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RELATIONSHIP WITH OUR PARTNER BANK
 9 Months Ended
Sep. 30, 2022
Related Party Transactions [Abstract]  
RELATIONSHIP WITH OUR PARTNER BANK RELATIONSHIP WITH OUR PARTNER BANK
The Company has several relationships with our Partner Bank, Customers Bank, which is a related party of the Company. These relationships are described below.

Cash management

All the Company’s cash and cash equivalents are on deposit with our Partner Bank.

Debt financing

As disclosed in Note 7- Borrowings from Partner Bank, our Partner Bank previously provided the Company with lines of credit, all of which have been terminated as of December 31, 2021.

Servicing fees and interchange income from Partner Bank

On January 4, 2021, we entered into a Deposit Processing Services Agreement (the “Deposit Servicing Agreement”) with our Partner Bank, which provided that our Partner Bank would establish and maintain deposit accounts and other banking services in connection with customized products and services offered by us, and we would provide certain other related services in connection with the accounts. Our Partner Bank retains any and all revenue generated from the funds held in the deposit accounts, and in exchange, pays us a 3% servicing fee based on average monthly deposit balances, subject to certain contractual adjustments, and a monthly interchange fee equal to all debit card interchange revenues on the demand deposit accounts, plus the difference between Durbin exempt and Durbin regulated interchange revenue.
On June 29, 2022, the Company received written notice from Customers Bank that it did not intend to renew the Deposit Servicing Agreement with the Company. The 180-day notice was given in accordance with the terms of the Deposit Servicing Agreement, as a result of which, the Deposit Servicing Agreement would terminate effective December 31, 2022.

On November 8, 2022, the Company and Customers Bank entered into the First Amendment to Deposit Processing Services Agreement (the “DPSA Amendment”) to extend the Deposit Servicing Agreement termination date to the earlier of the Company’s successful completion of the transfer of the Company’s serviced deposits to a new sponsor bank or June 30, 2023. See Note 15 - Subsequent Events for additional information.

Transition Services Agreement

On January 4, 2021, we entered into a Transition Services Agreement with our Partner Bank, pursuant to which each party agreed for a period of up to twelve months to provide certain transition services listed therein to the other party. A limited number of these transition services were subsequently extended through March 31, 2022. In consideration for the services, we paid our Partner Bank a service fee of $12,500 per month, plus any expenses associated with the services.

The Transition Services Agreement included a provision for providing the Company with assistance in the establishment and administration of a 401(k) plan for the benefit of Company employees. Effective April 9, 2021, the Customers Bank 401(k) plan became a multi-employer plan, as defined by the U.S. Department of Labor in accordance with the Employee Retirement Income Security Act of 1974, covering both the full-time employees of Customers Bank and the Company. The Company provides a matching contribution equal to 50% of the first 6% of the contributions made by its eligible participating employees. The Company’s employer contributions to the 401(k) plan for the benefit of its employees for the three months ended September 30, 2022 and 2021 were $0.2 million, and $0.1 million, respectively. For the nine months ended September 30, 2022 and 2021, the Company’s employer contributions totaled $0.6 million and $0.5 million, respectively. These contributions are recorded in Salaries and employee benefits in the Consolidated Statements of Income (Loss).

Other

On January 4, 2021, the Company entered into a Software License Agreement with our Partner Bank which provides it with a non-exclusive, non-transferable, royalty-free license to utilize our mobile banking technology for a period up to 10 years. The Software License Agreement is cancellable by our Partner Bank at any time, without notice, and without penalty, and for any reason or no reason at all. To date, our Partner Bank has not utilized the Company’s mobile banking technology and zero consideration has been paid or recognized under the Software License Agreement.

On January 4, 2021, the Company entered into a Non-Competition and Non-Solicitation Agreement with our Partner Bank providing that our Partner Bank will not, for a period of 4 years after the closing of the divestiture, directly or indirectly engage in the Company’s business in the territory (both as defined in the Non-Competition Agreement), except for white label digital banking services with previously identified parties and passive investments of no more than 2% of a class of equity interests of a competitor that is publicly traded. Our Partner Bank also agreed not to directly or indirectly hire or solicit any employees of the Company.

On November 29, 2021, the Company entered into an agreement with our Partner Bank which terminated the $10.0 million letter of credit and gave the Company the right to any shares that were forfeited as part of the January 4, 2021 Share-Based Compensation Award. During the three and nine months ended September 30, 2022, respectively, 6,500 and 26,500 forfeited shares were reacquired by the Company from our Partner Bank.

Both the President and Executive Chairman of the Board of our Partner Bank are immediate family members of the Company’s CEO, and together with their spouses, own less than 5.0% of the Company’s outstanding common stock at September 30, 2022.

On March 1, 2022, the Company reached an agreement, with settlement on March 11, 2022, to reacquire 1,169,963 private warrants at a price of $1.69 per warrant, or a total cost of $2.0 million, from Ms. Sherry Sidhu and Mr. Samvir Sidhu, who are immediate family members of our CEO. The transaction price was established based on the range of market prices during the repurchase conversations and was approved by the Company’s Audit Committee.
On April 20, 2022, the Company entered into a Special Limited Agency Agreement with our Partner Bank that provides for marketing assistance from the Company for originating consumer installment loans funded by Customers Bank. In consideration for this marketing assistance, the Company receives certain fees specified within the Special Limited Agency Agreement which are recorded as a component of Other Revenue within the Consolidated Statements of Income (Loss). During the three and nine months ended September 30, 2022, less than $0.1 million of revenue has been realized under the Special Limited Agency Agreement.

Positions with our Partner Bank are presented on our Consolidated Balance Sheets in Accounts receivable, net, Deferred revenue, current, and Accounts payable and accrued liabilities. The Accounts receivable balances related to our Partner Bank as of September 30, 2022 and December 31, 2021 were $1.8 million and $5.5 million, respectively. The Deferred revenue balances related to our Partner Bank as of September 30, 2022 and December 31, 2021 were $7.8 million and $12.7 million, respectively. The Accounts payable and accrued liabilities balances related to our Partner Bank as of September 30, 2022 and December 31, 2021 were $0.9 million and $0.4 million, respectively.

The Company recognized $17.3 million and $60.9 million in revenues from our Partner Bank for the three and nine months ended September 30, 2022, respectively. Of these amounts, $4.3 million and $13.8 million are paid directly by MasterCard or individual account holders to the Company for the three and nine months ended September 30, 2022, respectively. The Company recognized $20.6 million and $60.0 million in revenues from our Partner Bank for the three and nine months ended September 30, 2021, respectively. Of these amounts, $5.2 million and $14.7 million are paid directly by MasterCard or individual account holders to the Company for the three and nine months ended September 30, 2021, respectively. These amounts are included in the Consolidated Statements of Income (Loss).

The Company recognized zero and less than $0.1 million of expenses from our Partner Bank for the three and nine months ended September 30, 2022, respectively. The Company recognized less than $0.1 million and $0.2 million of expenses from our Partner Bank for the three and nine months ended September 30, 2021, respectively. These amounts are included in the Consolidated Statements of Income (Loss).