What changed in this filing

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Item 1. Business

2026-03-23 compared with 2025-03-26 · 140 added, 93 removed, 400 unchanged (37% of the section changed)

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We operate through our wholly-owned subsidiary, FinWise Bank, a Utah state-chartered bank.

Our business is conducted through three reportable segments:

traditional banking, banking as a service (“BaaS”) and treasury & administration.

We currently operate one full-service banking location in Sandy, Utah.

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We have also deployed our own in-house technology to deliver loan and deposit solutions to our customers directly and through third parties.

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

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

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

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

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

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

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

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

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

FinWise Bancorp currently does not engage in any material business activity other than those relating to owning all of the capital stock of FinWise Bank.

Our Relationship with Business Funding Group

BFG is a nationally significant referral source of small business loans.

Included in these loans are SBA loans to be funded by financial institutions and other SBA lenders.

BFG works alongside a network of over 50 banks to refer business loans to small, independent businesses across various industries.

Our relationship with BFG is an important component of our diversification strategy.

Since the launch of our SBA lending program in 2014, BFG has been the primary source of SBA loan referrals for the Bank.

In consideration of marketing and referral services provided to the Bank, BFG receives a fee for SBA loans referred to the Bank that are closed and funded by the Bank.

The fees on each SBA loan referred to the Bank by BFG are determined on a loan-by-loan basis and based on the amount and terms of the principal SBA loan.

The methodology for determining such fees has been substantially consistent since 2019.

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

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

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

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

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

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

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

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

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

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

As consideration for the right of first refusal and option, we issued warrants to each BFG member (other than the Company) with the right to acquire shares of our common stock on a pro rata basis according to each such person’s percentage ownership in BFG, not exceeding an aggregate of 270,000 shares, at an exercise price of $6.67 per share.

Unless otherwise exercised, the warrants will expire on March 31, 2028.

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

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

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

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

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

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

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

Accordingly, we are not subject to restrictions imposed by Regulation W with respect to transactions with BFG, and we are not aware of any other regulatory restrictions on the business relationship between the Bank and BFG.

Lending Activities

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

Loans Held-for-Investment

The following table presents the composition of our loans held-for-investment portfolio by lending program, as of December 31, 2025:

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

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

corporations, or other business enterprises for commercial, industrial, agricultural, or professional purposes, but not for personal expenditure purposes are included in this category.

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.

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As of December 31, 2025, our commercial non-real estate loans comprised 0.7% of the Bank’s loans held-for-investment portfolio.

Residential and Commercial Real Estate Loans .

Residential and Commercial Real E state Loans .

We operate a single branch location in Sandy, Utah.

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All the loans generated through this branch are held on our balance sheet.

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

Strategic Programs .

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

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

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

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

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

As of December 31, 2025, our branch-based banking operations consisted of approximately $121.2 million in loans of which the majority are residential and commercial real estate loans.

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

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

Strategic Programs .

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

During the fourth quarter of 2024 we began offering a credit enhanced product for certain programs whereby the program will absorb all credit and fraud losses.

During the year ended December 31, 2025, we originated approximately $5.7 billion in Strategic Program loans and had approximately $129.8 million in Strategic Program loans held-for-investment on our balance sheet at December 31, 2025, of which $108.1 million was associated with the credit enhanced program.

As of December 31, 2025, our Strategic Program held-for-investment loans comprised of 22.2% of the Bank’s loan portfolio.

Consumer Loans .

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The majority of the approximately $21.9 million in consumer loans outstanding as of December 31, 2025, that were not generated through our Strategic Programs were originated in connection with our POS lending program.

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

December 31, 2024.

During the year ended December 31, 2025, we originated approximately $11.6 million in POS loans and held approximately $21.9 million of POS loans on our balance sheet as of December 31, 2025.

As of December 31, 2025, our consumer loans comprised 3.8% of the Bank’s total loans held-for-investment portfolio.

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

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

receivables originated through our Strategic Programs cannot meet its contractual obligation to purchase.

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

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We control credit risk both through disciplined underwriting of each transaction, as well as active credit management processes and procedures to manage risk and minimize loss throughout the life of a loan, and our loan policies establish the basic guidelines governing our lending operations.

Traditional Loan Portfolio

Underwriting .

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We create standardized underwriting criteria that are uniformly and consistently applied to each product.

When originating with a third party, we review and approve the credit approval models prior to the launch of the lending program.

