private investments made by the Company and the Bank.

On October 13, 2021, we formed FinWise Investment, LLC, a limited liability company, as a wholly owned subsidiary of the Company to hold and manage private investments made by the Company and the Bank.

The Company currently holds and, in the future, may acquire equity in certain of our Strategic Program service providers through this subsidiary.

As of December 31, 2024, and 2023, this subsidiary holds $0.3 million and $0.3 million, respectively, of equity securities of two Strategic Program service providers.

The Bank generally services the loans originated through the Strategic Programs in consideration of servicing fees equal to a percentage of the loans generated under the Strategic Program.

The Bank is generally the servicer of the loans it originates through Strategic Programs.

The Bank earns a servicing fee equal to a percentage of the outstanding balance of the loans generated under Strategic Programs for servicing such loans..

In turn, the Strategic Program service providers, subject to the Bank’s approval and oversight, serve as sub-servicer and perform typical primary servicing duties including loan collections, modifications, charging-off, reporting and monitoring.

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We solicit deposits through our relationship-driven team of dedicated and accessible bankers and through community-focused marketing.

We use a diversified funding strategy with an emphasis on core deposits from our branch operations, deposits originated through SBA 7(a) lending programs and Strategic Programs, coupled with brokered deposits and borrowings as needed.

We maintain a diversified funding strategy using core deposits from our branch operations and deposits originated through SBA 7(a) lending programs and Strategic Programs, coupled with brokered deposits and borrowings as needed.

A meaningful portion of our core deposits include funds deposited through our Strategic Programs, to support reserve requirements.

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In addition to the reserve deposit account, certain Strategic Program relationships have opened operating deposit accounts at the Bank.

Our core deposits, as of December 31, 2023, constituted 42.6% of our funding sources (our core deposits comprise the sum of demand deposits, HSA demand deposits sourced through Lively, Inc., NOW accounts, MMDA accounts, savings accounts, and time deposits under $250,000 that are not brokered deposits).

Our core deposits, as of December 31, 2024, constituted 35.6% of our funding sources (our core deposits comprise the sum of demand deposits, FBO demand deposits, NOW accounts, MMDA accounts, savings accounts, and time deposits under $250,000 that are not brokered deposits).

Securities Portfolio

We manage our securities portfolio and cash to maintain adequate liquidity and to ensure the safety and preservation of invested principal, with a secondary focus on yield and returns.

Our investments were approximately $15.4 million as of December 31, 2023.

We manage our securities portfolio and cash to maintain adequate liquidity with a secondary focus on yield and returns.

Our investment security portfolio totaled $42.5 million as of December 31, 2024.

Specific objectives of our investment policy and portfolio are as follows:

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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.

• Income Generation—The Bank’s investment portfolio is managed to optimize income on invested funds in a manner that is consistent with the Bank’s objective to preserve the invested principal.

• 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.

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Overall investment objectives are established by our board through our investment policy and monitored through our asset-liability management committee.

Day-to-day activities pertaining to the securities portfolio are conducted under the supervision of our Chief Financial Officer.

Day-to-day activities pertaining to the securities portfolio are conducted under the supervision of our Chief Financial

We actively monitor our investments on an ongoing basis to identify any material changes in our mix of securities.

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Based on this deposit insurance function, the FDIC also has certain supervisory authority and powers over the Bank as well as all other FDIC insured institutions.

Both the UDFI and the FDIC conduct routine examinations of the Bank.

The Company’s and the Bank’s regulators generally have broad discretion to impose

restrictions and limitations on our operations.

Both the UDFI and the FDIC conduct regular examinations of the Bank.

The Company’s and the Bank’s regulators generally have broad discretion to impose restrictions and limitations on our operations.

Bank regulation is intended to protect depositors, consumers, and commercial customers, and not shareholders.

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The FDIC is the Bank’s primary federal regulatory agency.

In addition, the Bank’s deposit accounts are insured by the FDIC to the maximum extent permitted by law, and the FDIC has certain enforcement powers over the Bank.

In addition, the Bank’s deposit

accounts are insured by the FDIC to the maximum extent permitted by law, and the FDIC has certain enforcement powers over the Bank.

The UDFI and the FDIC periodically examine the Bank’s operations and financial condition and compliance with federal consumer-protection laws.

If, based on an examination of our Bank, the regulators should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of the Bank’s operations are unsatisfactory, or that the Bank or our management is violating or has violated any law or regulation, various remedies are available to the regulators.

