[PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited statements show asset growth to $842.5 million and a net income increase to $7.3 million for the six months ended June 30, 2025 [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew 13.0% to $842.5 million, driven by loan portfolio expansion and funded by a 16.6% increase in deposits - Total assets increased by **13.0%** to **$842.5 million** as of June 30, 2025, from $746.0 million at December 31, 2024, primarily driven by a **60.8% increase in Strategic Program loans held-for-sale** and a **13.1% increase in loans held-for-investment**[16](index=16&type=chunk) - Total deposits grew by **16.6%** to **$635.2 million**, funded mainly by an increase in interest-bearing deposits, while total shareholders' equity rose to **$182.0 million** from $173.7 million[16](index=16&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$842,488** | **$745,976** | | Total cash and cash equivalents | $90,100 | $109,162 | | Strategic Program loans held-for-sale | $147,282 | $91,588 | | Loans held-for-investment, net | $506,503 | $447,812 | | **Total Liabilities** | **$660,529** | **$572,256** | | Total deposits | $635,174 | $544,952 | | **Total Shareholders' Equity** | **$181,959** | **$173,720** | [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income) Net income rose 12.2% year-over-year to $7.3 million, propelled by a 67.6% surge in non-interest income - **Net income** for the six months ended June 30, 2025, increased by **12.2%** year-over-year to **$7.3 million**, driven by a **67.6% surge in non-interest income** that offset higher credit loss provisions and non-interest expenses[18](index=18&type=chunk) - For Q2 2025, **non-interest income more than doubled to $10.3 million** from $5.2 million in Q2 2024, primarily due to a significant increase in credit enhancement income and gain on sale of loans[18](index=18&type=chunk) Key Income Statement Data (in thousands, except EPS) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Interest Income | $29,008 | $28,621 | | Provision for credit losses | $8,062 | $5,539 | | Total Non-interest Income | $18,147 | $10,828 | | Total Non-interest Expense | $29,230 | $25,223 | | **Net Income** | **$7,286** | **$6,495** | | **Diluted EPS** | **$0.52** | **$0.49** | [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail business operations through subsidiaries, a stock repurchase program, and a post-quarter data breach with related litigation - The company operates through its subsidiaries, FinWise Bank and FinWise Investment, LLC, with the Bank providing solutions to fintech brands and originating loans through third-party Strategic Programs[33](index=33&type=chunk) - A stock repurchase program was authorized on March 6, 2024, to purchase up to 641,832 shares; as of June 30, 2025, **44,608 shares have been repurchased for $0.5 million**, with no repurchases in Q2 2025[38](index=38&type=chunk) - Subsequent to the quarter end, the company notified approximately **600,000 individuals of a data breach** and is now facing class action lawsuits, though management believes any related losses will not be material[147](index=147&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Asset and net income growth were driven by Strategic Program loans, though net interest margin compressed and credit loss provisions increased [Results of Operations](index=42&type=section&id=Results%20of%20Operations) Net income grew 12.2% despite a compressed net interest margin, driven by a 67.6% increase in non-interest income - **Net interest margin (NIM) decreased to 8.03%** for the six months ended June 30, 2025, from 10.19% in the prior-year period, due to loan repricing and a strategic shift to higher quality, lower-yielding loans[160](index=160&type=chunk)[161](index=161&type=chunk) - **Non-interest income** for the first six months of 2025 **grew by 67.6% YoY**, primarily due to higher Strategic Program fees, a significant increase in credit enhancement income, and higher gains on the sale of SBA loans[169](index=169&type=chunk) - **Non-interest expense rose 15.9% YoY** for the first six months of 2025, mainly due to a **25.6% increase in salaries and employee benefits** from increased headcount and compensation adjustments[171](index=171&type=chunk) Net Income Components Comparison (in thousands) | Component | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Net interest income | $29,008 | $28,621 | 1.4% | | Provision for credit losses | ($8,062) | ($5,539) | 45.5% | | Non-interest income | $18,147 | $10,828 | 67.6% | | Non-interest expense | ($29,230) | ($25,223) | 15.9% | | **Net income** | **$7,286** | **$6,495** | **12.2%** | [Financial Condition](index=47&type=section&id=Financial%20Condition) Total assets grew 12.9% to $842.5 million, led by increases in Strategic Program and held-for-investment loans - **Total assets grew by $96.5 million (12.9%) to $842.5 million** at June 30, 2025, from year-end 2024, led by a **$55.7 million increase in Strategic Program loans held-for-sale** and a **$58.7 million increase in loans held-for-investment**[174](index=174&type=chunk) - **Nonperforming assets increased to $39.7 million** as of June 30, 2025, from $36.5 million at year-end 2024; however, **$21.2 million of these are SBA 7(a) loan balances guaranteed by the SBA**[198](index=198&type=chunk) - The **Allowance for Credit Losses (ACL) increased to $16.2 million (3.1% of total loans)** from $13.2 million (2.8% of total loans) at year-end, driven by