These models are also periodically validated by independent third parties in accordance with regulatory guidance.

For retained portfolios, we conduct vintage analyses to ensure credit is performing as expected.

Loan Approval Authority .

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The thresholds associated with lending authorities vary by loan product.

Our loan committee is comprised of our Chief Executive Officer, our President, our Chief Credit Officer, our Chief Financial Officer, certain other members of management and select senior loan officers, which is primarily responsible for day-to-day implementation and oversight of our loan approval procedures.

Our loan committee is comprised of our Chief Executive Officer/President, our Chief Credit Officer, our Chief Financial Officer, certain other members of management and select senior loan officers, which is primarily responsible for day-to-day implementation and oversight of our loan approval procedures.

The levels of lending authority are periodically reviewed by the Bank’s board of directors.

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

Any loan policy

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

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

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

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We record any necessary charge-offs promptly and maintain adequate allowance levels for probable loan losses incurred in the loan portfolio.

Management regularly reviews the status of the watch list and classified assets portfolio as well as the larger credits in the portfolio.

Management regularly reviews the status of the watch list and classified assets portfolio as

well as the larger credits in the portfolio.

Once a loan is identified as a problem loan or a loan requiring a workout, the Bank makes an evaluation and develops a plan for handling the loan.

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(a) continuation of loan collection efforts on their existing terms, (b) a restructure of the loan’s terms, (c) a sale of the loan, (d) a charge-off or partial charge-off, (e) foreclosure on pledged collateral, or (f) acceptance of a deed in lieu of foreclosure.

For loans originated through our Strategic Program, the Bank does not currently grade individual loans held-for-investment due to their small balances and homogenous nature.

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

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

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The Bank’s legal lending limit on loans to a single borrower was approximately $23.0 million as of December 31, 2025.

Strategic Programs

Strategic Program Loan Portfolio

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

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

Bank and the specific Strategic Program service provider.

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

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

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

The Bank’s current Strategic Program service providers inclu de Upstart, Elevate, Reach (formerly Liberty Lending), Plannery, Backd, Albert, Tilt, Earnest, PowerPay, Clasp, LendingPoint, OppLoans, Mulligan Funding, and American First Finance.

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

The Bank has engaged with other Strategic Program service providers since we established our first Strategic Program in 2016 and we may enter into Strategic Programs with other service providers in the future.

Underwriting.

We review and approve the credit approval models prior to the launch of the lending program with the Strategic Partner.

These credit models are periodically validated by independent third parties in accordance with regulatory

For both held-for-sale (“HFS”) and held-for-investment (“HFI”) portfolios, we conduct vintage analyses to evaluate loan performance.

We originate loans within a predetermined underwriting criterion that is approved by the Board.

Senior management is responsible for reviewing and assessing the market, credit and industry data as it pertains to the proposed credit risk related to the HFS and HFI loan programs.

This is accomplished by various controls and monitoring activities, including, but not limited to:

• Reviewing of credit model validation reports

• Presenting to Loan Committee and Board for approval prior to soft launch and annually thereafter;

• Assisting Information Technology in programming underwriting rules into our API;

• Monitoring veracity of underwriting rules;

• Approving any changes and escalating non-compliance as necessary;

• Ongoing financial review of all Strategic Partners.

Loan Approval Authority.

Our lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by our Board and Senior Management in consultation with the Strategic Program.

Ongoing Credit Risk Management.

With the exception of Backd, the Bank does not currently risk rate individual HFI loans due to their small balances and homogenous nature.

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

Credit Concentrations .

We actively monitor and manage the composition of our HFS and HFI portfolios, including credit concentrations.

Our credit policies establish concentration limits by loan product to manage portfolio diversification.

The Bank’s concentration management program couples quantitative data with a thorough qualitative approach to provide an in-depth understanding of its loan portfolio concentrations.

The Bank’s portfolio analysis includes concentration trends by portfolio product type, overall growth trends, pool correlations, risk rating trends, policy and/or underwriting exceptions, nonperforming asset trends, stress testing, market and submarket analysis and changing economic conditions.

The portfolio concentration limits set forth in the Bank’s lending and collection policies are reviewed and approved by the Bank’s Board at least annually.

Concentration levels are monitored by management and reported to the Bank’s Board on a quarterly basis.

Lending Limits.

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

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

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

The Bank offers consumer loans for loan amounts up to $250,000 with terms not to exceed 180 months.

