FINW 10-K & 10-Q changes, risk factors and insider trading

The following risks, some of which have occurred and any of which may occur in the future, can have a material adverse effect on our businessbusiness, results of operations or financial performance, which in turn can affect the price of our publicly traded securities. These are not the only risks we face. There may be other risks we are not currently aware of or that we currently deem not to be material but that may become material in the future. To the extent that any of the information contained in this document constitutes forward-looking statements, the risk factors below should be reviewed as cautionary statements identifying important factors that could cause actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. See Cautionary Note Regarding Forward-Looking Statements.

As aOur business operatingand operations in the financial services industry, our business and operationsindustry may be adversely affected in numerous and complex ways by weak economic conditions.

The success of our real estate lending programs depends substantially upon the general economic conditions in Utah, which we cannot predict with certainty.predict. Adverse conditions in the local Utah economy such as unemployment, recession, a catastrophic event or other factors beyond our control could impact the ability of borrowers participating in our real estate lending program to repay their loans, which could impact our net interest income. In addition, our borrowers who participate in our SBA 7(a) lending program span across multiple states, with a focus in New York and New Jersey. As in the case with Utah, we similarly cannot foresee or control the economic conditions in such states. A downturn in these regional economies generally could make it more difficult for our borrowers to repay their loans and may lead to loan losses. For these reasons, anyAny national, regional or local economic downturn that affects our service regions, or existing or prospective borrowers in such regions, could have a material adverse effect on our real estate and SBA 7(a) lending and the business, financial condition and results of operations.

We operate in the highly competitive financial services industry and face significant competition for customers from financial institutions located both within and beyond our principal markets and product lines. We compete with commercial banks, savings banks, credit unions, nonbank financial services companiescompanies, including the private credit lending market, and other financial institutions operating both within our market areas and nationally, and in respect of our financial technology initiative we also compete with other entities in the financial technology industry, including a limited number of other banks that have developed strategic programs similar to our Strategic Programs.

Our business substantially depends on our ability to successfully measure and manage credit risk. As a lender, we are exposed to the risk that the principal of, or interest on, a loan will not be paid timely or at all or that the value of any collateral supporting a loan will be insufficient to cover our outstanding exposure. In addition, we are exposed to risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting, closing, servicing and liquidation, risks resulting from changes in economic and industry conditions, and risks inherent in dealing with individual loans and borrowers. If the overall economic climate in the United States generally, or in any of our markets specifically, experiences material disruption, our borrowers may experience difficulties in repaying their loans, the collateral we hold may decrease in value or become illiquid, and the level of delinquencies, nonperforming loans, and charge-offs could rise and require significant additional provisions for loan losses.

The Financial Accounting Standards Board (the “FASB”) has issued an accounting standard for establishing allowancesan allowance for loan and leasecredit losses that replaces the prior approach under United States generally accepted accounting principles (“U.S. GAAP”), which generally considers only past events and current conditions, with a forward-looking methodology that reflectsestimates the expected credit losses over the lives of financial assets, starting when such assets are first originated or acquired. As an emerging growth company relying on the extended transition period for new accounting standards, this standard, referred to as Current Expected Credit Loss (“CECL”), became effective for us on January 1, 2023. The CECL standard requires us to record, at the time of origination, credit losses expected throughout the life of the asset portfolio on loans and held-to-maturity (“HTM”) securities,securities. as opposed to the former practice of recording losses when it is probable that a loss event has occurred. Moreover, theThe CECL standard may create more volatility in the level of allowance for credit losses. If we are required to materially increase the level of our allowance for credit losses for any reason, such increase could have an adverse effect on our business, financial condition, and results of operations. For further information, please see Note 1 - Summary of Significant Accounting Policies to the consolidated financial statements included in Part II, Item 8.

Our SBA lending program is dependent upon the U.S. federal government. WeIn are2025, anwe approvedvoluntarily participantrelinquished in the SBAour Preferred LendersLending Program (“PLP”). delegated authority. We are now an SBA-approved General Processing(“GP”) lender. As an SBA PreferredGP Lender, we aresubmit able to offerall SBA loansloan to our clients without being subjectapplications to the potentiallyLoan lengthyGuaranty SBAProcessing approval processCenter for application,final servicingapproval. orThere liquidationis actionsa necessary for lendersrisk that are not SBA Preferred Lenders. If we lose our status as an SBA Preferred Lender, we may lose someloan orapplicants alland of ourexisting customers to lenders who are SBA Preferred Lenders, and as a result we could experience a material adverse effect on our financial results. Any changes to the SBA program, including but not limited to changes to the level of guarantee provided by the federal government on SBA loans, changes to program specific rules impacting volume eligibility under the guaranty program, as well as changes to the program amounts authorized by Congress or exhaustion of the available funding for SBA programs, may have a material adverse effect on our business. In addition, any default by the U.S. government on its obligations or any prolonged government shutdown could, among other things, impede our ability to originate SBA loans or sell such loans in the secondary market, which could materially and adversely affect our business, financial condition and results of operations. When we originate SBA loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on a loan, we share any loss and recovery related to the loan pro-rata with the SBA. If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us.

