FinWise Bancorp NASDAQ: FINW management said first-quarter 2026 results were pressured by elevated charge-offs in a narrow portion of its SBA portfolio, while highlighting continued growth in loan originations, early traction in cards and payments, and an ongoing ramp in its credit-enhanced lending programs.
CEO transition and quarter overview
Executive Chairman Kent Landvatter opened the call by discussing a leadership transition announced earlier in the month. Jim Noone assumed the role of CEO of FinWise Bancorp in addition to serving as President and CEO of FinWise Bank, a move Landvatter described as “a successful execution of a deliberate multi-year succession plan.” Landvatter said he will remain Executive Chairman with involvement in long-term strategy, board governance, and investor relations, and that the transition “does not change our strategic direction.”
Noone said the quarter included an “earnings shortfall,” which he attributed primarily to increased charge-offs in the SBA portfolio that were “concentrated in a narrow set of legacy credits.” He added the bank expects those SBA-related charge-offs “to remain elevated over the next few quarters as those credits continue to be actively managed.”
Originations growth and partner pipeline
Noone said FinWise originated $1.7 billion of loans in the first quarter, up 38% year-over-year, driven by contributions from both established partners and newer program launches. He said quarterly volumes can vary with partner mix and seasonality, but characterized the platform’s trajectory as positive. He also noted FinWise manages 16 lending programs and said its partner pipeline is strengthening, including both new partners and additional products with existing partners.
To support growth, Noone said the company added two seasoned professionals to its business development team. He later told analysts the pipeline is “stronger than I’ve seen it” in his eight years at the bank, and described the current mix as about 50% lending and 50% split between cards and payments.
In a discussion of originations composition, Noone said student lending seasonality surged in the quarter and was a major contributor to the increase, while “higher rate lenders were down,” which he said is typical for the first quarter.
Credit-enhanced lending, cards and payments, and AI initiatives
Credit-enhanced balances ended the quarter at $109 million, up $1 million sequentially. Noone said the pace was below the company’s guided run rate of $8 million to $10 million per month, attributing the slower growth to the ramp timing of newer partners rather than demand or partner commitment. He said FinWise still expects organic growth of $8 million to $10 million per month on average for the full year, with growth “skewed toward the middle and back half of 2026.”
During Q&A, Noone said five programs are currently live in the credit-enhanced structure and that the portfolio’s average term is “probably like 15 months” in aggregate, though it varies by program. He said one partner is expected to grow “meaningfully” in the program in the second and third quarters, while others moderated in Q1 due to expected plateauing based on product trajectory.
On cards and payments, Noone pointed to early results in interchange income and referenced a new program announced with Vera, which he said was introduced through Zeta, a card processing partner. He said interchange income rose to $703,000 from $310,000 in the prior quarter, reflecting early contribution from the credit card portfolio and “the cross-sell thesis” tied to a credit-enhanced balance sheet partner.
Management also discussed internal technology efforts. Noone said FinWise has established a dedicated “AI and innovation team,” with initial deployments focused on developer productivity, automation, and operational workflows.
Credit quality: elevated charge-offs and higher nonperforming loans
Net charge-offs totaled $9.4 million in Q1, up from $6.7 million in the prior quarter. Noone broke out net charge-offs as:
- $4.8 million from strategic program loans with credit enhancement
- $2.3 million from strategic program loans without credit enhancement
- $2.2 million from the core portfolio, primarily SBA 7(a) loans retained balances
Noone said SBA net charge-offs were concentrated in a small subset of legacy credits, primarily tied to the e-commerce vertical and certain origination years. He cited still-elevated interest rates affecting certain vintages and noted the bank has implemented “material policy tightening and restrictions” on certain attributes.
In response to a question from Raymond James analyst Joseph Yanchunis, Noone said the remaining pool of the legacy SBA cohort totaled about $50 million of “performing outstanding balances” at the end of Q1. He said the bank identified “six attributes from a few cohorts,” and that those attributes have driven roughly 75% of net charge-offs and a similar proportion of unguaranteed nonperforming assets over the last three years.
For credit-enhanced program loans, Noone said higher charge-offs largely reflect “normal seasoning of a rapidly scaling portfolio,” and emphasized that FinWise is “fully reimbursed for any losses” through partner cash reserve deposits held at the bank.
