8 unchanged sentences
Our banking business offers a diverse range of commercial and retail banking products and services, and consists primarily of originating loans in a variety of sectors.
−Removed: Attracting nationwide deposits from the general public, businesses and other financial institutions, and investing those deposits, together with borrowings and other sources of funds, is also critical to our banking business.
+Added: Attracting nationwide deposits from the general public, businesses and other financial institutions, and investing those deposits, together with borrowings, capital and other sources of funds, is also critical to our banking business.
While our commercial and residential real estate lending and other products and services offered from our branch continue to be concentrated in and around the Salt Lake City, Utah MSA, our third-party loan origination relationships have allowed us to expand into new markets across the United States.
−Removed: These relationships were developed to support our ability to generate significant loan volume across diverse consumer and commercial markets and have been the primary source of our significant growth and superior profitability.
−Removed: Our track record has demonstrated that these factors help deliver superior growth and profitability and that the flexibility inherent in our model enhances our ability to manage credit risk.
−Removed: We gather deposits in the Salt Lake City, Utah MSA through our one branch and nationwide from our Strategic Program service providers, SBA 7(a) borrowers, demand deposits sourced through Lively, Inc., institutional deposit exchanges, and brokered deposit arrangements.
−Removed: Our financial condition and results of operations depend primarily on our ability to (i) originate loans using our strategic relationships with third-party loan origination platforms to earn interest and noninterest income, (ii) effectively manage credit and other risks throughout the Bank, (iii) attract and retain low cost, stable deposits, and (iv) efficiently operate in compliance with applicable regulations.
+Added: These relationships were developed to support our ability to generate significant loan volume across diverse consumer and commercial markets and have been the primary source of our significant growth and our consistent ability to operate profitability since developing the third-party loan origination business.
+Added: Our track record has demonstrated that these factors help deliver such growth and profitability, and that the flexibility inherent in our model enhances our ability to manage credit risk.
+Added: We gather deposits in the Salt Lake City, Utah MSA through our one branch and nationwide from our Strategic Program service providers, SBA 7(a) borrowers, institutional deposit exchanges, brokered deposit arrangements and other deposit sources.
+Added: Our financial condition and results of operations depend primarily on our ability to (i) originate loans and leases directly or by using our strategic relationships with third-party loan origination platforms to earn interest and non-interest income, (ii) effectively manage credit and other risks throughout the Bank, (iii) attract and retain low cost, stable deposits, and (iv) efficiently operate in compliance with applicable regulations.
Our lending focuses on four main lending areas:
1 unchanged sentence
For a description and analysis of the Company’s loan categories, see “Financial Condition.”
−Removed: Critical Accounting Policies and Estimates
−Removed: The preparation of our consolidated financial statements in accordance with GAAP requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities.
+Added: Critical Accounting Estimates
+Added: The preparation of our consolidated financial statements in accordance with U.S.
+Added: GAAP requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent assets and liabilities.
We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under current circumstances, results of which form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily available from other sources.
1 unchanged sentence
Actual results may differ from these estimates under different assumptions or conditions.
−Removed: Accounting policies, as described in detail in the notes to our consolidated financial statements, included elsewhere in this Report, are an integral part of our financial statements.
+Added: Accounting policies, as described in detail in the notes to our consolidated financial statements included in Part II, Item 8, are an integral part of our financial statements.
A thorough understanding of these accounting policies is essential when reviewing our reported results of operations and our financial position.
2 unchanged sentences
The JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies.
−Removed: We have elected to take advantage of this extended transition period, which means that the financial statements included in this Report, as well as any financial statements that we file in the future, will not be subject to all
−Removed: new or revised accounting standards generally applicable to public companies for the transition period for so long as we remain an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period under the JOBS Act.
−Removed: The following is a discussion of the critical accounting policies and significant estimates that we believe require us to make the most complex or subjective decisions or assessments.
+Added: We have elected to take advantage of this extended transition period, which means that the financial statements included in this Report, as well as any financial statements that we file in the future, will not be subject to all new or revised accounting standards generally applicable to public companies for the transition period for so long as we
+Added: remain an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period under the JOBS Act.
+Added: Our critical accounting estimates primarily relate to the allowance for credit losses.
+Added: We previously disclosed our stock-based compensation and income taxes as critical accounting estimates.
+Added: We have determined our stock-based compensation and income taxes are no longer critical accounting estimates as they do not involve a significant level of estimate uncertainty that would likely have a material effect on our financial condition or results of operations.
+Added: See Note 1 - Summary of Significant Accounting Policies to the consolidated financial statements included in Part II, Item 8 for information on our accounting policy related to this cri tical accounting estimate.
Allowance for Credit Losses.
2 unchanged sentences
The forward-looking concept of CECL requires loss estimates to consider historical experience, current conditions and reasonable and supportable economic forecasts of future events and circumstances.
−Removed: The ACL on loans held for investment is the combination of the allowance for credit losses and the reserve for unfunded loan commitments.
−Removed: The allowance for credit losses is reported as a reduction of the amortized cost basis of loans, while the reserve for unfunded loan commitments is included within "other liabilities" on the Consolidated Balance Sheets.
+Added: The allowance for credit losses is reported as a reduction of the amortized cost basis of loans held-for-investment, while the reserve for unfunded loan commitments is included within other liabilities on the Consolidated Balance Sheets.
The estimate of credit loss incorporates assumptions for both the likelihood and amount of funding over the estimated life of the commitments, including adjustments for current conditions and reasonable and supportable forecasts.
Management periodically reviews and updates its assumptions for estimated funding rates.
+Added: Accrued interest receivable is excluded from the ACL calculation.
The amortized cost basis of loans does not include accrued interest receivable, which is included in accrued interest receivable on the Consolidated Balance Sheets.
The provision for credit losses on the Consolidated Statements of Income is a combination of the provision for credit losses and the provision for unfunded loan commitments.
−Removed: With respect to the Bank's core portfolio which consists of commercial real estate, residential real estate, commercial and industrial, commercial leases and consumer loans, the Bank pools similar loans that are collectively evaluated and determines an appropriate level of general allowance by portfolio segment using a non-discounted cash flow model taking into account probability of default, loss in the event of default, and prepayment speed estimates based on industry specific collected data.
−Removed: The model captures losses over the historical charge-off and prepayment cycle and applies those losses at a loan level over the remaining maturity of the loan.
+Added: With respect to the Bank's core portfolio which consists of SBA 7(a), local lending, retail point of sale, and equipment finance and leasing , the Bank pools similar loans that are collectively evaluated and determines an appropriate level of general allowance by portfolio segment using a non-discounted cash flow model taking into account probability of default, loss in the event of default, and prepayment speed estimates based on industry specific collected data.
+Added: The model captures credit and fraud losses assumed to be credit related losses over the historical charge-off and prepayment cycle and applies those losses at a loan level over the remaining maturity of the loan.
The model then calculates a historical loss rate using the average losses over the reporting period, which is then applied to each segment utilizing a standard reversion rate.
16 unchanged sentences
and, if applicable, changes in the composition and volume of the loan portfolio due to mergers, acquisitions, and other significant transactions not considered elsewhere.
−Removed: The Bank also considers as an additional qualitative factor any lingering "ripple" effects of the Covid-19 pandemic, including lasting changes to consumer behavior, lending, and society at large.
It is also possible that these factors could include social, political, economic, and terrorist events or activities.
35 unchanged sentences
If the borrower defaults on the loan, the Bank may need to repossess and sell the equipment to recover the outstanding debt.
−Removed: However, the value of the equipment may depreciate over time, or disappear, making it difficult for the Bank to recover the full amount of the loan.
+Added: However, the value of the equipment may depreciate over time, or disappear, making it difficult for the Bank to recover the full amount of the lease.
In equipment leasing, the residual value of the equipment is an important consideration.
16 unchanged sentences
In addition, residential mortgage loans that have adjustable rates could expose the borrower to higher debt service requirements in a rising interest rate environment.
−Removed: Further, real estate values
−Removed: could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.
+Added: Further, real estate values could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.
Residential Real Estate Multifamily.
2 unchanged sentences
If property values decline, the Bank may not be able to recover the full amount of the loan if the property needs to be foreclosed.
−Removed: Strategic Program Loans.
+Added: Strategic Program Loans Held-for-Investment.
Unsecured consumer loans and secured or unsecured business loans issued by the Company through these programs generally follow and are limited to specific predetermined underwriting criteria.
5 unchanged sentences
When a loan is placed on nonaccrual status, all accrued and uncollected interest on that loan is reversed.
−Removed: Past-due interest received on nonaccrual loans is not recognized in interest income but is applied as a reduction of the outstanding principal of the loan consistent with the accounting for impaired loans.
+Added: Past-due interest received on nonaccrual loans is not recognized in interest income but is applied as a reduction of the outstanding principal of the loans.
A loan is relieved of its nonaccrual status when all principal and interest payments are brought current, the loan is well secured, and an analysis of the borrower’s financial condition provides reasonable assurance that the borrower can repay the loan as scheduled.
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due in accordance with the contractual terms of the loan agreement, including scheduled interest payments.
−Removed: Impaired loans, identified by classified loan grades (also know as risk rating), are removed from the collectively assessed population and added to the individually assessed population of loans.
+Added: The Company identifies such loans by classified loan grades (also known as risk rating), removes them from the collectively assessed population and adds them to the individually assessed population of loans.
Within the individually assessed population, the Company determines whether loan repayment is expected from cash flow or from the liquidation of collateral.
11 unchanged sentences
For the inactive HFI strategic programs, the Company evaluates impairment collectively by calculating blended loss rates comparing the actual loan tapes against portfolio level data provided by the inactive HFI strategic programs.
−Removed: Stock-based Compensation.
−Removed: Our historical and outstanding stock-ba sed compensation awards are described in Note 10 in our annual consolidated financial statements included elsewhere in this Report.
−Removed: We record stock-based compensation in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”) and recognize stock-based compensation expense in the period in which an employee or non-employee is required to provide service, which is generally over the vesting period of the individual stock-based payment award.
−Removed: Compensation expense for awards is recognized over the requisite service period on a straight-line basis and we account for forfeitures as they occur.
−Removed: We classify our awards as equity awards and these awards are valued as of the grant date based upon the underlying stock price and a number of assumptions, including volatility, performance period, risk-free interest rate and expected dividends.
−Removed: The determination of the grant date fair value using an option pricing model is affected principally by our estimated fair value of our common stock and requires us to make a number of other assumptions, including the expected term of the award, the expected volatility of the underlying shares, the risk-free interest rate and the expected dividend yield.
−Removed: The assumptions used in our Black-Scholes option-pricing model represent management’s best estimates at the time of measurement.
−Removed: These estimates are complex, involve a number of variables, uncertainties and assumptions and the application of management’s judgment, as they are inherently subjective.
−Removed: We will continue to use judgment in evaluating the expected volatility, expected terms and interest rates utilized for our stock-based compensation expense calculations on a prospective basis.
−Removed: If any assumptions change, our stock-based compensation expense could be materially different in the future.
−Removed: These assumptions are estimated as follows:
−Removed: • Expected Term.
−Removed: The expected term represents the period that our awards are expected to be outstanding.
−Removed: We calculated the expected term using a permitted simplified method, which is based on the vesting period and contractual term for each tranche of awards.
−Removed: • Expected Volatility.
−Removed: Prior to our initial public offering, the expected volatility was based on the historical share volatility of several comparable publicly traded companies over a period of time equal to the expected term of the awards, as we did not have any trading history to use the volatility of our own common shares.
−Removed: After the completion of our initial public offering, it is no longer necessary to utilize the volatility of comparable publicly traded companies as we now have historical trading volatility data on our own common shares.
−Removed: • Risk-Free Interest Rate.
−Removed: The risk-free rate is based on the U.S.
−Removed: Treasury yield curve in effect at the time of grant for periods corresponding with the expected life.
−Removed: • Expected Dividend Yield.
−Removed: We have not paid dividends on our common shares nor do we expect to pay dividends in the foreseeable future.
−Removed: Therefore, we used an expected dividend yield of zero.
−Removed: For the years ended December 31, 2023 and 2022, stock-based compensation expense was $2.0 million and $0.8 million, respectively.
−Removed: As of December 31, 2023, we had $1.4 million of total unrecognized stock-based compensation costs, which we expect to recognize over an estimated weighted-average period of 1.5 years.
−Removed: We expect to continue to grant options and other stock-based awards in the future, and to the extent that we do, our stock-based compensation expense recognized in future periods will likely increase.
−Removed: Income Taxes.
−Removed: We account for income taxes under the asset and liability method.
−Removed: Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates expected to be in effect for the year in which the differences are expected to reverse.
−Removed: Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized.
−Removed: Realization of the future tax benefits is dependent on our ability to generate sufficient taxable income within the carryforward period.
−Removed: We assess all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities.
−Removed: Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is more likely than not of being realized upon ultimate settlement.
−Removed: As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate.
−Removed: The recognition and measurement of tax benefits requires significant judgment.
−Removed: Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.
