Q1 2026 FinWise Bancorp Earnings Call

April 30, 2026

Operator 3: Greetings, welcome to the FinWise Bancorp Q1 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce the FinWise team. Please go ahead.

Operator: Greetings, welcome to the FinWise Bancorp Q1 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce the FinWise team. Please go ahead.

Speaker #2: If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce the Finwise team.

Speaker #2: Please go ahead. Good afternoon and thank you for joining us today for Finwise Bancorp's First Quarter 2026 Earnings Conference Call. Earlier today, we filed our earnings release and investor deck and posted them to our investor website at investors.finwisebancorp.com.

Juan Arias: Good afternoon, and thank you for joining us today for FinWise Bancorp's Q1 2026 Earnings Conference Call. Earlier today, we filed our earnings release and investor deck and posted them to our investor website at investors.finwisebancorp.com. Today's conference call is being recorded and webcast on the company's investor website, as previously mentioned. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Forward-looking statements represent management's current estimates, expectations, and beliefs, and FinWise Bancorp assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements, including factors that may negatively impact them, contained in the company's earnings press release and filings with the Securities and Exchange Commission.

Speaker #2: Today's conference call is being recorded and webcast on the company's investor website as previously mentioned. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risk and uncertainties that could cause actual results to differ from those discussed today.

Speaker #2: Forward-looking statements represent management's current estimates expectations and beliefs and Finwise Bancorp assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements including factors that may negatively impact them contained in the company's earnings press release and filings with the Securities and Exchange Commission.

Speaker #2: Posting the call today, our Kent Landvatter, Executive Chairman, Jim Noone, CEO, and Bob Wallman, CFO. Kent, please go ahead.

Juan Arias: Hosting the call today are Kent Landvatter, Executive Chairman, Jim Noone, CEO, and Robert Wahlman, CFO. Kent, please go ahead.

Speaker #3: Good afternoon, everyone. I want to briefly comment on the executive transition we recently announced. Earlier this month, Jim Noone assumed the role of CEO of FinWise Bancorp, in addition to serving as President and CEO of FinWise Bank.

Kent Landvatter: Good afternoon, everyone. I want to briefly comment on the executive transition we recently announced. Earlier this month, Jim Noone assumed the role of CEO of FinWise Bancorp in addition to serving as President and CEO of FinWise Bank. This reflects a successful execution of a deliberate multi-year succession plan developed by our board, with Jim progressing from bank president in 2023 to company CEO today. As Executive Chairman, I will remain actively involved in long-term strategy, board governance, and investor relations. This transition does not change our strategic direction, and both the board and I have full confidence in Jim's leadership. With that, I will turn it over to Jim to discuss our Q1 results.

Speaker #3: This reflects a successful execution of a deliberate multi-year succession plan developed by our board. With Jim progressing from Bank President in 2023 to Company CEO today, as Executive Chairman, I will remain actively involved in long-term strategy, board governance, and investor relations.

Speaker #3: This transition does not change our strategic direction and both the board and I have full confidence in Jim's leadership. With that, I will turn it over to Jim to discuss our First Quarter results.

Speaker #4: Thanks, Ken. Before discussing our results, I want to say that I'm honored to step into the role of CEO of Finwise. And grateful for the trust the board and Kent have placed in me.

Jim Noone: Thanks, Kent. Before discussing our results, I am honored to step into the role of CEO of FinWise and grateful for the trust the board and Kent have placed in me. This was a thoughtfully planned transition, and I've been fortunate to work closely with Kent for many years. With a strong team, clear strategy, and disciplined operating model, I will remain focused on executing our strategic plan and building long-term value for our stakeholders. I want to start by addressing our earnings shortfall this quarter. It was primarily driven by an increase in charge-offs in our SBA portfolio, concentrated in a narrow set of legacy credits. While we are confident in our overall portfolio, we expect these charge-offs to remain elevated over the next few quarters as those credits continue to be actively managed.

Speaker #4: This was a thoughtfully planned transition and I've been fortunate to work closely with Kent for many years. With a strong team, clear strategy, and disciplined operating model, I will remain focused on executing our strategic plan and building long-term value for our stakeholders.

Speaker #4: So, I want to start by addressing our earnings shortfall this quarter. It was primarily driven by an increase in charge-offs in our SBA portfolio.

Speaker #4: Concentrated in a narrow set of legacy credits. While we are confident in our overall portfolio, we expect these charge-offs to remain elevated over the next few quarters as those credits continue to be actively managed.

Speaker #4: I'll walk through more details of that segment during the credit section. I also want to provide my perspective on the business. FinWise has multiple growth engines, and they're at different stages of maturity.

Jim Noone: I'll walk through more details of that segment during the credit section. I also want to provide my perspective on the business. FinWise has multiple growth engines, and they're at different stages of maturity. We manage 16 lending programs today. Our credit-enhanced portfolio scaled from virtually 0 to over $100 million in under a year. Cards and payments are just beginning to contribute. This quarter, originations were strong at $1.7 billion, and core expenses held flat, enabling us to grow tangible book value per share to $14.34 at the end of Q1. From a broader perspective, our partner pipeline continues to strengthen, the platform is scaling, and the long-term trajectory of this business is exciting. Turning to quarterly trends, Q1 loan originations totaled $1.7 billion, up 38% year over year.

Speaker #4: We manage 16 lending programs today, our credit-enhanced portfolio scaled from virtually zero to over 100 million dollars in under a year. And cards and payments are just beginning to contribute.

Speaker #4: This quarter, originations were strong at 1.7 billion, and core expenses held flat. Enabling us to grow tangible book value per share to $14.34 at the end of Q1.

Speaker #4: But from a broader perspective, our partner pipeline continues to strengthen, the platform is scaling, and the long-term trajectory of this business is exciting. Turning to quarterly trends, First Quarter loan originations totaled 1.7 billion.

Speaker #4: Up 38% year over year. Performance reflected contributions from both established maturing partners and newer launches. Our strategic partners' platform continues to scale effectively. This enables us to pursue larger and increasingly impactful opportunities.

Jim Noone: Performance reflected contributions from both established maturing partners and newer launches. Our strategic partners platform continues to scale effectively. This enables us to pursue larger and increasingly impactful opportunities and offers the flexibility to absorb partner and product changes over time. As with any growing platform, quarterly volumes will vary with partner mix and seasonality, but the underlying trajectory is clear. As a reminder, 2025 was a very strong year during which we announced seven new strategic partners across lending, cards, and payment programs, including our first major credit card program. Our partner pipeline is growing materially, both with new partners and new products from existing partners. We are increasingly sourcing more mature loan origination opportunities, and we are gaining traction with new card and payment programs.

Speaker #4: And offers the flexibility to absorb partner and product changes over time. As with any growing platform, quarterly volumes will vary with partner mix and seasonality but the underlying trajectory is clear.

Speaker #4: As a reminder, 2025 was a very strong year. During which we announced seven new strategic partners. Across lending, cards, and payment programs. Including our first major credit card program.

Speaker #4: Our partner pipeline is growing materially, both with new partners and new products from existing partners. We are increasingly sourcing more mature loan origination opportunities.

Speaker #4: And we are gaining traction with new card and payment programs. To support this effort, we recently added two seasoned professionals to our business development team.

Jim Noone: To support this effort, we recently added two seasoned professionals to our business development team, both of whom bring deep industry relationships and are well-positioned to manage the opportunities that are coming in. Credit-enhanced balances at quarter end stood at $109 million, an increase of $1 million during the quarter. We recognize this was below our guided pace of $8 to 10 million per month. I want to address that directly. The slower sequential growth this quarter was driven by the pace at which newer partners ramped originations. This is not a change in demand for the product or in our partners' commitment to the program.

Speaker #4: Both of whom bring deep industry relationships and are well-positioned to manage the opportunities that are coming in. Credit-enhanced balances at quarter end stood at 109 million.

Speaker #4: An increase of a million dollars during the quarter. We recognize this was below our guided pace of 8 to 10 million per month. And I want to address that directly.

Speaker #4: The slower sequential growth this quarter was driven by the pace at which newer partners ramped originations. This is not a change in demand for the product or in our partners' commitment to the program.

Speaker #4: We continue to expect organic growth of 8 to 10 million per month on average for the full year. With the growth now skewed toward the middle and back half of 2026.

