Finwise Bancorp (FINW) risk factors, FY2024 10-K

Risks Related to Cybersecurity and Technology

1. 01System failure or cybersecurity breaches of our network security could subject us to increased operating costs as well as litigation and other potential losses
2. 02We may not have the resources to keep pace with rapid technological changes in the industry or implement new technology effectively
3. 03Our operations could be interrupted if our third-party service providers or Strategic Program service providers experience operational or other systems difficulties or terminate their services

Risks Related to Our Banking Business

1. 04As a business operating in the financial services industry, our business and operations may be adversely affected in numerous and complex ways by weak economic conditions
2. 05Acts of terrorism, geopolitical and other external events could impact our ability to conduct business
3. 06Our commercial and consumer banking clients who participate in our real estate lending program and SBA 7(a) lending program are concentrated in certain geographic areas and we are sensitive to adverse changes in those regional economies
4. 07We face strong competition from financial services companies and other companies that offer banking services
5. 08We may not be able to measure and limit our credit risk adequately, which could lead to unexpected losses
6. 09in value or become illiquid, and the level of delinquencies, nonperforming loans, and charge-offs could rise and require significant additional provisions for loan losses
7. 10Our ACL may prove to be insufficient to absorb potential losses in our loan portfolio
8. 11New lines of business or new products and services may subject us to additional risks
9. 12We may be subject to certain risks in connection with growing through mergers and acquisitions
10. 13Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans
11. 14Generally, we do not maintain reserves or loss allowances for such potential claims and any such claims could materially and adversely affect our business, financial condition and earnings
12. 15We rely on BFG for loan referrals associated with our SBA 7(a) lending program, any disruption of that relationship may adversely impact our SBA lending business
13. 16Appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, other real estate owned and repossessed business and personal property may not accurately describe the net value of the asset
14. 17We may not be able to protect our intellectual property rights, and may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful
15. 18Our origination of construction loans exposes us to increased lending risks
16. 19The small- to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair our borrowers’ ability to repay loans
17. 20Our concentration of large loans to a limited number of borrowers may increase our credit risk
18. 21Liquidity is essential to our business. We rely on our ability to generate deposits and effectively manage the repayment and maturity schedules of our loans and investment securities, respectively, to ensure that we have adequate liquidity to fund our operations
19. 22If we are unable to attract additional merchants and retain and grow our existing merchant relationships, our business, results of operations, financial condition, and future prospects could be materially and adversely affected
20. 23We are subject to interest rate risk as fluctuations in interest rates may adversely affect our earnings
21. 24The accuracy of our financial statements and related disclosures could be affected if the judgments, assumptions or estimates used in our critical accounting policies are inaccurate
22. 25We could recognize losses on investment securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate
23. 26We are subject to certain operational risks, including, but not limited to, customer, employee or third-party fraud
24. 27We rely heavily on our executive management team and other key employees, and we could be adversely affected by the unexpected loss of their services
25. 28Negative public opinion regarding the Company or failure to maintain our reputation within the industries we serve and across our product lines could adversely affect our business and prevent us from growing our business
26. 29We may be susceptible to deposit run-off risks
27. 30We may not be able to raise the additional capital needed, in absolute terms or on terms acceptable to us, to fund our growth strategy in the future if we continue to grow at our current pace
28. 31Climate change or government action and societal responses to climate change could adversely affect our results of operations
29. 32We expect to derive a percentage of our deposits, total assets and income from deposit accounts generated through our Fintech Banking and Payment Solutions relationships
30. 33Our strategy of pursuing business with our Fintech Banking and Payment Solutions customers has been adopted by other institutions with which we compete
31. 34Our agreements with Fintech Banking and Payment Solutions customers may expose us to credit risk
32. 35Our agreements with Fintech Banking and Payment Solutions customers may produce limited revenue and may expose us to liability for compliance violations by Fintech Banking and Payment Solutions customer

Risks Related to Regulation

1. 36We are subject to regulation, which increases the cost and expense of regulatory compliance and therefore reduces our net income and may restrict our growth and ability to acquire other financial institutions
2. 37Legislative and regulatory actions taken now or in the future may increase our costs and impact our business, governance structure, financial condition or results of operations
3. 38Due to Section 162(m) of the Internal Revenue Code (the “Code”), we may not be able to deduct all of the compensation of some executives, including executives of companies we may acquire in the future
4. 39Because of the Dodd-Frank Act and related rulemaking, the Company is subject to more stringent capital requirements
5. 40Federal and state banking agencies periodically conduct examinations of our business, including our compliance with laws and regulations, and our failure to comply with any regulatory actions, if any, could adversely impact us
6. 41Financial institutions, such as the Bank, face risks of noncompliance and enforcement actions related to the Bank Secrecy Act and other anti-money laundering statutes and regulations
7. 42Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities
8. 43We are subject to numerous laws and regulations, designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws or regulations could lead to a wide variety of sanctions
9. 44We may be subject to liability for potential violations of predatory lending laws, which could adversely impact our results of operations, financial condition and business
10. 45Regulatory agencies and consumer advocacy groups have asserted claims that the practices of lenders and loan servicers result in a disparate impact on protected classes
11. 46Increases in FDIC insurance premiums could adversely affect our earnings and results of operations

Risks Relating to Our Strategic Programs

1. 47The Bank and our Strategic Program service providers are subject to borrower protection laws and federal and state consumer protection laws and may be subject to public criticism by consumer advocacy groups
2. 48If we are unable to maintain our relationships with our Strategic Program service providers, our business will suffer
3. 49Inadequate oversight of our relationships with our Strategic Program service providers and POS merchants could result in regulatory actions against the Bank, which could adversely affect our business, financial condition and result of operations
4. 50Fraudulent activity associated with a Strategic Program service provider could negatively impact operating results, brand and reputation and cause the use of a Strategic Program’s loan products and services to decrease and its fraud losses to increase
5. 51We depend on the accuracy and completeness of information provided by our Fintech Banking and Payment Solutions service providers for our lending, payments and BIN programs

Risks Related to Potential Strategic Transactions

1. 52We may pursue strategic acquisitions in the future, and we may not be able to overcome risks associated with such transactions
2. 53We have entered into, and expect to continue to enter into, joint venture, strategic collaboration, teaming and other business arrangements, and these activities involve risks and uncertainties. A failure of any such relationship could have a material adverse effect on our business and results of operations
3. 54Acquisitions and strategic collaborations may never materialize

Risks Related to Ownership of Our Common Stock

1. 55The market price of our common stock may be subject to substantial fluctuations, which may make it difficult for you to sell your shares at the volume, prices and times desired
2. 56The market price of our common stock may be highly volatile, which may make it difficult for you to resell your shares at the volume, prices and times desired. There are many factors that may affect the market price and trading volume of our common stock, most of which are outside of our control
3. 57Our executive management and board of directors have significant control over our business
4. 58We are an emerging growth company and smaller reporting company, and the reduced regulatory and reporting requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors
5. 59Provisions in our governing documents and Utah law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies
6. 60Our Articles and Bylaws contain an exclusive forum provision that limits the judicial forums where our shareholders may initiate derivative actions and certain other legal proceedings against us and our directors and officers
7. 61Our common stock is not an insured deposit and is subject to risk of loss