−Removed: Our unrecognized tax benefits, if recognized, would not have an impact on our effective tax rate assuming we continue to maintain a full valuation allowance position.
−Removed: We do not expect our unrecognized tax benefits to change significantly over the next 12 months.
−Removed: Our policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit.
−Removed: During the years ended December 31, 2023 and 2022, the Company recognized $0.3 million and de minimis interest and penalties, respectively.
Executive Summary
−Removed: Net income for the year ended December 31, 2023 decreased $7.7 million to $17.5 million when compared to the year ended December 31, 2022 due primarily to a $11.9 million reduction in gain on sale of loans primarily attributable to the Company's increased retention of the guaranteed portion of SBA loans the Company originates to increase the interest income the Company receives from such loans, a $6.6 million reduction in strategic program fees resulting primarily from
−Removed: a decline in loan origination volumes, and an increase in non-interest expense of $1.4 million.
−Removed: Partially offsetting these declines were a $4.6 million reduction in the provision for income taxes, a $3.7 million increase in net interest income, a $1.9 million reduction in the provision for credit losses, and a $2.3 million increase in other miscellaneous income.
−Removed: The net interest margin was 11.65% for the year ended December 31, 2023, compared to 14.04% for the year ended December 31, 2022.
−Removed: The decline in net interest margin was due primarily to a $26.6 million decrease in the average balances of loans held for sale along with a shift in the Company's deposit portfolio mix from lower costing deposits to higher costing deposits, partially offset by an increase in average yield and balances in the Company's interest bearing deposits.
−Removed: Total assets increased by $185.4 million to $586.2 million as of December 31, 2023 compared to December 31, 2022.
−Removed: This increase was primarily attributable to increased brokered deposits utilized to fund a $134.3 million increase in net loans receivable, a $23.9 million increase in Strategic Program loans held-for-sale, and a $16.4 million increase in the Company's interest-bearing deposits.
−Removed: Originations decreased by $3.0 billion to $4.3 billion for the year ended December 31, 2023 compared to the year ended December 31, 2022 due mainly to adverse market and economic conditions affecting loan purchasers and borrowers.
−Removed: Results of Operations
+Added: This executive summary provides certain 2024 and 2023 financial highlights from the discussion and analysis that follows:
+Added: • Originations of total loans increased by $0.7 billion to $5.0 billion for the year ended December 31, 2024 compared to the year ended December 31, 2023.
+Added: New Strategic Programs and organic growth through existing programs contributed to the increase in loan originations.
+Added: • Net interest margin (“NIM”) was 9.99% for the year ended December 31, 2024, compared to 11.65% for the year ended December 31, 2023.
+Added: NIM is impacted by income earned from interest-earning assets and interest costs incurred on interest-bearing liabilities.
+Added: NIM decreased principally as a result of FinWise having diversified its revenue sources by lending to lower risk borrowers with lower yields on loans.
+Added: • FinWise generated net income of $12.7 million and $17.5 million for the year ended December 31, 2024 and 2023, respectively.
+Added: Net income declined as FinWise invested in expansion of its product offerings and supporting business infrastructure.
+Added: • Total assets increased by $159.8 million to $746.0 million as of December 31, 2024 compared to December 31, 2023, principally in loans and investment securities.
+Added: We believe our strong capital levels support our current and planned growth strategy.
+Added: Strategic Program Service Providers
+Added: During the year ended December 31, 2024, we entered into the following new strategic program relationships:
+Added: • We enhanced our portfolio of private student loan products through our new strategic lending program with Earnest, to help students and their families with education financing.
+Added: • We announced our first strategic payments program with Hank Payments Corp.
+Added: to offer modernized payments and cash management solutions to our customers.
+Added: • We announced our new strategic lending program with Plannery to offer a debt consolidation platform exclusively for healthcare professionals.
+Added: Additionally, we are providing Plannery with access to our Credit Enhancement Program.
+Added: • We announced the launch of a new strategic lending program with PowerPay to offer consumers a simple and affordable lending solution for home improvement and elective health care purchases.
+Added: We have introduced our Payments (MoneyRails™) and Bank Identification Number (“BIN”) Sponsorship products which, together with our Strategic Programs, comprise the Bank’s Fintech Banking and Payment Solutions offerings.
+Added: Payments (MoneyRails™) and BIN Sponsorship connect our customers to the Bank’s API-driven banking services ledger.
+Added: Results of Operations for the Years Ended December 31, 2024 and 2023
The following table sets forth the principal components of net income for the periods indicated:
−Removed: For the Years Ended
($ in thousands) 2024 2023
1 unchanged sentence
Interest expense (15,440) (9,975)
−Removed: Provision for loan losses (11,638) (13,519)
+Added: Net interest income 58,912 54,559
+Added: Provision for credit losses (11,573) (11,638)
Non-interest income 22,485 21,456
2 unchanged sentences
Net income $ 12,742 $ 17,460
−Removed: Net income for the year ended December 31, 2023 was $17.5 million, a decrease of $7.7 million, or 30.5%, from net income of $25.1 million for the year ended December 31, 2022.
−Removed: The decrease was primarily attributable to an $11.9 million, or 87.6%, reduction in the gain on sale of loans primarily attributable to the Company's increased retention of the guaranteed portion of SBA loans the Company originates to increase the interest income the Company receives from such loans, lower strategic program fees of $6.6 million, or 29.2%, resulting primarily from a decline in loan origination volume, and an increase of $8.5 million, or 595.5%, in interest expense primarily associated with a shift in our deposit portfolio mix from lower costing deposits to higher costing deposits.
−Removed: Partially offsetting the decrease in net income were an increase in total interest income of $12.2 million, or 23.3%, a reduction in provision for income taxes of $4.6 million, or 41.8%, a decrease of $1.9 million, or 13.9%, in provision for credit losses, and an increase of $2.3 million, or 871.3%, in other miscellaneous income due primarily to an increase of $1.1 million in rental income earned on the Company's operating lease portfolio and a $0.6 million gain on the resolution of a forbearance agreement in the Company's SBA lending program.
−Removed: Net Interest Income and Net Interest Margin Analysis
+Added: Net Interest Income and NIM
Net interest income was the primary contributor to our earnings in 2024 and 2023.
Net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as “volume changes.” It is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing deposits and other borrowed funds, referred to as “rate changes.”
−Removed: For the year ended December 31, 2023, our net interest income increased $3.7 million, or 7.2%, to $54.6 million compared to the year ended December 31, 2022.
−Removed: This increase was primarily due to increases in the yields on all interest earning asset categories and was partially offset by decreases in the loans held-for-sale volume as well as increased rates on our certificate of deposit portfolio.
−Removed: Average interest earning assets increased by $106.0 million, or 29.2%, to $468.5 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, while the related yield on average interest earning assets decreased by 66 basis points to 13.78%.
−Removed: The cost of funds on interest bearing liabilities for the year ended December 31, 2023 increased by 306 basis points to 4.22%, and the average balance in interest bearing liabilities increased by $113.3 million, or 92.0%, to $236.5 million compared to the prior year period.
−Removed: The increase in cost of funds was primarily due to rate increases in time deposits as well as volume growth in our interest bearing demand accounts.
−Removed: Our net interest margin decreased to 11.65% for the year ended December 31, 2023 from 14.04% for the year ended December 31, 2022.
+Added: Net interest income increased $4.4 million for the year ended December 31, 2024, compared to the year ended December 31, 2023 primarily due to volume increases in the loans held for investment and loans held-for-sale portfolios and was partially offset by increased volume and rate in the certificates of deposit portfolio which also contributed to the increase in our cost of funds.
+Added: Average interest-earning assets increased by $121.4 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, while the related yield on average interest earning assets decreased by 118 basis points to 12.60%.
+Added: Average interest-bearing liabilities increased by $101.4 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, while the related cost of funds increased 35 basis points to 4.57%.
+Added: NIM decreased to 9.99% for the year ended December 31, 2024 from 11.65% for the year ended December 31, 2023 primarily as a result of our increased lending to lower risk borrowers with lower yields on loans as part
+Added: of our strategy to reduce average credit risk in the loan portfolio combined with the increased cost of funds as the Bank competed in the national deposit market for funds to support our asset growth.
Average Balances and Yields .
−Removed: The following table presents average balances for assets and liabilities, the total dollar amounts of interest income from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs.
−Removed: The yields and costs for the periods indicated are derived by dividing the income or expense by the average balances for assets or liabilities, respectively, for the periods presented.
−Removed: Loan fees are included in interest income on loans and represent net fees of approximately $1.0 million and
−Removed: $0.1 million for the year ended December 31, 2023 and 2022, respectively.
+Added: The following table presents average balances for assets and liabilities, the total dollar amounts of interest income from interest-earning assets, the total dollar amounts of interest expense on interest-bearing liabilities, the resulting average yields and costs, and NIM.
+Added: The yields and costs for the periods indicated are derived by dividing the annualized income or expense by the average balances for assets or liabilities, respectively, for the periods presented.
+Added: The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yield/rates.
Average balances have been calculated using daily averages.
+Added: Loan fees are included in interest income on loans and represent net fees of approximately $2.8 million and $1.0 million for the years ended December 31, 2024 and 2023, respectively.
Years Ended December 31,
4 unchanged sentences
Interest-earning assets:
−Removed: Interest-bearing deposits with the Federal Reserve, non
−Removed: central banks and other banks $ 110,866 $ 5,751 5.19 % $ 74,920 $ 1,180 1.58 %
+Added: Interest-bearing deposits $ 87,086 $ 4,563 5.24 % $ 110,866 $ 5,751 5.19 %
Investment securities 26,691 897 3.36 % 14,731 338 2.30 %
1 unchanged sentence
Loans held-for-investment (1)
+Added: 417,207 51,194 12.27 % 303,784 43,394 14.28 %
Total interest-earning assets 589,880 74,352 12.60 % 468,472 64,534 13.78 %
−Removed: Non-interest earning assets 25,269 19,325
+Added: Noninterest-earning assets 47,598 25,269
Total assets $ 637,478 $ 493,740
7 unchanged sentences
Total interest-bearing liabilities 337,876 15,440 4.57 % 236,464 9,975 4.22 %
−Removed: Non-interest bearing deposits 93,126 114,174
−Removed: Non-interest bearing liabilities 17,250 15,781
+Added: Noninterest-bearing deposits 107,760 93,126
+Added: Noninterest-bearing liabilities 26,634 17,250
Shareholders’ equity 165,208 146,901
1 unchanged sentence
Net interest income and interest rate spread (2)
+Added: $ 58,912 8.03 % $ 54,559 9.56 %
Net interest margin (3)
+Added: 9.99 % 11.65 %
Ratio of average interest-earning assets to average interest-bearing liabilities 174.58 % 198.12 %
+Added: (1) Loans placed on nonaccrual status are included in loan balances.
+Added: (2) Interest spread is the weighted average yield on interest-earning assets, less the weighted average rate incurred on interest-bearing liabilities.
+Added: (3) Net interest margin is net interest income, expressed as a percentage of average earning assets.
Rate/Volume Analysis.
−Removed: The following table sets forth the effects of changing rates and volumes on our net interest income.
−Removed: The rate column shows the effects attributable to changes in rate.
−Removed: The volume column shows the effects attributable to
−Removed: changes in volume.
−Removed: For purposes of this table, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.
+Added: The following table sets forth the effects of changing rates and volumes on our net interest income based on average balances.
+Added: The rate column shows the effects attributable to changes in average rate.
+Added: The volume column
+Added: shows the effects attributable to changes in average volume.
+Added: For purposes of this table, changes attributable to changes in both average rate and average volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.
Years Ended December 31,
−Removed: Increase (Decrease) Due to Increase (Decrease) Due to
+Added: Increase (Decrease) Due to Change in Increase (Decrease) Due to Change in
($ in thousands) Rate Volume Total Rate Volume Total
15 unchanged sentences
Provision for Credit Losses
−Removed: On January 1, 2023, the Company adopted ASU 2016-13, Topic 326 which replaced the incurred loss methodology, allowance for loan losses ("ALL"), with CECL for financial instruments measured at amortized cost and other commitments to extend credit.
−Removed: The provision for credit losses is a charge to income to bring our allowance for credit losses ("ACL") to a level deemed appropriate by management and approved by our board of directors.
+Added: On January 1, 2023, the Company adopted ASU 2016-13, Topic 326 which replaced the incurred loss methodology, allowance for loan losses, with CECL for financial instruments measured at amortized cost and other commitments to extend credit.
+Added: The provision for credit losses is a charge to income to bring our ACL to a level deemed appropriate by management and approved by our board of directors.
We determine the provision for credit losses monthly in connection with our evaluation of the adequacy of our ACL.
−Removed: For a description of the factors we considered in determining the ACL see Recently adopted accounting pronouncements - Allowance for Credit Losses presented in Note 1 - "Summary of Significant Accounting Policies" in Part I, Item 1 of this Report.
−Removed: Our provision for credit losses was $11.6 million and $13.5 million for the years ended December 31, 2023 and 2022, respectively.