Jim Noone: We continue to expect organic growth of $8 million to $10 million per month on average for the full year, with the growth now skewed toward the middle and back half of 2026, as Bob will detail in his outlook. The long-term economics and growth potential of this product remain central to our plans. Turning to our BIN and payments business, we continue to build traction. Earlier this month, we announced a new program with Vera, Inc., an early-stage fintech led by an experienced management team. The introduction to Vera, Inc. originated through Zeta, a card processing partner of the bank, and we are encouraged by the opportunity to further develop our relationship with both companies over the long term. As fintech partners increasingly value broad product capabilities, we are expanding relationships through both new programs and incremental cross-selling.

Speaker #4: As Bob will detail in his outlook. The long-term economics and growth potential of this product remain central to our plans. Turning to our BIN and payments business, we continue to build traction.

Speaker #4: Earlier this month, we announced a new program with Vera. An early-stage fintech led by an experienced management team. The introduction to Vera originated through Zeta.

Speaker #4: A card processing partner of the bank. And we are encouraged by the opportunity to further develop our relationship with both companies over the long term.

Speaker #4: As fintech partners increasingly value, broad product capabilities, we are expanding relationships through both new programs and incremental cross-selling. The growth in interchange income this quarter, to $703,000 from $310,000 last quarter, reflects the early contributions from our credit card portfolio.

Jim Noone: The growth in interchange income this quarter to $703,000 from $310,000 last quarter reflects the early contributions from our credit card portfolio and reinforces the cross-sell thesis as this came in conjunction with a credit-enhanced balance sheet partner. On the AI front, we have established a dedicated AI and innovation team to centralize and accelerate use cases already in demand across the bank. Initial deployments are focused on developer productivity, automation, and increasingly operational workflows. We will continue to provide updates on our progress throughout the year. Turning to credit quality, quarterly net charge-offs were $9.4 million in Q1 compared to $6.7 million in the prior quarter.

Speaker #4: And reinforces the cross-sell thesis. As this came in conjunction with a credit-enhanced balance sheet partner. On the AI front, we have established a dedicated AI and innovation team to centralize and accelerate use cases already in demand across the bank.

Speaker #4: Initial deployments are focused on developer productivity, y, automation, and increasingly operational workflows. We will continue to provide updates on our progress throughout the year.

Speaker #4: Turning to credit quality, quarterly net charge-offs were 9.4 million in Q1 compared to 6.7 million in the prior quarter. Net charge-offs included 4.8 million from strategic program loans with credit enhancement, 2.3 million from strategic program loans without credit enhancement, and 2.2 million from our core portfolio.

Jim Noone: Net charge-offs included $4.8 million from strategic program loans with credit enhancement, $2.3 million from strategic program loans without credit enhancement, and $2.2 million from our core portfolio, primarily SBA 7(a) loans retained balances. I'll now provide a bit more detail on each net charge-off category. Starting with SBA net charge-offs, these were concentrated in a small subset of legacy credits, primarily within the e-commerce vertical and certain origination years. This largely reflects a backdrop of still elevated interest rates continuing to impact certain origination years and to a lesser extent, certain industry and loan attributes that we have implemented material policy tightening and restrictions on. Importantly, as I noted earlier, these charge-offs are likely to remain elevated over the next few quarters. We remain confident in the overall portfolio and will continue to update you on this.

Speaker #4: Primarily SBA 7A loans retained balances. I'll now provide a bit more detail on each net charge-off category. Starting with SBA net charge-offs, these were concentrated in a small subset of legacy credits.

Speaker #4: Primarily within the e-commerce vertical and certain origination years. This largely reflects a backdrop of still-elevated interest rates continuing to impact certain origination years.

Speaker #4: And to a lesser extent, certain industry and loan attributes that we have implemented material policy tightening and restrictions on. Importantly, as I noted earlier, these charge-offs are likely to remain elevated over the next few quarters.

Speaker #4: We remain confident in the overall portfolio and will continue to update you on this. With respect to charge-offs from strategic program loans with credit enhancement, the sequential increase in charge-offs primarily reflects the normal seasoning of a rapidly scaling portfolio.

Jim Noone: With respect to charge-offs from strategic program loans with credit enhancement, the sequential increase in charge-offs primarily reflects the normal seasoning of a rapidly scaling portfolio, and FinWise is fully reimbursed for any losses. Each fintech partner with credit enhancement is required to maintain a cash reserve deposit at FinWise, which is used to recover these charge-offs. As a reminder, the credit-enhanced portfolio grew materially from virtually zero 12 months ago to over $100 million today. It is reasonable to expect charge-offs to rise as the portfolio matures and grows. Before a fintech partner is approved for the credit-enhanced program, we thoroughly analyze their high-water loss experience and stress it by 50% and 100% to confirm the cash flows from the loans are sufficient to absorb losses even under those stress scenarios.

Speaker #4: And Finwise's fully reimbursed for any losses. Each fintech partner with credit enhancement is required to maintain a cash reserve deposit at Finwise which is used to recover these charge-offs.

Speaker #4: As a reminder, the credit-enhanced portfolio grew materially from virtually zero 12 months ago to over $100 million today. It is reasonable to expect charge-offs to rise as the portfolio matures and grows.

Speaker #4: Before a fintech partner is approved for the credit-enhanced program, we thoroughly analyze their high-water loss experience, and stress it by 50% and 100% to confirm the cash flows from the loans are sufficient to absorb losses, even under those stressed scenarios.

Speaker #4: Lastly, net charge-off activity in strategic program loans without credit enhancement reflects normal repayment behavior for the balances we are managing. Net charge-offs for this portfolio were 2.3 million in Q1.

Jim Noone: Lastly, net charge-off activity in strategic program loans without credit enhancement reflects normal repayment behavior for the balances we are managing. Net charge-offs for this portfolio were $2.3 million in Q1 versus $2.6 million in Q4 2025. Provision for credit losses was $10.6 million for Q1 compared to $17.7 million for the prior quarter. This decrease reflects elevated provisioning in the prior quarter related to the ramp-up of credit-enhanced loan programs, with credit-enhanced balance growth moderating in Q1. Of the $10.6 million in provision this quarter, $5.9 million was from credit enhancement loans, with the remainder reflecting the previously described net charge-offs within our core and strategic program portfolios.

Speaker #4: Versus $2.6 million in the fourth quarter of 2025. Provision for credit losses was $10.6 million for the first quarter, compared to $17.7 million for the prior quarter.

Speaker #4: This decrease reflects elevated provisioning in the prior quarter related to the ramp-up of credit-enhanced loan programs. With credit-enhanced balance growth moderating in the first quarter.

Speaker #4: Of the $10.6 million in provision this quarter, $5.9 million was from credit-enhancement loans, with the remainder reflecting the previously described net charge-offs within our core and strategic program portfolios. As a reminder, the provision for credit losses on the credit-enhanced loan portfolio differs from the core portfolio.

Jim Noone: As a reminder, the provision for credit losses on the credit-enhanced loan portfolio differs from the core portfolio as it's fully offset by the recognition of future recoveries recorded as credit enhancement income in non-interest income. The estimated future recoveries are reported as a credit enhancement asset on the balance sheet. From a reserving standpoint, we continue to take a conservative approach. Our allowances for classified loans reflect the projected net realizable value of collateral and are reviewed at least quarterly. During Q1, NPL balances increased by $6.1 million sequentially, bringing our total NPL balance to $49.8 million at the end of the quarter. Of that total, $26.7 million, or 53%, is guaranteed by the federal government, and $23.2 million is unguaranteed.

Speaker #4: As it fully offset by the recognition of future recoveries, recorded as credit-enhancement income in non-interest income. The estimated future recoveries are reported as a credit-enhancement asset on the balance sheet.

Speaker #4: From a reserving standpoint, we continue to take a conservative approach. Our allowances for classified loans reflect the projected net realizable value of collateral and are reviewed at least quarterly.

Speaker #4: During Q1, NPL balances increased by 6.1 million dollars sequentially. Bringing our total NPL balance to 49.8 million at the end of the quarter. Of that total, 26.7 million or 53% is guaranteed by the federal government.

Speaker #4: And 23.2 million is unguaranteed. Quarterly SBA 7A loan originations increased sequentially. Driven by the normalization of business activity, following the typical Q4 slowdown, and the reopening of the government after the November shutdown.

Jim Noone: Quarterly SBA 7(a) loan originations increased sequentially, driven by the normalization of business activity following the typical Q4 slowdown and the reopening of the government after the November shutdown. During Q1, we continued selling the guaranteed portion of our SBA loans, though at a slower pace than the elevated level in Q4. We expect to continue selling guaranteed portions as long as market conditions remain favorable. Our SBA guaranteed balances, strategic program loans held for sale, and our credit-enhanced balances, all of which carry lower credit risk, collectively accounted for 47% of the total portfolio at the end of Q1. Just looking ahead, the platform is scaling, the pipeline is strengthening, and the trajectory of this business has not changed. Charge-offs were elevated this quarter. We identified the segment, have updated our policies, and will continue actively managing it.

