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Item 7. Management’s Discussion and Analysis

2026-03-23 compared with 2025-03-26 · 245 added, 288 removed, 552 unchanged (49% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes thereto and other financial information included elsewhere in this Report.

The Company is a Utah corporation and the parent company of FinWise Bank and FinWise Investment, LLC.

FinWise Bancorp, Inc.

is a Utah corporation and the parent company of FinWise Bank and FinWise Investment, LLC.

The Company is a registered bank holding company that is subject to supervision by Utah Department of Financial Institutions (“UDFI”) and the Federal Reserve.

The Company’s assets consist primarily of its investment in the Bank and all of its material business activities are conducted through the Bank.

The Company is a registered bank holding company that is subject to supervision by the UDFI and the Federal Reserve.

As a Utah state-chartered bank that is not a member of the Federal Reserve System, the Bank is separately subject to regulations and supervision by both the UDFI and the FDIC.

As a Utah state-chartered bank that is not a member of the Federal Reserve System, the Bank is separately subject to regulations and supervision by both the UDFI and the Federal Deposit Insurance Corporation (“FDIC”).

The Bank’s deposits are federally insured up to the maximum legal limits.

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Attracting nationwide deposits from the general public, businesses and other financial institutions, and investing those deposits, together with borrowings, capital and other sources of funds, is also critical to our banking business.

While our commercial and residential real estate lending and other products and services offered from our branch continue to be concentrated in and around the Salt Lake City, Utah MSA, our third-party loan origination relationships have allowed us to expand into new markets across the United States.

These relationships were developed to support our ability to generate significant loan volume across diverse consumer and commercial markets and have been the primary source of our significant growth and our consistent ability to operate profitability since developing the third-party loan origination business.

Our track record has demonstrated that these factors help deliver such growth and profitability, and that the flexibility inherent in our model enhances our ability to manage credit risk.

These relationships were developed to support our ability to generate significant loan volume across diverse consumer and commercial markets and have been the primary source of our growth and our consistent ability to operate profitability since developing our third-party loan origination business.

Our track record has demonstrated that our products and delivery of the products help deliver sustainable asset growth and strong profitability, and that the characteristics of our business model enhances our ability to manage credit risk.

We gather deposits in the Salt Lake City, Utah MSA through our one branch and nationwide from our Strategic Program service providers, SBA 7(a) borrowers, institutional deposit exchanges, brokered deposit arrangements and other deposit sources.

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

Our lending focuses on four main lending areas:

(i) SBA 7(a) loans, (ii) Strategic Programs, (iii) residential and commercial real estate and (iv) commercial leasing.

Our lending focuses on two main lending areas:

(i) traditional lending which includes SBA 7(a) loans, residential and commercial real estate, and commercial leasing;

and (ii) Strategic Programs lending which includes held-for-sale, credit enhanced, and retained loans.

For a description and analysis of the Company’s loan categories, see “Financial Condition.”

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GAAP requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent assets and liabilities.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under current circumstances, results of which form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily available from other sources.

We evaluate our estimates on an ongoing basis.

Actual results may differ from these estimates under different assumptions or conditions.

Accounting policies, as described in detail in the notes to our consolidated financial statements included in Part II, Item 8, are an integral part of our financial statements.

A thorough understanding of these accounting policies is essential when reviewing our reported results of operations and our financial position.

We believe that the critical accounting policies and estimates discussed below require us to make difficult, subjective or complex judgments about matters that are inherently uncertain.

Changes in these estimates, which are likely to occur from period to period, or use of different estimates that we could have reasonably used in the current period, would have a material impact on our financial position, results of operations or liquidity.

The JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies.

We have elected to take advantage of this extended transition period, which means that the financial statements included in this Report, as well as any financial statements that we file in the future, will not be subject to all new or revised accounting standards generally applicable to public companies for the transition period for so long as we

remain an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period under the JOBS Act.

Our critical accounting estimates primarily relate to the allowance for credit losses.

We previously disclosed our stock-based compensation and income taxes as critical accounting estimates.

