FINWISE BANCORP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

The following discussion and analysis of our financial condition and results of
operations should be read together with our consolidated financial statements
and related notes thereto and other financial information included elsewhere in
this Report. In addition to historical information, this discussion and analysis
contains forward-looking statements that involve risks, uncertainties and
assumptions that could cause actual results to differ materially from our
expectations. Factors that could cause such differences are discussed in the
sections of this Report and our most recently filed Annual Report on Form 10-K
entitled "Risk Factors," "Cautionary Note Regarding Forward-Looking Statements"
and elsewhere in this Report. We assume no obligation to update any of these
forward-looking statements except to the extent required by law.

The following discussion pertains to our historical results, on a consolidated
basis. However, because we conduct all our material business operations through
our wholly owned subsidiary, FinWise Bank, the discussion and analysis relates
to activities primarily conducted at the subsidiary level.

All dollar amounts in the tables in this section are in thousands of dollars,
except per share data or where otherwise specifically noted. Unless otherwise
stated, all information in this Report gives effect to a six-for-one stock split
of our common stock completed effective July 26, 2021. The effect of the stock
split on outstanding shares and per share figures has been retroactively applied
to all periods presented in this Report.

Overview

The Company is a Utah corporation and the parent company of FinWise Bank. The
Company's assets consist primarily of its investment in the Bank and all of its
material business activities are conducted through the Bank. The Company is a
registered bank holding company that is subject to supervision by the UDFI and
the Federal Reserve. As a Utah state-chartered bank that is not a member of the
Federal Reserve System, the Bank is separately subject to regulations and
supervision by both the UDFI and the FDIC. The Bank's deposits are federally
insured up to the maximum legal limits. See "Supervision and Regulation."

Our banking business is our only business line. 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. 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. 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. 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. Our analytics platform, FinView™, enhances
our ability to gather and interpret performance data for our originations and
provides management with an ability to identify attractive, risk-adjusted
sectors for growth. These insights coupled with the billions of dollars in
originations funded annually and our ability to sell loans or retain for
investment enhance our unique position. Our track record has demonstrated that
these qualities deliver superior growth and profitability and that the
flexibility inherent in our model enhances our ability to manage credit risk.

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) utilize FinView™ to identify attractive risk-adjusted lending opportunities
and inform the selection of loans for investment while limiting credit losses,
(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: (i) SBA 7(a) loans, (ii)
Strategic Programs, (iii) residential and commercial real estate and (iv)
consumer lending. For a description and analysis of the Company’s loan
categories, see “-Principal Factors Affecting Our Financial Condition”.

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Index

Covid 19 Pandemic


Since March 2020, our nation has experienced a massive health and economic
crisis as a result of the Covid-19 pandemic, which continues to negatively
impact the health and finances of millions of people and businesses and have a
pronounced impact on the global and national economy. To control the spread of
the Covid-19 virus, governments around the world instituted widespread shutdowns
of the economy which resulted in record unemployment in a matter of weeks. The
economic turbulence spawned by the Covid-19 pandemic left many banks with
potential credit quality and income issues. These issues are further compounded
by uncertainties regarding the length, depth and possible resurgence of the
pandemic and its ultimate long-term effects on the economy. In an effort to
reduce the impact of economic shutdowns, the United States Congress has passed
the CARES Act, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and
Venues Act, the Consolidated Appropriations Act, 2021, and recently the American
Rescue Plan Act of 2021. These relief measures have provided stimulus payments
to individuals, expanded unemployment benefits, and created programs that
provided critical financing to small businesses through products such as the
EIDL and the PPP, both of which are being administered by the SBA. Additionally,
the United States government agreed to make six months of payments on SBA loans
and increase the SBA guaranty on SBA 7(a) loans to 90% for loans originated from
February 1, 2020 through September 30, 2021. The SBA has made the full monthly
P&I payments with respect to our qualifying SBA 7(a) customers in "regular
servicing" status for six months. For most of our SBA portfolio (the legacy
loans), the SBA made borrowers' principal and interest payments from April 2020
through September 2020. These were officially referred to as First Round Section
1112 Payments, as they derived from Section 1112 of the CARES Act. To be
eligible for the full six months of First Round Section 1112 Payments, the SBA
loans were required to be: (i) in "regular servicing" status; (ii) approved by
the SBA before March 27, 2020; and (iii) fully disbursed by September 27, 2020.
Under the Economic Aid Act, the SBA will make an additional two payments for
eligible SBA customers, capped at $9,000 per month per loan. Borrowers with loan
payments above $9,000 per month are responsible for paying the difference. For
our legacy portfolio, the SBA will make payment on the lesser of a borrower's
monthly principal and interest payment or $9,000 per month from February 2021
through March 2021. These are referred to as Second Round Section 1112 Payments.

The SBA released a list of NAICS codes deemed to have been particularly affected
by the Covid-19 pandemic. SBA customers who met all other Section 1112
qualifying criteria and operated within certain NAICS codes, are entitled to an
additional three months of payments which were completed in 2021. As of March
31, 2021, the Bank had 35 qualifying SBA loans totaling approximately $4.9
million in SBA 7(a) unguaranteed balance that received an additional three
months of Second Round Section 1112 Payments, which were capped at $9,000 per
month and per loan. As of March 31, 2022, 5 of the 35 qualifying SBA loans have
been paid in full. The remaining 30 loans are performing and total approximately
$4.4 million in SBA 7(a) unguaranteed balance. As of March 31, 2022, none of the
remaining 30 loans are entitled to additional Section 1112 payments.  We ceased
originating PPP loans after 2020.

We believe the Bank's diversified loan portfolio and associated revenue streams
have enabled the Bank to sustain and grow its business despite the adverse
conditions relating to the Covid-19 pandemic. For the three months ended March
31, 2021, the provision for loan losses amounted to $0.6 million. For the three
months ended March 31, 2022 the provision for loan losses amounted to $2.9
million. While some of the adverse conditions relating to the Covid-19 pandemic
reversed in 2021, and have continued such reversal in the beginning of 2022,
sustained improvements are highly dependent upon strengthening economic
conditions. The Covid-19 pandemic continues to cause economic uncertainties
which may again result in these and other adverse impacts to our financial
condition and results of operations. We believe our SBA 7(a) underwriting
program has remained strong throughout the Covid-19 pandemic and our SBA 7(a)
loans are well collateralized when compared to the SBA industry in general.

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  Index

Results of Operations

Net Income Overview

The following table sets forth the principal components of net income for the
periods indicated.

                                For the Three Months Ended
                                         March 31,
($ in thousands)                 2022                2021
Interest income              $      13,223       $       8,806
Interest expense                      (262 )              (372 )
Provision for loan losses           (2,947 )              (633 )
Non-interest income                 11,682               6,079
Non-interest expense                (9,048 )            (6,663 )
Provision for income taxes          (3,214 )            (1,926 )
Net income                           9,434               5,291



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Index


Net income for the three months ended March 31, 2022 was $9.4 million, an
increase of $4.1 million or 78.3% from net income of $5.3 million for the three
months ended March 31, 2021. The increase was primarily due to an increase of
$5.6 million or 92.2% in non-interest income and an increase of $4.4 million or
50.2% in interest income, offset by an increase of $2.4 million or 35.8% in
non-interest expense and an increase of $2.3 million or 365.6% in provision for
loan losses, as described below.