Speaker #4: During Q1, we continued selling the guaranteed portion of our SBA loans. Though at a slower pace than the elevated level in Q4. We expect to continue selling guaranteed portions as long as market conditions remain favorable.

Speaker #4: Our SBA guaranteed balances strategic program loans held for sale and our credit-enhanced balances all of which carry lower credit risk collectively accounted for 47% of the total portfolio at the end of Q1.

Speaker #4: So just looking ahead, the platform is scaling, the pipeline is strengthening, and the trajectory of this business has not changed. Charge-offs were elevated this quarter.

Speaker #4: We identified the segment, have updated our policies, and will continue actively managing it. We have the capital, the partners, the team, and the infrastructure to support continued growth.

Jim Noone: We have the capital, the partners, the team, and the infrastructure to support continued growth, and that is exactly what we intend to do. I will now turn the call over to our CFO, Bob Wahlman, to provide more detail on our financial results.

Speaker #4: And that is exactly what we intend to do. I will now turn the call over to our CFO, Bob Wallman, to provide more detail on our financial results.

Speaker #2: Thanks, Joan. And good afternoon, everyone. FinWise reported net income of $2.7 million for the first quarter, and diluted earnings per share of $0.20.

Robert Wahlman: Thanks, Jim, and good afternoon, everyone. FinWise reported net income of $2.7 million for Q1 and diluted earnings per share of $0.20. Key positive drivers during Q1 included strong loan originations, growth in net interest income and interchange income, and continued disciplined expense management. Q1 results were adversely impacted by lower gain-on-sale income, a negative change in our BFG investment valuation, and a large provision for credit losses with our traditional banking portfolio.

Speaker #2: Key positive drivers during the quarter included strong loan originations growth in net interest income and interchange income and continued disciplined expense management. First quarter results were adversely impacted by lower gain on sale income a negative change in our BFG investment valuation and a large provision for credit losses with our traditional banking portfolio.

Speaker #2: Net interest income grew to 28.1 million from the prior quarter's 24.6 million primarily due to a change in our estimate of the allocation of interest received on credit-enhanced loans and excess of the interest Finwise retains referred to as the excess spread from origination costs which are reported as net with interest income to credit-enhanced servicing and guarantee expenses as well as an increase in average credit-enhanced balances in the helper investment portfolio.

Robert Wahlman: Net interest income grew to $28.1 million from the prior quarter's $24.6 million, primarily due to a change in our estimate of the allocation of interest received on credit-enhanced loans in excess of the interest Synovus retains, referred to as the excess spread, from origination costs, which are reported as net with interest income to credit-enhanced servicing and guarantee expenses, as well as an increase in average credit-enhanced balances in the held-for-investment portfolio, lower average balances, and reduced interest rates paid on CDs. Net interest margin increased to 12.9% compared to 11.42% in the prior quarter. The increase was driven by the change in estimate of the credit-enhanced loans excess spread allocated to origination costs, which is a reduction of income to credit-enhanced servicing and guaranteed expenses, as well as an increase in average balances in the credit-enhanced portfolio.

Speaker #2: Lower average balances and reduced interest rates paid on CDs. Net interest margin increased to 12.9% compared to 11.42% in the prior quarter. The increase was driven by the change in estimate of the credit-enhanced loans excess spread allocated to origination costs which is a reduction of income to credit-enhanced servicing and guaranteed expenses as well as an increase in average balances in the credit-enhanced portfolio.

Speaker #2: Net of the adjustment for credit-enhanced program expenses, net interest margin was 7.15% compared to 7.85% in the prior quarter. This is consistent with our ongoing risk reduction strategy and the fourth quarter 2025 onboarding of a new credit enhancement program, for which our compensation includes both interest income generated by credit cards and a portion of the interchange generated by the card usage.

Robert Wahlman: Net of the adjustment for credit-enhanced program expenses, net interest margin was 7.15% compared to 7.85% in the prior quarter, consistent with our ongoing risk reduction strategy and Q4 2025 onboarding of a new credit enhancement program, for which our compensation includes both interest income generated by credit cards and a portion of the interchange generated by the card usage. As we've noted on prior calls, we suggest thinking about our net interest income and net interest margin in two distinct ways, including and excluding excess credit-enhanced income. Non-interest income was $14.6 million compared to the prior quarter's $22.3 million.

Speaker #2: As we've noted on prior calls, we suggest thinking about our net interest income and net interest margin in two distinct ways. Including and excluding excess credit-enhanced income.

Speaker #2: Non-interest income was 14.6 million compared to the prior quarter's 22.3 million. The sequential quarter decline was primarily driven by lower credit-enhanced income and gain on sale revenue as well as a decline in the fair value of our BFG investment reflecting a broader pullback in private company valuations observed in March following heightened global market volatility.

Robert Wahlman: The sequential quarter decline was primarily driven by lower credit-enhanced income and gain-on-sale revenue, as well as a decline in the fair value of our BFG investment, reflecting a broader pullback in private company valuations observed in March following heightened global market volatility. As a reminder, credit enhancement income mirrors the provision for credit losses on credit-enhanced loans. Partially offsetting the sequential decline in non-interest income was higher interchange income, driven largely by a full quarter of contribution from the credit card portfolio acquired in mid-November 2025. Non-interest expense was $28.3 million compared to $23.7 million in the prior quarter.

Speaker #2: As a reminder, credit enhancement income mirrors the provision for credit losses on credit-enhanced loans. Partially offsetting the sequential decline in non-interest income was higher interchange income driven largely by a full quarter of contributions from the credit card portfolio acquired in mid-November 2025.

Speaker #2: Non-interest expense was 28.3 million compared to 23.7 million in the prior quarter. The increase was primarily due to higher credit enhancement guarantee and servicing expenses resulting from the change in estimated allocation of excess spread on credit-enhanced loans from contra income origination costs to servicing and guarantee expenses as described earlier.

Robert Wahlman: The increase was primarily due to higher credit enhancement guarantee and servicing expenses resulting from the change in estimated allocation of excess spread on credit-enhanced loans from contra income origination costs to servicing and guarantee expenses, as described earlier, as well as an increase in average balances of credit-enhanced loans and the resulting growth in the excess spread. Excluding credit enhancement related items, core operating expenses remained well controlled. The reported efficiency ratio for the quarter was 66.3% versus 50.5% in the prior quarter. Excluding the offsetting accounting effects of the credit-enhanced loans, the efficiency ratio was 65.0% for Q1 2026 and 60.6% for Q4 2025. Total assets were $899.4 million as of the end of the quarter, compared to $977.1 million in the prior quarter.

Speaker #2: As well as an increase in average balances of credit-enhanced loans and the resulting growth in the excess spread. Excluding credit enhancement related items core operating expenses remained well controlled.

Speaker #2: The reported efficiency ratio for the quarter was 66.3% versus 50.5% in the prior quarter. Excluding the offsetting accounting effects of the credit-enhanced loans the efficiency ratio was 65.0% for Q1 2026 and 60.6% for Q4 2025.

Speaker #2: Total assets were $899.4 million as of the end of the quarter compared to $977.1 million in the prior quarter. The decline was primarily due to decreases in interest-bearing deposits with small declines in loans held for sale and loans held for investment.

Robert Wahlman: The decline was primarily due to decreases in interest-bearing deposits, with small declines in loans held for sale and loans held for investment. Total end of the period deposits were $674.9 million, compared to $754.6 million in the prior quarter. The decline was primarily due to runoff of funding, principally non-interest-bearing deposits and brokered CDs that were not needed to support the lower level of assets. Finally, we continue to operate with a very strong capital position, reflected in a bank leverage ratio of 16.8%, nearly double the current well-capitalized minimum requirement to be well capitalized. Let me provide forward outlook on some key metrics as we've done in prior quarters. Loan originations for Q2 2026. Originations through the first four weeks of April are tracking at a quarterly run rate of approximately $1.4 billion.

Speaker #2: Total end of the period deposits were $674.9 million compared to $754.6 million in the prior quarter. The decline was primarily due to runoff of funding principally non-interest-bearing deposits and brokered CDs that were not needed to support the lower level of assets.

Speaker #2: Finally, we continue to operate with a very strong capital position, reflected in a bank leverage ratio of 16.8%, nearly double the current well-capitalized minimum requirement.