Generally, we do not maintain reserves or loss allowances for such potential claims and any such claims could materially and adversely affect our business, financial condition and earnings. The laws, regulations and standard operating procedures that are applicable to SBA loan products may change in the future. We cannot predict the effects of these changes on our business and profitability. Because government regulation greatly affects the business and financial results of all commercial banks and bank holding companies and especially our organization, changes in the laws, regulations and procedures applicable to SBA loans could adversely affect our ability to operate profitably.

Because a significant portion of our loan portfolio held-for-investment within our local lending program, owner occupied commercial lending program and SBA 7(a) lending program is secured by real estate, negativeNegative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses.

As of December 31, 2024,2025, approximately $64.2$121.2 million, or 13.8%,20.7%, of our total gross loans held-for-investment were local lending or owner occupied commercial lending program loans with real estate as a primary or secondary component of collateral. We also have approximately $254.3$199.0 million, or 54.7%,34.0%, of our total gross loans held-for-investment in SBA loans that are securedsecured, at least in part, with real estate as a component of collateral as of December 31, 2024.2025. The market value of real estate can fluctuate significantly in a short period of time. As a result, adverse developments affecting real estate values and the liquidity of real estate in our primary markets could increase the credit risk associated with our loan portfolio, and could result in losses that adversely affect our credit quality, financial condition and results of operations. Negative changes in the economy affecting real estate values and liquidity in our market areas could significantly impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses. Collateral may have to be sold for less than the outstanding balance of the loan, which could result in losses on such loans. Such declines and losses would have a material adverse effect on our business, financial condition and results of operations.

We also may borrow funds from third-party lenders, such as other financial institutions. We currently utilize fourthree secured lines of credit provided by the FHLB, PPPLFFHLB and the Federal Reserve and twothree unsecured lines of credit provided by Bankers Bank of the WestWest, Pacific Coast Bankers’ Bank, and Zions Bank.Bank, that in the aggregate provided nearly immediate liquidity available of $230.4 million. Our access to funding sources in amounts adequate to finance or capitalize our activities, or on terms that are acceptable to us, could be impaired by factors that affect us directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry. Our access to funding sources could also be affected by one or more adverse regulatory actions against us.

Any futureThe failure to maintain effective internal control over financial reporting could impair the reliability of our financial statements, which in turn could harm our business, impair investor confidence in the accuracy and completeness of our financial reports and our access to the capital markets and cause the price of our common stock to decline and subject us to regulatory penalties.

We may be susceptible to deposit run-off risks.risks, which could adversely affect our business and financial condition.

The Bank relies significantly upon deposits for liquidity and funding business operations. Generally, deposits are a relatively stable and cost-effective source of funding for banks due to many factors, including FDIC deposit insurance. Changes in deposit levels can be influenced substantially by many factors, including customer satisfaction and the interest rates offered to deposit customers. Those rates, in turn, generally reflect prevailing market conditions. During the first quarter of 2023, the media highlighted the risks of an extreme form of deposit run-off, sometimes referred to as a “run on the bank.” The failures of Silicon Valley Bank, Signature Bank, and First Republic Bank in 2023 resulted in significant disruption in the financial services industry and negative media attention, which has also adversely impacted the volatility and market prices of the securities of financial institutions and resulted in outflows of deposits for many other financial institutions. More moderate levels of run-off can adversely affect banks but are less dramatic and have been significantly less reported. The rapid rise in interest rates during 2022 and 2023 and the resulting industry-wide reduction in the fair value of securities portfolios, among other events, have increased volatility and uncertainty with respect to the health of the U.S. banking system.system for a period of time. We believe thisthese recent experiences has resulted in a continued heightened awareness around liquidity, uninsured deposits, deposit composition, unrecognized investment losses, and capital.capital, We, believe that the increased level of public concern created by the current adverse business environment, punctuated by media reports of potential or actual bank failures, havehaving increased the risk of some level of deposit run-off for depository institutions at the present time.institutions. That increased run-off risk applies both generally and in relation to deposits that exceed FDIC insurance coverage. To manage this risk,While the Bank maintains cash reserves and access to other liquidity sources to accommodate normal and, to a degree, unusual withdrawal activity, and the Bank plans to respond promptly and accurately to any customer concerns that might arise.arise, we cannot assure you that we will be able to manage a deposit run-off if it were to occur and could adversely affect our business and financial condition.

We expect to acquire deposit accounts through our Fintech Banking and Payment Solutions relationships and provide oversight over these relationships, which must meet our internal and regulatory requirements. We may exit relationships where such requirements are not met or be required by our regulators to exit such relationships. Also, our Fintech Banking and Payment Solutions customers could terminate their relationships with us for many reasons, including being able to obtain better terms from another provider or dissatisfaction with the level or quality of our services. If a relationship were to be terminated, it could materially reduce our deposits, assets and income. We cannot assure you that we would be able to acquire the deposits initially, or successfully replace such relationships. If we cannot acquire or replace such relationships, we may be required to seek higher rate funding sources and interest expense might increase. We may also be required to sell securities or other assets to meet funding needs which would reduce revenues or potentially generate losses.

