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Sat Oct 31 · markets closed3 signals on Oct 30129 insider buys this week · $10BCIRO short report next: Nov 14The week ahead

FINW

Finwise Bancorp
NASDAQ · FINANCIALS · STATE COMMERCIAL BANKS
13.19
−0.14 −1.05%
USD · close Oct 30
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MKT CAP $183.1MP/E 13.7DIV YIELD —FCF YIELD 3.00%REV TTM —NET INCOME $13.7M +1.0%NET CASH —52W 10.45 – 19.35SEC XBRL · TTM TO Invalid Date

How FINW rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025
Text kept
67%
of sentences unchanged
Added
223
new sentences
Dropped
167
sentences removed
Length
+1,924
words, now 33,525

New in FY2025

  • If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from our forward-looking statements.
  • SUMMARY OF RISK FACTORS Our business is subject to a number of risks and a summary of the significant risk factors is set forth below.
  • Risk Factors and should be read together with this summary and considered along with other information contained in this annual report before investing in our securities.
  • Risks Related to Our Banking Business: • Risks related to the loans we make, including the heightened risk associated with construction loans, loans to small-to-medium sized businesses, concentration of large loans to a limited number of borrowers and with respect to secured loans, the value of the assets collateralizing such loans • Risks related to our SBA lending program including our dependency on the U.S. federal government and our reliance on Business Funding Group, LLC (“BFG”) for loan referrals in originating loans under the program; • Adverse changes to regional economies, particularly those with a concentration of commercial and consumer banking clients that participate in our real estate lending program and SBA 7(a) lending program; • Inability to measure our credit risk adequately and insufficiency for our allowance for credit losses to absorb potential losses in our loan portfolio; • Challenges with managing interest rate risk, including fluctuations and volatility that could impact our lending strategy and value of our loan portfolio • Our ability to manage our liquidity appropriately, including deposit run-off risk and challenges with raising additional capital on favorable terms or at all; • Competition among other financial services companies that offer banking and lending services, including the recent pursuit of bank charters by fintech companies; • The significant reliance on our executive management team and other key employees; • Our ability to grow our revenue through mergers and acquisitions and/or new lines of business, new products and services that we may offer and additional merchant relationships and the risks associated with such potential growth; • Risks related to our agreements and relationships with Fintech Banking and Payment Solutions; • The ability to maintain effective internal controls over financial reporting, including the reliability and understanding of the presentation of our financial statements; • Operational risks including customer, employee or third-party vendor fraud or error; • The impact that weak economic conditions may have on the financial services industry; • The impact of acts of terrorism, geopolitical and other external events may have on our ability to conduct our business; Risks Related to Our Strategic Programs: • Risks related to the existing and new regulations imposed on us and our Strategic Program service providers that continue to impact our ability to make certain loans, including “true lender” loans originated through marketplaces found to violate state usury laws; • Our ability to maintain relationships with our Strategic Program service providers; • Our reliance on deposit accounts with our Strategic Program service providers that serves as an important source of funding; • Risks related to fraudulent activity and the dependency of accuracy and completeness of information provided by our Fintech Banking and Payment Solutions service providers; Risks Related to Technology: • Risks related to system failure or cybersecurity breaches of our network security; • Failure to extensively test our proprietary technologies and analytic models; • The inability to keep pace with rapid technological changes or implement new technology effectively, including the development and use of artificial intelligence; • Our ability to protect and enforce our intellectual property rights and proprietary technology; • Risks related to the interruption of our operations if our third-party service providers or Strategic Program service providers experience operational or other systems difficulties; Risks Related to Regulatory, Legal and Compliance: • Risks associated with the highly regulated environment in which we operate, including the effects of heightened regulatory and supervisory requirements, expectations and scrutiny in the U.S. leading to increased compliance, regulatory and other risks and costs and subject us to legal