growth in credit-enhanced Strategic Program loans[216](index=216&type=chunk)[217](index=217&type=chunk) Loan Portfolio Composition (Gross, in thousands) | Loan Category | June 30, 2025 | % of Total | Dec 31, 2024 | % of Total | | :--- | :--- | :--- | :--- | :--- | | SBA | $246,903 | 46.6% | $255,056 | 54.8% | | Commercial leases | $88,957 | 16.8% | $70,153 | 15.1% | | Commercial real estate (Owner occupied) | $77,871 | 14.7% | $41,046 | 8.8% | | Residential real estate | $54,132 | 10.2% | $51,574 | 11.1% | | Strategic Program loans | $30,699 | 5.8% | $20,122 | 4.3% | | Other | $33,482 | 6.3% | $27,281 | 5.9% | | **Total Loans Held-for-Investment** | **$530,044** | **100.0%** | **$465,233** | **100.0%** | [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity and a 'well-capitalized' status, with a leverage ratio of 18.0% - The primary source of funding is deposits, which **increased by $90.2 million** since year-end 2024, mainly through brokered time deposits to fund loan growth[222](index=222&type=chunk)[223](index=223&type=chunk) - The company maintains significant liquidity sources, including **$90.1 million in cash**, a **$257.6 million line with the Federal Reserve Bank**, and a **$24.9 million line with the FHLB**, with no outstanding balances[230](index=230&type=chunk)[231](index=231&type=chunk) - The Bank remains **'well-capitalized'** under the Community Bank Leverage Ratio (CBLR) framework, with a **leverage ratio of 18.0%** as of June 30, 2025, well above the 9.0% requirement[91](index=91&type=chunk)[236](index=236&type=chunk) Key Performance Ratios | Ratio | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Return on Average Equity | 9.2% | 7.9% | | Return on Average Assets | 2.0% | 2.1% | | Total Equity to Total Assets | 21.6% | 23.3% (as of 12/31/24) | [Quantitative and Qualitative Disclosures About Market Risk](index=65&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is asset-sensitive, with a +100 basis point rate shock projected to increase net interest income by 2.7% - The company's Asset/Liability Management Committee (ALCO) manages interest rate risk by structuring the balance sheet and **does not use leveraged derivatives, options, or futures contracts** for this purpose[254](index=254&type=chunk)[255](index=255&type=chunk) Earnings at Risk (EAR) Analysis as of June 30, 2025 | Interest Rate Shock | Impact on Net Interest Income | | :--- | :--- | | +300 bps | +8.7% | | +200 bps | +5.8% | | +100 bps | +2.7% | | -100 bps | (2.0)% | | -200 bps | (4.5)% | [Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that **disclosure controls and procedures were effective** as of the end of the period covered by the report[257](index=257&type=chunk) - **No changes in internal control over financial reporting** occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[258](index=258&type=chunk) [PART II. OTHER INFORMATION](index=68&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=68&type=section&id=Item%201.%20Legal%20Proceedings) The company is not subject to any material legal proceedings outside the ordinary course of business - The company is not subject to any material legal proceedings, only claims and litigation from the ordinary course of business[260](index=260&type=chunk) [Risk Factors](index=68&type=section&id=Item%201A.%20Risk%20Factors) A new risk factor regarding counterparty default in credit enhancement arrangements for Strategic Program loans has been identified - A new risk factor highlights the **counterparty risk from credit enhancement agreements** with Strategic Program service providers; if a provider defaults on its obligation to reimburse for credit or fraud losses, the Bank would assume that risk[263](index=263&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased in the quarter, with 597,224 shares remaining available under the current program - **No shares of common stock were repurchased** during the three months ended June 30, 2025; there are **597,224 shares remaining for repurchase** under the current program[264](index=264&type=chunk) [Other Information](index=68&type=section&id=Item%205.%20Other%20Information) No directors or officers engaged in changes to Rule 10b5-1(c) trading arrangements during the quarter - No directors or officers adopted, modified, or terminated a Rule 10b5-1(c) trading arrangement during the quarter[267](index=267&type=chunk) [Exhibits](index=69&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including bylaws, stock plans, and officer certifications - Exhibits filed include Amended and Restated Bylaws, the 2019 and 2016 Stock Plans, and certifications from the Principal Executive Officer and Principal Financial Officer[270](index=270&type=chunk)

Group 1 - FinWise Bank experienced a data security incident involving a former employee accessing sensitive data after their employment ended, with the breach occurring around May 31, 2024, and notification to affected individuals delayed for over 14 months [3][4]. - Compromised data includes personal information such as customers' full names, Dates of Birth, Social Security Numbers, and account numbers [4]. - Edelson Lechtzin LLP is investigating potential class action lawsuits for individuals whose sensitive personal data may have been compromised due to the FinWise data breach [5]. Group 2 - FinWise Bank is a Utah chartered bank that provides "embedded banking" services, assisting non-financial businesses, including fintechs, in offering financial products to consumers and businesses [2].