We may enter into agreements with our Fintech Banking and Payment Solutions customers pursuant to which our Fintech Banking and Payment Solutions customers may market bank consumer checking and consumer or commercial line of credit (“LOC”) accounts using their brands and digital platforms, make underwriting determinations for the LOC accounts, cover any losses on the LOC accounts, provide cash collateral to the Bank to secure payment of such losses or be partial guarantors of losses on the LOC accounts. In the event the cash collateral amount is not adequately maintained or is insufficient to cover the losses on the LOC accounts and the Fintech Banking and Payment Solutions customer does not or cannot otherwise meet its partial guaranty or other obligations under its agreement with the Bank, the Bank may incur lossesfinancial on the LOC accounts.losses. Losses associated with the LOC accounts (or the portfolios of other third parties with whom we enter into comparable Fintech Banking and Payment Solutions relationships) in such circumstances could have a material adverse effect on our net income, results of operations and financial condition.

Any of these actions may harm the Bank and/or our Strategic Program service providers, and may result in, among other penalties, borrowers rescinding their loans, imposition of financial penalties against the Bank and/or our Strategic Program service providers, and/or injunctive relief against the Bank and/or our Strategic Program service providers requiring the Bank and/or our Strategic Program service providers to cease or curtail certain operations. If any of the Strategic Program service providers with which we do business suffers any of these consequences, we may be forced to create new relationships with Strategic Program service providers, which if not formed, could have an adverse effect on our growth strategy, business, results of operation and financial condition. Additionally, the Bank may suffer economic penalties and consequences as a result of a financial penalty or damages or injunctive relief. If the Bank and/or any of the Strategic Program service providers with which we do business suffers any of these consequences, the Bank may not be able to recover economic damages and/or costs the Bank incurs from the Strategic Program service provider, whether under an indemnification right or other action against the service provider. The foregoing could adversely affect our growth, business prospects, financial condition and results of operations. The Bank and our Strategic Program service providers may be subject to consumer arbitration or litigation regardless of whether the claims have merit. Given the wide variety of state and federal consumer financial protection laws, consumer claims are a regular and ordinary component of any consumer lending and servicing business.

The Bank and our Strategic Program service providers may be subject to consumer arbitration or litigation regardless of whether the claims have merit. Given the wide variety of state and federal consumer financial protection laws, consumer claims are a regular and ordinary component of any consumer lending and servicing business. The Bank and our Strategic Program service providers may face consumer claims (including class action claims) under state or federal laws governing fair debt collection, fair credit reporting, electronic funds transfers, truth in lending, unfair or deceptive acts or practices, telecommunications, or other consumer protection laws. The Bank or our Strategic Program service providers may be required to defend against such consumer claims in court or through arbitration. The litigation risks attendant in defending against these claims, which we intend to do vigorously, may include increased legal fees, related costs and expenses, and reputational harm. Because litigation risk is generally unpredictable, we cannot estimate the amount of damages (if any) that might be awarded in any case, foresee other forms of relief a competent tribunal may impose, or otherwise predict the impact of consumer claims on the Bank’s or any Strategic Program service provider’s operations or revenue.

A significant portion of our loan origination is conducted through our Strategic Programs. Approximately $54.1,$76.1 million, or 55.9%50.4% of our total revenues for the year ended December 31, 2024,2025, were generated through our Strategic Programs. Our agreements with service providers to the Strategic Programs are non-exclusive and do not prohibit the service providers from working with our competitors upon payment of a fee or from offering competing services. In addition, the Strategic Program service providers may not perform as expected under our agreements including potentially being unable to accommodate our projected growth in loan volume and revenue. Although we have taken steps to secure relationships with our Strategic Program service providers and key third-party relationships, we could in the future have disagreements or disputes with our Strategic Program service providers, which could negatively impact or threaten our relationship. Furthermore, our agreements with third parties could come under scrutiny by our regulators, and our regulators could raise an issue with, or object to, any term or provision in such an agreement or any action taken by such third party vis-à-vis the Bank’s operations or customers, resulting in a material adverse effect to us including, but not limited to, the imposition of fines and/or penalties and the material restructuring or termination of such agreement.

The regulatory framework for our Strategic Programs is evolving and uncertain. It is possible that new laws and regulations will be adopted in the United States and internationally, or existing laws and regulations may be amended, removed or interpreted in new ways, that would affect the operation of our Strategic Program service providers and the way in which they interact with borrowers and investors. Recognizing the growth in online marketplaces, in July 2015 the Treasury issued a request for information to study the marketplace lending industry, which led to the release of a Treasury white paper on May 10, 2016, on the online marketplace lending industry. The white paper included several recommendations to the federal government and private sector participants in order to encourage safe growth and access to credit. In April 2022, the CFPB announced that it intends to examine nonbank financial companies, which may include some of our Strategic Program service providers, that pose risks to consumers and in June 2022, the Deputy Director of the CFPB indicated that relationships between banks and nonbank lenders will be an area of increased regulatory focus for the agency in the near future. Subsequently, in November 2022, the Treasury Department issued a report encouraging the CFPB to increase its supervisory activity with respect to larger nonbank lenders. State regulators have also increased the level of regulatory scrutiny on financial technology companies. However, following the inauguration of the new President in January 2025, new acting federal financial regulators have signaled that they will take a different approach to regulation of the financial marketplace and financial technology companies compared to the prior administration. We cannot predict whether any legislation or proposed rulemaking will actually be introduced or how any legislation or rulemaking will impact our business and results of operations of marketplace lenders going forward.