We have determined our stock-based compensation and income taxes are no longer critical accounting estimates as they do not involve a significant level of estimate uncertainty that would likely have a material effect on our financial condition or results of operations.

See Note 1 - Summary of Significant Accounting Policies to the consolidated financial statements included in Part II, Item 8 for information on our accounting policy related to this cri tical accounting estimate.

Allowance for Credit Losses.

On January 1, 2023, the Company adopted ASU 2016-13, Topic 326 which replaced the incurred loss methodology with CECL for financial instruments measured at amortized cost and other commitments to extend credit.

CECL requires the immediate recognition of estimated credit losses expected to occur over the estimated remaining life of the asset.

The forward-looking concept of CECL requires loss estimates to consider historical experience, current conditions and reasonable and supportable economic forecasts of future events and circumstances.

The allowance for credit losses is reported as a reduction of the amortized cost basis of loans held-for-investment, while the reserve for unfunded loan commitments is included within other liabilities on the Consolidated Balance Sheets.

The estimate of credit loss incorporates assumptions for both the likelihood and amount of funding over the estimated life of the commitments, including adjustments for current conditions and reasonable and supportable forecasts.

Management periodically reviews and updates its assumptions for estimated funding rates.

Accrued interest receivable is excluded from the ACL calculation.

The amortized cost basis of loans does not include accrued interest receivable, which is included in accrued interest receivable on the Consolidated Balance Sheets.

The provision for credit losses on the Consolidated Statements of Income is a combination of the provision for credit losses and the provision for unfunded loan commitments.

With respect to the Bank's core portfolio which consists of SBA 7(a), local lending, retail point of sale, and equipment finance and leasing , the Bank pools similar loans that are collectively evaluated and determines an appropriate level of general allowance by portfolio segment using a non-discounted cash flow model taking into account probability of default, loss in the event of default, and prepayment speed estimates based on industry specific collected data.

The model captures credit and fraud losses assumed to be credit related losses over the historical charge-off and prepayment cycle and applies those losses at a loan level over the remaining maturity of the loan.

The model then calculates a historical loss rate using the average losses over the reporting period, which is then applied to each segment utilizing a standard reversion rate.

With respect to the Bank's active retained Strategic Program loan portfolio, the Bank is using a methodology that compares the actual loan performance of a vintage to the worst performing loans within that vintage, known as the high-water mark.

The Bank records the expected credit losses based on the high-water mark loss rate.

With respect to the Bank's inactive retained Strategic Program loan portfolio, performance data at the summary level provided by the Strategic Programs is banded by credit profile and original loan term and compared to actual loan performance on a quarterly basis.

The expected loss rate is supplemented with adjustments for reasonable and supportable forecasts of relevant economic indicators, including but not limited to national unemployment rate forecasts.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate.

Also included in the ACL are qualitative factors based on the risks present for each portfolio segment.

These qualitative factors include the following that are derived from the Interagency Policy Statement on Allowance for Credit Losses:

changes in lending policies and procedures;

changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the loan portfolio;

changes in the nature and volume of the loan portfolio and in the terms of loans;

changes in the experience, ability, and depth of lending management and staff;

changes in the volume and severity of past due loans, nonaccrual loans, and classified or graded loans;

changes in the quality of the Bank's loan review system;

changes in the value of underlying collateral for loans that are not collateral-dependent;

changes in the level of concentration of credit;

changes in the effect of competition, legal, and regulatory requirements on the level of estimated credit losses;

and, if applicable, changes in the composition and volume of the loan portfolio due to mergers, acquisitions, and other significant transactions not considered elsewhere.

It is also possible that these factors could include social, political, economic, and terrorist events or activities.

All of these factors are susceptible to change, which may be significant.

When management identifies loans that do not share common risk characteristics (i.e., are not similar to other loans within a pool) they are evaluated on an individual basis.

These loans are not included in the collective evaluation.

For loans identified as having a likelihood of foreclosure or that the borrower is experiencing financial difficulty, a collateral-dependent approach is used.

These are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral.

Under CECL, for collateral-dependent loans, the Company has adopted the practical expedient method to measure the allowance for credit losses based on the fair value of collateral.