−Removed: The decrease of $1.9 million for the year ended December 31, 2023 compared to the prior year was primarily due to an increase in the proportion of loan balances that are guaranteed by the SBA in our loans held for investment portfolio.
−Removed: Although the held for investment loan portfolio balances grew by $135.6 million, the majority of that growth was in loan balances that are guaranteed by the SBA.
+Added: For a description of the factors we considered in determining the ACL see Allowance for credit losses presented in Note 1 - Summary of Significant Accounting Policies included in Part II, Item 8.
+Added: Our provision for credit losses was substantially flat at $11.6 million for the years ended December 31, 2024 and 2023.
+Added: Although the held-for-investment loan portfolio balances grew by $93.0 million, the growth occurred in lower risk categories, such as lease financing, residential real estate and the secured balance of SBA loans, all of which have lower expected loss factors contributing to the lower provision.
+Added: In connection with our review of individual loans migrating to non-performing status for impairment, we released all or a portion of the allowance for credit losses for certain loans, which had the effect of reducing the provision for loan losses, based on strong collateral positions associated with such loans.
+Added: These factors contributed to in the minimal increase in the provision for credit losses.
At December 31, 2024, the Company maintained $158.7 million in loan balances that are guaranteed by the SBA compared to $131.7 million in loan balances that are guaranteed by the SBA balances as of December 31, 2023.
−Removed: Also contributing to the decrease from the prior year was a reduction in strategic program loans held for investment to which higher risk is attributable.
−Removed: In addition, the provision for the prior year period was calculated under the incurred loss model rather than the current expected credit loss methodology as required under ASU 2016-13 and is not necessarily comparable to the provisions charged in 2023.
−Removed: Noninterest Income
−Removed: The largest portion of our noninterest income is associated with our Strategic Program fees.
−Removed: Other sources of noninterest income include gain on sale of loans, SBA loan servicing fees, change in fair value on investment in BFG and other miscellaneous income.
−Removed: The following table presents, for the periods indicated, the major categories of noninterest income:
−Removed: For the Years Ended
+Added: Non-interest Income
+Added: The following table presents, for the periods indicated, the major categories of non-interest income:
December 31, Change
($ in thousands) 2024 2023 $ %
−Removed: Noninterest income:
+Added: Non-interest income:
Strategic Program fees $ 17,762 $ 15,914 $ 1,848 11.6 %
Gain on sale of loans, net 2,036 1,684 352 20.9 %
−Removed: SBA loan servicing fees 1,466 1,603 (137) (8.5) %
+Added: SBA loan servicing fees, net 1,137 1,842 (705) (38.3) %
Change in fair value on investment in BFG (625) (600) (25) 4.2 %
+Added: Credit enhancement income 111 — 111 100.0 %
Other miscellaneous income 2,064 2,616 (552) (21.1) %
−Removed: Total noninterest income $ 21,080 $ 37,411 $ (16,331) (43.7) %
−Removed: For the year ended December 31, 2023, total noninterest income decreased $16.3 million, or 43.7%, to $21.1 million compared to the year ended December 31, 2022.
−Removed: This decrease was primarily due to an $11.9 million, or 87.6%, reduction in the gain on sale of loans primarily attributable to the Company's increased retention of the guaranteed portion of SBA loans the Company originates to increase the interest income the Company receives from such loans and lower strategic program fees of $6.6 million, or 29.2%, primarily resulting from a decline in loan origination volume.
−Removed: Noninterest Expense
−Removed: Noninterest expense has increased as we have grown and as we have expanded and modernized our operational infrastructure and continued to implement our plan to build an efficient, integrated fintech banking operation with significant capacity for growth.
−Removed: The following table presents, for the periods indicated, the major categories of noninterest expense:
−Removed: For the Years Ended
+Added: Total non-interest income $ 22,485 $ 21,456 $ 1,029 4.8 %
+Added: The increase in total non-interest income for the year ended December 31, 2024 , compared to the same period in 2023 , was primarily due to increased fees associated with the higher origination volume of Strategic Program loans, partially offset by a decrease in other miscellaneous income due to a $0.9 million charge-off of unamortized premium on approximately $160.0 million of callable CDs which were called during the fourth quarter of 2024 and replaced with lower cost CDs.
+Added: This decrease was partially offset by a $0.5 million gain on sale of the guaranteed portion of SBA loans that occurred during the fourth quarter of 2024.
+Added: Non-interest Expense
+Added: Non-interest expense has increased as we have grown and as we have expanded and modernized our operational infrastructure and continued to implement our plan to build an efficient, integrated fintech banking operation with significant capacity for growth.
+Added: The following table presents, for the periods indicated, the major categories of non-interest expense:
December 31, Change
($ in thousands) 2024 2023 $ %
−Removed: Noninterest expense:
+Added: Non-interest expense:
Salaries and employee benefits $ 35,205 $ 25,751 $ 9,454 36.7 %
1 unchanged sentence
Occupancy and equipment expenses 4,240 3,312 928 28.0 %
−Removed: Impairment of SBA servicing asset (376) 1,728 (2,104) (121.8) %
+Added: Credit enhancement expense 8 — 8 100.0 %
Other operating expenses 8,646 6,540 2,106 32.2 %
−Removed: Total noninterest expense $ 40,188 $ 38,756 $ 1,432 3.7 %
−Removed: For the year ended December 31, 2023, total noninterest expense increased $1.4 million, or 3.7%, to $40.2 million compared to the year ended December 31, 2022.
−Removed: This increase was primarily due to an increase in other operating expenses primarily related to data processing costs, an increase in salaries and employee benefits related to a higher number of employees, and increased occupancy and equipment expenses related to our increase in commercial operating lease activity, and was partially offset by a recovery on the SBA servicing asset during 2023 that did not occur in the prior year.
+Added: Total non-interest expense $ 52,835 $ 40,564 $ 12,271 30.3 %
+Added: The increase in total non-interest expense for the year ended December 31, 2024, compared to the same period in 2023, was primarily due to an increase in salaries and employee benefits due mainly to an increase in the number of employees, expenses related to our increase in commercial operating lease activity as well as software amortization, and other operating expenses primarily driven by increases in data processing costs of $0.8 million, SBA program fees and underwriting related to SBA loans of $0.4 million, and a charge related to potential bad debt expense on our program receivables of $0.3 million.
+Added: Provision for Income Taxes
+Added: The provision for income taxes totaled $4.2 million at an effective tax rate of 25.0% for the year ended December 31, 2024, compared to $6.4 million at an effective tax rate of 26.7% for the year ended December 31, 2023.
+Added: The decrease in
+Added: provision for income taxes from the prior year period was primarily due to a reduction in permanent differences impacting income tax expense.
+Added: The decrease in net income for the year ended December 31, 2024, compared to the same period in 2023, was primarily the result of the factors discussed above.
Financial Condition
−Removed: The following table summarizes selected components of the Company’s consolidated balance sheets as of December 31, 2023 and 2022 .
+Added: The following table summarizes selected components of our consolidated balance sheets as of December 31, 2024 and 2023 .
December 31, Change
($ in thousands) 2024 2023 $ %
+Added: Interest-bearing deposits in other banks $ 99,562 $ 116,564 $ (17,002) (14.6) %
+Added: Investment securities available-for-sale, at fair value 29,930 — 29,930 100.0 %
+Added: Investment securities held-to-maturity, net 12,565 15,388 (2,823) (18.3) %
+Added: Strategic Program loans held-for-sale, at lower of cost or fair value 91,588 47,514 44,074 92.8 %
+Added: Loans held-for-investment, net 447,812 358,560 89,252 24.9 %
Total assets 745,976 586,221 159,755 27.3 %
−Removed: Investment securities held to maturity, at cost 15,388 14,292 1,096 7.7 %
−Removed: Loans receivable, net 358,560 224,217 134,343 59.9 %
Deposits 544,952 404,833 140,119 34.6 %
+Added: Total liabilities 572,256 431,165 141,091 32.7 %
Total shareholders' equity 173,720 155,056 18,664 12.0 %
Total equity to total assets 23.3 % 26.5 % (3.2) %
−Removed: Weighted average shares outstanding, basic (1)
+Added: Interest-Bearing Deposits in Other Banks
+Added: The decrease in interest-bearing deposits in other banks from December 31, 2024 to December 31, 2023, was primarily due to the purchase of the investment securities available-for-sale.
+Added: Aside from minimal balances held with our correspondent banks, the majority of our interest-bearing deposits are at the Federal Reserve.
+Added: We use our securities portfolio to provide a source of liquidity, provide an appropriate return on funds invested, manage interest rate risk, meet collateral requirements and meet regulatory capital requirements.
+Added: We classify investment securities as either HTM or AFS based on our intentions and our ability to hold such securities until maturity.
+Added: In determining such classifications, securities that we have the positive intent and the ability to hold until maturity are classified as HTM and carried at amortized cost.
+Added: All other securities are designated as AFS and carried at estimated fair value with unrealized gains and losses included in shareholders’ equity on an after-tax basis.
+Added: The following table summarizes the weighted-average yields of our investment securities at December 31, 2024 .
+Added: The weighted average yield of investment securities was calculated using the sum of all interest that the investments generate, divided by the average book value.
+Added: There are no tax-exempt securities.
+Added: 1 Year or Less 1 - 5 Years 5 - 10 Years Over 10 Years Total
+Added: Securities available-for-sale:
+Added: Treasuries 4.68 % 4.19 % — % — % 4.23 %
+Added: Securities held-to-maturity:
+Added: Mortgage-backed securities — % 3.29 % 1.32 % 1.73 % 1.85 %
+Added: Collateralized mortgage obligations — % 3.18 % — % 3.08 % 3.09 %
+Added: Total 4.68 % 4.14 % 1.32 % 2.50 % 3.72 %
+Added: There were no calls, sales or maturities of securities during the years ended December 31, 2024 and December 31, 2023.
+Added: At December 31, 2024, there were 22 securities, consisting of eight collateralized mortgage obligations, four U.S.
+Added: Treasuries and ten mortgage-backed securities, in an unrealized loss position as of December 31, 2024 and 19 securities, consisting of nine collateralized mortgage obligations and ten mortgage-backed securities, in an unrealized loss position as of December 31, 2023.
+Added: Strategic Program Loans Held-for-Sale
+Added: We, through our Strategic Program service providers, issue, on a nationwide basis, unsecured and secured consumer and business loans to borrowers within certain approved credit profiles.
+Added: Loans originated through these programs are limited to predetermined Bank underwriting criteria, which has been approved by our board of directors.
+Added: The Company generally retains the loans and/or receivables for a number of business days after origination before selling the loans and/or receivables to the Strategic Program provider or another investor.
+Added: Interest income is earned by the Company while holding the loans.
+Added: These loans are classified as held-for-sale on the balance sheet and measured at the lower of cost or market.
+Added: Our Strategic Program loans held-for-sale increased $44.1 million as of December 31, 2024 compared to December 31, 2023, primarily as a result of greater hold periods for new originations for certain programs and a higher level of originations in the fourth quarter of 2024 compared to the same period in 2023.
+Added: Loans Held-for-Investment Portfolio
+Added: Through our diversification efforts we have built a portfolio that we believe positions us to withstand economic shifts.
+Added: For example, we focus on industries and loan types that have historically lower loss rates such as professional, scientific and technical services (including law firms), non-store retailers (e-commerce), and ambulatory healthcare services.
+Added: The following table summarizes our gross loan portfolio held-for-investment by loan program as of the periods indicated:
+Added: As of December 31,
+Added: ($ in thousands) Amount % of
+Added: loans Amount % of
$ 255,056 54.8 % $ 239,922 64.5 %
−Removed: Weighted average shares outstanding, diluted (1)
+Added: Commercial leases
70,153 15.1 % 38,110 10.2 %
−Removed: (1) Average shares presented for December 31, 2023 and December 31, 2022 are for the respective years ended on those dates.
−Removed: Total assets at December 31, 2023 were $586.2 million, an increase of $185.4 million from December 31, 2022.
−Removed: The increase in total assets was due primarily to increases in loans receivable, net, of $134.3 million, Strategic Program loans held-for-sale of $23.9 million, and cash and cash equivalents of $16.4 million.
−Removed: The decline in the total equity to total assets ratio was primarily due to the asset growth achieved during 2023.
−Removed: The reduction in weighted average basic and diluted shares outstanding was primarily the result of the Company's share repurchase program that was completed during the third quarter of 2023.
−Removed: Loan Portfolio
−Removed: We manage our loan portfolio based on factors that include concentrations per loan program and aggregated portfolio, industry selection and geographies.
+Added: Commercial, non real estate 3,691 0.8 % 2,457 0.7 %
+Added: Residential real estate 51,574 11.1 % 38,123 10.2 %
+Added: Strategic Program loans 20,122 4.3 % 19,408 5.2 %
+Added: Commercial real estate:
+Added: Owner occupied 41,046 8.8 % 20,798 5.6 %
+Added: Non-owner occupied 1,379 0.3 % 2,025 0.5 %
+Added: Consumer 22,212 4.8 % 11,372 3.1 %
+Added: Total loans held-for-investment, gross $ 465,233 100.0 % $ 372,215 100.0 %
+Added: (1) SBA loans as of December 31, 2024 and December 31, 2023 include $158.7 million and $131.7 million, respectively, of SBA 7(a) loan balances that are guaranteed by the SBA.