Such remedies include the power to enjoin unsafe or unsound practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in capital, to restrict growth, to assess civil monetary penalties, to remove officers and directors and ultimately to request the FDIC to terminate the Bank’s deposit insurance.

Such remedies include the power to enjoin unsafe or unsound practices, to require mitigating action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in capital, to restrict growth, to assess civil monetary penalties, to remove officers and directors and ultimately to request the FDIC to terminate the Bank’s deposit insurance.

As a Utah state-chartered bank, the Bank is authorized by statute, subject to certain limitations, to take and pay interest on, savings and time deposits, to accept demand deposits, to make loans on residential and other real estate, to make consumer and commercial loans, to invest, with certain limitations, in equity securities and in debt obligations of banks and corporations and to provide various other banking services for the benefit of the Bank’s customers.

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The amount of the assessment paid by a Utah bank to the UDFI is calculated on an annual basis based on our average total assets for the prior year.

During the year ended December 31, 2023, the Bank paid a de minimis assessment to the UDFI.

During the year ended December 31, 2024, the Bank paid an assessment to the UDFI of $0.1 million.

Capital Adequacy Guidelines

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Under the Dodd-Frank Act, the Federal Reserve must apply consolidated capital requirements to depository institution holding companies that are no less stringent than those currently applied to depository institutions.

The Dodd-Frank Act additionally requires capital requirements to be countercyclical so that the required amount of capital increases in times of economic expansion and decreases in times of economic contraction, consistent with safety and soundness.

The Dodd-Frank Act additionally requires capital requirements to be counter-cyclical so that the required amount of capital increases in times of economic expansion and decreases in times of economic contraction, consistent with safety and soundness.

The current requirements, which began to take effect in 2015, are based on the international Basel III capital framework.

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prohibiting the institution from accepting deposits from correspondent banks;

requiring the institution to divest certain

subsidiaries;

requiring the institution to divest certain subsidiaries;

prohibiting the payment of principal or interest on subordinated debt;

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In general, a depository institution may be reclassified to a lower category than is indicated by its capital levels if the appropriate federal depository institution regulatory agency determines the institution to be otherwise in an unsafe or unsound condition or to be engaged in an unsafe or unsound practice.

This could include a failure by the institution, following receipt of a less-than-satisfactory rating on its most recent examination report, to correct the deficiency.

See “Part II, Item 8.

Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note 7, Capital Standards” for additional regulatory capital information, including the Bank’s and Company’s Leverage Ratio as of December 31, 2023.

This could result from a failure by the institution to timely correct a deficiency identified in an examination report.

See Note 8 - Capital Requirements to the consolidated financial statements included in Part II, Item 8 for additional regulatory capital information, including the Bank’s and Company’s leverage ratio as of December 31, 2024.

Safety and Soundness Standards

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and (vi) compensation, fees and benefits.

In addition, the federal banking agencies have also adopted safety and soundness guidelines with respect to asset quality and for evaluating and monitoring earnings to ensure that earnings are sufficient for the maintenance of adequate capital and reserves.

These guidelines provide six standards for establishing and maintaining a system to identify problem assets and prevent those assets from deteriorating.

Under these standards, an insured depository institution should:

(i) conduct periodic asset quality reviews to identify problem assets;

(ii) estimate the inherent losses in problem assets and establish reserves that are sufficient to absorb estimated losses;

(iii) compare problem asset totals to capital;

(iv) take appropriate corrective action to resolve problem assets;

(v) consider the size and potential risks of material asset concentrations;

and (vi) provide periodic asset quality reports with adequate information for management and the board of directors to assess the level of asset risk.

In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risk and exposures specified in the guidelines.

Transactions with Affiliates and Insiders

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Loans to such persons and certain affiliated entities of any of the foregoing, may not exceed, together with all other outstanding loans to such person and affiliated entities, the institution’s loans-to-one-borrower limit.

Federal regulations also prohibit loans above amounts prescribed by the appropriate federal banking agency to directors, executive officers, and shareholders who own more than 10% of an institution, and their respective affiliates, unless such loans are approved in advance by a

majority of the board of directors of the institution.

Any “interested” director may not participate in the voting.

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The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that appropriately balance risk and rewards in a manner that does not encourage imprudent risk taking, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

In accordance with the Dodd-Frank Act, the federal banking agencies prohibit incentive-based compensation arrangements that encourage inappropriate risk taking by covered financial institutions (generally institutions that have over $1 billion in assets) and are deemed to be excessive, or that may lead to material losses.

accordance with the Dodd-Frank Act, the federal banking agencies prohibit incentive-based compensation arrangements that encourage inappropriate risk taking by covered financial institutions (generally institutions that have over $1 billion in assets) and are deemed to be excessive, or that may lead to material losses.