TheFinWise CompanyBancorp, Inc. is a Utah corporation and the parent company of FinWise Bank and FinWise Investment, LLC. The Company is a registered bank holding company that is subject to supervision by Utah Department of Financial Institutions (“UDFI”) and the Federal Reserve. 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.Federal Deposit Insurance Corporation (“FDIC”). The Bank’s deposits are federally insured up to the maximum legal limits.

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, capital 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 our consistent ability to operate profitability since developing theour third-party loan origination business. Our track record has demonstrated that theseour factorsproducts and delivery of the products help deliver suchsustainable asset growth and strong profitability, and that the flexibilitycharacteristics inherent inof our business model enhances our ability to manage credit risk. 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, brokered deposit arrangements and other deposit sources.

Our financial condition and results of operations depend primarily on our ability to (i) originate loans and leases directlydirectly, or by using our strategic relationships with third-party loan origination platforms to earn interest and non-interest income, (ii) effectively manage credit and other risks throughout the Bank, (iii) attract and retain low cost, stable deposits, and (iv) efficiently operate in compliance with applicable regulations.

Our lending focuses on fourtwo main lending areas: (i) traditional lending which includes SBA 7(a) loans, (ii) Strategic Programs, (iii) residential and commercial real estateestate, and commercial leasing; and (ivii) commercialStrategic leasing.Programs lending which includes held-for-sale, credit enhanced, and retained loans. For a description and analysis of the Company’s loan categories, see “Financial Condition.”

The preparation of our consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent assets and liabilities. We base ourThese estimates are based on historical experience and on various other reasonable assumptions that are believed to be reasonable under current circumstances, the results of which form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily availabledeterminable from other sources. We evaluatereview ourthese estimates on an ongoing basis.regularly. Actual results may differ from these estimates under different assumptions or conditions.estimates.

This executive summary provides certain 20242025 and 20232024 consolidated financial highlights from the discussion and analysis that follows:

•Originations of total loans increased by $0.7$1.1 billion to $5.0$6.1 billion for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. New Strategicstrategic Programsprograms and organic growth through existingcertain established strategic programs contributed to the increase in loan originations.

•Net interest margin (“NIM”) was 9.23% for the year ended December 31, 2025, compared to 9.99% for the year ended December 31, 2024, compared to 11.65% for the year ended December 31, 2023.2024. NIM is impacted by income earned from interest-earning assets and interest costs incurred on interest-bearing liabilities. NIM decreased principally as a result of FinWise having diversified its revenue sources by lending to lower risk borrowers with lower yields on loans.

•FinWise generated net income of $12.7$16.1 million and $17.5$12.7 million for the year ended December 31, 20242025 and 2023,2024, respectively. Net income declinedincreased as FinWisewe investedbenefited from the past investment in expansion of itsour product offerings and supporting business infrastructure.offerings.

•Total assets increased by $159.8$231.2 million to $746.0$977.1 million as of December 31, 20242025 compared to December 31, 2023,2024, principally in our Strategic Program loans held-for-sale and investmentcredit securities.enhanced Strategic Program loans held-for-investment. We believe our strong capital levels support our current and planned growth strategy.

•We announced our first strategic payments program with FUTR Payments (formerly Hank Payments Corp.) to offersupport modernizedautomated paymentspayment processing and cashremittance management solutions to our customers.capabilities.

We have introduced ourOur Payments (MoneyRails™) and Bank Identification Number (“BIN”) Sponsorship products which, together with our Strategic Programs, comprise the Bank’s Fintech Banking and Payment Solutions offerings. Payments (MoneyRails™) and BIN Sponsorship connectconnects our customers to the Bank’s API-driven banking services ledger.

Net interest income increased $4.4$13.3 million for the year ended December 31, 2024,2025, compared to the year ended December 31, 20232024 primarily due to volume increases in the loans held for investmentheld-for-investment and loans held-for-sale portfolios and was partially offset by increased volume and rate in the certificates of deposit portfolio which also contributed to the increase in our cost of funds.portfolio. Average interest-earning assets increased by $121.4$192.1 million for the year ended December 31, 20242025 compared to the year ended December 31, 2023,2024, while the related yield on average interest earning assets decreased by 11877 basis points to 12.60%.11.83%. Average interest-bearing liabilities increased by $101.4$166.4 million for the year ended December 31, 20242025 compared to the year ended December 31, 2023,2024, while the related cost of funds increaseddecreased 3555 basis points to 4.57%. NIM decreased to 9.99% for the year ended December 31, 2024 from 11.65% for the year ended December 31, 2023 primarily as a result of our increased lending to lower risk borrowers with lower yields on loans as part of our strategy to reduce average credit risk in the loan portfolio combined with the increased cost of funds as the Bank competed in the national deposit market for funds to support our asset growth.4.02%.