The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral, which is

adjusted for liquidation costs/discounts, and amortized cost.

If the fair value of the collateral exceeds the amortized cost, no allowance is required.

The CECL methodology requires a significant amount of management judgment in determining the appropriate allowance for credit losses.

Several of the steps in the methodology involve judgment and are subjective in nature including, among other things:

segmenting the loan portfolio;

determining the amount of loss history to consider;

selecting predictive econometric regression models that use appropriate macroeconomic variables;

determining the methodology to forecast prepayments;

selecting the most appropriate economic forecast scenario;

determining the length of the reasonable and supportable forecast and reversion periods;

estimating expected utilization rates on unfunded loan commitments;

and assessing relevant and appropriate qualitative factors.

In addition, the CECL methodology is dependent on economic forecasts, which are inherently imprecise and will change from period to period.

Although the allowance for credit losses is considered appropriate, there can be no assurance that it will be sufficient to absorb future losses.

In determining an appropriate amount for the allowance, the Bank segments and aggregates the loan portfolio based on common characteristics.

The following segments have been identified:

Commercial Real Estate.

These loans are generally secured by owner-occupied nonfarm, nonresidential properties, or by other nonfarm, nonresidential properties.

Owner-occupied commercial real estate loans are typically repaid first by the cash flows generated by the underlying business.

Factors that may influence a business' cash flows include, but are not limited to, demand for its products or services, quality and depth of management, degree of competition, regulatory changes, and general economic conditions.

Non-owner occupied commercial real estate loans are generally considered to have a higher degree of credit risk as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to economic conditions.

Commercial and Industrial.

These loans are generally secured by business assets such as furniture, fixtures, equipment, accounts receivable, inventory, business vehicles, and other business personal property.

Commercial and industrial loans are typically repaid first by the cash flows generated by the borrower's business operations.

The primary risk characteristics are specific to the underlying business and its ability to generate sustainable profitability and resulting positive cash flows.

Factors that may influence a business' profitability include, but are not limited to, demand for its products or services, quality and depth of management, degree of competition, regulatory changes, and general economic conditions.

Commercial Leases.

Equipment financing and leasing typically involve the use of equipment as collateral for the loan.

If the borrower defaults on the loan, the Bank may need to repossess and sell the equipment to recover the outstanding debt.

However, the value of the equipment may depreciate over time, or disappear, making it difficult for the Bank to recover the full amount of the lease.

In equipment leasing, the residual value of the equipment is an important consideration.

The residual value is the estimated value of the equipment at the end of the lease term.

If the actual value of the equipment is lower than the residual value, the lessor may not be able to recover the full amount of the lease payments.

Construction and Land Development.

Risks common to construction loans are cost overruns, changes in market demand for property, supply chain interruption affecting construction materials, inadequate long-term financing arrangements and declines in real estate values.

Changes in market demand for property could lead to longer marketing times resulting in higher carrying costs, declining values, and higher interest rates.

Risks common to residential lot loans are those similar to other types of real estate construction loans, as many customers finance the purchase of improved lots in anticipation of constructing a 1 to 4 family residence.

Accordingly, common risks are changes in market demand for property, supply chain interruption affecting construction materials, inadequate long-term financing arrangements and declines in real estate values.

Changes in market demand for property could lead to longer marketing times resulting in higher carrying costs, declining values and higher interest rates.

These are loans to individuals for household, family, and other personal expenditures.

Consumer loans generally have higher interest rates and shorter terms than residential loans but tend to have higher credit risk due to the type of collateral securing the loan or in some cases the absence of collateral.

Residential Real Estate.

These loans are generally secured by 1 to 4 family residential properties.

The primary risk characteristics associated with residential mortgage loans typically involve:

major living or lifestyle changes to the borrower, including unemployment or other loss of income;

unexpected significant expenses, such as for major medical issues or catastrophic events;

and divorce or death.

In addition, residential mortgage loans that have adjustable rates could expose the borrower to higher debt service requirements in a rising interest rate environment.