Speaker #2: To be well-capitalized. Let me provide forward outlook on some key metrics as we've done in prior quarters. Loan originations for Q2 2026. Originations through the first four weeks of April are tracking at a quarterly run rate of approximately 1.4 billion.

Speaker #2: Loan originations for the full year 2026. While there may be variability quarter to quarter we are reaffirming 1.4 billion in quarterly loan originations as our baseline reflecting typical seasonality from student lending partners.

Robert Wahlman: Loan originations for the full year 2026. While there may be variability quarter to quarter, we are reaffirming $1.4 billion in quarterly loan originations as our baseline, reflecting typical seasonality from student lending partners. Annualizing this baseline and applying a 5% growth rate provides a reasonable outlook for full year 2026 originations. We will continue to update our originations outlook each quarter as the year progresses. Origination levels are influenced by several variables, including new partner additions and contributions from both established programs and newer launches. Credit-enhanced balances for full year 2026. We remain comfortable with organic growth in credit-enhanced balances of $8 to 10 million on average per month for 2026. Quarterly results may be lumpy, with growth skewed toward the middle and back half of the year. SBA loan sales.

Speaker #2: Annualizing this baseline and applying a 5% growth rate provides a reasonable outlook for full year 2026 originations. We will continue to update our originations outlook each quarter as the year progresses.

Speaker #2: Origination levels are influenced by several variables including new partner additions and contributions from both established programs and newer launches. Credit-enhanced balances for full year 2026.

Speaker #2: We remain comfortable with organic growth in credit-enhanced balances of 8 to 10 million dollars on average per month for 2026. Quarterly results may be lumpy with growth skewed toward the middle and back half of the year.

Speaker #2: SBA loan sales. We will continue to follow our strategy of selling guaranteed portions of our SBA loans as long as market conditions remain favorable.

Robert Wahlman: We will continue to follow our strategy of selling guaranteed portions of our SBA loans as long as market conditions remain favorable. That said, we expect this quarter's gain on sale of loans to better reflect a sustainable quarterly run rate for the year. Quarterly Net Charge-Offs. We anticipate an approximate range of $45 million in Net Charge-Offs for non-credit-enhanced loans is a good quarterly number to use in your models for the remainder of this year. Non-Performing Loan Balances for Q2 2026. We think there is potentially as much as $10 million in watchlist loans that could migrate to Non-Performing Loans in Q2. Net Interest Margin. We remain comfortable with our prior outlook that when including credit-enhanced balances, the Net Interest Margin is expected to increase, driven by growth in credit-enhanced balances and efforts to lower funding costs.

Speaker #2: That said we expect this quarter's gain on sale of loans to better reflect a sustainable quarterly run rate for the year. Quarterly net charge-offs.

Speaker #2: We anticipate an approximate range of $4 to $5 million in net charge-offs for non-credit-enhanced loans is a good quarterly number to use in your models for the remainder of this year.

Speaker #2: Non-performing loan balances for Q2 2026. We think there is potentially as much as 10 million in watchlist loans that could migrate to non-performing loans in the second quarter.

Speaker #2: Net interest margin. We remain comfortable with our prior outlook that, when including credit-enhanced balances, the net interest margin is expected to increase. This is driven by growth in credit-enhanced balances and efforts to lower funding costs.

Speaker #2: This upward trend is expected to persist until growth in these balances begins to moderate. Conversely excluding excess credit-enhanced income we anticipate a gradual decline in margin consistent with our ongoing risk reduction strategy.

Robert Wahlman: This upward trend is expected to persist until growth in these balances begins to moderate. Conversely, excluding excess credit-enhanced income, we anticipate a gradual decline in margin consistent with our ongoing risk reduction strategy. The efficiency ratio. We remain focused on driving sustainable positive operating leverage with a long-term goal of steadily lowering our core efficiency ratio. That is, excluding the credit enhancement accounting effects. That said, there may be periods in which the efficiency ratio may increase. Tax rate. While multiple factors may influence the actual tax rate, we suggest using 27% in your modeling. With that, we would like to open the call for Q&A. Operator?

Speaker #2: The efficiency ratio. We remain focused on driving sustainable, positive operating leverage with a long-term goal of steadily lowering our core efficiency ratio—that is, excluding the credit enhancement accounting effects.

Speaker #2: That said there may be periods in which the efficiency ratio may increase. Tax rate. While multiple factors may influence the actual tax rate we suggest using 27% in your modeling.

Speaker #2: With that we would like to open the call for Q&A. Operator?

Speaker #1: Thank you. We will now be conducting a question and answer session. If you would like to ask a question please press star one on your telephone keypad.

Operator 3: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We'll pause for just a moment. Our first question, we'll hear from Joseph Yanchunis with Raymond James.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We'll pause for just a moment. Our first question, we'll hear from Joseph Yanchunis with Raymond James.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment it may be necessary to pick up the handset before pressing the star keys.

Speaker #1: We ask that and we'll pause for just a moment. And our first question we'll hear from Joe Yanchunas with Raymond James.

Speaker #3: Hey guys. how are we doing?

Joseph Yanchunis: Hey, guys. How are we doing?

Joe Yanchunis: Hey, guys. How are we doing?

Speaker #4: Good Joe. How are you?

Robert Wahlman: Good, Joe. How are you?

Speaker #3: I'm doing well. so I was wondering can you help with size the remaining pool of these legacy SBA credits? And you know how should we think about the difference between proactively cleaning up you know this specific cohort versus there being you know some fundamental softening in the industry?

Rachel Smith: I'm doing well. I was wondering, can you help with size the remaining pool of these legacy SBA credits? You know, how should we think about the difference between proactively cleaning up, you know, this specific cohort versus there being, you know, some fundamental softening in the industry? Also, I understand that you called out the e-commerce industry, but is there any specific vintages you could point to where they're concentrated?

Joe Yanchunis: I'm doing well. I was wondering, can you help with size the remaining pool of these legacy SBA credits? You know, how should we think about the difference between proactively cleaning up, you know, this specific cohort versus there being, you know, some fundamental softening in the industry? Also, I understand that you called out the e-commerce industry, but is there any specific vintages you could point to where they're concentrated?

Speaker #3: And then also, I understand that you called out the e-commerce industry, but is there any specific vintages you could point to where they're concentrated?

Speaker #4: Yeah. So let me just walk through. Hey Joe. This is Jim Noone. let me just walk through I think the the couple pieces there.

Jim Noone: Yes. Let me just walk through. Hey, Joe, this is Jim Noone. Let me just walk through, I think the couple of pieces there. To just bound it's about $50 million in performing outstanding balances at the end of Q1 that carry these attributes. As far as, you know, what the attributes are, you know, we had a surge in SBA originations back in 2022 and 2023, specifically in some of the consumer-focused businesses like e-commerce.

Speaker #4: so to just bound it it's about 50 million dollars in performing outstanding balances at the end of Q1 that carry these attributes. as far as you know what the attributes are you know we haven't surged in SBA originations back in '22 and '23.

Speaker #4: Specifically in some of the consumer-focused businesses like e-commerce there's six attributes from a few cohorts there that we zeroed in on. like I said it's about 50 million dollars in remaining outstanding and performing balances at the end of Q1.

Jim Noone: There's 6 attributes from a few cohorts there that we zeroed in on. Like I said, it's about $50 million in remaining outstanding and performing balances at the end of Q1. Really importantly, you know, these attributes are what has led to 75% of the NCOs and a similar amount of the unguaranteed NPAs over the last 3 years. We feel like we've identified it, we've segmented it, we're actively managing it. I think we're in good shape with it.

Speaker #4: Really importantly you know these attributes are what has led to 75% of the MCOs and a similar amount of the unguaranteed MPAs over the last three years.

Speaker #4: So we feel like we've identified it, we've segmented it, and we're actively managing it. So I think we're in good shape with it.

Rachel Smith: Okay. Shifting gears here. Just kind of wanna understand, or make sure I'm thinking about what's going on with the NIM here. It benefited from the change in estimates on that excess interest allocation within the credit-enhanced portfolio, but that also flowed through higher servicing and guarantee expenses. One, is that right? Two, what's the cleanest way to think about kind of the normalized earnings contribution from the credit-enhanced portfolio after this change? Has there been any change to that outlook?

Speaker #3: Okay, so shifting gears here, I just kinda want to understand or make sure I'm thinking about what's going on with the NIM here. So it benefited from the change in estimates on that excess interest allocation within the credit-enhanced portfolio, but that also flowed through higher servicing and guarantee expenses.