Net Interest Income and Net Interest Margin Analysis


Net interest income was the primary contributor to our earnings in 2022 and
2021. We believe our net interest income results were enhanced by using FinView™
to identify attractive risk-adjusted lending opportunities and assist in the
selection of Strategic Program loans that we chose to hold for investment. 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."

For the three months ended March 31, 2022, our net interest income increased
$4.5 million, or 53.7%, to $13.0 million compared to the three months ended
March 31, 2021. This increase was primarily due to an increase in asset yields,
growth in average interest earning assets, and a decrease in our cost of funds.
Average interest earning assets increased by $80.1 million, or 26.0%, to $387.8
million for the three months ended March 31, 2022 compared to the three months
ended March 31, 2021, while the related yield on average interest earning assets
increased by 219 basis points to 13.64%, resulting in increased interest income
for the three months ended March 31, 2022 of $13.2 million. A substantial
decrease in the average balances of comparatively low yielding PPP loans during
the three months ended March 31, 2022 contributed to the increase in yield on
average interest earning assets for the period. The corresponding cost of funds
on interest bearing liabilities for the three months ended March 31, 2022
declined by 9 basis points to 0.79%, and the average balance in interest bearing
liabilities decreased by $35.5 million, or 21.0%. The general decline of
interest rates in the U.S. financial markets in 2021 is the primary cause for
the decline in the cost of funds. As indicated in the rate/volume table set
forth below, the decline in the cost of funds and the effect of decreased
volumes of interest-bearing liabilities resulted in decreased interest expense
for the three months ended March 31, 2022 to $0.3 million. 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, and brokered deposit arrangements. For the three months ended March
31, 2022, average outstanding balances under our PPPLF decreased compared to the
three months ended March 31, 2021.  The decrease in funding from our PPPLF was
partially offset by increases in deposits sourced through our branch, Strategic
Programs, SBA 7(a) borrowers, national Institutional Deposit exchanges and
brokered deposit arrangements compared to the three months ended March 31, 2021.
Our net interest margin increased from 10.96% at March 31, 2021 to 13.37% at
March 31, 2022.

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Index


Average Balances and Yields. 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. 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. Loan fees are included in interest income on loans and
represent a net cost of approximately $0.4 million (including de minimis SBA
fees related to PPP loans) for the three months ended March 31, 2022.and $1.3
million (including approximately $0.9 million in SBA fees related to PPP loans)
of net loan fees are included in interest income on loans for the three months
ended March 31, 2021. Average balances have been calculated using daily
averages.

                                                       Three Months Ended March 31,
                                            2022                                          2021
                           Average                       Average         Average                       Average
($ in thousands)           Balance       Interest       Yield/Rate       Balance       Interest       Yield/Rate
Interest earning
assets:
Interest-bearing
deposits with the
Federal
Reserve, non-
U.S. central banks and
other banks               $  79,855     $       28             0.14 %   $  46,885     $       10             0.09 %
Investment securities        11,263             39             1.39 %       1,750              6             1.37 %
Loans held for sale          94,610          6,765            28.60 %      35,349          3,566            40.35 %
Loans held for
investment                  202,052          6,391            12.65 %     223,728          5,224             9.34 %
Total interest earning
assets                      387,780         13,223            13.64 %     307,712          8,806            11.45 %
Less: ALL                   (10,366 )                                      (6,288 )
Non-interest earning
assets                       24,160                                        11,354
Total assets              $ 401,574                                     $ 312,778
Interest bearing
liabilities:
Demand                    $   6,344     $       14             0.88 %   $   6,287     $       14             0.89 %
Savings                       6,678              1             0.06 %       6,851              3             0.18 %
Money market accounts        31,889             22             0.28 %      17,728             16             0.36 %
Certificates of deposit      87,626            224             1.02 %      50,888            264             2.08 %
Total deposits              132,537            261             0.79 %      81,754            297             1.45 %
Other borrowings                985              1             0.41 %      87,267             75             0.34 %
Total interest bearing
liabilities                 133,522            262             0.79 %     169,021            372             0.88 %
Non-interest bearing
deposits                    137,750                                        89,111
Non-interest bearing
liabilities                  11,553                                         6,586
Shareholders' equity        118,749                                        48,060
Total liabilities and
shareholders' equity      $ 401,574                                     $ 312,778
Net interest income and
interest rate spread                    $   12,961            12.85 %                 $    8,434            10.57 %
Net interest margin                                           13.37 %                                       10.96 %
Ratio of average
interest-earning assets
to average interest-
bearing liabilities                                          290.42 %                                      182.06 %



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Index


Rate/Volume Analysis. The following table sets forth the effects of changing
rates and volumes on our net interest income. The rate column shows the effects
attributable to changes in rate. The volume column shows the effects
attributable to changes in volume. 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.

                                                           Three Months Ended March 31,
                                                                       2022
                                                            Increase (Decrease) Due to
($ in thousands)                                        Rate            Volume         Total
Interest income:
Interest-bearing deposits with the Federal
Reserve, non-U.S. central banks and other banks      $        9       $        9     $      18
Investment securities                                         -               33            33
Loans held-for-sale                                        (672 )          3,871         3,199
Loans held for investment                                 1,606             (439 )       1,167
Total interest income                                       943            3,474         4,417
Interest expense:
Demand                                                        -                -             -
Savings                                                      (2 )              -            (2 )
Money market accounts                                        (3 )              9             6
Certificates of deposit                                      95             (135 )         (40 )
Other borrowings                                             17              (91 )         (74 )
Total interest bearing liabilities                          107             (217 )        (110 )
Net interest income                                  $      836       $    3,691     $   4,527



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Index

Provision for Loan Losses


The provision for loan losses is a charge to income to bring our ALL to a level
deemed appropriate by management and approved by of board of directors. We
determine the provision for loan losses monthly in connection with our monthly
evaluation of the adequacy of our ALL. For a description of the factors we
considered in determining the ALL see "-Principal Factors Affecting Our
Financial Condition-Allowance for Loan Losses" and "-Critical Accounting
Policies and Estimates-Allowance for Loan Losses."

Our provision for loan losses was $2.9 million and $0.6 million for the three
months ended March 31, 2022 and 2021, respectively. The increase of $2.3 million
was primarily due to substantial growth in SBA 7(a) and Strategic Program loans,
and an increase in net charge offs.

Noninterest Income


The largest portion of our noninterest income is associated with our Strategic
Program fees. 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 fees.

The following table presents, for the periods indicated, the major categories of
noninterest income:

                                               For the Three Months Ended
                                                        March 31,                         Change
($ in thousands)                                 2022                2021             $             %
Noninterest income:
Strategic Program fees                      $        6,623       $      2,953     $   3,670         124.3 %
Gain on sale of loans                                5,052              2,603         2,449          94.1 %
SBA loan servicing fees                                387                152           235         154.6 %
Change in fair value on investment in BFG             (398 )              360          (758 )      (210.6 %)
Other miscellaneous income                              18                 11             7          63.6 %
Total noninterest income                    $       11,682       $      6,079     $   5,603          92.2 %



For the three months ended March 31, 2022, total noninterest income increased
$5.6 million, or 92.2%, to $11.7 million compared to the three months ended
March 31, 2021. This increase was primarily due to the increase in Strategic
Program fees, gain on sale of loans, and SBA loan servicing fees. The increase
in Strategic Program fees was primarily due to the increase in loan origination
volume in the Strategic Program. The increase in gain on sale of loans was
primarily due to the increase in the number of SBA 7(a) loans sold during the
three months ended March 31, 2022. The increase in SBA loan servicing fees was
primarily due to the increase in SBA 7(a) loans serviced for others during the
period.  These increases were partially offset by a decrease in the change in
fair value on investment in BFG due primarily to the softening of comparable
company values used in determining BFG fair value.