+Added: We manage our loan portfolio based on factors that include concentrations per loan program and aggregated portfolio, industry of operation and geographies.
We also monitor the impact of identified and estimated losses on capital as well as the pricing characteristics of each product.
−Removed: The following provides a general description and the risk characteristics relevant to each of the business lines.
+Added: The following provides a general description and the risk characteristics relevant to each of the products.
Each loan is assigned a risk grade during the origination and closing process by credit administration personnel based on criteria described later in this section.
1 unchanged sentence
This ratings analysis is performed at least quarterly.
−Removed: SBA 7(a) Loans
−Removed: We originate and service loans partially guaranteed by the SBA under its Section 7(a) loan program.
−Removed: SBA 7(a) loans are made to small businesses and professionals throughout the USA.
+Added: We originate and service loans partially guaranteed by the SBA under its Section 7(a) loan program for small businesses and professionals throughout the USA.
+Added: Through our diversification efforts, we have built an SBA 7(a) portfolio that we believe positions us to better withstand economic shifts.
+Added: For example, we focus on industries such as non-store retailers (e-commerce), ambulatory healthcare services, professional, scientific and technical services (including law firms), and merchant wholesalers.
As of December 31, 2024 and December 31, 2023, we had total SBA 7(a) loans of $255.1 million and $239.9 million, respectively, representing 54.8% and 64.5% of our total loans held-for-investment, respectively.
9 unchanged sentences
Historically, we have generally sold the SBA-guaranteed portion (typically 75% of the principal balance) of a majority of the loans we originate at a premium in the secondary market while retaining all servicing rights and the unguaranteed portion.
−Removed: In light of reduced gain-on-sale premiums and increasing variable loan rates during 2022 and 2023, we retained on our balance sheet a greater
−Removed: percentage of the guaranteed portion of certain SBA loans that we originated than we have historically, which we believe will benefit the Company through stronger government guaranteed held for investment loan growth and an increased recurring stream of interest income and partially offset the related decline in gain-on-sale revenue.
+Added: In light of suppressed gain-on-sale premiums and increasing variable loan rates during 2023, we retained on our balance sheet a greater percentage of the guaranteed portion of certain SBA loans that we originated than we have historically, which we believe will benefit us through stronger government guaranteed held-for-investment loan growth and an increased recurring stream of interest income and partially offset the decline in gain-on-sale revenue.
Commercial leases
As of December 31, 2024 and December 31, 2023, we had total commercial leases of $70.2 million and $38.1 million, respectively, representing 15.1% and 10.2% of our total loans held-for-investment, respectively.
−Removed: Underwriting for smaller ticket credit requests is generally scorecard-based.
−Removed: Underwriting for larger ticket credit requests 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.
−Removed: The nature of the business, use of proceeds, length of time in business, management experience, repayment ability, credit history, ratio calculations and assessment of collateral adequacy are all considerations.
−Removed: These leases are generally secured by liens on business assets leased or purchased with Company funds.
+Added: Underwriting for smaller credit requests is generally scorecard-based.
+Added: Underwriting for smaller credit requests from customers is generally based on an internal credit scorecard, incorporating several customer and structure attributes including:
+Added: severity and aging of delinquency;
+Added: number of credit inquiries;
+Added: loan-to-value ratio;
+Added: and payment-to-income ratio.
+Added: We periodically update our underwriting scorecard, which can have an impact on our credit tier scoring.
+Added: Underwriting for larger credit requests from customers is generally based on commercial credit metrics where the primary repayment source considered is borrower cash flow, secondary is personal guarantor cash flow (when applicable) and tertiary is the sale of collateral pledged.
+Added: The nature of the business, use of proceeds, length of time in business, management experience, repayment ability, credit history, ratio calculations and assessment of collateral adequacy are also considerations.
+Added: These leases are generally secured by liens on business assets leased or purchased with our funds.
Historically, we have retained these leases on our balance sheet for investment;
−Removed: however, the Company may occasionally sell leases to certain purchasers.
+Added: however, we may sell leases to certain purchasers from time to time.
Commercial, non-real estate
−Removed: Commercial non-real estate loans consist of loans made to commercial enterprises that are not secured by real estate.
+Added: Commercial non-real estate loans consist of loans and leases made to commercial enterprises that are not secured by real estate.
As of December 31, 2024 and December 31, 2023, we had total commercial non-real estate loans of $3.7 million and $2.5 million, respectively, representing 0.8% and 0.7% of our total loans held-for-investment, respectively.
−Removed: Any loan, line of credit, or letter of credit (including any unfunded commitments) and any interest obtained in such loans made by another lender to individuals, sole proprietorships, partnerships, corporations, or other business enterprises for commercial, industrial, agricultural, or professional purposes, not secured by real estate, but not for personal expenditure purposes are included in this category.
+Added: Any loan, lease, line of credit, or letter of credit (including any unfunded commitments) and any interest obtained in such loans made by another lender to individuals, sole proprietorships, partnerships, corporations, or other business enterprises for commercial, industrial, agricultural, or professional purposes, not secured by real estate, but not for personal expenditure purposes are included in this category.
For example, commercial vehicle term loans and commercial working capital term loans.
13 unchanged sentences
Strategic Program loans
−Removed: We, through our Strategic Program service providers, issue, on a nationwide basis, unsecured consumer and secured or unsecured business loans to borrowers within certain approved credit profiles.
−Removed: Although we have generally sold most of these loans, we may determine to hold more of the funded loans and/or receivables based on a number of factors including the amount of our available capital and risk management considerations.
+Added: We, through our Strategic Program service providers, issue, on a nationwide basis, unsecured and secured consumer and business loans to borrowers within certain approved credit profiles.
+Added: Although we have generally sold most of these loans, we may choose to hold more of the funded loans and/or receivables based on a number of factors including the amount of our available capital.
As of December 31, 2024 and December 31, 2023, we had total Strategic Program loans held-for-investment of $20.1 million and $19.4 million, respectively, representing 4.3% and 5.2% of our total loans held-for-investment, respectively.
−Removed: Loans originated through these programs are limited to predetermined Bank underwriting criterion, which has been approved by our board of directors.
+Added: Loans originated through these programs are limited to predetermined Bank underwriting criteria, which has been approved by our board of directors.
The primary form of repayment on these loans is from personal or business cash flow.
−Removed: Business loans may be secured by liens on business assets, as applicable.
+Added: Secured loans are secured by liens on consumer or business assets, as applicable.
We reserve the right to sell any portion of funded loans and/or receivables directly to the Strategic Program service providers or other investors.
3 unchanged sentences
As of December 31, 2024 and December 31, 2023, we had total commercial real estate loans of $42.4 million and $22.8 million, respectively, representing 9.1% and 6.1% of our total loans held-for-investment, respectively.
−Removed: The commercial real estate loans that are owner occupied as of December 31, 2023 and December 31, 2022 represent 91.1% and 72.4% of the commercial real estate loans, respectively.
+Added: Of these amounts, $41.0 million and $20.8 million represented owner occupied properties as of December 31, 2024 and December 31, 2023, respectively.
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.
15 unchanged sentences
Historically, we have retained these loans on our balance sheet for investment.
−Removed: Loan Portfolio Program Summary
−Removed: Through our diversification efforts we have built a portfolio that we believe positions us to withstand economic shifts.
−Removed: For example, we focus on industries and loan types that have historically lower loss rates such as professional, scientific and technical services (including law firms), non-store retailers (e-commerce), and ambulatory healthcare services.
−Removed: The following table summarizes our loan portfolio by loan program as of the dates indicated:
−Removed: As of December 31,
−Removed: loans Amount % of
−Removed: $ 239,922 64.5 % $ 145,172 61.4 %
−Removed: Commercial leases
−Removed: 38,110 10.2 % 9,252 3.9 %
−Removed: Commercial, non real estate 2,457 0.7 % 2,232 0.9 %
−Removed: Residential real estate 38,123 10.2 % 37,815 16.0 %
−Removed: Strategic Program loans 19,408 5.2 % 24,259 10.2 %
−Removed: Commercial real estate
−Removed: Owner occupied 20,798 5.6 % 8,733 3.7 %
−Removed: Non-owner occupied 2,025 0.5 % 3,330 1.4 %
−Removed: Consumer 11,372 3.1 % 5,808 2.5 %
−Removed: Total $ 372,215 100.0 % $ 236,601 100.0 %
−Removed: (1) SBA loans as of December 31, 2023 and December 31, 2022 include $131.7 million and $49.5 million, respectively, of SBA 7(a) loan balances that are guaranteed by the SBA.
−Removed: Loan Maturity and Sensitivity to Changes in Interest Rates
+Added: Loan Maturity
As of December 31, 2024, $279.8 million, or 60.1%, of the total held-for-investment loan balance matures in less than five years.
1 unchanged sentence
The variable rate portion of our total held-for-investment loan portfolio at December 31, 2024 was $329.7 million or 70.9%.
−Removed: The variable rate portion of the total held for investment loans reflects our strategy of minimizing interest rate risk through the use of variable rate products.
−Removed: The following tables detail maturities and sensitivity to interest rate changes for our loan portfolio at December 31, 2023:
+Added: The variable rate portion of the total held-for-investment loans reflects our strategy of limiting interest rate risk through the use of variable rate products.
+Added: The following table details the contractual maturity ranges of loans in our loan portfolio and the amount of such loans with fixed and variable rates in each maturity range as of December 31, 2024:
As of December 31, 2024 Remaining Contractual Maturity Held-for-Investment
($ in thousands) One Year
−Removed: or Less Average
−Removed: Yield/Rate After
−Removed: Years Average
−Removed: Yield/Rate After Five
−Removed: Years Average
−Removed: Fixed rate loans:
−Removed: SBA $ 493 4.39 % $ 796 9.23 % $ 1,606 10.45 %
−Removed: Commercial leases
−Removed: 10,073 6.83 % 27,413 7.16 % 624 7.56 %
−Removed: Commercial, non-real estate 703 5.68 % 1,621 5.82 % 123 3.76 %
−Removed: Residential real estate 6,230 7.07 % 4,653 7.65 % 60 4.29 %
−Removed: Strategic Program loans 14,305 125.05 % 5,103 82.20 % — — %
−Removed: Commercial real estate
−Removed: Owner occupied 1,976 7.04 % 1,725 7.85 % — — %
−Removed: Non-owner occupied 101 4.60 % 108 3.51 % 244 3.48 %
−Removed: Consumer 3,051 6.40 % 7,668 5.79 % 653 9.17 %
−Removed: Variable rate loans:
−Removed: SBA 15,720 10.87 % 62,367 10.87 % 100,880 10.70 %
−Removed: Commercial leases
−Removed: — — % — — % — — %
−Removed: Commercial, non-real estate — — % — — % — — %
−Removed: Residential real estate 23,718 9.02 % 1,941 5.85 % 1,521 4.55 %
−Removed: Strategic Program loans — — % — — % — — %
−Removed: Commercial real estate
−Removed: Owner occupied 943 8.91 % 3,766 8.91 % 7,384 9 %
−Removed: Non-owner occupied 1,541 10.50 % — — % — — %
−Removed: Consumer — — % — — % — — %
−Removed: Total $ 78,854 29.82 % $ 117,161 12.37 % $ 113,095 10.48 %
−Removed: As of December 31, 2023 Remaining Contractual Maturity Held for Investment
−Removed: ($ in thousands) After
−Removed: Years Average
−Removed: Yield/Rate Total Average
+Added: or Less After
+Added: Years After Five
Fixed rate loans:
9 unchanged sentences
Consumer 5,925 15,102 1,185 — 22,212
+Added: Subtotal fixed rate loans 50,106 76,210 7,811 1,410 135,537
Variable rate loans:
8 unchanged sentences
Consumer — — — — —
+Added: Subtotal variable rate loans 61,164 92,341 125,673 50,518 329,696
Total $ 111,270 $ 168,551 $ 133,484 $ 51,928 $ 465,233
7 unchanged sentences
Interest income is subsequently recognized only to the extent recoveries received (either from payments received from the customer, derived from the disposition of collateral or from legal action, such as judgment enforcement) exceed liquidation expenses incurred and outstanding principal.
−Removed: A non-accrual asset may be restored to accrual status when (1) none of its principal and interest is due and unpaid, and we expect repayment of the remaining contractual principal and interest, or (2) when asset otherwise becomes well secured and is not in the process of collection.
+Added: A nonaccrual asset may be restored to accrual status when (1) none of its principal and interest is due and unpaid, and we expect repayment of the remaining contractual principal and interest, or (2) when asset otherwise becomes well secured and is not in the process of collection.
Any loan which we deem to be uncollectible, in whole or in part, is charged off to the extent of the anticipated loss.
−Removed: In general, loans that are past due for 90 days or more are charged off unless the loan is both well secured and in the process of collection.