Further, real estate values could drop significantly and cause the value of the property to fall below the loan amount, creating additional potential loss exposure for the Bank.

Residential Real Estate Multifamily.

Risks common to multifamily loans are poor management, high vacancy rates and regulatory changes.

The value of multi-family properties can be impacted by changes in the local real estate market.

If property values decline, the Bank may not be able to recover the full amount of the loan if the property needs to be foreclosed.

Strategic Program Loans Held-for-Investment.

Unsecured consumer loans and secured or unsecured business loans issued by the Company through these programs generally follow and are limited to specific predetermined underwriting criteria.

Strategic Program loans cover a wide range of borrower credit profiles, loan terms and interest rates.

Strategic Program loans generally have higher interest rates and shorter terms similar to consumer loans and tend to have higher credit risk due to the type of collateral securing the loan or in most cases the absence of collateral.

The Company generally places loans on a nonaccrual status when:

(1) payment is in default for 90 days or more unless the loan is well secured and in the process of collection;

or (2) full repayment of principal and interest is not foreseen.

When a loan is placed on nonaccrual status, all accrued and uncollected interest on that loan is reversed.

Past-due interest received on nonaccrual loans is not recognized in interest income but is applied as a reduction of the outstanding principal of the loans.

A loan is relieved of its nonaccrual status when all principal and interest payments are brought current, the loan is well secured, and an analysis of the borrower’s financial condition provides reasonable assurance that the borrower can repay the loan as scheduled.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due in accordance with the contractual terms of the loan agreement, including scheduled interest payments.

The Company identifies such loans by classified loan grades (also known as risk rating), removes them from the collectively assessed population and adds them to the individually assessed population of loans.

Within the individually assessed population, the Company determines whether loan repayment is expected from cash flow or from the liquidation of collateral.

For individually assessed cash flow based repayment loans, the Company considers the net of the present value of estimated future cash flows using the original loan terms, including the original effective interest rate.

Loans that experience insignificant payment delays and payment shortfalls are generally not individually evaluated.

The Company considers the significance of payment delays on a case-by-case basis, taking into consideration the circumstances of the loan and borrower, including the length of delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to principal and interest owed.

For individually assessed collateral based repayment loans, the Company estimates the net realizable value by evaluating the asset's present fair market value (supported by current independent appraisals or evaluations) less liquidation expenses associated with the asset's sale or disposal.

Common liquidation expenses considered are commissions paid to brokers or auctioneers, property taxes, force-placed insurance premiums, legal fees, maintenance costs, and other care and preservation of collateral expenses.

Within the strategic program loan portfolio, the Company has held-for-investment (“HFI”) strategic programs that it considers active and inactive.

Strategic programs are considered active when the Company is continuing to originate and retain vintages of loans with the strategic program.

Strategic programs are considered inactive when the Company is no longer originating and retaining vintages of loans with the strategic program.

For the inactive HFI strategic programs there may still be outstanding loan balances from previously originated vintages;

however, those loan balances decrease month-over-month through a combination of prepayment, charge-off, and regular amortization.

For the active HFI strategic programs, the Company evaluates impairment collectively on a vintage basis employing a high-water vintage methodology.

For the inactive HFI strategic programs, the Company evaluates impairment collectively by calculating blended loss rates comparing the actual loan tapes against portfolio level data provided by the inactive HFI strategic programs.

These estimates are based on historical experience and other reasonable assumptions under current circumstances, the results of which form the basis for making judgments about the carrying value of certain assets and liabilities that are not readily determinable from other sources.

We review these estimates regularly.

Actual results may differ from these estimates.

Management considers the determination of our allowance for credit losses to be a critical accounting estimate, as it involves making difficult, subjective, or complex judgments about inherently uncertain matters.

Changes in this estimate, whether due to evolving circumstances from period to period or the use of other reasonable assumptions, could materially affect our financial position, results of operations, or liquidity.

For further details on our accounting policy related to this estimate, refer to Note 1 – Summary of Significant Accounting Policies to the consolidated financial statements included in Part II, Item 8.

Allowance for Credit Losses (“ACL”).