Core Viewpoint - FinWise Bancorp reported quarterly earnings of $0.29 per share, exceeding the Zacks Consensus Estimate of $0.22 per share, and showing an increase from $0.24 per share a year ago, representing an earnings surprise of +31.82% [1][2] Financial Performance - The company posted revenues of $25.07 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 13.93%, compared to $19.45 million in the same quarter last year [2] - Over the last four quarters, FinWise Bancorp has exceeded consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance and Outlook - FinWise Bancorp shares have increased by approximately 0.9% since the beginning of the year, while the S&P 500 has gained 8.1% [3] - The current consensus EPS estimate for the upcoming quarter is $0.29 on $25 million in revenues, and for the current fiscal year, it is $1.05 on $96.3 million in revenues [7] Industry Context - The Zacks Industry Rank for Banks - Southwest is currently in the top 13% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8]

Financial Data and Key Metrics Changes - The company reported net income of $4,100,000 or $0.29 per diluted common share for Q2 2025, driven by strong loan originations and a pickup in net interest income [15][16] - Tangible book value per share increased to 13.51 from 13.42 in the prior quarter [4] - Average loan balances totaled $634,000,000 for the quarter, up from $565,000,000 in the prior quarter [15] - Net interest income rose to $14,700,000 from $14,300,000 in the previous quarter, while net interest margin decreased to 7.81% from 8.27% [16][17] - Fee income increased to $10,300,000 from $7,800,000 in the prior quarter [18] Business Line Data and Key Metrics Changes - Loan originations totaled $1,500,000,000 in Q2, a 17% increase quarter over quarter and a 27% increase year over year [9] - SBA loan originations increased by 24% quarter over quarter and over 140% year over year [10] - The company continued to sell guaranteed portions of SBA loans, which made up 43% of the total portfolio at the end of Q2 [11] Market Data and Key Metrics Changes - The company is experiencing strong demand for credit enhanced products, with expected balances reaching $50,000,000 to $100,000,000 by the end of Q4 2025 [10][46] - The overall portfolio growth is supported by a stable environment for SBA lending and healthy demand from qualified applicants [5] Company Strategy and Development Direction - The company aims for gradual growth through 2025 and 2026, focusing on credit enhanced products and new programs signed late in 2024 and early in 2025 [5][6] - Strategic investments made over the past two years are expected to yield results, with potential benefits from BIN and payment products anticipated to enhance profitability [6][14] - The company is exploring the integration of artificial intelligence to improve operational efficiency [8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the stability of the overall lending environment and the potential for continued growth in loan originations [5][10] - The company expects a rebound in return on average equity into the low to mid-teens range and return on average assets exceeding 2% in the long term [7][62] - Management acknowledged that while growth may not be linear, they are excited about the long-term potential of the bank [14] Other Important Information - The efficiency ratio improved to 59.5% from 64.8% in the prior quarter, indicating better cost management [19] - The effective tax rate decreased to 24.5% from 28.1% in the prior quarter, with expectations around 27% for 2025 [20] Q&A Session Summary Question: Can you discuss the relationship between credit enhanced income and expected balances? - The credit enhanced income reflects the provision for credit losses related to the credit enhanced portfolio, which will increase as balances grow [22][23] Question: What are the plans for funding growth given the strong loan production? - Short-term funding relies on wholesale funding, while long-term strategies include integrating payments business to attract lower-cost deposits [25][26] Question: What is the trend in net charge-offs this quarter? - The increase in net charge-offs was primarily due to SBA charge-offs, but overall levels are in line with historical expectations [28] Question: How does the company view the impact of AI and stablecoins on the banking industry? - The company sees potential in AI for fraud detection and operational efficiency, while stablecoins are being monitored for future opportunities [40][41][37] Question: What is the current health of the company's partners and pipeline? - The health of partners is strong, with solid growth in origination levels and a good pipeline for new lending partners [47][50]