The Federal Reserve will review, as part of the regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as the Company, that are not “large, complex banking organizations.” These reviews will be tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements.

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Parents or holding companies of other insured depository institutions are required to report separately from their subsidiary depository institutions.

The FDIC’s methodology for setting assessments for individual banks has changed over time, although the broad policy is that lower-risk institutions should pay lower assessments than higher-risk institutions.

The FDIC now uses a methodology, known as the “financial ratios method,” that began to apply on July 1, 2016, in order to meet requirements of the Dodd-Frank Act.

The statute established a minimum designated reserve ratio for the DIF of 1.35% of the estimated insured deposits and required the FDIC to adopt a restoration plan should the reserve ratio fall below 1.35%.

As of September 30, 2020, the FDIC announced that the ratio had declined to 1.30% due largely to consequences of the Covid-19 pandemic.

The FDIC adopted a plan to restore the DIF to the 1.35% ratio within eight years but did not change its assessment schedule.

In November 2023, The FDIC finalized a special assessment to recoup losses to the DIF from protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank.

The assessment base is equal to the amount of an insured depository institution’s uninsured deposits, as reported for the quarter ended December 31, 2022, minus up to $5 billion of uninsured deposits at the institution (or, if a banking organization has more than one insured depository

institution, at the banking organization in the aggregate).

Because we have less than $5 billion of uninsured deposits, the special assessment did not have any financial impact on the Bank.

A significant increase in insurance assessments would likely have an adverse effect on our operating expenses and results of operations.

We cannot predict what insurance assessment rates will be in the future.

Furthermore, deposit insurance may be terminated by the FDIC upon a finding that an insured depository institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC.

Regulatory Restrictions on Dividends and Repurchases of Equity Securities

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Should an insured depository institution controlled by a bank holding company be “significantly undercapitalized” under the applicable federal bank capital ratios, or if the bank subsidiary is “undercapitalized” and has failed to submit an acceptable capital restoration plan or has materially failed to implement such a plan, federal banking regulators (in the case of the Bank, the FDIC) may choose to require prior Federal Reserve approval for any capital distribution by the bank holding company.

In addition, since we are a legal entity separate and distinct from the Bank and do not conduct stand-alone operations, an ability to pay dividends depends on the ability of the Bank to pay dividends to us and the FDIC and the UDFI may, under certain circumstances, prohibit the payment of dividends to us from the Bank.

Utah corporate law also requires that dividends can only be paid out of funds legally available therefor.

In addition, since we are a legal entity separate and distinct from the Bank and do not conduct stand-alone operations, an ability to pay dividends depends on the ability of the Bank to pay dividends to the holding company and the FDIC and the UDFI may, under certain circumstances, prohibit the payment of dividends to the holding company from the Bank.

Utah corporate law also requires that dividends can only be paid out of funds legally available for such a distribution.

The Federal Reserve policy statement also provides that a bank holding company should inform the Federal Reserve reasonably in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in a material adverse change to the bank holding company’s capital structure.

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It is also the Federal Reserve’s policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source of strength to its banking subsidiaries.

The Federal Reserve Board or the FRB could prohibit or limit the payment of dividends by a bank holding company if it determines that payment of the dividend would constitute an unsafe or unsound practice.

The Federal Reserve Board or the FRB could prohibit or limit the

payment of dividends by a bank holding company if it determines that payment of the dividend would constitute an unsafe or unsound practice.

Unless an exception applies, the Federal Reserve’s Regulation Y requires a bank holding company to give the Federal Reserve prior notice of any redemption or repurchase of its own equity securities, if the consideration to be paid, together with the consideration paid for any repurchases in the preceding year, is equal to 10% or more of the bank holding company’s consolidated net worth.

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The Community Reinvestment Act of 1977 and the regulations issued thereunder are intended to encourage banks to help meet the credit needs of the communities they serve, including their assessment area(s) (as established for these purposes in accordance with current applicable regulations based principally on the location of branch offices).

