FinWise Bancorp NASDAQ: FINW reported second-quarter 2026 net income of $2.1 million, or $0.15 per diluted share, as higher loan originations and net interest income were partly offset by increased provisions for credit losses in its traditional banking portfolio.
Chief Executive Officer Jim Noone said earnings fell short of management’s expectations because of higher provisions on loans for which the bank retains credit risk. He said the company is taking actions to address the affected credits, including giving its credit and compliance teams authority to identify and reduce risk.
Credit Costs Rise as Nonperforming Balances Decline
Total provision for credit losses was $22.7 million in the second quarter, up from $10.6 million in the first quarter. Of the total, $16.7 million was tied to credit-enhancement loans and was offset by corresponding credit-enhancement income, meaning it did not affect net results, according to Noone.
The remaining $6 million of provision expense reflected higher reserves in the core loan portfolio. Management attributed the increase to losses recognized during the liquidation of nonperforming loans, higher reserves on nonperforming and classified credits, and more conservative servicing standards.
Nonperforming loan balances decreased to approximately $38 million from nearly $50 million in the prior quarter, primarily because of collateral resolutions and paydowns of SBA 7(a) loans classified as nonaccrual. About $19 million of the remaining balance is federally guaranteed, while the other $19 million is unguaranteed, Noone said.
Net charge-offs excluding credit-enhanced loans totaled $5.2 million, slightly above FinWise’s previously discussed $4 million to $5 million range. About 80% of core-portfolio charge-offs came from a defined legacy pool, which had roughly $50 million of performing balances at quarter-end.
- SBA net charge-offs were $2.9 million, compared with $2.2 million in the first quarter.
- Credit-enhanced strategic-program loan charge-offs were $7.9 million, up from $4.8 million, though FinWise said it is fully reimbursed for those losses.
- Strategic-program loans without credit enhancement recorded $2.3 million in net charge-offs, unchanged from the prior quarter.
Noone said charge-offs in legacy SBA credits are likely to remain elevated for the next few quarters. CFO Robert Wahlman said the bank expects approximately $4 million to $5 million in quarterly net charge-offs for non-credit-enhanced loans through the rest of 2026 and anticipates about $7 million of loans could migrate to nonperforming status in the third quarter.
Wahlman said the second quarter’s $6 million core-portfolio provision should be viewed as somewhat of an outlier, with provisioning expected to be lower in the second half.
Originations Top Guidance; New Card Partnership Announced
FinWise originated $1.6 billion of loans during the quarter, exceeding its $1.4 billion expectation but declining from $1.7 billion in the first quarter. Management said lower seasonal student-loan volume was partly offset by growth across established programs.
For the second half, FinWise expects originations of about $1.6 billion in the third quarter, supported by the typical seasonal pickup in student lending, and a baseline of $1.4 billion in the fourth quarter.
The company also announced that it signed a strategic partnership after the quarter ended with an established prepaid-card provider. The partner will use FinWise’s BIN sponsorship and MoneyRails services for Mastercard-branded cards. Management expects the program to go live in the fourth quarter but did not identify the partner.
Noone said FinWise’s sales pipeline has strengthened as the company expanded its business-development team. He said the firm expects to sign additional and potentially more meaningful deals before year-end. In response to an analyst question, management said its investor presentation showed several prospective programs, primarily with new partners, along with two expanded offerings for existing partners.
Revenue, Margin and Balance Sheet Metrics
Net interest income increased to $28.7 million from $28.1 million in the first quarter. Wahlman said the increase reflected growth in the credit-enhanced loan portfolio, lower nonaccrual balances, and reduced average interest-bearing liabilities and funding costs. Those benefits were partly offset by lower average balances in the traditional loan portfolio.
Net interest margin rose to 13.69% from 12.90% sequentially. Management maintained its outlook for margin to increase when including credit-enhanced balances, supported by credit-enhanced portfolio growth and lower funding costs. Excluding excess credit-enhanced income, however, FinWise expects a gradual margin decline as it pursues its risk-reduction strategy.
Noninterest income rose to $25.6 million from $14.6 million, largely because of credit-enhancement income that corresponded with the associated loan-loss provision. The company also recorded $450,000 in miscellaneous income and a $300,000 reduction in other expenses after prevailing in litigation with an off-boarded strategic partner.
Noninterest expense was $28.9 million, compared with $28.3 million in the first quarter. Excluding credit-enhancement accounting effects, the efficiency ratio improved to 63.9% from 65.0%.
Total assets reached $925.3 million at June 30, up from $899.4 million at the end of the first quarter. Deposits increased to $693.8 million from $674.9 million. The bank reported an 18.1% leverage ratio, while the holding company leverage ratio exceeded 22%.
Tallied Integration and Capital Actions
Management discussed the Tallied acquisition as a technology-platform transaction designed to expand FinWise’s card-processing capabilities and complement its Fintech Connect lending and MoneyRails payments offerings. The company expects approximately $4 million of integration and transition costs over the coming year, concentrated in the next two quarters, excluding non-cash amortization related to acquired assets.
FinWise withdrew its prior guidance for approximately $217 million in credit-enhanced balances by year-end, citing changes in the structure of balances associated with Tallied and slower-than-expected growth at another partner. Management said it still expects some credit-enhanced balance growth this year, though more meaningful growth beyond 2026 will depend on adding new partners.
As of June 30, FinWise had repurchased 29,736 shares for approximately $400,000 under its May 2026 authorization to buy up to 685,000 shares. Wahlman said the company prioritizes repurchases outside blackout periods when the stock trades below tangible book value.
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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