Noninterest Expense


Noninterest expense has increased as we have grown and as we have expanded and
modernized our operational infrastructure and implemented our plan to build an
efficient, technology-driven banking operation with significant capacity for
growth.

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Index


The following table presents, for the periods indicated, the major categories of
noninterest expense:

                                              For the Three Months Ended
($ in thousands)                                       March 31,                         Change
                                               2022                2021              $             %
Noninterest expense:
Salaries and employee benefits             $       7,092       $       4,895     $   2,197          44.9 %
Occupancy and equipment expenses                     302                 194           108          55.7 %
Recovery of SBA servicing asset                      (59 )                 -           (59 )      (100.0 %)
Other operating expenses                           1,713               1,574           139           8.8 %
Total noninterest expense                  $       9,048       $       6,663     $   2,385          35.8 %



For the three months ended March 31, 2022, total noninterest expense increased
$2.4 million, or 35.8%, to $9.0 million compared to the three months ended March
31, 2021. This increase was primarily due to the increase in salaries and
employee benefits. For the three months ended March 31, 2022, salaries and
employee benefits increased $2.2 million, or 44.9%, to $7.1 million compared to
the three months ended March 31, 2021. This increase was primarily due to the
increase in the number of employees during the three months ended March 31,
2022. The increase in employees during this timeframe coincided with an increase
in Strategic Program loan volume and the expansion of our information technology
and security division to support enhancements in our infrastructure, and an
increase in contractual bonuses paid relating to the expansion of the Strategic
Programs in 2022. For the three months ended March 31, 2022, other operating
expense increased $0.1 million, or 8.8%, to $1.7 million compared to the three
months ended March 31, 2021. This increase was primarily due to our initiative
to develop new and upgrade existing technology, increased third party financial
and business process reviews, increased marketing costs, and increased legal and
professional fees, all with the intent of supporting of our growth. For the
three months ended March 31, 2022, the increase in noninterest expense was
partially offset by a the minor recovery and lack of additional impairment on
the SBA servicing asset during the three months ended March 31, 2022.

Financial Condition

Loan Portfolio


We manage our loan portfolio based on factors that include concentrations per
loan program and aggregated portfolio, industry selection and geographies. We
also monitor the impact of identified and estimated losses on capital as well as
the pricing characteristics of each product. The following provides a general
description and the risk characteristics relevant to each of the business lines.
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. We analyze the resulting ratings, as well as other external statistics
and factors such as delinquency, to track the migration performance of the
portfolio balances. This ratings analysis is performed at least quarterly.

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Index

SBA 7(a) Loans


We originate and service loans partially guaranteed by the SBA under its Section
7(a) loan program. SBA 7(a) loans are made to small businesses and professionals
throughout the USA. As of March 31, 2022 and December 31, 2021, we had total SBA
7(a) loans of $126.8 million and $141.3 million, respectively, representing
46.5% and 53.2% of our total loans, respectively. Loans are sourced primarily
through our referral relationship with BFG. Although BFG actively markets
throughout the USA, because of its physical location in the New York area we
have developed a lending presence in the New York and New Jersey geographies.
The maximum SBA 7(a) loan amount is $5 million. Underwriting is generally based
on commercial credit metrics where the primary repayment source is borrower cash
flow, secondary is personal guarantor cash flow and tertiary is the sale of
collateral pledged. These loans may be secured by commercial and residential
mortgages as well as liens on business assets. In addition to typical
underwriting metrics, we review the nature of the business, use of proceeds,
length of time in business and management experience to help us target loans
that we believe have lower credit risk. The SBA 7(a) program generally provides
50%, 75%, 85% and 90% guarantees for eligible SBA 7(a) loans. The guaranty is
conditional and covers a portion of the risk of payment default by the borrower,
but not the risk of improper underwriting, closing or servicing by the lender.
As such, prudent underwriting, closing and servicing processes are essential to
effective utilization of the SBA 7(a) program. 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; however, beginning
in 2020, we made the decision to drive interest income by temporarily retaining
a larger amount of the guaranteed portion of these loans.

SBA Paycheck Protection Program Loans


As of March 31, 2022 and December 31, 2021, we had total PPP loans of $1.0
million and $1.1 million, respectively, representing 0.4% of our total loans,
respectively. The PPP loans also resulted in fees paid by the SBA to the
originating bank for processing PPP loans, which fees are accreted into interest
income over the life of the applicable loans. If a PPP loan is forgiven or paid
off before maturity, the remaining unearned fee is recognized into income at
that time. For the three months ended March 31, 2021, the Company recognized a
total of $0.9 million in PPP-related accreted fees ($0.6 million of which were
accelerated due to loan forgiveness). A de minimis amount was recognized during
the three months ended March 31, 2022 and a de minimis amount of deferred fees
remained as of March 31, 2022.

Commercial, non-real estate


Commercial non-real estate loans consist of loans and leases made to commercial
enterprises that are not secured by real estate. As of March 31, 2022 and
December 31, 2021, we had total commercial non-real estate loans of $3.3 million
and $3.4 million, respectively, representing 1.2% and 1.3% of our total loans,
respectively. 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. For example, commercial
vehicle term loans and commercial working capital term loans. 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. 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. These loans are generally secured by
liens on business assets. Historically, we have retained these loans on our
balance sheet for investment.

Residential real estate


Residential real estate loans include construction, lot and land development
loans that are for the purpose of acquisition and development of property to be
improved through the construction of residential buildings, and loans secured by
other residential real estate. As of March 31, 2022 and December 31, 2021, we
had total residential real estate loans of $30.8 million and $27.1 million,
respectively, representing 11.3% and 10.2% of our total loans, respectively.
Construction loans are usually paid off through the conversion to permanent
financing from third-party lending institutions. Lot loans may be paid off as
the borrower converts to a construction loan. At the completion of the
construction project, if the loan is converted to permanent financing by us or
if scheduled loan amortization begins, it is then reclassified from construction
to single-family dwelling. Underwriting of construction and development loans
typically includes analysis of not only the borrower's financial condition and
ability to meet the required debt obligations, but also the general market
conditions associated with the area and type of project being funded. These
loans are generally secured by mortgages for residential property located
primarily in the Salt Lake City, Utah MSA, and we obtain guarantees from
responsible parties. Historically, we have retained these loans on our balance
sheet for investment.

Strategic Program loans

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. As of March 31, 2022 and December 31,
2021, we had total Strategic Program loans of $101.8 million and $85.9 million,
respectively, representing 37.4% and 32.3% of our total loans, respectively.
Loans originated through these programs are limited to predetermined Bank
underwriting criterion, which has been approved by our board of directors. The
primary form of repayment on these loans is from personal or business cash flow.
Business loans may be secured by liens on business assets, as applicable. We
have generally sold most of these loans, but as our capital grows and FinView™
evolves, we may choose to hold more of the funded loans and/or receivables. We
reserve the right to sell any portion of funded loans and/or receivables
directly to the Strategic Program service providers or other investors. We
retain the legal right to service all these loans, but contract with the
Strategic Program service provider or another approved sub-servicer to service
these loans on our behalf.