+Added: In general, commercial loans that are past due for 90 days or more are charged off unless the loan is both well secured and in the process of collection.
+Added: Consumer loans and credit card balances are charged off at 120 days and 180 days, respectively.
We believe our disciplined lending approach and focused management of nonperforming assets has resulted in sound asset quality and timely resolution of problem assets.
2 unchanged sentences
There can be no assurance, however, that our loan portfolio will not become subject to increasing pressures from deteriorating borrower credit due to general economic conditions.
−Removed: The Company had a total of $27.1 million in nonperforming assets and $0.5 million in material loan modifications at December 31, 2023.
−Removed: The amount of nonperforming assets and material loan modifications as of December 31, 2023 include $15.0 million and $0.3 million,respectively,of SBA 7(a) loan balances that are guaranteed by the SBA.
−Removed: The Company had no nonperforming assets and $0.4 million in troubled debt restructurings at December 31, 2022.
−Removed: The amount of troubled debt restructurings as of December 31, 2022 include $0.3 million of SBA 7(a) loan balances that are guaranteed by the SBA.
−Removed: The increase in nonperforming assets from the prior period was primarily attributable to several loans in the SBA 7(a) loan portfolio moving to nonperforming status due mainly to the negative impact of elevated interest rates on the Bank's small business borrowers.
−Removed: The following table provides information with respect to our nonperforming assets at the dates indicated:
−Removed: December 31, 2023
−Removed: Loans Past Due and Still Accruing
−Removed: ($ in thousands) 30-89
−Removed: and Greater Total Non-
−Removed: Accrual Loans with no ACL(1) Non-Accrual Loans with ACL Current Loans Total Loans
−Removed: Construction and land development $ 1,648 $ 297 $ 1,945 $ — $ — $ 26,385 $ 28,330
−Removed: Residential real estate 23 — 23 1,585 — 49,820 51,428
−Removed: Residential real estate multifamily — — — — — 647 647
−Removed: Commercial real estate:
−Removed: Owner occupied — — — 21,643 640 164,267 186,550
−Removed: Non-owner occupied — — — 2,362 — 12,992 15,354
−Removed: Commercial and industrial — — — 282 — 21,117 21,399
−Removed: Consumer 81 47 128 — — 10,860 10,989
−Removed: Commercial leases — — — — — 38,110 38,110
−Removed: Retained Strategic Program loans 1,953 96 2,049 — — 17,359 19,408
−Removed: Total $ 3,705 $ 440 $ 4,145 $ 25,872 $ 640 $ 341,558 $ 372,215
−Removed: (1) Included in the nonaccrual loan balances are $15.0 million of SBA 7(a) loan balances guaranteed by the SBA.
+Added: We had a total of $36.5 million in nonperforming assets, which included $0.8 million in material loan modifications at December 31, 2024.
+Added: The amount of nonperforming assets as of December 31, 2024 includes $19.2 million of SBA 7(a) loan balances that are guaranteed by the SBA.
+Added: We had $27.1 million in nonperforming assets, which included $0.5 million in material loan modifications at December 31, 2023.
+Added: The amount of nonperforming assets as of December 31, 2023 includes $15.0 million of SBA 7(a) loan balances that are guaranteed by the SBA.
+Added: The increase in nonperforming assets and material loan modifications from the prior period was primarily attributable to multiple loans in the SBA 7(a) loan portfolio moving to nonperforming status.
+Added: Due to elevated interest rates, the slowdown of consumer spending and the variable rate nature of our SBA portfolio, the risk of default is elevated and may result in additional delinquencies in future periods.
+Added: Our Strategic Program service providers also provide for loan modifications to borrowers.
+Added: As of December 31, 2024 and 2023, the balance of outstanding modified loans to individuals in the Strategic Program retained portfolio was approximately $4.4 million and $4.5 million, respectively.
Credit Risk Profile
We believe that we underwrite loans carefully and thoroughly, limiting our lending activities to those products and services where we have the resources and expertise to lend profitably without undue credit risk.
−Removed: We require all loans to conform to policy (or otherwise be identified as exceptions to policy and monitored and reported on, at minimum, quarterly) and be granted on a sound and collectable basis.
+Added: We require all loans to conform to policy (or otherwise be identified as exceptions to policy and monitored and reported on, at minimum, quarterly) and be granted on a sound basis.
Loans are made with a primary emphasis on loan profitability, credit risk and concentration exposures.
4 unchanged sentences
In addition to our oversight of the credit policies and processes associated with these programs, we limit within our concentration policies the aggregate exposure of these loans as a percentage of the total loan portfolio, carefully monitor certain vintage loss-indicative factors such as first payment default and marketing channels, and appropriately provision for these balances so that the cumulative charge-off rates remain consistent with management expectations.
−Removed: While the level of nonperforming assets fluctuates in
−Removed: response to changing economic and market conditions, the relative size and composition of the loan portfolio, and our management’s degree of success in resolving problem assets, we believe our proactive stance to early identification and intervention is the key to successfully managing our loan portfolio.
+Added: While the level of nonperforming assets fluctuates in response to changing economic and market conditions, the relative size and composition of the loan portfolio, and our management’s degree of success in resolving problem assets, we believe our proactive stance to early identification and intervention is the key to successfully managing our loan portfolio.
Accurate and timely loan risk grading is considered a critical component of an effective credit risk management system.
1 unchanged sentence
Loan risk grades are changed as necessary to reflect the risk inherent in the loan.
−Removed: Among other things, we use loan risk grading information for loan pricing, risk and collection management and determining monthly loan loss reserve adequacy.
+Added: Among other things, we use loan risk grading information for loan pricing, risk and collection management and determining credit loss reserve adequacy.
Further, on a quarterly basis, the Loan Committee holds a Loan Risk Grade meeting, wherein all loans in our portfolio are reviewed for accurate risk grading.
4 unchanged sentences
The grade is periodically evaluated and adjusted as performance dictates.
−Removed: Loan grades 1 through 4 are passing grades, grade 5 is special mention.
−Removed: Collectively, grades 6 (substandard), 7 (doubtful) and 8 (loss) represent classified loans within the portfolio.
+Added: Internal loan grades are based on current financial information, historical payment experience, and credit
+Added: documentation, among other factors.
The following guidelines govern the assignment of these risk grades.
1 unchanged sentence
As credit quality for Strategic Program loans have been highly correlated with delinquency levels, the Strategic Program loans are evaluated collectively for impairment.
−Removed: Pass - Loans fully secured by deposit accounts.
−Removed: Loans where the borrower has strong sources of repayment, generally 5 years or more of consistent employment (or related field) and income history.
−Removed: Debt of the borrower is modest relative to the borrower’s financial strength and ability to pay with a DTI ratio of less than 25%.
−Removed: Cash flow is very strong as evidenced by significant discretionary income amounts.
−Removed: Borrower will consistently maintain 30% of the outstanding debts in deposit accounts with us, often with the right of offset, holds, etc.
−Removed: Loan to value ratios (LTV) will be 60% or less.
−Removed: Loans in this category require very minimal monitoring.
−Removed: Pass - The borrower has good sources of repayment, generally 3 years or more of consistent employment (or related field) and income history.
−Removed: The debt of the borrower is reasonable relative to the borrower’s financial strength with a DTI ratio of less than 35%.
−Removed: Cash flow is strong as evidenced by exceptional discretionary income amounts.
−Removed: Borrowers will consistently maintain 20% of the outstanding debts in deposit accounts with us.
−Removed: LTV ratios will be 70% or less.
−Removed: These loans require minimal monitoring.
−Removed: Pass - There is a comfortable primary source of repayment, generally 2 years or more of consistent employment (or related field) and income history.
−Removed: Borrowers may exhibit a mix of strengths and weaknesses.
−Removed: For example, they have either adequate cash flow with higher than desired leverage, or marginal cash flow with strong collateral and liquidity.
−Removed: Borrowers will have DTIs less than 45%.
−Removed: Borrowers will generally maintain deposit accounts with us, but the consistency and amount of the deposits are not as strong as Grades 1 and 2.
−Removed: LTV ratios will be within our guidelines.
−Removed: These loans will be monitored on a quarterly basis.
−Removed: Pass Watch – There is adequate primary source of repayment, generally employment time or time in a related field is less than 2 years.
−Removed: Borrowers’ debt to income ratios may fall outside of our guidelines or there is minimal excess cash flow.
−Removed: There may be heavy reliance on collateral, or the loan is large, relative to the financial strength of the borrower.
−Removed: The loans may be maintenance intensive requiring closer monitoring.
−Removed: Special Mention – A loan in this category has a specific weakness or problem but does not currently present a significant risk of loss or default as to any material terms of the loan or financing agreement.
−Removed: A typical problem could include a documentation deficiency.
−Removed: If the deficiency is corrected the account will be re-graded.
−Removed: Classified Substandard – A substandard loan has a developing or current weakness or weaknesses that could result in loss or default if deficiencies are not corrected, or adverse conditions arise.
−Removed: Classified Doubtful – A doubtful loan has an existing weakness or weaknesses that make collection or liquidation in full, on the basis of currently existing facts and conditions, highly questionable and improbable.
−Removed: Classified Loss – A loss loan has an existing weakness or weaknesses that render the loan uncollectible and of such little value that continuing to carry as an asset on our book is not warranted.
+Added: Pass - A Pass asset is higher quality and does not fit any of the other categories described below.
+Added: The likelihood of loss is believed to be remote.
+Added: Watch – A Watch asset may be a larger loan or one that places a heavier reliance on collateral due to the relative financial strength of the borrower.
+Added: The assets may be maintenance intensive requiring closer monitoring.
+Added: The obligor is believed to have an adequate primary source of repayment.
+Added: New loans pursuant to the SBA 7(a) program are classified as watch loans until they have a demonstrated period of satisfactory performance, typically 18 months.
+Added: Special Mention – A Special Mention asset has potential weaknesses that may be temporary or, if left uncorrected, may result in a loss.
+Added: While concerns exist, we believe that it is currently protected against a default and loss is considered unlikely and not imminent.
+Added: Substandard – A Substandard asset is believed to be inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.
+Added: Assets so classified have identified weaknesses and are characterized by the possibility that we may sustain some loss if deficiencies are not corrected.
+Added: Doubtful - A doubtful asset has an existing weakness or weaknesses that make collection or liquidation in full, on the basis of currently existing facts and conditions, highly questionable and improbable.
+Added: Loss - A loss asset has an existing weakness or weaknesses that render the loan uncollectible and of such little value that continuing to carry as an asset on our books is not warranted.
This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical nor desirable to defer writing off this basically worthless asset, even though partial recovery may be affected in the future.
−Removed: The following table presents, as of the period presented, the loan balances by loan program as well as risk rating.
−Removed: No loans were classified as 'Loss' grade during the periods presented.
−Removed: December 31, 2023 2023 2022 2021 Prior Revolving Loans Total
−Removed: ($ in thousands)
−Removed: Construction and land development
−Removed: Pass $ 12,919 $ 10,345 $ 4,354 $ 97 $ — $ 27,715
−Removed: Watch — — — — — —
−Removed: Special Mention — — — — — —
−Removed: Substandard — 615 — — — 615
−Removed: Total 12,919 10,960 4,354 97 — 28,330
−Removed: Current period gross writeoff — — — — — —
−Removed: Residential real estate
−Removed: Pass 2,209 874 1,480 2,947 2,249 9,759
−Removed: Watch 23,614 12,399 1,661 2,035 — 39,709
−Removed: Special Mention — — 208 11 — 219
−Removed: Substandard — 1,585 — 156 — 1,741
−Removed: Total 25,823 14,858 3,349 5,149 2,249 51,428
−Removed: Current period gross writeoff — (121) — (104) — (225)
−Removed: Residential real estate multifamily
−Removed: Pass 278 263 80 — — 621
−Removed: Watch — — — 26 — 26
−Removed: Special Mention — — — — — —
−Removed: Substandard — — — — — —
−Removed: Total 278 263 80 26 — 647
−Removed: Current period gross writeoff — — — — — —
−Removed: Commercial real estate owner occupied
−Removed: Pass 12,566 1,234 854 12,207 — 26,861
−Removed: Watch 62,360 53,832 11,871 7,654 — 135,717
−Removed: Special Mention — 192 — 1,498 — 1,690
−Removed: Substandard 16,466 3,712 1,066 1,038 — 22,282
−Removed: Total 91,392 58,970 13,791 22,397 — 186,550
−Removed: Current period gross writeoff (318) (21) (97) (278) — (714)
−Removed: Commercial real estate non-owner occupied
−Removed: Pass 2,805 1,294 — 419 — 4,518
−Removed: Watch 4,382 2,635 1,223 234 — 8,474
−Removed: Special Mention — — — — — —
−Removed: Substandard — 2,362 — — — 2,362
−Removed: Total 7,187 6,291 1,223 653 — 15,354
−Removed: Current period gross writeoff — — — — — —
−Removed: Commercial and industrial
−Removed: Pass 2,090 601 744 821 31 4,287
−Removed: Watch 10,157 4,600 764 930 — 16,451
−Removed: Special Mention — — — 8 — 8
−Removed: Substandard 260 — — 393 — 653
−Removed: Total 12,507 5,201 1,508 2,152 31 21,399
−Removed: Current period gross writeoff (87) (114) (122) (149) — (472)
−Removed: Pass 7,792 1,975 637 558 2 10,964
−Removed: Watch 24 — — 1 — 25
−Removed: Special Mention — — — — — —
−Removed: Substandard — — — — — —
−Removed: Total 7,816 1,975 637 559 2 10,989
−Removed: Current period gross writeoff (3) (5) (53) (7) — (68)
−Removed: Commercial leases
−Removed: Pass 31,313 6,559 — 238 — 38,110
−Removed: Watch — — — — — —
−Removed: Special Mention — — — — — —
−Removed: Substandard — — — — — —
−Removed: Total 31,313 6,559 — 238 — 38,110
−Removed: Current-period gross writeoffs — — — — — —
−Removed: Retained Strategic Program loans
−Removed: Pass — — — — — —
−Removed: Watch — — — — — —
−Removed: Special Mention — — — — — —
−Removed: Substandard — — — — — —
−Removed: Not Rated 14,506 3,609 1,292 1 — 19,408
−Removed: Total 14,506 3,609 1,292 1 — 19,408
−Removed: Current-period gross writeoffs (3,773) (6,154) (1,017) (2) — (10,946)
−Removed: Total portfolio loans receivable, gross 203,741 108,686 26,234 31,272 2,282 372,215
−Removed: Total current-period gross writeoffs (4,181) (6,415) (1,289) (540) — (12,425)
+Added: Not Rated - For certain Strategic Program and consumer loans, we do not evaluate and risk rate the loans in the same manner as other loans in our portfolio.