(1) Loans placed on nonaccrual status are included in loan balances. See “Nonperforming Assets” below.

On January 1, 2023, the Company adopted ASU 2016-13, Topic 326 which replaced the incurred loss methodology, allowance for loan losses, with CECL for financial instruments measured at amortized cost and other commitments to extend credit. The provision for credit losses is a charge to income to bring our ACL to a level deemed appropriate by management and approved by our board of directors. We determine the provision for credit losses monthly in connection with our evaluation of the adequacy of our ACL. For a description of the factors we considered in determining the ACL see Allowance for credit losses presented in Note 1 - Summary of Significant Accounting Policies included in Part II, Item 8.

The following table presents, for the periods indicated,presents the major categories of non-interest income for the periods indicated:

The following table presents, for the periods indicated,presents the major categories of non-interest expense for the periods indicated:

There have been no material changes during the threesix months ended MarchJune 31,30, 2026 to the methods we used and judgments we made relating to critical accounting estimates from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2025 Form 10-K.

•For the three months ended MarchJune 31,30, 2026, originations increased to $1.7$1.6 billion from $1.3$1.5 billion when compared to the three months ended MarchJune 31,30, 2025. For the six months ended June 30, 2026, originations increased to $3.4 billion from $2.7 billion when compared to the six months ended June 30, 2025. New strategic programs and organic growth through certain established strategic programs contributed to the increase in loan originations.

•Net interest margin (“NIM”) was 12.90%13.69% for the three months ended MarchJune 31,30, 2026, compared to 8.27%7.81% for the three months ended MarchJune 31,30, 2025. NIM was 13.29% for the six months ended June 30, 2026, compared to 8.03% for the six months ended June 30, 2025. NIM is impacted by income earned from interest-earning assets and interest costs incurred on interest-bearing liabilities.liabilities and increased significantly for the three and six months ended June 30, 2026 compared to the same periods in 2025 due to the growth of the credit enhanced loan program.

•We generated $2.7$2.1 million and $3.2$4.1 million of net income for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $4.9 million and $7.3 million of net income for the six months ended June 30, 2026 and 2025, respectively. The decrease in netNet income wasdeclined primarily impacted by higher net-charge offs, which leddue to an increasedincrease in the provision for credit losseslosses, driven by higher net charge-offs within ourthe traditional banking portfolio.This increase in provision for credit losses had a negative impact on our after-tax net income for the period.portfolio.

•Total assets decreased by $77.7$51.8 million to $899.4$925.3 million as of MarchJune 31,30, 2026 compared to December 31, 2025, principally due to decreases in interest-bearing cash deposits,deposits and loans-held-for-investment, partially offset by an increase in Strategic Program loans held-for-sale and loans-held-for-investment.held-for-sale.

Net interest income increased for the three months ended MarchJune 31,30, 2026, compared to the same period in 20252025, primarily due to anthe increase in the Bank’s average balance of credit enhanced loans, an increase in average balances in the Strategic Program loans held-for-sale portfolio of $45.0 million, and a a change in estimateestimate, based on additional information and experience, on the allocation of interest received on credit enhanced loans in excess of the amount FinWisewe retains.retain. FinWiseWe now estimatesestimate that all excess interest is attributable to servicing and credit guarantee expenseexpense, wherewhereas previouslyin the prior year it had been estimated that a portion was attributable to originationsorigination costs, or findersfinders' fee,fees, and was reported in net in interest income.

NIM increased to 12.90%13.69% for the three months ended MarchJune 31,30, 2026 from 8.27%7.81% for the three months ended MarchJune 31,30, 2025 and increased to 13.29% for the six months ended June 30, 2026 from 8.03% for the six months ended June 30, 2025, primarily attributable tofrom the growth ofin the credithigher enhancedyielding loancredit-enhanced portfolio average balance and higher yields on loans held for investment, the change in estimated allocation of the excess interest as previously described abovedescribed, and theslightly averagelower balancerates growthpaid inon the credit enhanced portfolio.deposits.

Average Balances and Yields. The following tabletables presentspresent average balances for assets and liabilities, the total dollar amounts of interest income from interest-earning assets, the total dollar amounts of interest expense on interest-bearing liabilities, the resulting average yields and costs, and NIM. The yields and costs for the periods indicated are derived by dividing the annualized income or expense by the average balances for assets or liabilities, respectively, for the periods presented. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yield/rates. Average balances have been calculated using daily averages.

The following tabletables presentspresent the components of the provision for credit losses for the periods indicated:

NM denotes the percentage change is not meaningful (1)For credit enhanced loans, fintech partners are required to maintain a deposit account at FinWise, which is used to recover charge-offs. The provision for credit losses on these loans differs from the core portfolio, as it is fully offset by expected recoveries under the partner guarantee, which is recognized as credit enhancement income in non-interest income.