The Bank offers commercial loans for loan amounts up to $5.0 million with terms not to exceed 120 months.

The Bank has a documented exceptions process wherein we can approve loans outside these thresholds with Board approval;

however no single unsecured loan will ever exceed 15% of capital and no single secured loan will ever exceed 25% of capital.

The Bank’s legal lending limit on loans to a single borrower was approximately $23.0 million as of December 31, 2025.

Selection and Oversight .

We select service providers for our Strategic Programs applying third party guidance promulgated by the FDIC, including comprehensive onboarding due diligence covering strategic, operational, transaction, compliance, credit and other risks, and evaluating any potential reputational impact.

We approve service providers for our Strategic Programs considering third party guidance promulgated by the Federal Deposit Insurance Corporation (“ FDIC”) and our own guidelines and policies, including comprehensive onboarding due diligence covering strategic, operational, transaction, compliance, credit and other risks, and evaluating any potential reputational impact.

Furthermore, the Bank conducts extensive ongoing oversight and monitoring of the Strategic Program service providers in accordance with regulatory requirements and as augmented by Bank policies and the Bank’s compliance management systems developed for its oversight of the Strategic Program service providers.

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In other Strategic Programs, the Bank may choose not to retain any loans or interest until the Strategic Program service provider has satisfied certain audit requirements of the Bank.

Credit Enhanced .

The Bank offers an enhanced balance sheet solution to select Strategic Partners.

After a thorough credit review of the Strategic Partner and the portfolio’s performance, the Bank calculates the maximum amount the Bank will carry on its balance sheet.

The Bank receives the full contractural loan interest but retains only a rate based on Prime plus an agreed-upon margin for the outstanding balance.

Generally the interest received that exceeds the retained interest is passed to the strategic partner in the following manner.

First, the Bank retains the interest it is owed for holding the loan on its balance sheet.

Second, the Bank owes the amount of interest received on each individual loan that exceeds the Bank’s retained rate of interest to the strategic partner in the form of a servicing or guarantee fee.

Third, from those proceeds, the Strategic Partner will pay into the loan loss reserve the amount needed to fund the loan loss reserve to the target level.

Fourth, the Bank will pay any remaining amount to the Strategic Partner.

If the cash flow to the Strategic Partner is insufficient to fund the loan loss reserve for the minimum target level, then the Strategic Partner must fund the shortfall.

The Bank launched the credit enhanced program at the end of 2024, and the outstanding balance of credit enhanced loans as of December 31, 2025 , was $108.1 million.

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

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

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

Fees and Other Economics.

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

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

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

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

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

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

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

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

As of December 31, 2025, and 2024, this subsidiary holds $0.4 million and $0.3 million, respectively, of equity securities o f five and two Strategic Program service providers, respectively.

Funding and Deposits

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Our core deposits, as of December 31, 2025, constituted 28.6% of our funding sources (our core deposits comprise the sum of demand deposits, FBO demand deposits, NOW accounts, MMDA accounts, savings accounts, and time deposits under $250,000 that are not brokered deposits).

The certificates of deposit are predominately brokered deposits.

Securities Portfolio

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

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

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

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

We also review our securities for potential impairment (other-than-temporary impairments) at least quarterly.

The banking and financial services industry is highly-competitive, and we compete with a wide range of financial institutions within our markets, including local, regional and national commercial banks, credit unions, and non-bank financial service providers such as financial technology companies and other financial intermediaries for certain of our products and services.

Segment Reporting

Historically, we managed our business on the basis of one operating and reportable segment.

During the third quarter of 2025, we revised our reportable segments to reflect a change in the manner in which the business is managed.

Based on significant operational growth and how our chief operating decision maker (“CODM”) reviews operating results and makes

decisions about resource allocation, we now have three reportable segments:

traditional banking, BaaS and treasury and administration.

The traditional banking segment provides loan and deposit products and services to consumers and businesses nationally and in and around the Salt Lake City, Utah MSA.

The BaaS segment provides lending, card and payments solutions nationally to fintech brands.

The treasury and administration segment consists of investments, deposits sourced nationally to support the business segments, and other items not specific to the traditional banking or BaaS segments.

For more information about each of the Company’s reportable segments, please see Note 17 – Segments of the accompanying notes to the consolidated financial statements included included in Part II, Item 8.