+Added: The Not Rated loans are typically homogenous, smaller dollar balances approved using abridged underwriting methods that allow us to streamline the loan approval process and increase efficiency .
+Added: Credit quality for Strategic Program loans has been highly correlated with delinquency levels.
+Added: See Note 3 - Loans to the consolidated financial statements included in Part II, Item 8 for more information on the credit quality of our loans held-for-investment (“LHFI”) portfolio.
Allowance for Credit Losses
3 unchanged sentences
Management periodically reviews and updates its assumptions for estimated funding rates.
−Removed: Our judgment in determining the adequacy of the ACL is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available and as situations and information change.
−Removed: We evaluate the ACL on a monthly basis and take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans and current economic conditions and trends that may affect the borrower’s ability to repay.
−Removed: The quality of the loan portfolio and the adequacy of the ACL is reviewed by regulatory examinations and the Company’s auditors.
+Added: Our judgment in determining the adequacy of the allowance is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available and as situations and information change.
+Added: We evaluate the ACL on at least a quarterly basis and take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans and current economic conditions and trends that may affect the borrower’s ability to repay.
+Added: The quality of the loan portfolio and the adequacy of the ACL is reviewed by regulatory examinations and our auditors.
Credit losses are charged against the ACL when we believe that the collectability of the principal loan balance is unlikely.
2 unchanged sentences
The provision for credit losses on the Consolidated Statements of Income is a combination of the provision for credit losses and the provision for unfunded loan commitments.
−Removed: The following tables present a summary of changes in the ACL for the periods and dates indicated:
−Removed: ($ in thousands) Year Ended
−Removed: December 31, 2023
+Added: The following tables present a summary of changes in the ACL for the periods indicated:
+Added: Year Ended December 31,
+Added: ($ in thousands) 2024
Beginning balance $ 12,888 $ 11,985
6 unchanged sentences
Commercial real estate
+Added: Owner occupied
+Added: (1,039) (714)
+Added: Non-owner occupied
Commercial and industrial (889) (472)
6 unchanged sentences
Commercial real estate
+Added: Owner occupied
+Added: Non-owner occupied
Commercial and industrial 17 21
3 unchanged sentences
(1) ASU 2016-13 (CECL) was adopted January 1, 2023.
−Removed: ($ in thousands) Year Ended
−Removed: December 31, 2022
−Removed: Beginning balance $ 9,855
−Removed: Provision for loan losses 13,519
−Removed: Commercial leases
−Removed: Commercial, non-real estate —
−Removed: Residential real estate —
−Removed: Strategic Program loans (11,948)
−Removed: Commercial real estate —
−Removed: Consumer (66)
−Removed: Commercial leases
−Removed: Commercial, non-real estate 2
−Removed: Residential real estate —
−Removed: Strategic Program loans 885
−Removed: Commercial real estate —
−Removed: Ending balance $ 11,985
−Removed: (2) ASU 2016-13 (CECL) was adopted January 1, 2023.
−Removed: The 2022 amounts presented are calculated under the prior accounting standard.
−Removed: The following tables show the allocation of the ACL as of December 31, 2023, and allowance for loan losses ("ALL") as of December 31, 2022, among loan categories.
−Removed: The ACL related to Strategic Programs constitutes 54.8% of the total ACL while comprising 5.2% of total loans held for investment as of December 31, 2023.
−Removed: The ALL related to Strategic Programs constitutes 55.9% of the total ALL while comprising 10.2% of total loans held for investment as of December 31, 2022.
+Added: The following tables show the allocation of the ACL as of December 31, 2024, and 2023.
+Added: The ACL related to Strategic Programs constitutes 47.8% and 54.8% of the total ACL while comprising 4.3% and 5.2%, respectively, of total loans held-for-investment as of December 31, 2024 and 2023, respectively.
The percentage of ACL related to Strategic Program loans retained reflects the increased credit risks associated with certain retained Strategic Program loans.
14 unchanged sentences
($ in thousands) Amount % of
−Removed: SBA $ 4,294 35.8 %
−Removed: Commercial leases
−Removed: Commercial, non real estate 56 0.5 %
+Added: Construction and land development $ 316 2.5 %
Residential real estate 956 7.4 %
−Removed: Strategic Program loans 6,701 55.9 %
+Added: Residential real estate multifamily 6 — %
Commercial real estate
+Added: Owner occupied 3,336 25.9 %
+Added: Non-owner occupied 282 2.2 %
+Added: Commercial and industrial 361 2.8 %
Consumer 211 1.6 %
+Added: Commercial leases
+Added: Strategic Program loans 7,065 54.8 %
Total $ 12,888 100.0 %
−Removed: The following table reflects the ratios of the ACL to total loans held for investment ("LHFI"), nonaccrual loans to total loans held for investment, and the ACL to nonaccrual loans by CECL loan category as of December 31, 2023.
+Added: The following table reflects the ratios of the ACL to total LHFI, nonaccrual loans to total loans held-for-investment, and the ACL to nonaccrual loans by CECL loan category as of December 31, 2024.
LHFI Nonaccrual loans
13 unchanged sentences
Total 2.8 % 7.7 % 36.9 %
−Removed: The following table reflects the ratios of the ALL to total loans held for investment, nonaccrual loans to total loans held for investment, and the ALL to nonaccrual loans by loan category as of December 31, 2022.
−Removed: ($ in thousands) ALL to
+Added: The following table reflects the ratios of the ACL to total LHFI, nonaccrual loans to total loans held-for-investment, and the ACL to nonaccrual loans by CECL loan category as of December 31, 2023.
+Added: ($ in thousands) ACL to
Total LHFI Nonaccrual
−Removed: to Total LHFI ALL to
+Added: to Total LHFI ACL to
Nonaccrual loans
−Removed: SBA 3.0 % — % — %
−Removed: Commercial leases
−Removed: 4.3 % — % — %
−Removed: Commercial, non-real estate — % — % — %
+Added: Construction and land development 1.1 % — % — %
Residential real estate 1.9 % 3.1 % 60.3 %
−Removed: Strategic Program loans 27.6 % — % — %
+Added: Residential real estate multifamily 1.0 % — % — %
Commercial real estate
+Added: Owner occupied 1.8 % 11.6 % 15.4 %
+Added: Non-owner occupied 1.8 % 15.4 % 12.0 %
+Added: Commercial and industrial 1.7 % 1.3 % 128.2 %
Consumer 1.9 % — % — %
+Added: Commercial leases
+Added: 0.9 % — % — %
+Added: Strategic Program loans 36.4 % — % — %
Total 3.5 % 7.0 % 49.8 %
−Removed: The decrease in ACL/ALL to total loans held for investment for the periods presented above was primarily due to growth in the SBA 7(a) loan balances with $131.7 million and $49.5 million of loan balances guaranteed by the SBA at December 31, 2023 and 2022, respectively.
−Removed: The increase in nonaccrual loans to loans held for investment and the increase in ACL to nonaccrual loans ratios from December 31, 2022 to December 31, 2023 was primarily related to a small number of large SBA loans that were moved to nonaccrual status during 2023.
−Removed: The following table reflects the ratio of net charge-offs to average loans outstanding by loan category, as of the dates indicated.
−Removed: For the Years Ended
+Added: When comparing December 31, 2024 to December 31, 2023, the decrease in ACL to total LHFI as well as the decrease in ACL to total nonaccrual loans was primarily due to the shifting of SBA loans from the collectively assessed population to the individually assessed population where the loans are assessed based on the net realizable value of the collateral .
+Added: The increase in nonaccrual loans to total loans held-for-investment from December 31, 2023 to December 31, 2024 was primarily related to SBA loans that were moved to nonaccrual status during 2024.
+Added: The following table summarizes net charge-offs (“NCO”), average loans and the ratio of NCO to average loans for the periods indicated:
December 31, 2024 December 31, 2023
1 unchanged sentence
Offs (Recoveries)
+Added: Loans NCO (Recovery) to
Offs (Recoveries) Average
Loans NCO (Recovery) to
−Removed: SBA $ 903 $ 196,835 0.5 % $ 326 $ 132,199 0.2 %
−Removed: Commercial leases
+Added: Construction and land development
$ — $ 31,558 — % $ — $ 27,074 — %
−Removed: Commercial, non-real estate (1) 3,247 — % (2) 3,079 (0.1) %
Residential real estate
−Removed: Strategic program loans 9,892 21,483 46.0 % 11,063 27,378 40.4 %
+Added: 232 54,964 0.4 % 135 38,211 0.4 %
+Added: Residential real estate multifamily
+Added: — 1,219 — % — 545 — %
Commercial real estate
−Removed: Consumer 66 8,369 0.8 % 2 5,364 — %
−Removed: Total $ 10,879 $ 303,783 7.2 % $ 11,389 $ 209,352 11.0 %
−Removed: Due primarily to the increase in our average loans held for investment balances, the ratio of net charge-offs to average loans outstanding by loan category was lower during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
−Removed: The increase in the ratio for Strategic Programs loans was primarily due to a reduction in the average loan balances in the year ended December 31, 2023.
−Removed: Interest-Bearing Deposits in Other Banks
−Removed: Our interest-bearing deposits in other banks increased to $116.6 million at December 31, 2023 from $100.2 million at December 31, 2022, an increase of $16.4 million, or 16.4%.
−Removed: This increase was primarily due to an increase in brokered time deposit balances.
−Removed: Interest-bearing deposits in other banks have generally been the primary repository of the liquidity we use to fund our operations.
−Removed: Aside from minimal balances held with our correspondent banks, the majority of our interest-bearing deposits in other banks was held directly with the Federal Reserve.
−Removed: We use our securities portfolio to provide a source of liquidity, provide an appropriate return on funds invested, manage interest rate risk, meet collateral requirements and meet regulatory capital requirements.
−Removed: We classify investment securities as either held-to-maturity or available-for-sale based on our intentions and the Company’s ability to hold such securities until maturity.
−Removed: In determining such classifications, securities that we have the positive intent and the ability to hold until maturity are classified as held-to-maturity and carried at amortized cost.
−Removed: All other securities are designated as available-for-sale and carried at estimated fair value with unrealized gains and losses included in shareholders’ equity on an after-tax basis.
−Removed: For the year presented, all securities were classified as held-to-maturity.
−Removed: The following table summarizes the contractual maturities, amortized cost, and weighted average yields of investment securities at December 31, 2023 .
−Removed: As of December 31, 2023
−Removed: After Five to Ten Years Weighted After Ten Years
−Removed: ($ in thousands) Amortized
−Removed: Mortgage-backed securities $ 1,975 2.7 % $ 4,984 1.8 % $ 6,959
−Removed: Collateralized mortgage obligations 770 3.3 % 7,659 3.2 % 8,429
+Added: Owner occupied
+Added: 705 190,214 0.4 % 713 157,489 0.5 %
+Added: Non-owner occupied
+Added: 221 16,407 1.3 % (378) 11,972 (3.2) %
+Added: Commercial and industrial
+Added: 872 31,065 2.8 % 451 17,638 2.6 %
+Added: 128 16,478 0.8 % 66 6,558 1.0 %
+Added: Lease financing receivables
+Added: 201 56,675 0.4 % — 23,163 — %
+Added: Strategic Program loans
+Added: 8,601 18,627 46.2 % 9,892 21,134 46.8 %
Total $ 10,960 $ 417,207 2.6 % $ 10,879 $ 303,784 3.6 %
−Removed: The weighted average yield of investment securities is the sum of all interest that the investments generate, divided by the sum of the book value.