Joe Yanchunis: Okay. Shifting gears here. Just kind of wanna understand, or make sure I'm thinking about what's going on with the NIM here. It benefited from the change in estimates on that excess interest allocation within the credit-enhanced portfolio, but that also flowed through higher servicing and guarantee expenses. One, is that right? Two, what's the cleanest way to think about kind of the normalized earnings contribution from the credit-enhanced portfolio after this change? Has there been any change to that outlook?

Speaker #3: So one is that right? And two what's the cleanest way to think about a kind of the normalized earnings contribution from the credit-enhanced portfolio after this change?

Speaker #3: Or ha+has there been any change? To that outlook?

Speaker #4: So, Joe, I think that you are understanding it properly. The change in estimate grosses up, or increases, the interest income and flows all the way through net interest income.

Robert Wahlman: Joe, I think that you are understanding it properly. The change in estimate grosses up or increases the interest income and flows through all the way through net interest income. An exact offsetting amount is recorded as an expense, and so that grosses up the expense. You understood it exactly. In regards to the performance of the credit-enhanced portfolio, nothing really changes from this change in estimate. It's just, you know, when we first started the program, we thought that this would be the, you know, the distribution of the expense, particularly a portion that relates to origination, which offsets interest income.

Speaker #4: And an exact offsetting amount is recorded as an expense. And so that grosses up the expense. So you understood it exactly. In regards to the performance of the credit-enhanced portfolio nothing really changes from this change in estimate.

Speaker #4: It's just you know when we first started the program we thought that this would be the you know the distribution of the expense particularly a portion that relates to origination which offsets net income which offsets interest income.

Robert Wahlman: A year later, now we have some experience with it, and we're looking back at it, we changed that estimate, and we've shifted those expenses entirely to guarantee expense and servicing expense.

Speaker #4: but a year later after now we have some experience with it and we're looking back at it we're we changed that estimate and we've shifted those expenses entirely to guarantee expense and servicing expense.

Speaker #3: Okay. And was that change—was that recommended by your accounting firm or any of the regulators, or was this just done kind of internally?

Rachel Smith: Okay. Was that recommended by, like, your accounting firm or any of the regulators, or was this just done kind of internally?

Joe Yanchunis: Okay. Was that recommended by, like, your accounting firm or any of the regulators, or was this just done kind of internally?

Speaker #4: This was done based upon our own review, but it has been reviewed and discussed with our external accounting firm.

Robert Wahlman: This was done based upon our own review, but it has been reviewed and discussed with our external accounting firm.

Speaker #3: Okay. just a couple more for me me here. So with respect to your credit-enhanced strategic partners you know w+what's the general duration of these loans and you know have your partners changed their credit box or were there any partners that experienced you know outside losses that might have surprised them?

Rachel Smith: Okay. Just a couple more from me here. With respect to your credit-enhanced strategic partners, you know, what's the general duration of these loans? You know, have your partners changed their credit box, or were there any partners that experienced, you know, outside losses that might have surprised them? Then just also some color on the health of these fintechs that are supporting these loans.

Joe Yanchunis: Okay. Just a couple more from me here. With respect to your credit-enhanced strategic partners, you know, what's the general duration of these loans? You know, have your partners changed their credit box, or were there any partners that experienced, you know, outside losses that might have surprised them? Then just also some color on the health of these fintechs that are supporting these loans.

Speaker #3: And then just also some color on the health of these fintechs that are s supporting these loans.

Speaker #4: Yep. So there's five programs right now that are live in that program Joe. as far as the average term you know they they vary because they are five different programs.

Jim Noone: Yep. There's 5 programs right now that are live in that program, Joe. As far as the average term, you know, they vary because they are 5 different programs and products that are being managed there. I would tell you that they are on the shorter end generally. I would say on average, it's probably like 15 months, if you look at the pool in total. As far as, like, the health of the partners that are there, and the results in this quarter, you know, we grew this from virtually zero to $100 million in a year, and we were able to beat the high-end guidance at the end of 2025. You know, I was disappointed in the Q1 balances that they didn't grow, you know, from year-end.

Speaker #4: And and products that are being managed there. But I would tell you that they are on the shorter end generally I would say on average it's probably like fifteen months.

Speaker #4: if you look at the pool in total. as far as like the health of the partners that are there and the results in this quarter you know we grew this from virtually zero to a hundred million in a year.

Speaker #4: and we were able to beat the high-end guidance at the end of '25. But we were you know I was disappointed in the Q1 balances that they didn't grow you know from from year-end.

Speaker #4: The product is still central to our long-term plans, and we know our business well enough to know this stuff is lumpy sometimes. The guidance is intact for the full year.

Jim Noone: The product is still central to our long-term plans, and we know our business well enough that we know this stuff is lumpy sometimes. The guidance is intact for the full year. We are expecting one of our partners to grow meaningfully, you know, in that program here in Q2 and Q3. We'll update you again next quarter. As far as, you know, the other partners, they did moderate during the quarter. You know, where the growth is going to come from of those five partners, you know, over the next, call it two quarters, is likely from one of our partners. The others have kind of slowed down on the growth in that product, or at least they did in Q1.

Speaker #4: we are expecting one of our partners to grow meaningfully you know in that program here in Q2 and Q3. We'll update you again next quarter.

Speaker #4: as far as you know the other partners they did moderate during the quarter. So you know where the growth is going to come from of those five partners you know over the next call it two quarters.

Speaker #4: Is likely from one of our partners. The others have kind of slowed down on their on the growth in that product. or at least they did in Q1.

Speaker #3: I'd like to add one other point.

Robert Wahlman: I'd like to add one other point.

Speaker #4: And that slowdown be because of w that slowdown be because of y demand for the product or you know appetite around kind of the current credit environment or the losses that we're seeing in the portfolio?

Rachel Smith: Would that slowdown be because of demand for the product or, you know, appetite around kind of the current credit environment or the losses that we're seeing in the portfolio?

Joe Yanchunis: Would that slowdown be because of demand for the product or, you know, appetite around kind of the current credit environment or the losses that we're seeing in the portfolio?

Speaker #4: No it has to do with normal balances. And kind of like the the trajectory of that product with those three partners. you know they we knew about where they would start to plateau out in their balances.

Jim Noone: No, it has to do with normal balances and kind of like the trajectory of that product with those three partners. You know, we knew about where they would start to plateau out in their balances, at least for the products that we have with them right now. That's the answer.

Speaker #4: At least for the products that we have with them right now. so that's the answer.

Speaker #3: Okay, then last one for me here. So if we were to look out two to three years—or you could pick a duration—where do you see credit-enhanced loans as a percent of loans held for investment?

Rachel Smith: Okay, last one for me here. If we were to look out 2 to 3 years, or you could pick a duration, where do you see credit-enhanced loans as a % of loans held for investment?

Joe Yanchunis: Okay, last one for me here. If we were to look out 2 to 3 years, or you could pick a duration, where do you see credit-enhanced loans as a % of loans held for investment?

Jim Noone: There's no way for me to forecast that for you, Joe. I would just tell you that, you know, the balances were virtually zero nine months ago. We are still on the beginning of that growth curve. You know, it's incumbent on me to bring additional partners in and work with our business development team and our fintech team to bring those partners in.

Speaker #4: I there there's no way for me to forecast that for you Joe. I would just tell you that you know the the balances were were virtually zero nine months ago.

Speaker #4: We are still at the beginning of that growth curve. But you know, it's incumbent on me to bring additional partners in and work with our business development team and our fintech team to bring those partners in.

Robert Wahlman: To grow our balances. This is central to the strategic plan that we have that's been approved by the board, that we've talked to investors about. You know, I feel good about the program. Like I said, you know, our guidance for the year is still intact. We didn't have the growth that we thought we would have in Q1. We had more growth than we thought we would have, you know, for fiscal year 2025.

Speaker #4: to grow our balances. This is central to the strategic plan that we have. It's been approved by the board that we've talked to investors about.

Jim Noone: To grow our balances. This is central to the strategic plan that we have that's been approved by the board, that we've talked to investors about. You know, I feel good about the program. Like I said, you know, our guidance for the year is still intact. We didn't have the growth that we thought we would have in Q1. We had more growth than we thought we would have, you know, for fiscal year 2025.

Speaker #4: and you know I feel good about the program. Like I said you know our guidance for the year is is still intact. but we didn't have the growth that we thought we would have in Q1.

Speaker #4: We had more growth than we thought we would have you know for for fiscal year '25.

Speaker #3: All right. Well I appreciate you taking my questions.

Rachel Smith: All right. Well, I appreciate you taking my questions.

Joe Yanchunis: All right. Well, I appreciate you taking my questions.

Speaker #4: No problem.

Robert Wahlman: No problem.

