FinWise (NASDAQ:FINW) reported first-quarter financial results on Thursday. The transcript from the company’s first-quarter earnings call has been provided below.
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Summary
FinWise reported a decrease in net interest margin to 7.15% from 7.85% in the prior quarter, influenced by adjustments in credit enhanced program expenses.
Non-interest income fell to $14.6 million from $22.3 million, driven by lower credit enhanced income and a decline in BFG investment value.
Total assets decreased to $899.4 million from $977.1 million, with a decline in deposits due to runoff of funding not needed for current asset levels.
Loan originations for Q2 2026 are tracking at a quarterly run rate of approximately $1.4 billion, with a full year expectation of 5% growth.
The company anticipates $8 million to $10 million average monthly growth in credit enhanced balances for 2026, and continues to sell guaranteed portions of SBA loans.
Management remains focused on reducing the efficiency ratio and controlling expenses, while increasing revenues through new partnerships and product developments.
Despite a slow start in Q1, FinWise is confident in its credit enhanced program, expecting meaningful growth from a key partner in upcoming quarters.
The company is exploring AI adoption to improve efficiencies and has seen a headcount increase in fintech business development and operations.
Full Transcript
OPERATOR
In the prior quarter. The increase was driven by the change in estimate of the credit enhanced loans excess spread allocated to origination cost 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. 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 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. 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. 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 contributions 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. 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. 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 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 million 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 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 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. Non Performing loan balances for Q2 2026 we think there is potentially as much as $10 million in watch list loans that could migrate to non performing loans in the second quarter. 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. 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 and A 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. The 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 ask that and we’ll pause for just a moment. Our our first question we’ll hear from Joe Yanchunis with Raymond James.
Joe Yanchunis (Equity Analyst)
Hey guys, how are we doing? Good, Joe, how are you? I’m doing well. So I was wondering, can you help 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 some fundamental softening in the industry? 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?
Jim Noon
Yes, let me just walk through. Hey Joe, this is Jim Noon. Let me just walk through, I think the couple pieces there. So to just bound it, 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 22 and 23, 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 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 macroeconomic conditions and a similar amount of the unguaranteed loan balances over the last three years. So. So we feel like we’ve identified it, we’ve segmented it, we’re actively managing it. So I think we’re in good …
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