−Removed: There were no calls, sales or maturities of securities during the years ended December 31, 2023 and December 31, 2022.
−Removed: At December 31, 2023, there were 19 securities, consisting of nine collateralized mortgage obligations and 10 mortgage-backed securities, in an unrealized loss position as of December 31, 2023 and 17 securities, consisting of eight collateralized mortgage obligations and nine mortgage-backed securities, in an unrealized loss position as of December 31, 2022.
−Removed: Total Liabilities
−Removed: Total liabilities increased from $260.3 million at December 31, 2022 to $431.2 million at December 31, 2023 primarily due to an increase in total deposits.
−Removed: Deposits are the major source of funding for the Company.
−Removed: We offer a variety of deposit products including interest and noninterest bearing demand accounts, HSA demand deposits sourced through Lively, Inc., money market and savings accounts and certificates of deposit, all of which we market at competitive pricing.
+Added: The ratio of net charge-offs to average loans outstanding by loan category was lower during the year ended December 31, 2024 as compared to the year ended December 31, 2023, due primarily to the increase in our average loans held-for-investment balances.
+Added: The decrease in the ratio for Strategic Programs loans was primarily due to a reduction in the average loan balances as well as a reduction in net charge-offs during the year ended December 31, 2024.
+Added: Total assets at December 31, 2024 were $746.0 million, an increase of $159.8 million from December 31, 2023.
+Added: The increase in total assets was due primarily to increases in loans receivable, net, of $89.3 million, Strategic Program loans held-for-sale of $44.1 million, and investment securities available-for-sale of $29.9 million.
+Added: These increases were partially offset by a decrease in interest-bearing deposits in other banks of $7.8 million.
+Added: These changes were consistent with our strategy to grow assets in lower risk revenue producing products.
+Added: Deposits are the major source of funding for us.
+Added: We offer a variety of deposit products including interest and noninterest bearing demand accounts, HSA demand deposits, money market and savings accounts and certificates of deposit, all of which we market at competitive pricing.
We generate deposits from our customers on a relationship basis and through access to national institutional and brokered deposit sources.
We also generate deposits in relation to our Strategic Programs in the form of reserve accounts as discussed above.
−Removed: These deposits add an element of flexibility in that they tend to increase or decrease in relation to the size of our Strategic Program loan portfolio.
+Added: These deposits add an element of flexibility in that they tend to increase or decrease in relation to the size of or Strategic Program loan portfolio.
In addition to the reserve account, some Strategic Program loan originators maintain operating deposit accounts with us.
9 unchanged sentences
Total period end deposits $ 544,952 100.0 % $ 404,833 100.0 %
−Removed: For the Years Ended
−Removed: December 31, 2023 December 31, 2022
−Removed: ($ in thousands) Total Weighted
−Removed: rate paid Percent
−Removed: of total Total Weighted
−Removed: rate paid Percent
−Removed: Noninterest-bearing demand deposits $ 93,126 — % 28.3 % $ 114,174 — % 48.2 %
−Removed: Interest-bearing deposits:
−Removed: Demand 45,454 4.08 % 13.8 % 17,564 3.02 % 7.4 %
−Removed: Savings 8,207 0.62 % 2.5 % 7,310 0.10 % 3.1 %
−Removed: Money market 13,665 2.65 % 4.1 % 26,054 0.45 % 11.0 %
−Removed: Time certificates of deposit 168,887 4.56 % 51.3 % 71,661 1.09 % 30.3 %
−Removed: Total average deposits $ 329,339 3.03 % 100.0 % $ 236,763 0.61 % 100.0 %
−Removed: Our deposits increased to $404.8 million as of December 31, 2023 from $243.0 million as of December 31, 2022, an increase of $161.8 million, or 66.6%.
−Removed: This increase was primarily due to an increase in brokered time deposits and noninterest-bearing demand deposits utilized in the funding of our lending programs.
+Added: The increase in total deposits as of December 31, 2024, compared to December 31, 2023, was primarily due to an increase in brokered time deposits and noninterest bearing demand deposits utilized in the funding of our lending programs.
+Added: Also, during the fourth quarter of 2024, we called $160.0 million of higher-yielding time certificates of deposit and replaced them with lower cost time certificates of deposit.
As an FDIC-insured institution, our deposits are insured up to applicable limits by the DIF of the FDIC.
The Dodd-Frank Act raised the limit for federal deposit insurance to $250,000 for most deposit accounts and increased the cash limit of Securities Investor Protection Corporation protection from $100,000 to $250,000.
−Removed: Our total uninsured deposits were $136.9 million and $108.4 million as of December 31, 2023 and December 31, 2022, respectively.
−Removed: The maturity profile of our uninsured time deposits, those amounts that exceed the FDIC insurance limit, at December 31, 2023 is as follows:
+Added: Our total estimated uninsured deposits were $183.2 million and $136.9 million as of December 31, 2024 and December 31, 2023, respectively.
+Added: Estimated uninsured deposits at the Bank as of December 31, 2024 include $54.0 million of total deposits contractually required to be maintained at the Bank pursuant to our Strategic Program agreements and an additional $42.1 million of total deposits associated with accounts owned by the parent holding company or the Bank.
+Added: The maturity profile of our estimated uninsured time deposits, those amounts that exceed the FDIC insurance limit, at December 31, 2024 is as follows:
December 31, 2024
4 unchanged sentences
Time deposits, uninsured $ — $ 1,277 $ 1,746 $ 183 $ 3,206
+Added: Total Liabilities
+Added: Total liabilities increased from $431.2 million at December 31, 2023 to $572.3 million at December 31, 2024 primarily due to an increase in total deposits as discussed above.
Liquidity and Capital Resources
1 unchanged sentence
Liquidity management is the ability to meet current and future financial obligations of a short-term nature.
−Removed: Our primary sources of funds consist of deposit inflows, the sale of loans, repayment of loans and net profits.
+Added: Our primary sources of funds consist of deposit inflows, the sale of loans, principal repayments and interest on loans and net profits.
While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows, loan prepayments, loan sales and security sales are greatly influenced by general interest rates, economic conditions, and competition.
−Removed: Our primary source of funds to originate new loans is derived from deposits.
−Removed: Deposits are comprised of core and noncore deposits.
−Removed: We use brokered deposits and a rate listing service to advertise rates to banks, credit unions, and other institutional entities.
−Removed: We designate deposits obtained from this source as Institutional Deposits.
−Removed: To attract deposits from local and nationwide consumer and commercial markets, we historically paid rates at the higher end of the market, which we have been able to pay due to our high margin and technology-oriented business model.
+Added: Our primary source of funds to support new loan originations are deposits.
+Added: Deposits are comprised of core and non-core deposits.
+Added: To attract core deposits from local and nationwide consumer and commercial markets, we have paid rates at the higher end of the market.
+Added: We have been able to pay higher rates due to the higher rates earned on our loan portfolio.
We utilize rate listing services and website advertising to attract deposits from consumer and commercial sources.
−Removed: We regularly evaluate new, core deposit products.
+Added: Non-core deposits generally include brokered deposits and deposits acquired through the utilization of a listing service.
We intend to have various term offerings to match our funding needs.
−Removed: With no current plans to expand our brick-and-mortar branch network, online and mobile banking offers a means to meet customer needs and better efficiency through technology compared to traditional branch networks.
−Removed: We believe that the rise of mobile, online banking, and integrated fintech banking solutions provides us the opportunity to further leverage the technological competency we have demonstrated in recent years.
+Added: With no current plans to expand our brick-and-mortar branch network, online and mobile banking offers a means to meet customer needs and aggregate deposits more efficiently compared to a traditional branch network.
+Added: We believe that the rise of mobile and online banking provides us the opportunity to further leverage the technological competency we have demonstrated in recent years.
We regularly adjust our investment in liquid assets based upon our assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities and (4) the objectives of our asset/liability management, funds management and liquidity policies.
−Removed: The objective of the liquidity policy is to reduce the risk to our earnings and capital arising from the inability to meet obligations in a timely manner.
−Removed: This entails ensuring sufficient funds are available at a reasonable cost to meet potential demands from both fund providers and borrowers.
−Removed: Liquid assets, defined as cash and due from banks and interest bearing deposits, were 20.0% of total assets at December 31, 2023.
−Removed: We primarily utilize short-term and long-term borrowings to supplement deposits to fund our lending and investment activities, each of which is discussed below.
−Removed: At December 31, 2023, we had the ability to access $11.4 million from the Federal Reserve Bank’s Discount Window and $0.8 million from the Federal Reserve Bank's Bank Term Funding Program on a collateralized basis.
−Removed: Through Zions Bank, the Bank had an unsecured line available of $5.0 million at December 31, 2023.
−Removed: The Bank had an available unsecured line of credit with Bankers’ Bank of the West to borrow up to $1.1 million in overnight funds.
+Added: The objective of our liquidity policy is to control the risk to our earnings and capital arising from the inability to meet obligations in a timely manner.
+Added: This entails ensuring sufficient funds are available at all times and at a reasonable cost to meet potential demands from both fund providers and borrowers.
+Added: We primarily utilize short-term and long-term borrowings to supplement deposits to fund our lending and investment activities.
+Added: At December 31, 2024, we had the ability to access $239.2 million from the FRB’s Discount Window on a collateralized basis.
+Added: The Bank had an available unsecured line of credit with two correspondent banks to borrow up to $6.1 million in overnight funds.
We also maintain a $25.0 million line of credit with Federal Home Loan Bank, secured by specific pledged loans.
−Removed: We had no outstanding balances on such unsecured or secured lines of credit as of December 31, 2023.
+Added: We had no outstanding balances on any unsecured or secured lines of credit as of December 31, 2024.
In long term borrowings, we had $0.1 million outstanding at December 31, 2024 related to the PPPLF.
2 unchanged sentences
The levels of these assets depend on our operating, financing, lending and investing activities during any given period.
−Removed: At December 31, 2023, liquid assets (defined as cash and due from banks and interest bearing deposits), consisting of cash and due from banks, totaled $117.0 million.
−Removed: We believe that our liquid assets combined with the available lines of credit provide adequate liquidity to meet our current financial obligations for at least the next 12 months.
−Removed: Our consolidated financial statements and related notes, which have been prepared in accordance with GAAP, require the measurement of financial position and operating results in terms of historical dollars, without considering the changes in the relative purchasing power of money over time due to inflation.
−Removed: The impact of inflation is primarily reflected in the increased cost of operations.
−Removed: Unlike most industrial companies, nearly all of our assets and liabilities are monetary in nature.
−Removed: As a result, interest rates have a greater impact on our performance than do the effects of general levels of inflation.
−Removed: Interest rates do not necessarily move in the same direction or to the same extent as the price of goods or services.
+Added: At December 31, 2024, liquid assets (defined as cash and due from banks and interest-bearing deposits) totaled $109.2 million and constituted 14.6% of total assets.
+Added: In a ddition, during the third quarter of 2024, we purchased U.S.
+Added: Treasury securities, which are classified as investment securities AFS.
+Added: These investment securities totaled $29.9 million at December 31, 2024 (4.0% of total assets) and can be readily sold.
+Added: We believe that our liquid assets combined with the available lines of credit and our ability to generate core and non-core funding provides adequate liquidity to meet our current financial obligations for at least the next 12 months.
Capital Resources
−Removed: Shareholders’ equity increased $14.6 million to $155.1 million at December 31, 2023 compared to $140.5 million at December 31, 2022.
−Removed: The increase in shareholders’ equity was primarily attributable to net income of $17.5 million recognized for the year ended December 31, 2023.
−Removed: Exercised stock options and stock-based compensation increased additional paid-in capital in the aggregate by approximately $2.1 million while the repurchase of common stock and the adoption of ASC 2016-13 (CECL) reduced additional paid-in capital by approximately $4.7 million and $0.2 million, respectively, for the year ended December 31, 2023.
+Added: We seek to maintain adequate capital to support anticipated asset growth, operating needs and unexpected risks, and to ensure that we are in compliance with all current and anticipated regulatory capital guidelines.
+Added: Our primary sources of new capital include retained earnings and proceeds from the sale and issuance of capital stock or other securities.
+Added: Expected future use or activities for which capital may be set aside include balance sheet growth and associated relative increases in market or credit exposure, investment activity, potential product and business expansions, acquisitions and strategic or infrastructure investments.
+Added: Shareholders’ equity increased $18.7 million to $173.7 million at December 31, 2024 compared to $155.1 million at December 31, 2023, primarily due to the purchase of additional equity interests in BFG in exchange for $4.1 million in FinWise Bancorp common stock and net income of $12.7 million.
We use several indicators of capital strength.
2 unchanged sentences
Our return on average assets was 2.0% and 3.5% for the years ended December 31, 2024 and 2023, respectively.
−Removed: We seek to maintain adequate capital to support anticipated asset growth, operating needs and unexpected risks, and to ensure that we are in compliance with all current and anticipated regulatory capital guidelines.