In addition to substantial penalties and corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance with such laws and CRA into account when regulating and supervising other

Under the CRA, institutions are assigned a rating of “outstanding,” “satisfactory,” “needs to improve,” or “substantial noncompliance.” An institution’s record in meeting the requirements of the CRA is based on a performance-based evaluation system, and is made publicly available and is taken into consideration in evaluating any applications it files with federal regulators to engage in certain activities, including approval of a branch or other deposit facility, mergers and acquisitions, office relocations, or expansions into nonbanking activities.

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The rule materially revises the current CRA framework, including the assessments areas in which a bank is evaluated to include activities associated with online and mobile banking, the tests used to evaluate the bank in its assessment areas, new methods of calculating credit for lending, investment and service activities and additional data collection and reporting requirements.

The rule is expected to result in a significant increase in the thresholds for large banks to receive “satisfactory” or “outstanding” ratings in the future.

The rule maintained the option for a bank to operate under a strategic plan.

The rule is expected to take effect on April 1, 2024, with most of the provisions becoming applicable on January 1, 2026.

Most of the final CRA rule’s requirements will be applicable beginning January 1, 2026, with certain requirements, including the data reporting requirements, applicable as of January 1, 2027 .

However, the implementation of the new CRA regulations is currently paused pending the resolution of legal challenges to the new CRA rule.

Bank Secrecy Act, Anti-Terrorism, Anti-Money Laundering Legislation and OFAC

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Recent cyber-attacks against banks and other financial institutions that resulted in unauthorized access to confidential customer information have prompted the federal banking regulators to issue extensive guidance on cybersecurity.

Among other things, financial institutions are expected to design multiple layers of security controls to establish lines of defense and ensure that their risk management processes address the risks posed by compromised customer credentials, including security measures to authenticate customers accessing internet-based

A financial institution also should have a robust business continuity program to recover from a cyberattack and procedures for monitoring the security of third-party service providers that may have access to nonpublic data at the institution.

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Additionally, if a member financial institution fails, the right of the FHLB to seek repayment of funds loaned to that institution will take priority (a super lien) over the rights of all other creditors.

Other Consumer Laws

State usury laws and federal laws concerning interest rates (including preemption of certain state usury laws) limit the amount of interest and various other charges collected or contracted by a bank.

The Bank’s loans are also subject to Utah law and federal laws applicable to consumer credit transactions, such as the:

• Federal Truth-In-Lending Act governing disclosures of credit terms to consumer borrowers;

• Home Mortgage Disclosure Act requiring financial institutions to provide information to enable public officials to determine whether a financial institution is fulfilling its obligations to meet the housing needs of the community it serves;

• Equal Credit Opportunity Act prohibiting discrimination on the basis of race, creed or other prohibitive factors in extending credit;

• Real Estate Settlement Procedures Act which requires lenders to disclose certain information regarding the nature and cost of real estate settlements, and prohibits certain lending practices, as well as limits escrow account amounts in real estate transactions;

• Fair Debt Collection Act governing the manner in which consumer debts may be collected by collection agencies;

• Fair and Accurate Credit Transactions Act which establishes additional rights for consumers to obtain and correct credit reports, addresses identity theft, and establishes additional requirements for consumer reporting agencies and financial institutions that provide adverse credit information to a consumer reporting agency;

• The rules and regulations of various federal agencies charged with the responsibility of implementing such federal laws.

Such laws and other consumer regulation matters are issued and governed by the CFPB, although they are enforced against the Bank by the FDIC and UDFI.

The CFPB is responsible for establishing and implementing rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services.

The CFPB has rulemaking authority over many of the statutes governing products and services offered to bank customers.

On February 8, 2025, the Acting Director of the CFPB directed CFPB employees to pause all supervision and examination activity.

This directive, along with other actions recently taken by the current U.S.

presidential administration, have created uncertainty about the future of the CFPB, its rulemaking authority and its existing and proposed regulations.

However, the FDIC and UDFI enforce CFPB regulations in respect of the Bank.

The Bank’s deposit and loan operations are also subject to the following:

• Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

• Electronic Funds Transfer Act and Regulation E, which govern automatic deposits to, and withdrawals from, deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.

Available Information

The Company maintains an internet site at www.finwisebancorp.com on which it makes available, free of charge, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to the foregoing as soon as reasonably practicable after these reports are electronically filed with, or furnished to, the SEC.

In addition, stockholders may access these reports and documents on the SEC’s web site at www.sec.gov.

In addition, shareholders may access these reports and documents on the SEC’s web site at www.sec.gov.

The information on, or accessible through, our website or any other website cited in this Report is not part of, or incorporated by reference into, this Report and should not be relied upon in determining whether to make an investment decision.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business