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Index

Commercial real estate


Commercial real estate loans include loans to individuals, sole proprietorships,
partnerships, corporations, or other business enterprises for commercial,
industrial, agricultural, or professional purposes, secured by real estate
primarily located in the Salt Lake City, Utah MSA, but not for personal
expenditure purposes. As of March 31, 2022 and December 31, 2021, we had total
commercial real estate loans of $4.2 million and $2.4 million, respectively,
representing 1.5% and 0.9% of our total loans, 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. 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. In addition to real estate, these
loans may also be secured by liens on business assets. Historically, we have
retained these loans on our balance sheet for investment.

Consumer


Consumer lending provides financing for personal, family, or household purposes
on a nationwide basis. Most of these loans are originated through our POS
platform and come from a variety of sources, including other approved merchant
or dealer relationships and lending platforms. As of March 31, 2022 and December
31, 2021, we had total consumer loans of $4.7 million and $4.6 million,
respectively, representing 1.7% of our total loans, respectively. We use a
debt-to-income ("DTI") ratio to determine whether an applicant will be able to
service the debt. The DTI ratio compares the applicant's anticipated monthly
expenses and total monthly obligations to the applicant's monthly gross income.
Our policy is to limit the DTI ratio to 45% after calculating interest payments
related to the new loan. Loan officers, at their discretion, may make exceptions
to this ratio if the loan is within their authorized lending limit. DTI ratios
of no more than 50% may be approved subject to an increase in interest rate.
Strong offsetting factors such as higher discretionary income or large down
payments are used to justify exceptions to these guidelines. All exceptions are
documented and reported. While the loans are generally for the purchase of goods
which may afford us a purchase money security interest, they are underwritten as
if they were unsecured. On larger loans, we may file a Uniform Commercial Code
financing form. Historically, we have retained these loans on our balance sheet
for investment.

Loan Portfolio Program Summary


Through our diversification efforts and FinView™, we have built a portfolio that
we believe positions us to withstand economic shifts. 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. We believe that
these efforts helped minimize our exposure to industries severely impacted by
the Covid-19 pandemic.

The following table summarizes our loan portfolio by loan program as of the
dates indicated:

                                 As of March 31,             As of December 31,
                                      2022                          2021
                                               % of                          % of
                                               total                         total
                               Amount          loans         Amount          loans
SBA(1)                      $     127,778        46.9   % $     142,392        53.6   %
Commercial, non real estate         3,285         1.2   %         3,428         1.3   %
Residential real estate            30,772        11.3   %        27,108        10.2   %
Strategic Program loans           101,819        37.4   %        85,850        32.3   %
Commercial real estate              4,187         1.5   %         2,436         0.9   %
Consumer                            4,711         1.7   %         4,574         1.7   %
Total                       $     272,552       100.0   %     $ 265,788       100.0   %



(1) The amount of SBA loans as of March 31, 2022 and December 31, 2021 includes
approximately $1.0 million and $1.1 million of PPP loans. SBA loans as of March
31, 2022 and December 31, 2021 include $53.2 million and $75.7 million,
respectively, of SBA 7(a) loan balances that are guaranteed by the SBA.

                                       40

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Index

Loan Maturity and Sensitivity to Changes in Interest Rates


As of March 31, 2022, including the impact of PPP loans, $107.7 million, or
54.2%, of the total held for investment loan balance matures in less than five
years. Loans maturing in greater than five years totaled $91.1 million as of
March 31, 2022. The variable rate portion of our total held for investment loan
portfolio at March 31, 2022 was $155.1 million, or 78.0%. As of December 31,
2021, including the impact of PPP loans, $103.1 million, or 50.3%, of the total
held for investment loan balance matures in less than five years. Loans maturing
in greater than five years totaled $101.9 million as of December 31, 2021. The
variable rate portion of our total held for investment loan portfolio at
December 31, 2021 was $163.8 million, or 79.9%. The variable rate portion of the
total held for investment loans reflects our strategy to minimize interest rate
risk through the use of variable rate products.

The following tables detail maturities and sensitivity to interest rate changes
for our loan portfolio at March 31, 2022 and December 31, 2021:

At March 31, 2022                            Remaining Contractual Maturity Held for Investment
                                                                      After Five
                                                     After One        Years and
                                                      Year and         Through          After
                                   One Year           Through          Fifteen         Fifteen
($ in thousands)                   or Less           Five Years         Years           Years         Total
Fixed rate loans:
SBA(1)                          $           623     $        661     $        254     $     110     $   1,648
Commercial, non-real estate               1,087            1,987              202             9         3,285
Residential real estate                   3,113            1,056                -             -         4,169
Strategic Program loans                  17,470           10,544                -             -        28,014
Commercial real estate                    1,624              521                8             1         2,154
Consumer                                  1,485            2,880               53             -         4,418

Variable rate loans:
SBA                                       7,364           29,246           52,542        36,978       126,130
Commercial, non-real estate                   -                -                -             -             -
Residential real estate                  26,047              304              247             5        26,603
Strategic Program loans                       -                -                -             -             -
Commercial real estate                      864              521              648             -         2,033
Consumer                                     79              214                -             -           293
Total                                $   59,756     $     47,934     $     53,954     $  37,103     $ 198,747



(1) The amount of SBA fixed rate loans includes approximately $1.0 million of
PPP loans. PPP loans originated prior to June 5, 2020, have a two year term. PPP
loans originated on or after June 5, 2020, have a five year term. For PPP
borrowers who submit completed applications for forgiveness, loan payments are
automatically deferred until the SBA renders a decision on the forgiveness
request. PPP borrowers who fail to submit timely forgiveness applications are
required to make monthly payments beginning ten months from the end of the
chosen "covered period". The "covered period" is a maximum of 24 weeks from the
origination date. Assuming a 24 week covered period, PPP borrowers are not
required to begin making payments until 16 months after the origination date. At
the time payments begin, if the borrower and lender of a two year PPP loan
mutually agree to extend the term of the loan it can be extended to a five year
term. As of March 31, 2022, three PPP loans have been granted maturity date
extensions.

At December 31, 2021                Remaining Contractual Maturity Held for Investment
                                                            After Five
                                           After One        Years and
                                            Year and         Through          After
                        One Year            Through          Fifteen         Fifteen
($ in thousands)        or Less            Five Years         Years           Years          Total
Fixed rate loans:
SBA(1)                   $      644       $        732     $        259     $      114     $    1,749
Commercial, non-real
estate                        1,168              2,112              142              6          3,428
Residential real
estate                        2,876              1,519                -              -          4,395
Strategic Program
loans                        18,121              6,981                -              -         25,102
Commercial real
estate                        1,565                639                7              1          2,212
Consumer                      1,500              2,793               66              -          4,359

Variable rate loans:
SBA                           7,920             31,598           58,493         42,632        140,643
Commercial, non-real
estate                            -                  -                -              -              -
Residential real
estate                       22,234                291              188              -         22,713
Strategic Program
loans                             -                  -                -              -              -
Commercial real
estate                          224                  -                -              -            224
Consumer                         62                153                -              -            215
Total                   $    56,314       $     46,818     $     59,155     $   42,753     $  205,040



(1) The amount of SBA fixed rate loans includes approximately $1.1 million of
PPP loans. PPP loans originated prior to June 5, 2020, have a two year term. PPP
loans originated on or after June 5, 2020, have a five year term. For PPP
borrowers who submit completed applications for forgiveness, loan payments are
automatically deferred until the SBA renders a decision on the forgiveness
request. PPP borrowers who fail to submit timely forgiveness applications are
required to make monthly payments beginning ten months from the end of the
chosen "covered period". The "covered period" is a maximum of 24 weeks from the
origination date. Assuming a 24 week covered period, PPP borrowers are not
required to begin making payments until 16 months after the origination date. At
the time payments begin, if the borrower and lender of a two year PPP loan
mutually agree to extend the term of the loan it can be extended to a five year
term. As of December 31, 2021, three PPP loans have been granted maturity date
extensions.

