FinWise Bancorp Q1 2026 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2026. FinWise Bancorp is a Utah-based bank holding company operating primarily through its subsidiary, FinWise Bank. The company functions as a technology-focused bank, offering traditional banking services alongside "Banking-as-a-Service" (BaaS) solutions via Strategic Programs with fintech partners. The company is classified as a smaller reporting company and an emerging growth company.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 | Dec 31, 2025 (Balance Sheet) |
|---|---|---|---|
| Total Assets | $899.4 million | $754.7 million (Avg) | $977.1 million |
| Total Deposits | $674.9 million | $430.5 million (Avg) | $754.6 million |
| Net Interest Income | $28.1 million | $14.3 million | — |
| Net Interest Margin (NIM) | 12.90% | 8.27% | — |
| Provision for Credit Losses | $10.6 million | $3.3 million | — |
| Net Income | $2.7 million | $3.2 million | — |
| Earnings Per Share (Diluted) | $0.20 | $0.23 | — |
| Shareholders' Equity | $196.6 million | — | $193.2 million |
| Cash & Equivalents | $96.9 million | — | $163.4 million |
Material Changes vs. Prior Period
- Revenue Growth: Net interest income surged 96.7% year-over-year to $28.1 million, driven by a 12.90% NIM (up from 8.27%). This increase is attributed to the growth of the credit-enhanced loan portfolio and a change in accounting estimates regarding the allocation of excess interest on these loans.
- Profitability Decline: Despite revenue growth, Net Income decreased 14.2% to $2.7 million. This was primarily caused by a 217.2% increase in the Provision for Credit Losses ($10.6 million vs. $3.3 million), driven by higher net charge-offs in the traditional banking portfolio and migration of loans to nonperforming status.
- Expense Surge: Non-interest expenses nearly doubled (97.9% increase) to $28.3 million. The primary drivers were credit enhancement guarantee expenses ($10.1 million) and servicing expenses ($2.4 million), which correlate with the expansion of the credit-enhanced loan program.
- Balance Sheet Contraction: Total assets decreased $77.7 million quarter-over-quarter, largely due to a $60.7 million drop in interest-bearing deposits in other banks (maturity of brokered CDs not renewed) and a reduction in loans held-for-sale.
- Asset Quality: Nonperforming assets increased to $49.8 million, including $26.7 million of SBA 7(a) loans guaranteed by the SBA. The increase is linked to elevated interest rates impacting small business borrowers.
Guidance, Outlook, and Risks
- Segment Performance: The BaaS segment generated $2.9 million in net income, while the Traditional Banking segment reported a net loss of $0.2 million due to credit quality issues in the SBA portfolio.
- Outlook: Management expects continued growth in the BaaS segment through expanded fintech partnerships. Traditional banking performance remains sensitive to interest rate trends and credit quality.
- Legal Contingency: A consolidated class action lawsuit regarding a 2025 data breach was settled in March 2026. The settlement fund and associated costs are expected to be fully covered by the company's cyber insurance policy, pending court approval.
- Key Risks:
- Credit Risk: Elevated interest rates continue to increase default risk in the SBA and variable-rate loan portfolios.
- Counterparty Risk: Reliance on Strategic Program partners to fulfill credit enhancement obligations; failure to do so would expose the bank to unreimbursed losses.
- Regulatory Risk: Changes in SBA rules, fintech regulations, and capital requirements (CBLR framework).
- Cybersecurity: Ongoing risks related to system failures and data breaches.
Investor Verification Checklist
- Credit Enhancement Reliability: Verify the financial stability of Strategic Program partners and the adequacy of their reserve accounts to cover the $109.1 million credit-enhanced loan portfolio.
- SBA Portfolio Quality: Monitor the migration of SBA 7(a) loans to nonaccrual status and the impact of sustained high interest rates on small business borrowers.
- Deposit Stability: Assess the sustainability of the deposit base following the $79.7 million quarter-over-quarter decline, specifically the decision not to renew high-cost brokered CDs.
- Non-GAAP Adjustments: Review the reconciliation of GAAP to non-GAAP measures, specifically the impact of credit enhancement expenses on Net Interest Margin (which drops to 7.15% on a non-GAAP basis).
- Legal Settlement: Confirm the final court approval of the data breach settlement and ensure no uncovered liabilities remain.