Q2 2025 Financial Highlights FinWise Bancorp reported strong Q2 2025 results with increased net income and diluted EPS, driven by robust loan originations and improved efficiency [Second Quarter 2025 Performance Overview](index=1&type=section&id=Second%20Quarter%202025%20Highlights) FinWise Bancorp reported solid financial results for Q2 2025, with net income of $4.1 million and diluted EPS of $0.29. The company saw strong loan origination growth to $1.5 billion, reflecting successful execution of its growth strategy. Despite an increase in nonperforming loans, the company maintained disciplined expense management, leading to an improved efficiency ratio of 59.5% and an increase in tangible book value per share to $13.51 - The company achieved strong loan originations of **$1.5 billion**, maintained solid revenue, and practiced disciplined expense management, contributing to growing profitability and an increase in tangible book value per share to **$13.51**[4](index=4&type=chunk) - Nonperforming loan balances increased to **$39.7 million** as of June 30, 2025, up from **$29.9 million** in the prior quarter and **$27.9 million** in the prior year. Of this, **$21.2 million** was guaranteed by the SBA[5](index=5&type=chunk) Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Loan Originations | $1.5 billion | $1.3 billion | $1.2 billion | | Net Income | $4.1 million | $3.2 million | $3.2 million | | Diluted EPS | $0.29 | $0.23 | $0.24 | | Efficiency Ratio | 59.5% | 64.8% | 66.8% | Financial Performance Analysis This section analyzes key financial performance metrics including net interest income, net interest margin, credit loss provisions, and non-interest income and expenses [Net Interest Income and Net Interest Margin](index=2&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Net interest income for Q2 2025 was $14.7 million, a slight increase from both the prior quarter and the prior year, primarily driven by higher loan volumes. However, the net interest margin (NIM) decreased to 7.81% from 8.27% in the previous quarter and 10.31% a year ago. This compression in NIM is attributed to a strategic shift towards higher-quality, lower-yielding loans and interest reversals on loans that moved to nonaccrual status - The increase in net interest income was primarily due to higher average balances in Strategic Program loans and the held-for-investment portfolio[8](index=8&type=chunk) - The decrease in NIM was caused by **$0.6 million** in accrued interest reversals on new nonaccrual loans and the company's strategy to add higher quality, lower yielding loans to its portfolio[10](index=10&type=chunk) Net Interest Income and Margin Performance | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $14.7 million | $14.3 million | $14.6 million | | Net Interest Margin | 7.81% | 8.27% | 10.31% | [Provision for Credit Losses](index=3&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses increased to $4.7 million in Q2 2025, up from $3.3 million in the prior quarter and $2.4 million in the prior year. This increase was mainly due to higher net charge-offs and growth in the credit enhanced loan portfolio, as well as expansion in other held-for-investment loans - The rise in provision was driven by higher net charge-offs and growth in the credit enhanced, Strategic Program, and other held-for-investment loan portfolios[11](index=11&type=chunk) Provision for Credit Losses Trend | Period | Provision for Credit Losses | | :--- | :--- | | Q2 2025 | $4.7 million | | Q1 2025 | $3.3 million | | Q2 2024 | $2.4 million | [Non-interest Income](index=3&type=section&id=Non-interest%20Income) Total non-interest income significantly increased to $10.3 million in Q2 2025, compared to $7.8 million in the prior quarter and $5.2 million in the prior year. The growth was primarily driven by a substantial increase in credit enhancement income, higher gain on sale of loans, and increased Strategic Program fees from higher originations - The increase from the prior quarter was mainly due to higher credit enhancement income, gain on sale of SBA 7(a) loans, and increased Strategic Program fees[12](index=12&type=chunk) Non-interest Income Components ($ in thousands) | Component | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Strategic Program fees | $5,404 | $4,962 | $4,035 | | Gain on sale of loans | $1,483 | $846 | $356 | | Credit enhancement income | $2,275 | $85 | $39 | | **Total non-interest income** | **$10,337** | **$7,810** | **$5,166** | [Non-interest Expense](index=3&type=section&id=Non-interest%20Expense) Non-interest expense rose to $14.9 million in Q2 2025 from $14.3 million in the prior quarter. The increase was primarily due to higher salaries and employee benefits resulting from annual compensation reviews. Despite the rise in expenses, the efficiency ratio improved significantly to 59.5% from 64.8% in the prior quarter, largely due to the strong growth in non-interest income - The increase in non-interest expense from the prior quarter was mainly driven by higher salaries and employee benefits from annual compensation reviews and deferred compensation amortization[14](index=14&type=chunk) - The efficiency ratio improved to **59.5%** in Q2 2025, down from **64.8%** in Q1 2025 and **66.8%** in Q2 2024, primarily due to the increase in credit enhancement income[16](index=16&type=chunk) Non-interest Expense Components ($ in thousands) | Component | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $10,491 | $9,826 | $8,609 | | Professional services | $949 | $907 | $1,282 | | **Total non-interest expense** | **$14,912** | **$14,318** | **$13,218** | Balance