The banking and financial services industry is highly-competitive, and we compete with a wide range of financial institutions within our markets, including local, regional and national commercial banks, credit unions, and non-bank financial service providers such as financial technology companies, private credit lenders and other financial intermediaries for certain of our products and services.

Some of our competitors are not currently subject to the regulatory restrictions and the level of regulatory supervision applicable to us.

For example, financial technology companies have been actively acquiring or pursuing bank charters to gain direct access to deposits, reduce reliance on partner banks, and lower capital costs, driven by a more permissive regulatory environment.

This shift allows Fintech companies to scale and operate with the same authority as traditional banks.

The number of federal bank charter applications in 2025 reached its highest level since 2020, with numerous, crypto-adjacent, and non-bank firms seeking licensing and the Office of the Comptroller of the Currency (“OCC”) and the FDIC are signaling increased openness to fintech charter applications, encouraging new entrants.

Interest rates on loans and deposits, as well as prices on fee-based services, are typically significant competitive factors within the banking and financial services industry.

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The Federal Reserve conducts examinations of the Company and its subsidiaries.

In addition, as a Utah state-chartered bank that is not a member of the Federal Reserve, the Bank is subject to primary regulation, supervision, and examination by the FDIC and the UDFI.

addition, as a Utah state-chartered bank that is not a member of the Federal Reserve, the Bank is subject to primary regulation, supervision, and examination by the FDIC and the UDFI.

The Bank’s deposits are insured by the FDIC through the Deposit Insurance Fund (“DIF”).

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The Federal Reserve also has the authority under the BHC Act to require a bank holding company to terminate any activity or to relinquish control of a nonbank subsidiary upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness and stability of any bank subsidiary of the bank holding company.

The FDIA provides that, in the event of the “liquidation or other resolution” of an insured depository institution, the claims of depositors of the institution (including the claims of the FDIC as a subrogee of insured depositors) and certain claims for administrative expenses of the FDIC as a receiver will have priority over other general unsecured claims against the institution.

If an insured depository institution, such as the Bank, fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors, including the institution’s holding company, with respect to any extensions of credit they have made to such insured depository institution.

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

In addition, the Bank’s deposit

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

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

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

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Bank holding companies and banks are subject to various regulatory capital requirements administered by state and federal agencies.

These agencies may establish higher minimum requirements if, for example, a banking organization previously has received special attention or has a high susceptibility to interest rate risk.

These agencies may establish higher minimum requirements if, for example, a banking organization previously has credit quality issues or has a high susceptibility to interest rate risk or liquidity risk.

Risk-based capital requirements determine the adequacy of capital based on the risk inherent in various classes of assets and off-balance sheet items.

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On November 13, 2019, the federal regulators finalized and adopted a regulatory capital rule establishing a new community bank leverage ratio (“CBLR”), which became effective on January 1, 2020.

Eligibility criteria to utilize CBLR instead of the Basel III risk-based capital ratios include having total assets less than $10 billion and off-balance sheet exposures that were less than 25% of total assets, among others.

Eligibility criteria to utilize CBLR instead of the Basel III risk-based capital ratios include having total assets less than $10 billion and off-balance sheet exposures that is less than 25% of total assets, among others.

The Company and the Bank qualified for and elected to use CBLR beginning in the first quarter of 2020.

The Company and Bank continue to qualify for and elect to use the CBLR capital alternative.

Federal law provides the federal banking regulators with broad power to take prompt corrective action to resolve the problems of undercapitalized institutions.

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placing limits on asset growth and restrictions on activities;

requiring the institution to issue additional capital stock (including additional voting stock) or to be acquired;

requiring the institution to issue additional capital stock (including additional voting stock) or

to be acquired;

restricting transactions with affiliates;

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Banks are also prohibited from purchasing any “low quality” assets from an affiliate.

The Dodd-Frank Act generally enhanced the restrictions on transactions with affiliates under

Section 23A and 23B of the FRA, including an expansion of the definition of “covered transactions” to include derivatives transactions, repurchase agreements, reverse repurchase agreements and securities lending or borrowing transactions and an increase in the period of time during which collateral requirements regarding covered credit transactions must be satisfied.

The Dodd-Frank Act generally enhanced the restrictions on transactions with affiliates under Section 23A and 23B of the FRA, including an expansion of the definition of “covered transactions” to include derivatives transactions, repurchase agreements, reverse repurchase agreements and securities lending or borrowing transactions and an increase in the period of time during which collateral requirements regarding covered credit transactions must be satisfied.