                                       41

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Index

Nonperforming Assets


Loans are considered past due if the required principal and interest payments
have not been received as of the date such payments were contractually due.
Loans are placed on nonaccrual status when, in management's opinion, the
borrower may be unable to meet payment obligations as they become due, as well
as when required by regulatory provisions. Loans may be placed on nonaccrual
status regardless of whether such loans are actually past due. In general, we
place loans on nonaccrual status when they become 90 days past due. We also
generally place loans on nonaccrual status if they are less than 90 days past
due if the collection of principal or interest is in doubt. When interest
accrual is discontinued, all unpaid accrued interest is reversed from income.
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.

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.


Any loan which we deem to be uncollectible, in whole or in part, is charged off
to the extent of the anticipated loss. 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. We believe our disciplined lending approach and focused
management of nonperforming assets has resulted in sound asset quality and
timely resolution of problem assets. We have several procedures in place to
assist us in maintaining the overall quality of our loan portfolio. We have
established underwriting guidelines to be followed by our loan officers, and we
also monitor our delinquency levels for any negative or adverse trends. 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.

                                       42

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Index

The following table provides information with respect to our nonperforming
assets and troubled debt restructurings at the dates indicated:


                                                                                As of
($ in thousands)                                                March 31, 2022       December 31, 2021
Nonaccrual loans:
SBA                                                            $            657     $               657
Commercial, non real estate                                                   -                       -
Residential real estate                                                       -                       -
Strategic Program loans                                                       1                       -
Total nonperforming loans                                      $            658     $               657

Total accruing loans past due 90 days or more                  $            359     $                54
Nonaccrual troubled debt restructuring                         $             25     $                25
Total troubled debt restructurings                                           96                     106
Other Real Estate Owned                                                       -                       -
Less nonaccrual troubled debt restructurings                                (25 )                   (25 )
Total nonperforming assets and troubled debt restructurings    $            754     $               763
Total nonperforming loans to total loans                                    0.2 %                   0.2 %
Total nonperforming loans to total assets                                   0.2 %                   0.2 %

Total nonperforming assets and troubled debt restructurings
to total loans

                                                              0.3 %                   0.3 %

Total nonperforming assets and troubled debt restructurings
to total assets

                                                             0.2 %                   0.2 %

Total nonperforming assets and troubled debt restructurings
to total assets (less PPP loans) (1)

                                        0.2 %                   0.2 %



(1) See “GAAP Reconciliation and Management Explanation of Non-GAAP Financial
Measures” for a reconciliation of this measure to its most comparable GAAP
measure.


Our total nonperforming assets and troubled debt restructurings at March 31,
2022 and December 31, 2021 were $0.8 million. Total nonperforming assets at
March 31, 2022 and December 31, 2021 were composed of $0.7 million in nonaccrual
loans and $0.1 million of troubled debt restructurings.

We do not classify loans that experience insignificant payment delays and
payment shortfalls as impaired. We consider an "insignificant period of time"
from payment delays to be a period of 90 days or less, or 180 days or less in
certain Strategic Programs. We will customarily attempt to provide a
modification for a customer experiencing what we consider to be a short-term
event that has temporarily impacted cash flow. In those cases, we will review
the request to determine if the customer is experiencing cash flow strain and
how the event has impacted the ability of the customer to repay in the long
term. Short-term modifications are not classified as troubled debt
restructurings because they do not meet the definition set by the FDIC or our
accounting policy for identifying troubled debt restructurings. The FDIC issued
statements in March and April of 2020 that encouraged banks to work with all
borrowers, especially those from industry sectors particularly vulnerable to
economic volatility. The FDIC clarified that prudent efforts to modify the terms
on existing loans for affected customers will not be subject to examiner
criticism, and that certain loan modifications made in response to Covid-19 are
not troubled debt restructurings.

Interest income that would have been recorded for the three months ended March
31, 2022
and 2021 had nonaccrual loans been current throughout the period
amounted to de minimis amounts for each period.

                                       43

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Index

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. 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. Loans are made with a primary emphasis on loan profitability,
credit risk and concentration exposures.

We are proactive in our approach to identifying and resolving problem loans and
are focused on working with the borrowers and guarantors of problem loans to
provide loan modifications when warranted. When considering how to best
diversify our loan portfolio, we consider several factors including our
aggregate and product-line specific concentration risks, our business line
expertise, and the ability of our infrastructure to appropriately support the
product. While certain product lines generate higher net charge-offs, our
exposure is carefully monitored and mitigated by our concentration policies and
reserved for by the loan loss allowance we maintain. Specifically, retention of
certain Strategic Program loans with higher default rates account for a
disproportionate amount of our charge-offs. 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. 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. As an example, at the beginning of the Covid-19 pandemic we analyzed
our portfolio to identify loans that were more likely to be vulnerable to the
pandemic's impact. We then proactively opened a dialogue with potentially
affected borrowers to assess their needs and provide assistance. Through this
process we were able to not only better understand our portfolio risks but were
able to intercede with borrowers if needed.

Accurate and timely loan risk grading is considered a critical component of an
effective credit risk management system. Loan grades take into consideration the
borrower's financial condition, industry trends, and the economic environment.
Loan risk grades are changed as necessary to reflect the risk inherent in the
loan. Among other things, we use loan risk grading information for loan pricing,
risk and collection management and determining monthly loan 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. Any changes are made after the Loan Risk Grade meeting to provide for
accurate reporting. Reporting is achieved in Loan Committee minutes, which
minutes are reviewed by the Board. We supplement credit department supervision
of the loan underwriting, approval, closing, servicing and risk grading process
with periodic loan reviews by risk department personnel specific to the testing
of controls.

We use a grading system to rank the quality of each loan. The grade is
periodically evaluated and adjusted as performance dictates. Loan grades 1
through 4 are passing grades, grade 5 is special mention. Collectively, grades 6
(substandard), 7 (doubtful) and 8 (loss) represent classified loans within the
portfolio. The following guidelines govern the assignment of these risk grades.
We do not currently grade Strategic Program 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, the Strategic
Program loans are evaluated collectively for impairment.

Grade 1: Pass - Loans fully secured by deposit accounts. Loans where the
borrower has strong sources of repayment, generally 5 years or more of
consistent employment (or related field) and income history. 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%. Cash flow is very strong as evidenced by
significant discretionary income amounts. Borrower will consistently maintain
30% of the outstanding debts in deposit accounts with us, often with the right
of offset, holds, etc. Loan to value ratios (LTV) will be 60% or less. Loans in
this category require very minimal monitoring.

Grade 2: Pass - The borrower has good sources of repayment, generally 3 years or
more of consistent employment (or related field) and income history. The debt of
the borrower is reasonable relative to the borrower's financial strength with a
DTI ratio of less than 35%. Cash flow is strong as evidenced by exceptional
discretionary income amounts. Borrowers will consistently maintain 20% of the
outstanding debts in deposit accounts with us. LTV ratios will be 70% or less.
These loans require minimal monitoring.