Sheet and Capital Analysis This section examines the company's balance sheet composition, loan portfolio, deposit trends, and capital adequacy [Overall Balance Sheet](index=5&type=section&id=Balance%20Sheet) Total assets grew to $842.5 million as of June 30, 2025, up from $804.1 million at the end of the prior quarter. This growth was primarily fueled by increases in net loans held-for-investment and loans held-for-sale, consistent with the company's strategy to expand its loan portfolio with higher quality assets - Asset growth was driven by a **$34.1 million** increase in net loans held-for-investment and a **$28.5 million** increase in loans held-for-sale from the prior quarter[19](index=19&type=chunk) Total Assets Growth | Date | Total Assets | | :--- | :--- | | June 30, 2025 | $842.5 million | | March 31, 2025 | $804.1 million | | June 30, 2024 | $617.8 million | [Loan Portfolio](index=5&type=section&id=Loan%20Portfolio) Total gross loans held-for-investment (HFI) increased to $530.0 million, a rise of $37.8 million from the previous quarter. Growth was concentrated in owner-occupied commercial real estate and commercial leases, aligning with the strategy to add higher quality, lower rate loans. SBA loans remain the largest component of the portfolio at 46.6% - The company experienced growth primarily in its owner-occupied commercial real estate and commercial leases, consistent with its strategy to increase its portfolio with higher quality, lower rate loans[21](index=21&type=chunk) Composition of Loans Held-for-Investment (HFI) ($ in thousands) | Loan Type | 6/30/2025 | % of total | 3/31/2025 | % of total | | :--- | :--- | :--- | :--- | :--- | | SBA | $246,903 | 46.6% | $246,004 | 50.0% | | Commercial leases | $88,957 | 16.8% | $76,823 | 15.6% | | Owner occupied CRE | $77,871 | 14.7% | $65,920 | 13.4% | | Residential real estate | $54,132 | 10.2% | $55,814 | 11.3% | | Other | $62,181 | 11.7% | $48,686 | 9.7% | | **Total period end loans** | **$530,044** | **100.0%** | **$492,223** | **100.0%** | [Deposits](index=6&type=section&id=Deposits) Total deposits increased to $635.2 million, up from $605.8 million in the prior quarter. The growth was primarily driven by an increase in brokered time certificates of deposit, which were utilized to fund loan growth and enhance balance sheet liquidity. Time certificates of deposit now constitute 65.2% of total deposits - The increase in total deposits was driven primarily by increases in brokered time certificates of deposits to fund loan growth and provide liquidity[23](index=23&type=chunk) Deposit Composition ($ in thousands) | Deposit Type | 6/30/2025 | % of total | 3/31/2025 | % of total | | :--- | :--- | :--- | :--- | :--- | | Noninterest-bearing demand | $120,747 | 19.0% | $123,322 | 20.4% | | Time certificates of deposit | $413,831 | 65.2% | $372,200 | 61.4% | | Other Interest-bearing | $100,596 | 15.8% | $110,237 | 18.2% | | **Total period end deposits** | **$635,174** | **100.0%** | **$605,759** | **100.0%** | [Shareholders' Equity and Capital Ratios](index=6&type=section&id=Shareholders'%20Equity%20and%20Capital%20Ratios) Total shareholders' equity grew to $182.0 million, an increase of $4.6 million from the prior quarter, driven by net income and stock-based compensation. The Bank's leverage ratio decreased to 18.0% due to asset growth outpacing capital growth from earnings, but it remains significantly above the 9.0% well-capitalized requirement. No shares were repurchased during the quarter - Total shareholders' equity increased by **$4.6 million** to **$182.0 million** from Q1 2025, primarily due to net income and stock-based compensation[24](index=24&type=chunk) - No shares were repurchased during the second quarter of 2025 under the share repurchase program[26](index=26&type=chunk) Bank Leverage Ratio | Date | Leverage Ratio | Well-Capitalized Requirement | | :--- | :--- | :--- | | 6/30/2025 | 18.0% | 9.0% | | 3/31/2025 | 18.8% | 9.0% | | 6/30/2024 | 20.8% | 9.0% | Asset Quality This section reviews the company's asset quality, including trends in nonperforming loans, net charge-offs, and the allowance for credit losses [Asset Quality Summary](index=7&type=section&id=Asset%20Quality%20Summary) Asset quality metrics showed some deterioration in Q2 2025. Nonperforming loans increased to $39.7 million, or 7.5% of total loans HFI, up from 6.1% in the prior quarter. This increase was primarily driven by SBA 7(a) loans being classified as non-accrual due to the impact of sustained high interest rates on small business borrowers. Net charge-offs also rose to $2.8 million for the quarter. The allowance for credit losses to total loans HFI stood at 3.1% - The increase in nonperforming loans was primarily attributable to an increase in the SBA 7(a) loan portfolio being classified as non-accrual, mainly due to the negative impact of sustained elevated interest rates on small business borrowers[27](index=27&type=chunk) Asset Quality Indicators | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Nonperforming loans | $39.7M | $29.9M | $27.9M | | Nonperforming loans to total loans HFI | 7.5% | 6.1% | 6.5% | | Net charge-offs | $2.8M | $2.2M | $1.9M | | Allowance for credit losses to loans HFI | 3.1% | 2.9% | 3.2% | Allowance for Credit Losses and Credit Quality Data ($ in thousands) | Credit Quality Data | 6/30/2025 | 3/31/2025 | 6/30/2024 | | :--- | :--- | :--- | :--- | | Total nonperforming loans | $39,739 | $29,884 | $27,907 | | Allowance for credit losses | $16,247 | $14,235 | $13,127 | | Net charge-offs | $2,784 | $2,248 | $1,898 | | Total loans held-for-investment | $530,043 | $492,223 | $414,341 | Company Information and Forward-Looking Statements This section provides an overview of FinWise Bancorp's business model and outlines key forward-looking statements and associated risk factors [About FinWise Bancorp](index=9&type=section&id=About%20FinWise%20Bancorp) FinWise Bancorp is a Utah-based bank holding company for FinWise Bank. The company provides Banking and Payments solutions to fintech brands through its scalable API-driven infrastructure. Its business lines include Strategic Program Lending, a Credit Enhanced Balance Sheet Program, SBA 7(a) lending, and other commercial lending programs. FinWise is also expanding into Payments (MoneyRails™) and BIN Sponsorship offerings, emphasizing a culture of compliance and risk management - FinWise provides Banking and Payments solutions to fintech brands via API-driven infrastructure[34](index=34&type=chunk) - Key business lines include Strategic Program Lending, Credit Enhanced Balance Sheet Program, SBA 7(a) lending, and other lending programs[34](index=34&type=chunk) - The company is expanding its business model to include Payments (MoneyRails™) and BIN Sponsorship offerings[34](index=34&type=chunk) [Forward-Looking Statements and Risk Factors](index=10&type=section&id=%22Safe%20Harbor%22%20Statement%20Under%20the%20Private%20Securities%20Litigation%20Reform%20Act%20of%201995) The report contains forward-looking statements subject to risks and uncertainties. Key risk factors include the success and regulation of the fintech and BaaS industries, the company's ability to manage relationships with service providers, changes in laws and interest rate caps, cybersecurity threats, credit risk management, the adequacy of the allowance for credit losses, and reliance on the SBA 7(a) program - Key risks include the success and regulation of the financial technology (fintech) and banking-as-a-service (BaaS) industries[37](index=37&type=chunk) - The company's performance is subject to its ability to manage credit risk, the adequacy of its allowance for credit losses (ACL), and its levels of nonperforming assets[37](index=37&type=chunk) - Changes in SBA rules and regulations, particularly for the Section 7(a) program, could materially impact results[37](index=37&type=chunk) Consolidated Financial Statements (Unaudited) This section presents the unaudited consolidated balance sheets, statements of income, and average balances, yields, and rates [Consolidated Balance Sheets](index=13&type=section&id=FINWISE%20BANCORP%20CONSOLIDATED%20BALANCE%20SHEETS) This section provides the unaudited consolidated balance sheets as of June 30, 2025, March 31, 2025, and June 30, 2024, detailing the company's assets, liabilities, and shareholders' equity [Consolidated Statements of Income](index=14&type=section&id=FINWISE%20BANCORP%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) This section presents the unaudited consolidated statements of income for the three-month periods ending June 30, 2025, March 31, 2025, and June 30, 2024, outlining revenues, expenses, and net income [Average Balances, Yields, and Rates](index=15&type=section&id=FINWISE%20BANCORP%20AVERAGE%20BALANCES,%20YIELDS,%20AND%20RATES) This section details the average balances for assets and liabilities, along with the average yields and rates for interest-earning assets and interest-bearing liabilities for the respective three-month periods Reconciliation of Non-GAAP to GAAP Financial Measures This section provides reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures, offering additional insights into performance [Non-GAAP Measures Overview](index=16&type=section&id=Non-GAAP%20Measures%20Overview) The company provides several non-GAAP financial measures to offer additional insight into its performance, primarily by illustrating the impact of its credit enhancement program. These measures adjust for credit enhancement income and expense to show underlying operational trends. Key reconciliations provided include the efficiency ratio, net interest income, net interest margin, and the allowance for credit losses - The company uses non-GAAP measures to show the impact of its credit enhancement program, where Strategic Program service providers indemnify the bank for certain credit losses[50](index=50&type=chunk) - The allowance for credit losses, when excluding the effect of credit enhanced loans, was **$13.8 million** as of June 30, 2025, compared to the GAAP figure of **$16.2 million**[55](index=55&type=chunk) Efficiency Ratio vs. Adjusted Efficiency Ratio | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Efficiency ratio (GAAP) | 59.5% | 64.8% | 66.8% | | Adjusted efficiency ratio (Non-GAAP) | 65.1% | 65.0% | 67.0% |