The following tabletables presentspresent the components of non-interest income for the periods indicated:

The increase in total non-interest income for the threesix months ended MarchJune 31,30, 2026, compared to the samesix periodmonths inended June 30, 2025 was primarily due to increases in credit enhanced loan balances which generatedresulted in growth in the provision for credit losses which in turn resulted in higher credit enhancement income.income as a reciprocal to the provision for credit losses on credit enhanced loans. Additionally, the increased sales of the guaranteed portions of SBA 7(a) loans led to an increase in gains on loan sales,sales higherof originations$0.6 resultedmillion, an increase in increasedloan origination volume led to higher Strategic Program fees,fees of $0.6 million, and the acquisition of thea credit card portfolio in November 2025 introduced interchange income to FinWise.

The following tabletables presents the components of non-interest expense for the periods indicated:

The increase in total non-interest expense for the three and six months ended MarchJune 31,30, 2026, compared to the same period in 2025, was primarily due to an increase in credit enhancement guaranteeservicing and servicingguarantee expenses resulting from growth in credit enhanced loans and salaries and employee benefits mainly from increased headcount.

Our provision for income taxes for the three and six months ended MarchJune 31,30, 2026 and 2025 resulted in an effective income tax rate of 28.0%24.0%, 24.5%, 26.3% and 28.1%,26.1% respectively. The effective tax rate differed from the federal statutory rate of 21.0% for the three and six months ended MarchJune 31,30, 2026 principally due to state and local income taxes and certain non-deductible executive compensation.

The changes in net income for the three and six months ended MarchJune 31,30, 2026, compared to the same periods in 2025, were primarily the result of the factors discussed in the foregoing sections.

For periods prior to July 1, 2025, our operations were managed and reported as a single segment, and historical financial data by segment was not maintained. Accordingly, it is not practicable to present segment information for prior periods. In the segment reporting below, a non-GAAP subtotal is shown, captioned “Income (loss) before other operating expense allocation”. That subtotal presents an income (loss) subtotal before consideration of allocated corporate expenses which might be fixed, semi-fixed or otherwise resist changes without regard to a particular line of business. The following tabletables providesprovide segment information for the periods indicated ($ in thousands):

The BaaS segment’s strong performance for the three and six months ended MarchJune 31,30, 2026 underscores the success of our Strategic Program initiatives, while traditional banking is a core component of our business whose first quarter results were adversely affected by credit quality issues generally related to the SBA portfolio. Treasury and administration remains focused on optimizing liquidity and supporting the funding needs of our other operating segments.

The following table summarizes selected components of our consolidated balance sheets as of MarchJune 31,30, 2026 and December 31, 2025:

The decrease in interest-bearing deposits in other banks from December 31, 2025 to MarchJune 31,30, 2026, was primarily due to thefunding maturityour ofStrategic higher-costProgram brokeredloans certificatesheld-for-sale of deposit prior to the end of the quarter and we opted not to renew or replace them.portfolio. Aside from minimal balances held with our correspondent banks, the majority of our interest-bearing deposits are held at the Federal Reserve.

The following table summarizes the contractual maturities and weighted-average yields of our investment securities at MarchJune 31,30, 2026. The weighted average yield of investment securities was calculated using the sum of all interest that the investments generate, divided by the average book value. There are no tax-exempt securities.

There were no sales or transfers of investment securities between classifications during the threesix months ended MarchJune 31,30, 2026 and 2025.

At MarchJune 31,30, 2026, we had a total of eighteen securities in an unrealized loss position, consisting of eight collateralized mortgage obligations and ten mortgage-backed securities. At December 31, 2025, we had a total of seventeen securities in an unrealized loss position, consisting of eight collateralized mortgage obligations and nine mortgage-backed securities.

Our Strategic Program loans held-for-sale decreasedincreased $12.6$28.7 million as of MarchJune 31,30, 2026 compared to December 31, 2025, primarily as a result of lowerhigher originations for certain programs.

(1)SBA loans as of MarchJune 31,30, 2026 and December 31, 2025 include $95.1$66.1 million and $102.7 million, respectively, of SBA 7(a) loan balances that are guaranteed by the SBA.

As of MarchJune 31,30, 2026 and December 31, 2025, we had total SBA 7(a) loans of $202.4$164.0 million and $205.6 million, respectively, representing 34.6%28.7% and 35.1% of our total loans held-for-investment, respectively. Loans are sourced primarily through our referral relationship with BFG. Although BFG actively markets throughout the United States, we have developed a lending presence in the New York and New Jersey geographies due to its physical location in New York. The maximum SBA 7(a) loan amount is $5.0 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. We will sell interests in 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 when market pricing for SBA loans are favorable. We will retain both the guaranteed portion and unguaranteed portion on our balance sheet when market pricing for SBA loans is less favorable and to season the new SBA loans to obtain optimal pricing. During the firstsix quartermonths ended June 30, 2026, the Company sold $25.9$50.9 million of the guaranteed principal balances of SBA loans.

As of MarchJune 31,30, 2026 and December 31, 2025, we had total commercial leases of $78.9$83.1 million and $78.7 million, respectively, representing 13.5%14.5% and 13.4% of our total loans held-for-investment, respectively. Underwriting for smaller credit requests from customers is generally based on an internal credit scorecard, incorporating several customer and structure attributes including: severity and aging of delinquency; number of credit inquiries; loan-to-value ratio; term; and payment-to-income ratio. We periodically update our underwriting scorecard, which can have an impact on our credit tier scoring. Underwriting for larger credit requests from customers is generally based on commercial credit metrics where the primary repayment source considered 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 also underwriting considerations. These leases are generally secured by liens on business assets leased or purchased with Company funds. Historically, we have retained these leases on our balance sheet for investment; however, we may sell leases to certain purchasers from time to time.