Grade 3: Pass - There is a comfortable primary source of repayment, generally 2
years or more of consistent employment (or related field) and income history.
Borrowers may exhibit a mix of strengths and weaknesses. For example, they have
either adequate cash flow with higher than desired leverage, or marginal cash
flow with strong collateral and liquidity. Borrowers will have DTIs less than
45%. 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. LTV
ratios will be within our guidelines. These loans will be monitored on a
quarterly basis.

Grade 4: Pass Watch - There is adequate primary source of repayment, generally
employment time or time in a related field is less than 2 years. Borrowers' debt
to income ratios may fall outside of our guidelines or there is minimal excess
cash flow. There may be heavy reliance on collateral, or the loan is large,
relative to the financial strength of the borrower. The loans may be maintenance
intensive requiring closer monitoring.

Grade 5: 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. A typical problem
could include a documentation deficiency. If the deficiency is corrected the
account will be re-graded.

                                       44

——————————————————————————–

Index


Grade 6: 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.

Grade 7: 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.


Grade 8: 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. 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.

The following table presents, as of the period presented, the loan balances by
loan program as well as risk rating. No loans were classified as 'Loss' grade
during the periods presented.

                                                      As of March 31, 2022
                                                  Special        Classified/
                                     Pass         Mention         Doubtful            Loss
($ in thousands)                  Grade 1-4       Grade 5         Grade 6-7         Grade 8          Total
SBA                               $  125,366     $    1,461     $         951     $          -     $ 127,778
Commercial, non real estate            3,285              -                 -                -         3,285
Residential real estate               30,572              -               200                -        30,772
Commercial real estate                 4,187              -                 -                -         4,187
Consumer                               4,711              -                 -                -         4,711
Not Risk Graded
Strategic Program(1) loans                                                                           101,819
Total                             $  168,121     $    1,461     $       1,151     $          -     $ 272,552



                                       45

——————————————————————————–

  Index

                                                           As of December 31, 2021
                                                  Special        Classified/
                                     Pass         Mention         Doubtful            Loss
($ in thousands)                  Grade 1-4       Grade 5         Grade 6-7         Grade 8          Total
SBA                               $  139,985     $    1,435     $         972     $          -     $ 142,392
Commercial, non real estate            3,382             46                 -                -         3,428
Residential real estate               27,108              -                 -                -        27,108
Commercial real estate                 2,436              -                 -                -         2,436
Consumer                               4,574              -                 -                -         4,574
Not Risk Graded
Strategic Program(1) loans                                                                            85,850
Total                             $  177,485     $    1,481     $         972     $          -     $ 265,788



(1) The Strategic Program loan balance includes $73.8 million and $60.7 million
of loans classified as held-for-sale as of March 31, 2022 and December 31, 2021,
respectively.

Allowance for Loan Losses

We have not adopted Financial Accounting Standards Board Accounting Standards
Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326), commonly
referred to as the "CECL model," but plan to adopt the CECL model in the 2023
calendar year.

The ALL, a material estimate which could change significantly in the near-term
in the event of rapidly shifting credit quality, is established through a
provision for loan losses charged to earnings to account for losses that are
inherent in the loan portfolio and estimated to occur, and is maintained at a
level that we consider adequate to absorb potential losses in the loan
portfolio. Loan losses are charged against the ALL when we believe that the
collectability of the principal loan balance is unlikely. Subsequent recoveries,
if any, are credited to the ALL when received.

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.


We evaluate the ALL 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. The quality of the loan
portfolio and the adequacy of the ALL is reviewed by regulatory examinations.

The ALL consists of the following two elements:

? Specific allowance for identified impaired loans. For such loans that are

identified as impaired, an allowance is established when the discounted cash

flows (or collateral value if the loan is collateral dependent) or observable

market price of the impaired loan are lower than the carrying value of that

loan.

Independent appraisals are obtained for all collateral dependent loans deemed

impaired when collateral value is expected to exceed $5 thousand net of actual

and/or anticipated liquidation-related expenses. After initially measured for

impairment, new appraisals are ordered on at least an annual basis for all real

estate secured loans deemed impaired. Non-real estate secured loan appraisal

values are reevaluated and assessed throughout the year based upon interim

changes in collateral and market conditions.

? General valuation allowance. This component represents a valuation allowance on

the remainder of the loan portfolio, after excluding impaired loans. For this

portion of the allowance, loans are reviewed based on industry, stage and

structure and are assigned allowance percentages based on historical loan loss

experience for similar loans with similar characteristics and trends adjusted

for qualitative factors. Qualitative factors that, in management’s judgment,

affect the collectability of the portfolio as of the evaluation date, may

include changes in lending policies and procedures; changes in national and

local economic and business conditions, including the condition of various

market sectors; changes in the nature and volume of the portfolio; changes in

the experience, ability and depth of lending management and staff; changes in

the volume and severity of past due and classified loans and in the volume of

nonaccruals, troubled debt restructurings, and other loan modifications; the

existence and effect of any concentrations of credit and changes in the level

of such concentrations; and the effect of external factors, such as competition

and legal and regulatory requirements, on the level of estimated and inherent

  credit losses in our current portfolio.



                                       46

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Index


The ALL was $10.0 million at March 31, 2022 compared to $9.9 million at December
31, 2021, an increase of $0.1 million, or 1.3%. The increase was primarily due
to increased retention of Strategic Program loans with higher loss reserving
characteristics.

The following table presents a summary of changes in the ALL for the periods and
dates indicated:

                                 For the Three Months Ended
                                          March 31,
($ in thousands)                   2022                2021
ALL:
Beginning balance             $        9,855       $      6,199
Provision for loan losses              2,947                633
Charge offs
SBA                                      (31 )               (7 )
Commercial, non-real estate                -                (41 )
Residential real estate                    -                  -
Strategic Program loans               (2,878 )             (741 )
Commercial real estate                     -                  -
Consumer                                   -                 (2 )
Recoveries
SBA                                        -                 11
Commercial, non-real estate                1                  -
Residential real estate                    -                  -
Strategic Program loans                   93                132
Commercial real estate                     -                  -
Consumer                                   -                  -
Ending balance                $        9,987       $      6,184



Although we believe that we have established our ALL in accordance with GAAP and
that the ALL was adequate to provide for known and inherent losses in the
portfolio at all times shown above, future provisions for loan losses will be
subject to ongoing evaluations of the risks in our loan portfolio.

                                       47

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Index


The following table shows the allocation of the ALL among loan categories and
certain other information as of the dates indicated. The ALL related to
Strategic Programs constitutes 63.3% and 66.5% of the total ALL while comprising
37.4% and 32.3% of total loans as of March 31, 2022 and December 31, 2021,
respectively. This reflects the increased credit risks associated with certain
retained Strategic Program loans.