Provision for credit losses was $10.6 million in Q1, down from $17.7 million in the prior quarter. Noone said the decline reflected elevated provisioning in Q4 tied to the ramp-up of credit-enhanced programs, with growth moderating in Q1. Of the Q1 provision, $5.9 million related to credit-enhanced loans, with the remainder tied to charge-offs in the core and other strategic program portfolios. Noone also reiterated that provision expense for credit-enhanced loans is “fully offset” by recognition of estimated future recoveries recorded as credit enhancement income in non-interest income.
Nonperforming loan (NPL) balances rose $6.1 million sequentially to $49.8 million at quarter-end. Noone said $26.7 million (53%) of that total is guaranteed by the federal government, with $23.2 million unguaranteed.
Financial results, balance sheet changes, and outlook
CFO Robert Wahlman said FinWise reported net income of $2.7 million and diluted EPS of $0.20 for the first quarter. He said positives included strong originations, growth in net interest income and interchange income, and disciplined expense management. He also said results were negatively affected by lower gain-on-sale income, a negative change in the valuation of the company’s BFG investment, and a “large provision for credit losses with our traditional banking portfolio.”
Net interest income increased to $28.1 million from $24.6 million in Q4, driven primarily by an accounting change related to the estimated allocation of interest received on credit-enhanced loans (the “excess spread”), as well as higher average credit-enhanced balances and lower CD funding costs. Net interest margin rose to 12.9% from 11.42%, though Wahlman said that excluding excess credit-enhanced income, net interest margin was 7.15% versus 7.85% in Q4, consistent with the bank’s risk-reduction strategy.
Non-interest income declined to $14.6 million from $22.3 million sequentially, mainly due to lower credit-enhanced income and gain-on-sale revenue and a decline in the fair value of the BFG investment, which Wahlman tied to a broader pullback in private company valuations amid global market volatility in March. Non-interest expense rose to $28.3 million from $23.7 million, largely due to higher credit enhancement guarantee and servicing expenses resulting from the same excess-spread allocation change and higher average credit-enhanced loan balances.
Wahlman said total assets ended the quarter at $899.4 million, down from $977.1 million, primarily due to decreases in interest-bearing deposits. Total deposits were $674.9 million versus $754.6 million in Q4, driven by runoff in non-interest-bearing deposits and brokered CDs “that were not needed to support the lower level of assets.” He also said the bank maintained a “very strong capital position,” citing a bank leverage ratio of 16.8%.
On guidance, Wahlman said originations through the first four weeks of April were tracking at a quarterly run rate of about $1.4 billion. For full-year 2026, he reaffirmed $1.4 billion as a baseline quarterly originations figure and said annualizing it and applying 5% growth provides “a reasonable outlook” for the year, noting quarterly variability and seasonality, particularly from student lending partners. He reiterated expectations for credit-enhanced balances to grow $8 million to $10 million per month on average for 2026, with lumpiness and growth skewed to the middle and back half of the year.
Wahlman also said FinWise expects gain-on-sale in Q1 to better reflect a sustainable quarterly run rate, will continue to sell guaranteed portions of SBA loans while market conditions remain favorable, and suggested using a 27% tax rate for modeling purposes.
In response to an emailed question addressed by Head of Investor Relations Juan Arias, Noone said recent fintech efforts to pursue bank charters have not resulted in immediate changes to FinWise’s business. He said FinWise was in contact with Upstart and OppFi ahead of their public announcements and will continue to support them through their regulatory processes. Noone added that for many fintechs, partnering with a sponsor bank remains “the faster, more capital-efficient path,” and reiterated that FinWise’s lending pipeline is strong.
About FinWise Bancorp NASDAQ: FINW
FinWise Bancorp is the bank holding company for FinWise Bank, a digital‐first community bank headquartered in Lindon, Utah. The company specializes in providing commercial lending and deposit products to marketplace lending platforms, fintech companies and small to mid‐sized businesses across the United States. FinWise Bancorp operates through its wholly owned subsidiary, FinWise Bank, which is FDIC‐insured and leverages a technology‐driven model to deliver banking services efficiently.
The company's primary business activities include participant financing arrangements for marketplace lenders and other fintech platforms, as well as direct commercial loans.
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