Commercial non-real estate loans consist of loans and leases made to commercial enterprises that are not secured by real estate. As of MarchJune 31,30, 2026 and December 31, 2025, we had total commercial non-real estate loans of $3.9$3.5 million and $4.2 million, respectively, representing 0.7%0.6% and 0.7% of our total loans held-for-investment, respectively. Any loan, lease, 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 are included in this product loan category. 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 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 MarchJune 31,30, 2026 and December 31, 2025, we had total residential real estate loans of $62.5$70.5 million and $59.6 million, respectively, representing 10.7%12.3% and 10.2% of our total loans held-for-investment, 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 the general market conditions associated with the area and type of project being funded in addition to the borrower’s financial condition and ability to meet the required debt obligation. 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 consolidated balance sheetssheet for investment.

Through our Strategic Program service providers, we issue unsecured and secured consumer and business loans to borrowers within certain approved credit profiles nationwide. Although we have generally sold most of these loans, we may choose to hold more of the funded loans and/or receivables based on a number of factors including the amount of our available capital. As of MarchJune 31,30, 2026 and December 31, 2025, we had total Strategic Program loans held-for-investment of $129.9$144.6 million and $129.7 million, respectively, representing 22.3%25.3% and 22.2% of our total loans held-for-investment, respectively. Loans originated through the Strategic Program are limited to predetermined Bank underwriting criteria, which has been approved by our board of directors. The primary form of repayment on these loans is from the borrower’s personal or business cash flow. Secured loans are secured by liens on consumer or business assets, as applicable. 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 generally 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.

The Strategic Program loans with credit enhancement are distinct from our traditional loan portfolioportfolio. A specified percentage of the outstanding Strategic Program loan balances, representing interest and potentially other revenue sources associated with the program, is retained in thata restricted deposit account, from which FinWise recovers its share of any charged-off principal and interest on the related loans. Interest and fees collected in excess of the amounts needed to maintain the deposit balance at the required level are paid to the fintech. In addition, the sponsoring fintech company guarantees that FinWise is reimbursed for the credit and fraud losses associated with these loans. Credit enhanced Strategic Program loans totaled $109.1$120.8 million and $108.1 million as of MarchJune 31,30, 2026 and December 31, 2025, representing 18.7%21.1% and 18.5% of our total loans held-for-investment, respectively. This significant increase reflects the expansion of the credit enhanced program and its impact on our balance sheet. The Reconciliations of Non-GAAP Financial Measures section of this report below further details the impact of the credit enhancement program on our allowance for credit losses and related non-GAAP financial measures.

Strategic Program loans without credit enhancement totaled $20.8$23.9 million and $21.6 million as of MarchJune 31,30, 2026 and December 31, 2025, representing 3.6%4.2% and 3.7% of our total loans held-for-investment, respectively. Unlike the credit enhanced loans, these non-credit enhanced loans do not benefit from a third-party guarantee or indemnification of credit and fraud losses by the Strategic Program service provider. As a result, the Bank retains the full interest and fee income as well as the credit and fraud losses associated with these loans, and they are subject to our standard credit risk management, monitoring, and allowance for credit losses under the CECL model. The accounting for non-credit enhanced Strategic Program loans is consistent with our other held-for-investment loan portfolios. While the non-credit enhanced Strategic Program loans represent a smaller portion of our overall loan portfolio, they provide additional diversification and support our broader fintech strategy.

Commercial real estate loans include loans to individuals, sole proprietors, partnerships, corporations, or other business enterprises for commercial, industrial, agricultural, or professional purposes, secured by real estate, but not for personal expenditure purposes. As of MarchJune 31,30, 2026 and December 31, 2025, we had total commercial real estate loans of $88.1$88.7 million and $85.7 million, respectively, representing 15.1%15.5% and 14.6% of our total loans held-for-investment, respectively. Of these amounts, $86.1$86.6 million and $84.0 million represented owner occupied properties as of MarchJune 31,30, 2026 and December 31, 2025, 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 lending provides financing for personal, family, or household purposes on a nationwide basis. Most of these loans are originated through our loan origination system platform and come from a variety of sources, including other approved merchant or dealer relationships and lending platforms. As of MarchJune 31,30, 2026 and December 31, 2025, we had total consumer loans of $18.6$17.0 million and $21.9 million, respectively, representing 3.3%3.0% and 3.8% of our total loans held-for-investment, respectively. We use a debt-to-income (“DTI”) ratio test 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, these loans are underwritten as if they were unsecured. On larger loans, we may file a Uniform Commercial Code (“UCC”) financing form. Historically, we have retained these loans on our balance sheet for investment.