Jim Noone: No problem.

Speaker #1: And next we'll move to Andrew Terrell with Stevens Inc.

Operator 3: Next, we'll move to Andrew Terrell with Stephens Inc.

Operator: Next, we'll move to Andrew Terrell with Stephens Inc.

Andrew Terrell: Hey, good afternoon.

Speaker #5: Hey good afternoon.

Speaker #4: Hey Andrew.

Robert Wahlman: Hey, Andrew.

Andrew Terrell: Just thinking on the last point, you know, if I were to take the kind of original 8 to 12 a month kind of guide, you know, you should by the end of the year be $215 million or so to $250 million on credit-enhanced balances. You still feel like you can achieve that by the end of the year?

Speaker #5: so just thinking on the on the last point you know if I if I were to take the kind of original eight to twelve a month kind of guide you know you should by the end of the year be two hundred and fifteen million or so to two fifty on credit-enhanced balances.

Speaker #5: You still feel like you can achieve that by the end of the year?

Speaker #4: That is still our expectation. Andrew?

Jim Noone: That is still our expectation, Andrew.

Speaker #5: Okay. and Bob are you able to quantify the I I think I understand what's going on with the the excess spread. we talked about it a minute ago but are you able to quantify the the dollar amount that that impacted the the guarantee and servicing expense lines by this quarter?

Andrew Terrell: Okay. Bob, are you able to quantify the, I think I understand what's going on with the excess spread. We talked about a minute ago, but are you able to quantify the dollar amount that that impacted the guarantee and servicing expense lines by this quarter?

Speaker #4: I cer I certainly can. But I don't have that with me Andrew.

Robert Wahlman: I certainly can, but I don't have that with me, Andrew.

Andrew Terrell: Okay. I can follow up. I think last quarter, Bob, we talked about a 56%, 57% type efficiency ratio in 2026. I know the, the excess spread kind of change impacted a little bit of efficiency, but even accounting for that running, you know, well north on efficiency versus those expectations. I just wanted to hear from you know, updated kind of expectations around either full-year efficiency or where you think you can manage efficiency at moving forward.

Speaker #5: Okay, I can follow up. I think last quarter, Bob, we talked about a 56% to 57% type efficiency ratio in 2026. I know the excess spread kind of changed, impacted a little bit of efficiency.

Speaker #5: But even accounting for that, you're running well north on efficiency versus those expectations. So I just wanted to hear from you—updated kind of expectations around either full-year efficiency or where you think you can manage efficiency at, moving forward?

Robert Wahlman: Certainly I can do that. The, I think the important part to note first is that by increasing the revenue and the expense when you do the efficiency ratio, you know, that portion of it is, you know, 1 for 1. You know, that does make the getting the efficiency ratio down to the level that we had previously stated or previously forecast, it makes it more difficult. I do think that, you know, the key, you know, we have been controlling our expenses, I think very well over the past 3 or 4 quarters, and we believe we continue to explore expenses. The key then to getting that efficiency ratio down is going to be growing our revenues, which we are focused on at this point in time.

Speaker #4: certainly I can do that. The I think the important part to note first is that by increasing the revenue and the expense when you do the efficiency ratio you know that portion of it is you know one for one.

Speaker #4: So you know, that does make getting the efficiency ratio down to the level that we had previously stated or previously forecast, it makes it more difficult.

Speaker #4: But I do think that, you know, the key—you know, we have been controlling our expenses, I think, very well over the past three or four quarters.

Speaker #4: And we'll believe we continue to explore express expenses. The key then to getting that efficiency ratio down is going to be growing our revenues which we are focused on at this point in time.

Robert Wahlman: Given the expense numbers that we have right now, you know, considering that they're inflated, it would require us to have about a $2 million increase in revenue, you know, to get that efficiency ratio down to 60%. I think that's still possible. I think that's very possible for this year. I would expect to be able to continue that going forward. When we're bringing on new partners, we are looking at the efficiency ratio, the operating leverage ratio, and most of those partners will be coming on well below that, call it the 50% mark. I think that we'll continue to work on it. We'll get it down to...

Speaker #4: given the expense numbers that we have right now you know considering that they're inflated it would require us to have about a two million dollar increase in revenue you know to to to get that efficiency ratio down to sixty percent.

Speaker #4: I think that's still possible. I th I think that's very possible for this year. And and I I would expect to be able to continue that going forward.

Speaker #4: When we are bringing new on when we're bringing on new partners we are looking at the efficiency ratio the operating leverage ratio and most of those partners will be coming on well below that call it the fifty percent mark.

Speaker #4: And so I think that we'll continue to work on it. We'll get it down—it's just gonna take a little bit longer. But we will get it back down to the mid-fifties.

Robert Wahlman: It's just gonna take a little bit longer, but we will get it back down to the mid-fifties.

Speaker #5: Okay. Understood. maybe for Jim I think in your in your opening remarks I think you made a comment to the tune of you were you know increasingly sourcing more mature lending opportunities or or lending partner opportunities.

Andrew Terrell: Okay. Understood. Maybe for Jim, I think in your, in your opening remarks, I think you made a comment to the tune of you were, you know, increasingly sourcing more mature lending opportunities or lending partner opportunities. Can you maybe unpack that a bit for us, both on the lending side, but then, you know, more broadly just what you're seeing top of funnel, how the SKU is changing from smaller to larger, if it is. I know, you know, it takes some time to onboard new partners, but just want to get a sense of kind of what you're working on, how you feel about the pipeline right now.

Speaker #5: Can you maybe unpack that a bit for us both on the lending side but then you know more broadly just what you're seeing top of funnel how the skew is changing from smaller to larger if it is?

Speaker #5: And I know you know, it takes some time to onboard new partners, but just want to get a sense of kind of what you're working on, how you feel about the pipeline right now?

Speaker #4: Sure. Yeah. So, based on what we're seeing, Andrew, you know, the lending pipeline is stronger than I've seen it, you know, in my eight years at the bank. You know, we intend to keep executing to convert that pipeline into contracts and announcements.

Jim Noone: Sure. Yeah. Based on what we're seeing, Andrew, you know, the lending pipeline is stronger than I've seen it, you know, in my 8 years at the bank. You know, we intend to keep executing to convert that pipeline into contracts and announcements. You know, we announced a new product with Albert at the end of February. We're very supportive of Enon and Malcolm and their team there. They do a great job. Just generally, our business development team has their hands full right now. As far as, like, color on the, you know, on the growth in pipeline there, I would say, you know, where historically we had invested in cards and payments, and historically, we continued to have success from lending partners that wanted cards and payments, rather than those as standalone products.

Speaker #4: You know, we announced a new product with Albert at the end of February. We're very supportive of Enon and Malcolm and their team there.

Speaker #4: They do a great job. And just generally our business development team has their hands full right now. As far as like color on on the you know on the growth in pipeline there I would say you know where historically we had you know we had invested in in cards and payments.

Speaker #4: And historically we continued to have success from lending partners that wanted cards and payments. rather than those as standalone products I think that that's likely to continue to be the case for another quarter or two.

Robert Wahlman: I think that that's likely to continue to be the case for another Q or two, but we are starting to see meaningful opportunities on both of those new products. Overall, I'd characterize the pipeline as probably about 50% lending, 50% split between cards and payments. I think by the end of the year, we'll have some good announcements on winning a couple partners here. I should be able to give you a better update next Q.

Jim Noone: I think that that's likely to continue to be the case for another Q or two, but we are starting to see meaningful opportunities on both of those new products. Overall, I'd characterize the pipeline as probably about 50% lending, 50% split between cards and payments. I think by the end of the year, we'll have some good announcements on winning a couple partners here. I should be able to give you a better update next Q.

Speaker #4: But we are starting to see meaningful opportunities on both of those new products. Overall, I'd characterize the pipeline as probably about fifty percent lending.

Speaker #4: Fifty percent split between cards and payments. And I think by the end of the year we'll have some good announcements on winning a couple partners here.

Speaker #4: so I should be able to give you a better update next quarter.

Speaker #5: Okay. Great. Thank you for taking the questions.

Andrew Terrell: Okay, great. Thank you for taking the questions.

Speaker #4: Mm-hmm.

Jim Noone: Mm-hmm.

Speaker #1: And next, we'll move to Manuel Navas with Piper Sandler.

Operator 3: Next we'll move to Manuel Navas with Piper Sandler.

Operator: Next we'll move to Manuel Navas with Piper Sandler.

Speaker #6: Just one quick follow-up on on that last some of that last commentary. Where will we see card and payment wins? Is that only in the interchange line?