The Federal Reserve has promulgated Regulation W, which codifies prior interpretations under Sections 23A and 23B of the FRA and provides interpretive guidance with respect to affiliate transactions.

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Section 22(g) and Regulation O identifies limited circumstances in which banks are permitted to extend credit to executive officers.

Furthermore, we are prohibited from engaging in asset purchases or sales transactions with our officers, directors, or principal shareowners unless the transaction is on market terms and, if the transaction represents greater than 10% of the capital and surplus of the bank, a majority of the bank’s disinterested directors has approved the transaction.

Furthermore, we are prohibited from engaging in asset purchases or sales transactions with our officers, directors, or

principal shareowners unless the transaction is on market terms and, if the transaction represents greater than 10% of the capital and surplus of the bank, a majority of the bank’s disinterested directors has approved the transaction.

Incentive Compensation

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

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

In accordance with the Dodd-Frank Act, the federal banking agencies prohibit incentive-based compensation arrangements that encourage inappropriate risk taking by covered financial institutions (generally institutions that have over $1.0 billion in assets) and are deemed to be excessive, or that may lead to material losses.

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

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We are required to pay assessments to the FDIC on a quarterly basis.

The assessment amount is the product of multiplying the assessment base by the assessment amount.

The assessment amount is the product of multiplying the assessment base by the assessment rate.

The assessment base against which the assessment rate is applied to determine the total assessment due for a given period is the depository institution’s average total consolidated assets during the assessment period less average tangible equity during that assessment period.

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

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

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

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

Regulatory Restrictions on Dividends and Repurchases of Equity Securities

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

Bank holding companies also are required to consult with the Federal Reserve before materially increasing dividends.

companies also are required to consult with the Federal Reserve before materially increasing dividends.

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

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

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

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

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

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

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

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

Most of the final CRA rule’s requirements would have been applicable beginning January 1, 2026 .

However, in July of 2025, the federal banking regulators issued a proposal to rescind the 2023 CRA final rule.

Regulators are currently applying the pre-2023 CRA framework while waiting for the proposal to formally pass.

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

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persons and (v) verification and certification of money laundering risk with respect to private banking and foreign correspondent banking relationships.

For many of these tasks a bank must keep records to be made available to its primary federal regulator.

For many of these

tasks a bank must keep records to be made available to its primary federal regulator.

AML rules and policies are developed by a bureau within the Financial Crimes Enforcement Network (“FinCEN”), but compliance by individual institutions is overseen by its primary federal regulator.

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Cybersecurity

Federal banking regulators, as well as the U.S.

Securities and Exchange Commission (“SEC”) and related self-regulatory organizations, regularly issue guidance regarding cybersecurity that is intended to enhance cybersecurity risk management among financial institutions.

Federal banking regulators, as well as the Securities and Exchange Commission (“SEC”) and related self-regulatory organizations, regularly issue guidance regarding cybersecurity that is intended to enhance cybersecurity risk management among financial institutions.

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

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Banking organizations are required to notify their primary federal regulator of significant computer security incidents within 36 hours of determining that such an incident has occurred.

In addition, the SEC recently enacted rules, effective as of December 18, 2023, requiring public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on annual basis material information regarding their cybersecurity risk management, strategy, and governance.

In addition, the SEC requires public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy, and governance.

Federal Home Loan Bank Membership

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

Our Relationship with Business Funding Group

BFG is a nationally significant referral source of small business loans.

Included in these loans are SBA loans to be funded by financial institutions and other SBA lenders.

BFG works alongside a network of over 50 banks to refer business loans to small, independent businesses across various industries.

Our relationship with BFG is an important component of our diversification strategy as BFG has been the primary source of SBA loan referrals for the Bank.

In consideration of marketing and referral services provided to the Bank, BFG receives a fee for SBA loans referred to the Bank that are closed and funded by the Bank.

The fees on each SBA loan referred to the Bank by BFG are determined on a loan-by-loan basis and based on the amount and terms of the principal SBA loan.

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

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

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

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

Unless otherwise exercised, the warrants will expire on March 31, 2028.

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

On February 5, 2024, the transaction was consummated and the Company issued an aggregate 339,176 shares of the Company’s common stock in a private placement to the sellers in exchange for the additional membership interest in BFG.

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

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

Available Information

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

What changed 10-K

Item 1. Business