and regulatory examinations, investigations and enforcement actions; • Risks related to maintaining adequate regulatory capital to support our business strategies including the long-term impact of the regulatory capital standards and the capital rules of U.S. banks; • Risks related to our use of third-party service providers and our other ongoing third-party business relationships, which are subject to increasing regulatory requirements and attention; • Risks related to litigation and regulatory actions, including enforcement actions, which could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities; • Risks associated to us being subject to numerous local, state and federal laws and regulations and to regular examinations by our regulators of our business and compliance with laws and regulations; • Risks related to the FDIC’s restoration plan and related increased assessment rates; • Risks related to reviews performed by the IRS and state taxing authorities and potential changes in U.S. federal, state or local tax laws; • Risks related to privacy regulations, information security and data protection that could increase our costs, affect or limit how we collect and use personal information; • Risks related to climate change and related legislative and regulatory initiatives, as well as evolving ESG expectations; Risks related to Ownership of our Common Stock: • Risks related to substantial fluctuations in the pricing of our common stock; • Risks related to management and the board having significant control over our business; and • Risks related to provisions in our governing documents and Utah law having an anti-takeover effect and restricting limitations on dividends.
  • Our business is conducted through three reportable segments: traditional banking, banking as a service (“BaaS”) and treasury & administration.
  • 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 metropolitan statistical area (“MSA”).
  • 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.
  • 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: ($ in thousands) Total Loans % of Loans in Category of Total Loans SBA $ 205,615 35.1 % Commercial leases 78,743 13.4 % Commercial, non-real estate 4,201 0.7 % Residential real estate 59,602 10.2 % Strategic Program loans 129,768 22.2 % Commercial real estate: Owner occupied 84,016 14.3 % Non-owner occupied 1,638 0.3 % Consumer 21,926 3.8 % Total $ 585,509 100.0 % Note: SBA loans in the table above include $102.7 million of SBA 7(a) loan balances that are guaranteed by the SBA.
  • During the year ended December 31, 2025, we originated approximately $116.7 million in SBA 7(a) loans and held approximately $205.6 million of SBA 7(a) loans on our balance sheet as of December 31, 2025 of which $102.7 million was guaranteed by the SBA and $102.9 million was unguaranteed.
  • As of December 31, 2025, our loan portfolio is comprised of 17.6% in unguaranteed portions of SBA 7(a) loans and 17.5% in guaranteed portions of SBA 7(a) loans.
  • The maximum 7(a) loan amount is $5.0 million.
  • As of December 31, 2025, our commercial leases comprised 13.4% of the Bank’s loans held-for-investment portfolio.
  • 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 E state Loans .
  • 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.
  • As of December 31, 2025, our residential real estate loans comprised 10.2% of the Bank’s loans held-for-investment portfolio, and our commercial real estate loans comprised 14.6% of the Bank’s loans held-for-investment portfolio.
  • The majority of our commercial real estate loans are owner occupied commercial real estate loans which comprise 14.3% of the Bank's loans held-for-investment portfolio.
  • 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.
  • 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, 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.
  • Strategic Program Loans Held-for-Sale The majority of originations of Strategic Program loans as described above are not maintained by us as loans held-for-investment.
  • Business checking and money market demand accounts associated with Strategic Program relationships held balances of approximately $130.8 million (including $53.4 million held as collateral) as of December 31, 2025.
  • At December 31, 2025, we had $146.5 million in Strategic Program loans held-for-sale.
  • Traditional Loan Portfolio Underwriting .
  • 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 Bank’s legal lending limit on loans to a single borrower was approximately $23.0 million as of December 31, 2025.
  • Strategic Program Loan Portfolio Overview .
  • 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.
  • 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 guidance.
  • 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.
  • 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.
  • With the exception of Backd, the Bank does not currently risk rate individual HFI loans due to their small balances and homogenous nature.

and 183 more.