The following table details the contractual maturity ranges of loans in our loan portfolio and the amount of such loans with fixed and variable rates in each maturity range as of MarchJune 31,30, 2026:

We had a total of $49.8$37.7 million in nonperforming assets as of MarchJune 31,30, 2026, which included $26.7$19.0 million of SBA 7(a) loan balances that are guaranteed by the SBA. We had $43.7 million in nonperforming assets which included $0.5 million in material loan modifications at December 31, 2025. The amount of nonperforming assets as of December 31, 2025 includes $24.2 million of SBA 7(a) loan balances that are guaranteed by the SBA. The increasedecrease in nonperforming assets from the prior year was primarily attributable to thea increasedecrease in the SBA 7(a) loan portfolio being classified as nonaccrual mainly due to the negative impact of sustained elevated interest rates on our small business borrowers. Due to elevated interest rates, the slowdown of consumer spending and the variable rate nature of our SBA portfolio, the risk of default has become and continues to be elevated and may result in additional delinquencies in future periods.paydowns.

Our Strategic Program service providers also provide for loan modifications to borrowers. The service providers are authorized to make the loan modifications consistent with modification program terms previously approved by FinWise but without prior FinWise consent on the specific loans in order to react to immediately to borrower contact and optimize collections. As of MarchJune 31,30, 2026 the balance of outstanding loan modifications was approximately $0.2 million.

Pass -– A Pass asset is higher quality and does not fit any of the other categories described below. The likelihood of loss is believed to be remote.

Loss -– A loss asset 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 books 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.

(1) Recoveries related to Strategic Program loans that were reimbursed fully on the credit enhanced portfolio totaled $4.9$7.8 million and $1.0 thousand for the three months ended MarchJune 31,202630, 2026 and MarchJune 31,30, 2025, respectively, and $12.7 million and $2.0 thousand for the six months ended June 30, 2026 and June 30, 2026, respectively.

The following table shows the allocation of the ACL and the percentage of loans in each category to total loans as of MarchJune 31,30, 2026 and December 31, 2025. The ACL related to Strategic Programs constitutes 76.2%78.9% and 77.0% of the total ACL while comprising 22.3%25.3% and 22.2%, respectively, of total loans held-for-investment as of MarchJune 31,30, 2026 and December 31, 2025, respectively. The percentage of ACL related to Strategic Program loans retained reflects the increased credit risks associated with certain retained Strategic Program loans.

The following table reflects the ratios of the ACL to total LHFI, nonaccrual loans to total LHFI, and the ACL to nonaccrual loans by CECL loan category as of MarchJune 31,30, 2026:

When comparing MarchJune 31,30, 2026 to December 31, 2025, the increase in ACL to total loans held-for-investment was primarily due to the increase of the credit enhanced loan portfolio ACL resulting from the change in portfolio composition. The increasedecrease in nonaccrual loans to total loans held-for-investment as shown above was primarily relateddriven toby SBAa decline in nonaccrual loan balances, which more than offset the decrease in total loans that were moved to nonaccrual statusheld-for-investment during 2026.the period. The decreaseincrease in the ACL to nonaccrual loans ratio as shown above primarily pertained to growth in the nonaccrualcredit enhanced loans concentratedincluded in the SBAStrategic productProgram andloans charge-offsheld-for-investment offset in part by the perioddecrease asin updatednonaccrual appraisalsloan werebalances obtained.during the period.

The following tabletables summarizessummarize net charge-offs (“NCO”), average loans and the ratio of annualized NCO to average loans for the periods indicated:

Total assets at MarchJune 31,30, 2026 were $899.4$925.3 million, a decrease of $77.7$51.8 million from December 31, 2025. The decrease in total assets was primarily due to decreases in interest-bearing cash deposits of $60.7$63.8 million, loans held-for-sale portfolio of $12.6 million,million and loans held-for-investment, net, of $2.4$27.1 million, partially offset by increases in loans held-for-sale portfolio of $28.7 million, and the credit enhanced asset of $9.5 million.

The decrease in total deposits as of MarchJune 31,30, 2026 compared to December 31, 2025 of $79.7$60.8 million was primarily due to reductions in noninterest-bearing demand deposits and certificates of deposit, as excess funds were not required to support the lower level of assets.

As an FDIC-insured institution, our deposits are insured up to applicable$250,000 limitsper bydepositor, theper Depositinsured Insurance Fund (“DIF”) of the FDIC. The Dodd-Frank Act raised the limitbank, for federaleach depositaccount insuranceownership to $250,000 for most deposit accounts and increased the cash limit of Securities Investor Protection Corporation protection from $100,000 to $250,000.category. Our total estimated uninsured deposits were $182.2$174.4 million and $204.1 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively. Estimated uninsured deposits at the Bank as of MarchJune 31,30, 2026 include $35.6$29.0 million of total deposits contractually required to be maintained at the Bank pursuant to our Strategic Program agreements and an additional $43.0$52.1 million of total deposits associated with accounts owned by the parent holding company or the Bank. The maturity profile of our uninsured time deposits, those amounts that exceed the FDIC insurance limit, at MarchJune 31,30, 2026 is as follows:

Total liabilities decreased to $702.8$726.1 million, or 10.3%,7.4%, as of MarchJune 31,30, 2026 from $783.9 million as of December 31, 2025 primarily due to a decrease in deposits as discussed above.