Manuel Navas: Just one quick follow-up on some of that last commentary. Where will we see card and payment wins? Is that only in the interchange line? Where else will we see that in fees?

Speaker #6: Where else will we see that on the fee in fees?

Speaker #4: So with the cards and payments you will see I mean the on the payments it's going to be coming through that fee line. on cards it's gonna come through depending upon a couple of different things.

Robert Wahlman: With the cards and payments, you will see. I mean, on the payments, it's going to be coming through that fee line. On cards, it's gonna come through depending upon a couple of different things. One, if they are interested in the credit-enhanced balance sheet and balancing some of that, we'll see some of that come through in interest income. If they are, you know, and in that particular case, if they're doing credit-enhanced, they'll also need to supplement that with some interchange, so we'll see some revenue there. Other than that, it will be processing fees.

Speaker #4: One, if they are interested in the credit-enhanced balance sheet and balance sheet, some of that—we'll see some of that come through in interest income.

Speaker #4: if they are you know it it's if they and in that particular case if they're doing credit enhanced they'll also need to po supplement that with some interchange.

Speaker #4: So we'll see some revenue there. other than that it will be processing fees. Oh and and I also I I also want to mention I also want to mention one other very important thing.

Manuel Navas: Processing fees

Robert Wahlman: I also want to mention one other very important thing, particularly on the payment side, that business is frequently accompanied by significant deposits. We would look to see significant deposit increase, which will allow us to change our funding structure some. If we can get several of these new partners in here, we could significantly decrease our broker deposits and our cost of funds.

Speaker #4: Particularly on the payment side that business is frequently accompanied by significant deposits. And so we would look to see significant deposit increase which will allow us to change our funding structure some if we can get several of these new partners in here.

Speaker #4: We could significantly decrease our our broker deposits and our cost of funds.

Speaker #6: Okay. I appreciate that. can you give any color on what was what was the makeup of originations this quarter? And what pieces of it kind of step down towards the lower rate for the rest of the year?

Manuel Navas: Okay. I appreciate that. Can you give any color on what was the makeup of originations this quarter? What pieces of it kind of stepped down towards the lower rate for the rest of the year?

Speaker #4: Yeah. No problem Manuel. This is Jim. so the originations were really strong in the quarter. at one point seven billion. You know that exceeded our guidance of one point four.

Jim Noone: Yeah, no problem, Manuel. This is Jim. So the originations were really strong in the quarter, at $1.7 billion. You know, that exceeded our guidance of $1.4. It's up, you know, 38% year over year. As far as the composition, it's the seasonality of student lending that surged, and that was a big portion of the quarterly uptick. The higher rate lenders were down in the quarter, which is also typical in Q1. Then the rest of our lending partners, it was kind of a mix with nothing that, you know, stood out one way or the other, materially. The one thing I would point out, you know, you're continuing to see this, you know, gradual step-up.

Speaker #4: And it's up, you know, thirty-eight percent year over year. As far as the composition, it's the seasonality of student lending that surged, and that was a big portion of the quarterly uptick.

Speaker #4: the higher rate lenders were down in the quarter which is also typical in Q one. And then the rest of our lending partners it was kind of a it was kind of a mix with nothing that you know stood out one way or the other.

Speaker #4: materially. The one thing I I would point out you know you you're continuing to see this you know gradual step up. And I just wanna remind remind everyone you know we were at eight hundred and fifty million in originations three years ago in quarterly originations three years ago.

Jim Noone: I just wanna remind everyone, you know, we were at $850 million in originations 3 years ago, in quarterly originations 3 years ago. I'm really happy with the consistent increase that we've managed in getting to $1.7 billion this quarter.

Speaker #4: So I'm really happy with the consistent increase that we've managed in getting to $1.7 billion this quarter.

Speaker #6: What I appreciate that. where is some of the h higher headcount? In quarter? Is it compliance? is it operations?

Manuel Navas: What, I appreciate that. Where is some of the higher headcount in the quarter? Is it compliance? Is it operations?

Robert Wahlman: Oh, you're talking about the increase in the headcount in the quarter?

Speaker #4: you're you're talking about the increase in the headcount in the quarter?

Speaker #6: Yes. Yes.

Manuel Navas: Yes. Yes.

Speaker #4: The headcount that we had in the quarter we we brought on a di a few additional people. focused on facilitating growth. as Jim has talked about.

Robert Wahlman: The headcount that we had in the quarter, we brought on a few additional people, focused on facilitating growth, as Jim has talked about, and also to facilitate improved efficiencies through AI adoption. When you take a look at the particular areas, we saw that fintech business development, so that would be the marketing side, increased. You also saw a little bit of an increase in technology, for that is the AI as we are emphasizing that across the organization. You also see a few headcount increase in the onboarding program, excuse me, in operations, where we have the onboarding program for the new programs we anticipate coming through here in the next couple quarters.

Speaker #4: And also to facilitate im+improved efficiencies through AI adoption. So when you take a look at the particular areas we saw that fi+fintech business development.

Speaker #4: So that would be the marketing side. increased. you also saw a little bit of an increase in technology for that is the the AI as we as we are emphasizing that across the organization.

Speaker #4: And you also see a few headcount increases in the onboarding program—excuse me, in operations—where we have the onboarding program for the new, new PO, the new programs we anticipate coming through here in the next couple quarters.

Speaker #6: Thank you, I'll step back into the queue.

Manuel Navas: Thank you. I'll step back into the queue.

Speaker #1: And next, we'll take a follow-up question from Joe Yotanis with Raymond James.

Operator 3: Next, we'll take a follow-up question from Joseph Yanchunis with Raymond James.

Operator: Next, we'll take a follow-up question from Joseph Yanchunis with Raymond James.

Speaker #7: Hey so I I just wanted to revisit your your guide for originations. So on an annual basis you annualize the one point four billion.

Joseph Yanchunis: Okay. I just wanted to revisit your guide for originations. On an annual basis, you annualize the $1.4 billion. You slap a 5% growth rate on that. When you remove what happened in Q1, it seems like you're kind of calling for, you know, $1.4 billion over the next few quarters, which would include the seasonal step-up in student loan originations that occur in Q3. I mean, is that just a conservative view, or is there something that might have impacted or that could impact that seasonal uptick that we see in Q3?

Joe Yanchunis: Okay. I just wanted to revisit your guide for originations. On an annual basis, you annualize the $1.4 billion. You slap a 5% growth rate on that. When you remove what happened in Q1, it seems like you're kind of calling for, you know, $1.4 billion over the next few quarters, which would include the seasonal step-up in student loan originations that occur in Q3. I mean, is that just a conservative view, or is there something that might have impacted or that could impact that seasonal uptick that we see in september quarter?

Speaker #7: You slap a five percent growth rate on that. But then, when you remove what happened in one queue, it seems like you're kinda calling for, you know, $1.4 billion over the next few quarters, which would include the seasonal step up in student loan originations that occur in the third quarter.

Speaker #7: I mean, is that just a conservative view, or is there something that might have impacted, or that could impact, that seasonal uptick that we see in the September quarter?

Speaker #4: Now you're correct Joe. You know the one point four billion is the baseline that we proposed to use for modeling. And it strips out the student lender the student lending seasonality.

Jim Noone: No, you're correct, Joe. You know, the $1.4 billion is the baseline that we propose to use for modeling, and it strips out the student lending seasonality. Then you annualize that, apply 5% growth, and that's what we've used as far as guidance for the year. You're correct in that, it's the student lending seasonality that we are not accounting for.

Speaker #4: And then you annualize that, apply five percent growth, and that's what we've used as far as guidance for the year. So, you're correct in that it's the student lending seasonality that we are not accounting for.

Speaker #7: Okay. So assuming that seasonality does occur you know that annual guide is probably lower than what you're kind of expecting?

Joseph Yanchunis: Okay. Assuming that seasonality does occur, you know, that annual guide is probably lower than what you're kind of expecting. Is that right?

Joe Yanchunis: Okay. Assuming that seasonality does occur, you know, that annual guide is probably lower than what you're kind of expecting. Is that right?

Jim Noone: The best way to say it.

Speaker #4: the best way to say it seasonality would pull from two Q and four Q of twenty-six.

Joseph Yanchunis: I guess seasonality would pull from Q2 and Q4 of 2026.

Joe Yanchunis: I guess seasonality would pull from Q2 and Q4 of 2026.

Speaker #7: Yeah. There's nothing specific to student lending that would indicate that, you know, private student lending is certainly gonna be in any sort of contraction mode.