                                                 March 31, 2022
                                                                           % of
                                                                         Loans in
                                                                         Category
                                                           % of             of
                                            Total          Total          Total
($ in thousands)              Amount        Loans        Allowance        Loans
SBA                           $ 3,064     $ 127,778            30.7 %         46.9 %
Commercial, non real estate       107         3,285             1.1 %          1.2 %
Residential real estate           411        30,772             4.1 %         11.3 %
Strategic Program loans         6,322       101,819            63.3 %         37.4 %
Commercial real estate             21         4,187             0.2 %          1.5 %
Consumer                           62         4,711             0.6 %          1.7 %
Total                         $ 9,987     $ 272,552           100.0 %        100.0 %



                                                 December 31, 2021
                                                                               % of
                                                                             Loans in
                                                                             Category
                                                               % of             of
                                                               Total          Total
($ in thousands)              Amount       Total Loans       Allowance        Loans
SBA                           $ 2,739     $     142,392            27.8 %         53.6 %
Commercial, non real estate       132             3,428             1.3 %          1.3 %
Residential real estate           352            27,108             3.6 %         10.2 %
Strategic Program loans         6,549            85,850            66.5 %         32.3 %
Commercial real estate             21             2,436             0.2 %          0.9 %
Consumer                           62             4,574             0.6 %          1.7 %
Total                         $ 9,855     $     265,788           100.0 %        100.0 %



The following tables reflect the ratio of the ALL to nonperforming loan balances
and net charge-offs to average loans outstanding by loan category, for the
periods presented. The ratio of net charge-offs to average loans outstanding
generally decreased or remained consistent for loan categories in the three
months ended March 31, 2022 from the three months ended March 31, 2021. The
increase in the ratio for Strategic Programs loans was primarily due to
increases in charge-offs in the three months ended March 31, 2022 while the
decreases in Commercial, non-real estate and Consumer were primarily due to
lower charge-off amounts in the three months ended March 31, 2022.

                                                                    For the Three Months Ended
                                                                             March 31,
                                                                    2022                   2021
Net charge-offs to average loans outstanding by loan category
SBA                                                                       0.1 %                 0.0 %
Commercial, non-real estate                                              (0.1 %)                4.0 %
Residential real estate                                                   0.0 %                 0.0 %
Strategic Program loans                                                   9.2 %                 5.7 %
Commercial real estate                                                    0.0 %                 0.0 %
Consumer                                                                  0.0 %                 0.1 %



                                         As of
                             March 31,       December 31,
                                2022             2021
ALL to nonperforming loans      1,517.8 %          1,499.1 %



                                       48

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Index

Interest-Bearing Deposits in Other Banks


Our interest-bearing deposits in other banks increased to $116.2 million at
March 31, 2022 from $85.3 million at December 31, 2021, an increase of $30.9
million, or 36.2%. This increase was primarily due to the Company's public stock
offering and an increase in loan originations. Interest-bearing deposits in
other banks have generally been the primary repository of the liquidity we use
to fund our operations. 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.

Securities


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.

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. 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. 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. For the year presented, all securities were classified as
held-to-maturity.

The following tables summarize the contractual maturities and weighted average
yields of investment securities at March 31, 2022, and the amortized cost of
those securities as of the indicated dates.

                                                                        At 

March 31, 2022

                                                    One Year or Less                    After One to Five Years
                                                                   Weighted                                 Weighted
                                             Amortized             Average          Amortized               Average
($ in thousands)                               Cost                 Yield             Cost                   Yield
Mortgage-backed securities                 $           -                    -     $           -                      -



                                                                 At March 31, 2022
                                        After Five to Ten Years Weighted            After Ten Years Weighted
                                                                  Weighted                            Weighted         Total
                                         Amortized                Average          Amortized          Average        Amortized
($ in thousands)                            Cost                   Yield             Cost              Yield           Cost
Mortgage-backed securities           $            1,462                  1.2 %   $       9,524              1.4 %   $    10,986


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.

There were no calls, sales or maturities of securities during the three months
ended March 31, 2022 and March 31, 2021.


At March 31, 2022, there were 13 securities, consisting of five collateralized
mortgage obligations and eight mortgage-backed securities. One of these
securities were in a gain position for greater than 12 months and twelve of
these securities were in an unrealized loss position as of March 31, 2022. There
were nine securities in an unrealized loss position as of December 31, 2021.

Deposits


Deposits are the major source of funding for the Company, with the exception of
the Company's participation in the PPPLF, which added a significant amount of
funding in 2020 (see discussion below in Liquidity and Capital Resources -
Liquidity Management). We offer a variety of deposit products including interest
and noninterest bearing demand accounts, 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. 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.

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Index


The following table presents the end of period and average balances and for the
periods indicated (average balances have been calculated using daily averages):

                                          March 31, 2022            December 31, 2021
($ in thousands)                        Total       Percent        Total        Percent
Period end:
Noninterest-bearing demand deposits   $ 127,330         45.9 %   $  110,548         43.9 %
Interest-bearing deposits:
Demand                                    7,919          2.8 %        5,399          2.1 %
Savings                                   7,089          2.6 %        6,685          2.7 %
Money markets                            53,434         19.3 %       31,076         12.3 %
Time certificates of deposit             81,688         29.4 %       98,184         39.0 %
Total period end deposits             $ 277,460        100.0 %   $  251,892        100.0 %



                                             For the Three Months Ended March 31,
                                                2022                        2021
($ in thousands)                         Total        Percent        Total       Percent
Average:
Noninterest-bearing demand deposits   $   137,750         51.0 %   $  89,111         52.1 %
Interest-bearing deposits:
Demand                                      6,344          2.3 %       6,287          3.7 %
Savings                                     6,678          2.5 %       6,851          4.0 %
Money market                               31,889         11.8 %      17,728         10.4 %
Time certificates of deposit               87,626         32.4 %      50,888         29.8 %
Total average deposits                $   270,287        100.0 %   $ 170,865        100.0 %



Our deposits increased to $277.5 million at March 31, 2022 from $251.9 million
at December 31, 2021, an increase of $25.6 million, or 10.2%. This increase was
primarily due to an increase in money markets and noninterest-bearing demand
deposits.

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.
Our total uninsured deposits were $187.9 million and $106.4 million for the
three months ended March 31, 2022 and 2021, respectively. The maturity profile
of our uninsured time deposits, those amounts that exceed the FDIC insurance
limit, at March 31, 2022 is as follows:

                                                      March 31, 2022
                                          More than
                                            three         More than
                             Three         months         six months       More than
                            months         to six         to twelve         twelve
($ in thousands)            or less        months           months          months        Total
Time deposits, uninsured   $     128     $         -     $        502     $       144     $  774



                                       50

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Index

Liquidity and Capital Resources

Liquidity Management


Liquidity management is the ability to meet current and future financial
obligations of a short-term nature. Our primary sources of funds consist of
deposit inflows, the sale of loans, repayment of 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.

On November 23, 2021, we completed our IPO at a price of $10.50 per share. We
raised approximately $36.1 million in net proceeds after deducting underwriting
discounts and commissions of approximately $3.0 million and certain estimated
offering expenses payable by us of approximately of $3.2 million. The net
proceeds less $0.5 million in other related expenses, including legal fees
totaled $35.6 million.

Our primary source of funds to originate new loans (other than the PPPLF program
used to fund PPP loans in 2020) is derived from deposits. Deposits are comprised
of core and noncore deposits. We use brokered deposits and a rate listing
service to advertise rates to banks, credit unions, and other institutional
entities. We designate deposits obtained from this source as Institutional
Deposits. To date, depositors of brokered and Institutional Deposits have been
willing to place deposits with us at rates near the middle of the market. 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. We utilize
rate listing services and website advertising to attract deposits from consumer
and commercial sources.

We regularly evaluate new, core deposit products and in 2020, we launched a
deposit product targeted to the needs of our PPP borrowers. We intend to have
various term offerings to match our funding needs. Plans for 2022 include
marketing commercial checking accounts to selected business customers and
expanded roll out of our deposit product targeted to the needs of our SBA
borrowers. These accounts offer small business cash management tools including
ACH and wire capabilities, competitive interest rates, and personalized customer
support. The commercial checking account is expected to be a no-fee based
account with emphasis on electronic banking. 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. 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. 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. This
entails ensuring sufficient funds are available at a reasonable cost to meet
potential demands from both fund providers and borrowers. Liquid assets, defined
as cash and due from banks and interest bearing deposits, were 27.5% of total
assets at March 31, 2022.