−Removed: Our primary sources of new capital include retained earnings and proceeds from the sale and issuance of capital stock or other securities.
−Removed: Expected future use or activities for which capital may be set aside include balance sheet growth and associated relative increases in market or credit exposure, investment activity, potential product and business expansions, acquisitions and strategic or infrastructure investments.
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies.
−Removed: Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on the Company’s financial statements.
−Removed: Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.
−Removed: The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
+Added: Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on our business.
+Added: Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance-sheet items as calculated pursuant to regulatory definitions and requirements.
+Added: The sufficiency of capital and the Bank’s capital classifications are also subject to qualitative judgments by the regulators about risk weightings and other factors.
Under the prompt corrective action rules, an institution is deemed “well capitalized” if its Tier 1 leverage ratio, Common Equity Tier 1 ratio, Tier 1 Capital ratio, and Total Capital ratio meet or exceed 5%, 6.5%, 8%, and 10%, respectively.
−Removed: On September 17, 2019, the federal banking agencies jointly finalized a rule intending to simplify the regulatory capital requirements described above for qualifying community banking organizations that opt into the Community Bank Leverage Ratio framework, as required by Section 201 of the Regulatory Relief Act.
−Removed: The Bank has elected to opt into the Community Bank Leverage Ratio framework starting in 2020.
−Removed: Under these new capital requirements the Bank must maintain a leverage ratio greater than 9.0% for each year beginning in 2022.
−Removed: As of December 31, 2023 and December 31, 2022, the most recent notification from the FDIC categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action (there are no conditions or events since that notification we believe have changed the Bank’s category).
−Removed: The following table sets forth the actual capital amounts and ratios for the Bank and the amount of capital required to be categorized as well-capitalized as of the dates indicated.
−Removed: The following table presents the regulatory capital ratios for the Bank as of the dates indicated:
−Removed: Capital Ratios December 31, 2023 December 31, 2022 Well-
−Removed: Leverage Ratio (under CBLR) 20.7 % 25.1 % 9.0 %
+Added: On September 17, 2019, the federal banking agencies jointly issued a rule intending to simplify the regulatory capital requirements described above for qualifying community banking organizations that opt into the Community Bank Leverage Ratio framework, as required by Section 201 of the Regulatory Relief Act.
+Added: The Bank elected to opt into the Community Bank Leverage Ratio framework starting in 2020.
+Added: Under these capital requirements the Bank must maintain a leverage ratio greater than 9.0% to be considered well-capitalized.
+Added: As of December 31, 2024, the most recent notification from the FDIC categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action (there are no conditions or events since that notification we believe have changed the Bank’s category).
+Added: See Note 8 - Capital Requirements to the consolidated financial statements included in Part II, Item 8 for additional information regarding our regulatory capital requirements.
+Added: Stock Repurchase Program
+Added: We have a stock repurchase program authorized by our Board of Directors.
+Added: The stock repurchase program became effective as of March 6, 2024 and authorizes us to repurchase up to 641,832 shares of our common stock in the aggregate in open market transactions, privately negotiated transactions, or any manner that complies with the provisions of Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as pursuant to a trading plan under Rule 10b5-1 under the Exchange Act.
+Added: Our decision to repurchase shares will depend on a variety of factors, including but not limited to, the market price and trading volume of our common stock, general market and economic conditions, the ongoing assessment of our capital needs, and applicable legal and regulatory requirements.
+Added: The repurchase program does not obligate us to purchase any particular number of shares and may be limited or terminated at any time without prior notice.
+Added: The repurchase program expires on March 31, 2026.
+Added: During the three months ended December 31, 2024, there were no open-market share repurchases.
+Added: Since the repurchase program’s inception, we have repurchased and subsequently retired a total of 44,608 shares for $0.5 million at an average price of $10.30 per share.
+Added: See Note 1 - Summary of Significant Accounting Policies to the consolidated financial statements included in Part II, Item 8 for more information.
Contractual Obligations
We have contractual obligations to make future payments on debt and lease agreements.
−Removed: While our liquidity monitoring and management consider both present and future demands for and sources of liquidity, the following table of contractual commitments focuses only on future obligations and summarizes our contractual obligations as of December 31, 2023.
+Added: While our liquidity monitoring and management consider both present and future demands for and sources of liquidity, the following table of contractual commitments focuses only on future obligations and summarizes our significant contractual obligations as of December 31, 2024:
($ in thousands) Total Less than
3 unchanged sentences
Time deposits 320,771 245,180 29,629 35,294 10,668
−Removed: Long term borrowings (1)
−Removed: 190 — 190 — —
Operating lease obligations 5,595 1,122 2,270 2,203 —
Total $ 550,547 $ 470,483 $ 31,899 $ 37,497 $ 10,668
−Removed: (1) Balances in this category pertain to the PPPLF and are fully-collateralized with PPP loans
−Removed: Off-Balance Sheet Items
−Removed: In the normal course of business, we enter into various transactions, which, in accordance with GAAP, are not included in our consolidated statements of financial condition.
−Removed: We enter into these transactions to meet the financing needs of our customers.
+Added: Off-Balance Sheet Financing Arrangements
+Added: In the normal course of business, we enter into certain off-balance sheet arrangements to meet the financing needs of our customers.
These transactions include commitments to extend credit, which involves, to varying degrees, elements of credit risk and interest rate risk exceeding the amounts recognized in our consolidated statements of financial condition.
1 unchanged sentence
The same credit policies and procedures are used in making these commitments as for on-balance sheet instruments.
−Removed: We are not aware of any accounting loss to be incurred by funding these commitments;
−Removed: if required, we would maintain an allowance for off-balance sheet credit risk which would be recorded in other liabilities on the consolidated balance sheets.
−Removed: Our commitments to extend credit as of the dates indicated are summarized below.
−Removed: Since commitments associated with commitments to extend credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements.
−Removed: As of December 31,
+Added: With the exception of these off-balance sheet arrangements, we have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
+Added: For details of our commitments to extend credit please see Note 9 - Commitments and Contingencies to the consolidated financial statements included in Part II, Item 8..
+Added: Reconciliations of Non-GAAP Financial Measures
+Added: We believe that both management and investors benefit from certain non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods.
+Added: These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance.
+Added: We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.
+Added: Accordingly, we believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team.
+Added: Our calculation of these non-GAAP financial measures may differ from similarly-titled non-GAAP measures, if any, reported by our peers.
+Added: These non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with U.S.
+Added: FinWise has entered into agreements with certain of its Strategic Program service providers pursuant to which the service providers provide credit enhancement on loans which protects the Bank by indemnifying or reimbursing the Bank for incurred credit and fraud losses.
+Added: We estimate and record a provision for expected losses for these Strategic Program loans in accordance with U.S.
+Added: GAAP, which requires estimation of the provision without consideration of the credit enhancement.
+Added: When the provision for expected losses over the life of the loans that are subject to such credit enhancement is recorded, a credit enhancement asset reflecting the potential future recovery of those losses is also recorded on the balance sheet in the form of non-interest income (credit enhancement income).
+Added: Reimbursement or indemnification for incurred losses is provided for in the form of a deposit reserve account that is replenished periodically by the respective Strategic Program service provider.
+Added: Any remaining income on such loans in excess of the amounts retained by FinWise and placed in the deposit reserve account are paid to the Strategic Program service provider.
+Added: Income on such loans in excess of amounts retained by FinWise are expensed for services provided by the Strategic Program service provider including its legal commitment to indemnify or reimburse all credit or fraud losses pursuant to credit enhancement agreements.
+Added: The credit enhancement asset is reduced as credit enhancement payments and recoveries are received from the Strategic Program service provider or taken from its cash reserve account.
+Added: If the Strategic Program service provider is unable to fulfill its contracted obligations under its credit enhancement agreement, then the Bank could be exposed to the loss of the reimbursement and credit enhancement income as a result of this counterparty risk.
+Added: See the following reconciliations of non-GAAP measures for the impact of the credit enhancement on our financial condition and results.
+Added: The following non-GAAP measures are presented to illustrate the impact of certain credit enhancement expenses on total interest income on loans HFI and average yield on loans HFI:
+Added: As of and for the Year Ended
($ in thousands;
−Removed: Revolving, open-end lines of credit $ 1,630 $ 1,683
−Removed: Commercial real estate 17,421 17,886
−Removed: Other unused commitments 724 253
−Removed: Total commitments $ 19,775 $ 19,822
−Removed: GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures
−Removed: One of the financial measures included in this Report is not a measure of financial performance recognized by GAAP.
−Removed: This non-GAAP financial measure is “tangible book value per share.” Our management uses this non-GAAP financial measure in its analysis of our performance.
−Removed: • “Tangible book value per share” is defined as book value per share less goodwill and other intangible assets, divided by the outstanding number of common shares at the end of each period.
−Removed: The most directly comparable GAAP financial measure is book value per share.
−Removed: We had no goodwill or other intangible assets as of any of the dates indicated.
−Removed: We have not considered loan servicing rights or loan trailing fee asset as intangible assets for purposes of this calculation.
−Removed: As a result, tangible book value per share is the same as book value per share as of each of the dates indicated.
−Removed: We believe this non-GAAP financial measure provides useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP;
−Removed: however, we acknowledge that our non-GAAP financial measure has a number of limitations.
−Removed: As such, you should not view this measure as a substitute for results determined in accordance with GAAP, and such measure is not necessarily comparable to non-GAAP financial measures that other companies use.
−Removed: Recently Issued Accounting Pronouncements
−Removed: See our consolidated financial statements included elsewhere in this Report for a full description of recent accounting pronouncements, including the respective expected dates of adoption and anticipated effects on our results of operations and financial condition.
−Removed: Quantitative and Qualitative Disclosures About Market Risk
−Removed: Under the filer category of “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, the Company is not required to provide information requested by Part II, Item 7A of this Report.
+Added: unaudited) Total Average Loans HFI Total Interest Income on Loans HFI Average Yield on Loans HFI
+Added: Before adjustment for credit enhancement $ 417,207 $ 51,194 12.27 %
+Added: credit enhancement expense (8)
+Added: Net of adjustment for credit enhancement expenses $ 417,207 $ 51,186 12.27 %
+Added: Total interest income on loans HFI net of credit enhancement expense and the average yield on loans HFI are non-GAAP measures that include the impact of credit enhancement expense on total interest income on loans HFI and the respective average yield on loans HFI, the most directly comparable GAAP measures.
+Added: The following non-GAAP measures are presented to illustrate the impact of certain credit enhancement expenses on net interest income and NIM:
+Added: As of and for the Year Ended
+Added: ($ in thousands;
+Added: unaudited) Total Average Interest-Earning Assets Net Interest Income Net Interest Margin
+Added: Before adjustment for credit enhancement $ 589,880 $ 58,912 9.99 %
+Added: credit enhancement expense (8)
+Added: Net of adjustment for credit enhancement expenses $ 589,880 $ 58,904 9.99 %
+Added: Net interest income and net interest margin net of credit enhancement expense are non-GAAP measures that include the impact of credit enhancement expenses on net interest income and net interest margin, the most directly comparable GAAP measures.
+Added: Non-interest expenses less credit enhancement expenses is a non-GAAP measure presented to illustrate the impact of credit enhancement expense on non-interest expense:
+Added: ($ in thousands;
+Added: unaudited) Year Ended December 31, 2024
+Added: Total non-interest expense $ 52,835
+Added: credit enhancement expense (8)
+Added: Total non-interest expense less credit enhancement expenses $ 52,827
+Added: Total non-interest expense less credit enhancement expense is a non-GAAP measure that illustrates the impact of credit enhancement expenses on non-interest expense, the most directly comparable GAAP measure.
+Added: Total non-interest income less credit enhancement income is a non-GAAP measure to illustrate the impact of credit enhancement income resulting from credit enhanced loans on non-interest income:
+Added: ($ in thousands;
+Added: unaudited) Year Ended December 31, 2024
+Added: Total non-interest income $ 22,485
+Added: credit enhancement income (111)
+Added: Total non-interest income less credit enhancement income $ 22,374
+Added: Total non-interest income less indemnification income is a non-GAAP measure that illustrates the impact of credit enhancement income on non-interest income.
+Added: The most directly comparable GAAP measure is non-interest income.
+Added: The following non-GAAP measure is presented to illustrate the effect of the credit enhancement program that creates the credit enhancement on the allowance for credit losses:
+Added: ($ in thousands;
+Added: unaudited) As of December 31, 2024
+Added: Allowance for credit losses $ (13,176)
+Added: allowance for credit losses related to credit enhanced loans (111)
+Added: Allowance for credit losses excluding the effect of the allowance for credit losses related to credit enhanced loans $ (13,065)
+Added: The allowance for credit losses excluding the effect of the allowance for credit losses related to credit enhanced loans is a non-GAAP measure that reflects the effect of the credit enhancement program on the allowance for credit losses.
+Added: The total outstanding balance of loans held-for-investment with credit enhancement as of December 31, 2024 was approximately $0.9 million.
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.