Gone since FY2024

  • The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Report, including those discussed in the section entitled “Risk Factors.” If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from our forward-looking statements.
  • SUMMARY OF RISK FACTORS Our business, financial condition and results of operations are subject to a number of substantial risks and uncertainties.
  • Some of these risks include the following: • third-party service provider risk, including risks that we may be unable to maintain or increase loan originations facilitated through our Strategic Programs; • legal, accounting and compliance risks, including risks related to the extensive state and federal regulation under which we operate and changes in such regulations; • changes in the regulatory oversight environment impacting our Strategic Programs or non-compliance of federal and state consumer protection laws by our Strategic Program service providers; • legal and regulatory risks associated with “true lender” statutes associated with our Strategic Programs; • reputational risks, including the risk that we may be subject to negative publicity about us or our industry, including the transparency, fairness, user experience, quality, and reliability of our lending products or distribution channels; • legislative, regulatory, legal, and reputational risks related to our Strategic Programs, including those relating to our small dollar lending program; • securities market, inflation and interest rate risks, including risks related to interest rate fluctuations and the monetary policies and regulations of the Board of Governors of the Federal Reserve System, or the Federal Reserve; • risks related to cybersecurity breaches and system failures; • operational and strategic risks, including the risk that we may not be able to implement our growth strategy, our continued ability to establish relationships with Strategic Program service providers, and the possible loss of key members of our senior leadership team; • credit risks, including risks related to the significance of SBA 7(a), Strategic Programs and construction loans in our portfolio, our relationship with BFG, our ability to effectively manage our credit risk and the potential deterioration of the business and economic conditions in our markets; • liquidity and funding risks, including the risk that we will not be able to meet our obligations due to risks relating to our funding sources; and • investment risks, including volatility in the trading of our common stock and limitations on our ability to pay dividends.
  • 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.
  • 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.
  • 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.
  • The methodology for determining such fees has been substantially consistent since 2019.
  • 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).
  • The following table presents the composition of our loans held-for-investment portfolio by lending program, as of December 31, 2024: ($ in thousands) Total Loans % of Loans in Category of Total Loans SBA $ 255,056 54.8 % Commercial leases 70,153 15.1 % Commercial, non-real estate 3,691 0.8 % Residential real estate 51,574 11.1 % Strategic Program loans 20,122 4.3 % Commercial real estate: Owner occupied 41,046 8.8 % Non-owner occupied 1,379 0.3 % Consumer 22,212 4.8 % Total $ 465,233 100.0 % Note: SBA loans in the table above include $158.7 million of SBA 7(a) loan balances that are guaranteed by the SBA.
  • During the year ended December 31, 2024, we originated approximately $68.2 million in SBA 7(a) loans and held approximately $255.1 million of SBA 7(a) loans on our balance sheet as of December 31, 2024 of which $158.7 million was guaranteed by the SBA and $96.3 million was unguaranteed.
  • As of December 31, 2024, our loan portfolio is comprised of 20.7% in unguaranteed portions of SBA 7(a) loans and 34.1% in guaranteed portions of SBA 7(a) loans.
  • The maximum 7(a) loan amount is $5 million.
  • As of December 31, 2024, our commercial leases comprised 15.1% of the Bank’s loans held-for-investment portfolio.
  • As of December 31, 2024, our commercial non-real estate loans comprised 0.8% of the Bank’s loans held-for-investment portfolio.
  • Residential and Commercial Real Estate Loans .
  • 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).
  • 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, 2024, our residential real estate loans comprised 11.1% of the Bank’s loans held-for-investment portfolio, and our commercial real estate loans comprised 9.1% of the Bank’s loans held-for-investment portfolio.
  • The majority of our commercial real estate loans are owner occupied commercial real estate loans which comprise 8.8% of the Bank's loans held-for-investment portfolio.
  • The majority of the approximately $22.2 million in consumer loans outstanding as of December 31, 2024, that were not generated through our Strategic Programs were originated in connection with our POS lending program.
  • During the year ended December 31, 2024, we originated approximately $19.2 million in POS loans and held approximately $21.2 million of POS loans on our balance sheet as of December 31, 2024.
  • As of December 31, 2024, our consumer loans comprised 4.8% of the Bank’s total loans held-for-investment portfolio.
  • The majority of originations of Strategic Program loans as described above are not maintained by us as loans held-for-investment.
  • Business checking and money market demand accounts associated with Strategic Program relationships held balances of approximately $113.6 million (including $54.0 million held as collateral) as of December 31, 2024.
  • At December 31, 2024, we had $91.6 million in Strategic Program loans held-for-sale.
  • 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.
  • 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.
  • 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.
  • The Bank’s legal lending limit on loans to a single borrower was approximately $23.0 million as of December 31, 2024.
  • 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.

and 127 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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