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.
At March 31, 2022, we had the ability to access $9.6 million from the Federal
Reserve Bank's Discount Window on a collateralized basis. Through Zions Bank,
the Bank had an available unsecured line available of $1.0 million. The Bank had
an available unsecured line of credit with Bankers' Bank of the West to borrow
up to $1.05 million in overnight funds. We also maintain a $3.9 million line of
credit with Federal Home Loan Bank, secured by specific pledged loans. We had no
outstanding balances on such unsecured or secured lines of credit as of March
31, 2022. In long term borrowings, we had $1.0 million outstanding at March 31,
2022 related to the PPPLF. The PPPLF is secured by pledged PPP loans.

Our most liquid assets are cash and cash equivalents. The levels of these assets
depend on our operating, financing, lending and investing activities during any
given period. At March 31, 2022, liquid assets (defined as cash and due from
banks and interest bearing deposits), consisting of cash and due from banks,
totaled $116.6 million. 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.

Capital Resources


Shareholders' equity increased $9.5 million to $125.0 million at March 31, 2022
compared to $115.4 million at December 31, 2021. The increase in shareholders'
equity was primarily attributable to net income recognized of $9.4 million.
Stock options exercised, and stock-based compensation increased additional
paid-in capital aggregately by approximately $0.1 million.

We use several indicators of capital strength. The most commonly used measure is
average common equity to average assets, which was 29.9% and 25.7% for the three
months ended March 31, 2022 and December 31, 2021, respectively.

                                       51

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Index

Our return on average equity was 31.4% and 43.1% for the three months ended
March 31, 2022 and 2021, respectively. Our return on average assets was 9.4% and
6.5% for the three months ended March 31, 2022 and 2021, respectively.


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. Our primary
sources of new capital include retained earnings and proceeds from the sale and
issuance of capital stock or other securities. 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. 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. 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. The capital amounts and classifications are also subject to
qualitative judgments by the regulators about components, 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. 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. The Bank has elected to opt into the Community Bank
Leverage Ratio framework starting in 2020. Under these new capital requirements,
as temporarily amended by Section 4012 of the CARES Act, the Bank must maintain
a leverage ratio greater than 8.5% for 2021 and 9.0% for 2022.

As of March 31, 2022 and December 31, 2021, 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). 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.

The following table presents the regulatory capital ratios for the Bank as of
the dates indicated:

                                         March 31,       December 31,          2022                 2021
                                                                               Well-                Well-
                                                                            Capitalized          Capitalized
Capital Ratios                             2022              2021           Requirement          Requirement
Leverage Ratio (under CBLR)                    19.1 %             17.7 %             9.0 %(1)             8.5 %(2)


(1) The Well-Capitalized Requirement for years 2022 and 2021 were 9.0% and 8.5%.

                                       52

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Index

Contractual Obligations


We have contractual obligations to make future payments on debt and lease
agreements. 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 March 31, 2022.

                                                                  One to                           More
                                                 Less than         Three         Three to        Than Five
($ in thousands)                     Total       One Year          Years        Five Years         Years
Contractual Obligations
Deposits without stated maturity   $ 135,249   $     135,249     $       -     $          -     $         -
Time deposits                         81,688          28,967        35,080           16,901             740
Long term borrowings(1)                  952             545             -              407               -
Operating lease obligations            7,982             740         1,949            2,220           3,073
Total                              $ 225,871       $ 165,501     $  37,029     $     19,528     $     3,813


(1) Balances in this category pertain to the PPPLF and are fully-collateralized
with PPP loans


Off-Balance Sheet Items

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. We enter into these transactions 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. Our exposure to credit loss is represented by the
contractual amounts of these commitments. The same credit policies and
procedures are used in making these commitments as for on-balance sheet
instruments. We are not aware of any accounting loss to be incurred by funding
these commitments; 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.

Our commitments to extend credit as of the dates indicated are summarized below.
Since commitments associated with commitments to extend credit may expire
unused, the amounts shown do not necessarily reflect the actual future cash
funding requirements.


($ in thousands)                       As of March 31,       As of December 31,
                                            2022                    2021
Revolving, open-end lines of credit   $           1,224     $              1,259
Commercial real estate                           22,167                   15,402
Other unused commitments                            255                      377
Total commitments                     $          23,646     $             17,038


Critical Accounting Policies and Estimates


The accompanying management's discussion and analysis of results of operations
and financial condition is based upon our unaudited interim consolidated
financial statements, which have been prepared in accordance with GAAP. The
preparation of these financial statements in accordance with GAAP requires
management to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues, expenses and related disclosure 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. We evaluate our estimates on an ongoing basis. Actual
results may differ from these estimates under different assumptions or
conditions. There have been no significant changes during the three months ended
March 31, 2022 to the items that we disclosed as our critical accounting
policies and estimates in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the 2021 Form 10-K.

Accounting policies, as described in detail in the notes to our consolidated
financial statements, included in the 2021 Form 10-K, 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. We believe that those critical accounting policies and estimates
require us to make difficult, subjective or complex judgments about matters that
are inherently uncertain. Changes in these estimates, which are likely to occur
from period to period, or use of different estimates that we could have
reasonably used in the current period, would have a material impact on our
financial position, results of operations or liquidity.

                                       53

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Index

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures


Some of the financial measures included in this Report are not measures of
financial performance recognized by GAAP. This non-GAAP financial measure is
"total nonperforming assets and troubled debt restructurings to total assets
(less PPP loans)." Our management uses this non-GAAP financial measures in its
analysis of our performance.

• “Total nonperforming assets and troubled debt restructurings to total assets

(less PPP loans)” is defined as the sum of nonperforming assets and troubled

debt restructurings divided by total assets minus PPP loans. The most directly

comparable GAAP financial measure is the sum of nonperforming assets and

troubled debt restructurings to total assets. We believe this measure is

important because we believe that PPP loans will not be included in

nonperforming assets or troubled debt restructurings since PPP loans are 100%

guaranteed by the SBA. We believe that the non-GAAP measure more accurately

discloses the proportion of nonperforming assets and troubled debt

restructurings to total assets consistently with periods prior to the presence

  of PPP loans.



We believe these non-GAAP financial measures provide useful information to
management and investors that is supplementary to our financial condition,
results of operations and cash flows computed in accordance with GAAP; however,
we acknowledge that our non-GAAP financial measures have a number of
limitations. As such, you should not view these measures as a substitute for
results determined in accordance with GAAP, and they are not necessarily
comparable to non-GAAP financial measures that other companies use. The
following table provides a reconciliation of these non-GAAP financial measures
to the most closely related GAAP measure.

Total nonperforming assets and troubled debt restructurings to total assets
(less PPP loans)

                                                                               As of
($ in thousands)                                              March 31, 2022        December 31, 2021
Total nonperforming assets and troubled debt restructuring      $          754     $               763
Total assets                                                    $      424,484     $           380,214
PPP loans                                                       $          991     $             1,091
Total assets less PPP loans                                     $      423,493     $           379,123

Total nonperforming assets and troubled debt restructurings
to total assets (less PPP loans)

                                           0.2 %                   0.2 %

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