Jim Noone: Yeah. There's nothing specific to student lending that indicates that, you know, private student lending is certainly gonna be in any sort of contraction mode. I think it's the opposite. You know, what we are comfortable with giving as guidance is $1.4 billion quarterly with a 5% growth rate, you know, as far as the annual 2026 originations. Okay, thanks. Understand. You're welcome.

Speaker #7: I think it's the opposite. but you know what we are comfortable with giving as guidance is one point four billion quarterly with a five percent growth rate you know as far as the annual twenty twenty-six originations.

Joe Yanchunis: Okay, thanks. Understood.

Speaker #4: Okay. Thanks. Understood.

Speaker #7: You're welcome.

Jim Noone: You're welcome.

Speaker #1: And we do have a few questions via email. And I will turn the call over to Juan Arias. Head of investor relations.

Operator 3: We do have a few questions via email, and I will turn the call over to Juan Arias, Head of Investor Relations.

Operator: We do have a few questions via email, and I will turn the call over to Juan Arias, Head of Investor Relations.

Speaker #8: Thanks operator. we got a couple questions that came in. The first one can you comment on if you see a potential impact to your business from fintechs pursuing bank charters?

Juan Arias: Thanks, operator. We got a couple of questions that came in. First one, can you comment on if you see a potential impact to your business from Fintechs pursuing bank charters?

Speaker #4: Yes. No problem Juan. there's been you know a number of developments with fintech banking and charters the last three months. So I think it's good to address a couple of the items first.

Jim Noone: Yes. No problem, Juan. There's been, you know, a number of developments with Fintech banking and charters the last 3 months, so I think it's good to address a couple of the items first. You know, generally, the industry of bank sponsorship, it's always changing. Right now there's some large diversified Fintechs that are seeking bank charters during a window that appears open. You know, that path works for a handful of large diversified players. But for the vast majority of Fintechs, partnering with an experienced sponsor bank remains the faster, more capital-efficient path. That's driving a growing wave of inbound interest towards banks like ours. Charters pull a few large players out, but I would say simultaneously they also validate the model and drive dozens of others towards sponsor banks.

Speaker #4: You know generally the industry of bank sponsorship it's it's always changing. right now there's some large diversified fintechs. They're seeking bank charters. during a window that appears open.

Speaker #4: you know that path works for a handful of large diversified players. But for the vast majority of fintechs partnering with an experienced sponsor bank remains the faster more capital efficient path.

Speaker #4: And that's driving a growing wave of inbound interest towards banks like ours. Charters pull a few large players out. But I would say, simultaneously, they've also validated the model.

Speaker #4: and drive dozens of others towards sponsor banks. And the investments that we've made over the past several several years position us really well to capture that demand.

Jim Noone: The investments that we made over the past several years position us really well to capture that demand. I did wanna just say, you know, Upstart filed its bank charter in March, and OppFi announced its agreement to purchase BNC National Bank on Wednesday. There is no immediate change to our business from the regulatory applications they have filed, and we were in contact with both of them ahead of the public announcement. As they work through their regulatory process, we will continue to support them. I don't know how many fintechs in our industry will apply for charters, nor how many will receive them, but the lending pipeline at FinWise is stronger than I've seen it in my 8 years here, and that is what we manage to.

Speaker #4: I did wanna just say you know Upstart filed its bank charter in March. And OpFi announced its agreement to purchase BNC National Bank on Wednesday.

Speaker #4: There was no immediate change to our business from the regulatory applications they have filed. And we were in contact with both of them ahead of the public announcement.

Speaker #4: As they work through their regulatory process we will continue to support them. And I don't know how many fintechs in our industry will will apply for charters nor how many will receive them.

Speaker #4: But the lending pipeline at FinWise is stronger than I've seen it in my eight years here. And that is what we manage to.

Speaker #6: Thanks Jim. we got another question. It's actually for you. as you look ahead to your first twelve months in the CEO seat what are your top three priorities?

Juan Arias: Thanks, Jim. We got another question, and it is actually for you. As you look ahead to your first 12 months in the CEO seat, what are your top three priorities?

Speaker #4: Thanks Juan. Happy to address that. I think first some context on the transition itself. You know this was deliberate. It was a multi-year succession plan developed by the board.

Jim Noone: Thanks, Juan. Happy to address that. I think first some context on the transition itself. You know, this was deliberate. It was a multi-year succession plan developed by the board. I've worked alongside Kent for many years, and I'm grateful to him and the board for their trust and confidence. My role as CEO is straightforward: align our quarterly and annual execution with the strategic plan approved by our board and filed with our regulators and set the tone across the organization to deliver on it. I wanna be direct about my commitment. I moved my family across the country 8 years ago because I believed in this company and wanted the opportunity to be in exactly this seat. We had $65 million in assets at the time. We now have the capital, the partners, the team, the products, and the infrastructure.

Speaker #4: I've worked alongside Kent for many years. And I'm grateful to him and the board for their trust and confidence. My role as CEO is straightforward.

Speaker #4: Align our quarterly and annual execution with the strategic plan approved by our board and filed with our regulators. And set the tone across the organization to deliver on it.

Speaker #4: And I wanna be direct about my commitment. I moved my family across the country eight years ago. Because I believed in this company and wanted the opportunity to be in exactly this seat.

Speaker #4: We had sixty-five million dollars in assets at the time. We now have the capital, the partners, the team, the products, and the infrastructure. My focus is making sure that those pieces work together with discipline and speed to create meaningful value.

Jim Noone: My focus is making sure that those pieces work together with discipline and speed to create meaningful value. In terms of specific priorities, you heard much of it in our prepared remarks. First, we need to support the momentum that's already coming through our business development team. Originations were $1.7 billion in the quarter. Our pipeline for both new partners and new products is strong. Second, we will continue to empower our credit and compliance teams to identify and prune risk proactively. You're seeing that right now in a segment of our SBA program. This is not new for us. We took similar disciplined actions in our Fintech programs in 2019 and again in 2022. Active oversight and risk management is part of who we are. It will continue.

Speaker #4: In terms of specific priorities you heard much of it in our prepared remarks. First we need to support the momentum that's already coming through our business development team.

Speaker #4: Originations were one point seven billion in the quarter. And our pipeline for both new partners and new products is strong. Second we will continue to empower our credit and compliance teams.

Speaker #4: To identify and prune risk proactively. You're seeing that right now in a segment of our SBA program. But this is not new for us.

Speaker #4: We took similar disciplined actions in our fintech programs in twenty nineteen and again in twenty twenty-two. Active oversight and risk management is part of who we are.

Speaker #4: And it will continue. And then, third, being a multi-product platform carries enormous value for our bank and our shareholders. We saw this with Credit Enhanced Lending.

Jim Noone: Third, being a multi-product platform carries enormous value for our bank and our shareholders. We saw this with credit-enhanced lending, where we built the product capability, onboarded the partners, and in 12 months grew that portfolio from 0 to over $100 million. That same model, building the infrastructure, piloting it, marketing it, and then beginning to launch the right partners, is just now turning the corner in cards, payments, and deposit sponsorship. In the same way that our compliance investments positioned us during a previous cycle, these product investments are positioning us for exactly the cycle we're now entering. Finally, with more fintechs seeking sponsorship and our platform now offering lending, cards, payments, and deposits, I believe that we are entering a very strong period for new partnerships over the next 12 to 24 months.

Speaker #4: Where we built the product capability, onboarded the partners, and in twelve months grew that portfolio from zero to over $100 million. That same model—building the infrastructure, piloting it, marketing it, and then beginning to launch the right partners.

Speaker #4: Is just now turning the corner in cards payments and deposit sponsorship. So in the same way that our compliance investments positioned us during a previous cycle.

Speaker #4: These product investments are positioning us for exactly the cycle we're now entering. And then finally, with more fintechs seeking sponsorship and our platform now offering lending, cards, payments, and deposits.

Speaker #4: I believe that we are entering a very strong period for new partnerships over the next twelve to twenty-four months. So to answer your question simply the strategic direction doesn't change.

Jim Noone: To answer your question simply, the strategic direction doesn't change. What's changing is the pace of opportunity in front of us, and it's my job to make sure we capitalize on it for the long-term benefit of our shareholders.

Speaker #4: What's changing is the pace of opportunity in front of us, and it's my job to make sure we capitalize on it for the long-term benefit of our shareholders.

Speaker #1: And that will conclude today's question and answer session. In addition it does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.

Operator 3: That will conclude today's question and answer session. In addition, it does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time.

Operator: That will conclude today's question and answer session. In addition, it does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time.

Q1 2026 FinWise Bancorp Earnings Call

Request DemoDemo

Finwise Bancorp

Earnings