Core Insights - FinWise Bancorp reported strong financial performance for the second quarter of 2025, with loan originations reaching $1.5 billion, net income of $4.1 million, and diluted earnings per share of $0.29, reflecting solid growth and effective expense management [2][4][6]. Financial Performance - Loan originations totaled $1.5 billion for the quarter, an increase from $1.3 billion in the previous quarter and $1.2 billion year-over-year [6][10]. - Net income was $4.1 million, up from $3.2 million in the prior quarter and the same period last year [6][19]. - Diluted earnings per share were $0.29, compared to $0.23 in the previous quarter and $0.24 a year ago [6][19]. - The efficiency ratio improved to 59.5%, down from 64.8% in the prior quarter and 66.8% year-over-year, indicating better productivity [6][17]. Asset Quality - Nonperforming loans increased to $39.7 million, representing 7.5% of total loans held-for-investment, compared to $29.9 million (6.1%) in the prior quarter and $27.9 million (6.5%) a year ago [29][30]. - The allowance for credit losses was 3.1% of total loans held-for-investment, up from 2.9% in the previous quarter [29][30]. Balance Sheet - Total assets grew to $842.5 million, up from $804.1 million in the prior quarter and $617.8 million year-over-year [20][43]. - Total shareholders' equity increased to $182.0 million, compared to $177.4 million in the previous quarter and $165.8 million a year ago [25][43]. Non-Interest Income and Expenses - Non-interest income for the quarter was $10.3 million, an increase from $7.8 million in the prior quarter and $5.2 million year-over-year, driven by higher Strategic Program fees and gains on loan sales [13][15]. - Total non-interest expenses rose to $14.9 million, compared to $14.3 million in the previous quarter, primarily due to increased salaries and employee benefits [16][19]. Capital Ratios - The leverage ratio was 18.0%, down from 18.8% in the prior quarter, but still above the regulatory well-capitalized requirement of 9.0% [27].

Core Viewpoint - FinWise Bancorp will report its second quarter 2025 financial results and host a conference call on July 24, 2025, after market close [1]. Group 1: Conference Call Information - The conference call is scheduled for 5:00 p.m. ET, with a dial-in number of 1-877-423-9813 (toll-free) or 1-201-689-8573 (international) [2]. - Participants are advised to dial in 10 minutes prior to the scheduled start time [2]. Group 2: Webcast Information - A live webcast of the conference call will be available on the Company's website, with a replay accessible for six months following the call [3]. Group 3: Submission of Conference Call Questions - The Company will accept questions submitted via email prior to 5:00 p.m. ET on July 24, 2025, in addition to live questions from analysts during the call [4]. Group 4: About FinWise Bancorp - FinWise Bancorp provides Banking and Payments solutions to fintech brands, leveraging a scalable API-driven infrastructure for its Strategic Program Lending business [5]. - The Company offers a Credit Enhanced Balance Sheet Program to help diversify funding sources and manage capital efficiency for lending and card programs [5]. - FinWise also manages various Lending programs, including SBA 7(a), Owner Occupied Commercial Real Estate, and Leasing, to support disciplined balance sheet growth [5]. - The Company is expanding its business model by incorporating Payments (MoneyRails™) and BIN Sponsorship offerings, while maintaining a compliance oversight and risk management-first culture [5].

Business Model & Strategy - FinWise operates a differentiated business model as a banking and payments solutions provider to fintechs, emphasizing compliance and risk management[9, 10] - The company's growth strategy focuses on a broader banking and payments offering, incorporating credit enhancement, payments (MoneyRails™), and BIN sponsorship to enhance revenue diversification[21, 22] - Strategic Program Lending (SPL) diversification has improved since 1Q22, highlighting a longer-term pattern in recent years[18, 20] Financial Performance & Portfolio - As of 1Q25, 44% of FinWise's loan portfolio consists of SBA Guaranteed and Strategic Program HFS loans, which carry lower credit risk[10, 43] - Strategic Platform Loans on the balance sheet amounted to $1387 million as of March 31, 2025, with 856% held for sale (HFS) and 144% held for investment (HFI)[16] - In 1Q25, gain on sale (net) and strategic program fees accounted for $51 million, representing 657% of non-interest income[16] Risk Management & Compliance - FinWise has a strong compliance and risk management culture, with 37% (72 out of 196) of its FTEs dedicated to IT, Compliance, Risk Management, and BSA functions as of 1Q25[11, 13] - The company maintains a well-reserved position with an ACL/Total Gross Loans HFI of 29% as of the end of 1Q25, reflecting a lower-risk portfolio[40] Capital & Efficiency - FinWise remains well-capitalized, significantly above the regulatory requirement of 9% under the Community Bank Leverage Ratio framework[10, 83] - The efficiency ratio for 1Q25 was 648%, compared to 610% in 1Q24 and 642% in 4Q24[50, 86]

Group 1 - FinWise Bancorp has been added as a member of the US small-cap Russell 2000 Index, effective June 30, 2025, as part of the 2025 Russell indexes reconstitution [1][2] - Membership in the Russell 2000 Index is based on inclusion in the broader Russell 3000 Index and will remain for one year [1] - The stock was also added to the relevant growth and value indexes automatically [1] Group 2 - The Chairman and CEO of FinWise expressed pride in the addition to the Russell 2000 Index, highlighting its significance as a performance benchmark for U.S. small-cap companies [2] - Approximately $10.6 trillion in assets are benchmarked against the Russell US indexes, indicating the importance of these indexes in the investment community [2] Group 3 - FinWise provides Banking and Payments solutions to fintech brands, focusing on scalable API-driven infrastructure for deposit, lending, and payments programs [4] - The company is expanding its business model by incorporating Payments (MoneyRails ™) and BIN Sponsorship offerings, alongside its existing lending programs [4]

Financial Performance - Net income for the three months ended March 31, 2025, was $3.2 million, a decrease of 3.8% compared to $3.3 million in the same period of 2024[150]. - Interest income increased by 5.0% to $18.5 million for the three months ended March 31, 2025, compared to $17.6 million in 2024[150]. - Non-interest income rose significantly by 37.9% to $7.8 million in Q1 2025, up from $5.7 million in Q1 2024[150]. - Net interest margin (NIM) decreased to 8.27% for Q1 2025 from 10.12% in Q1 2024, primarily due to the repricing of variable rate loans[152]. - The effective income tax rate for the three months ended March 31, 2025, was 28.1%, compared to 26.5% in the same period of 2024[161]. - Return on average equity was 7.4% for the three months ended March 31, 2025, down from 8.4% for the same period in 2024[225]. Asset and Liability Management - Total assets increased by $58.2 million to $804.1 million as of March 31, 2025, compared to December 31, 2024[154]. - Total liabilities rose to $626.8 million, a 9.5% increase from $572.3 million as of December 31, 2024, mainly due to the increase in deposits[215]. - Total deposits increased to $605.8 million as of March 31, 2025, up from $545.0 million as of December 31, 2024, primarily driven by a $53.0 million increase in brokered time deposits[213]. - Liquid assets totaled $120.3 million, constituting 15.0% of total assets as of March 31, 2025, providing adequate liquidity for at least the next 12 months[222]. - The company maintains a leverage ratio greater than 9.0% to be considered well-capitalized under the Community Bank Leverage Ratio framework[227]. Loan Portfolio - Loan originations increased to $1.3 billion in Q1 2025 from $1.1 billion in Q1 2024, driven by new Strategic Programs and organic growth[154]. - Loans held-for-investment increased to $492,223,000 as of March 31, 2025, up from $465,233,000 as of December 31, 2024[173]. - SBA loans represented 50.0% of total loans held-for-investment as of March 31, 2025, totaling $246,004,000, down from 54.8% in the previous year[175]. - Total residential real estate loans increased to $55.8 million as of March 31, 2025, accounting for 11.3% of total loans held-for-investment[179]. - Total consumer loans reached $22.8 million as of March 31, 2025, representing 4.6% of total loans held-for-investment[183]. Credit Quality and Losses - The provision for credit losses increased to $3.3 million in Q1 2025, up 5.8% from $3.2 million in Q1 2024, attributed to growth in the loans held-for-investment portfolio[150][157]. - Nonperforming assets totaled $29.9 million as of March 31, 2025, down from $36.5 million at December 31, 2024[188]. - The decrease in nonperforming assets was primarily due to the resolution of two loans, despite some smaller loans migrating to nonperforming status[188]. - The allowance for credit losses (ACL) as of March 31, 2025, was $14.235 million, an increase from $13.176 million at December 31, 2024, with Strategic Program loans constituting 43.3% of the total ACL[205]. - Net charge-offs (NCO) for the three months ended March 31, 2025, totaled $2.248 million, with an annualized NCO to average loans ratio of 1.9%[210]. Non-Interest Expenses - Non-interest expense rose by 19.3% to $14.3 million in Q1 2025, compared to $12.0 million in Q1 2024[150]. - Total non-interest expense rose to $14,318,000, a 19.3% increase from $12,005,000 in the prior year[160]. - Salaries and employee benefits increased by $2,264,000, or 29.9%, from $7,562,000 in 2024 to $9,826,000 in 2025[160]. Strategic Initiatives - The company continues to focus on expanding its product offerings and supporting business infrastructure to drive future growth[154]. - The company emphasizes proactive identification and resolution of problem loans to maintain asset quality[190]. - The company manages interest rate risk through its Asset/Liability Management Committee (ALCO), which regularly reviews sensitivity to interest rate changes[247]. - The company does not engage in leveraged derivatives or financial options to mitigate interest rate risk, focusing instead on balance sheet structuring[246].