The ACL represents management’s estimate of expected credit losses on financial assets measured at amortized cost.

The ACL is evaluated and measured on a collective basis for loans that share similar risk characteristics.

At each reporting date, we assess whether loans within a given pool continue to exhibit similar risk characteristics or whether certain loans should be evaluated individually.

Expected credit losses are estimated over the contractual term of each loan, adjusted for expected prepayments.

Accordingly, assumptions regarding loan life may have a

significant impact on the ACL.

The Company segments its loan portfolio in a manner consistent with how credit risk is managed.

The Company utilizes multiple approaches to estimate expected credit losses, depending on the loan segment:

For certain loan segments, the Company applies a non-discounted cash flow approach using loan‑level assumptions and relevant information from internal and external sources related to historical experience, current conditions, and reasonable and supportable forecasts.

For other loan segments, the Company employs a vintage‑based approach that evaluates cumulative loss performance by origination period.

Expected losses for each product are anchored to the most severe loss experience observed for comparable vintages at a similar stage of seasoning.

This methodology is designed to conservatively estimate losses over the life of the product, even for unseasoned vintages.

The ACL also includes qualitative reserves for expected losses that may not be fully captured by the quantitative models.

Qualitative factors considered include, among others, general business and economic conditions, borrower financial condition, and the volume and severity of past‑due and nonaccrual loans.

Based on this assessment, the Company records a provision for credit losses to maintain the ACL at a level deemed appropriate by management.

The determination of the ACL is considered a critical accounting estimate, as it requires significant judgment and the use of subjective assumptions, including management’s evaluation of overall portfolio quality.

The Company maintains the ACL at an amount it believes is sufficient to cover expected credit losses inherent in the loan portfolio as of each balance sheet date.

Chang es in economic conditions or portfolio composition may result in fluctuations in the provision for credit losses.

The ACL increased from $13.2 million at December 31, 2024, to $36.8 million at December 31, 2025.

This increase was primarily driven by growth in loan balances, including a significant increase in credit‑enhanced balances, which increased from $0.9 million at December 31, 2024 to $108.1 million at December 31, 2025 .

For additional information, see Note 3 – Loans to the consolidated financial statements included in Part II, Item 8.

Changes in assumptions and estimates may materially affect the ACL and, in turn, the Company’s financial position, liquidity, and results of operations.

To assess the sensitivity of the ACL to changes in key assumptions, management performed a hypothetical sensitivity analysis focused on the national unemployment forecast.

All model inputs and assumptions were held constant except for unemployment, which was stressed from the baseline 12-month forecast provided by Fannie Mae (ranging from 4.5% to 4.6%) to a theoretical 9.0% over the full 12 month forecast period.

Incorporating this stressed forecast into both the quantitative and qualitative components of the CECL framework resulted in an incremental $1.7 million increase in the ACL, representing an approximate 4.7% increase.

This stressed forecast scenario would have the allowance to total loans and leases increase from 6.3% to 6.5% at December 31, 2025 .

Executive Summary

This executive summary provides certain 2024 and 2023 financial highlights from the discussion and analysis that follows:

This executive summary provides certain 2025 and 2024 consolidated financial highlights from the discussion and analysis that follows:

• Originations of total loans increased by $1.1 billion to $6.1 billion for the year ended December 31, 2025 compared to the year ended December 31, 2024.

New Strategic Programs and organic growth through existing programs contributed to the increase in loan originations.

New strategic programs and organic growth through certain established strategic programs contributed to the increase in loan originations.

• Net interest margin (“NIM”) was 9.23% for the year ended December 31, 2025, compared to 9.99% for the year ended December 31, 2024.

NIM is impacted by income earned from interest-earning assets and interest costs incurred on interest-bearing liabilities.

NIM decreased principally as a result of FinWise having diversified its revenue sources by lending to lower risk borrowers with lower yields on loans.

• FinWise generated net income of $16.1 million and $12.7 million for the year ended December 31, 2025 and 2024, respectively.

Net income declined as FinWise invested in expansion of its product offerings and supporting business infrastructure.

• Total assets increased by $159.8 million to $746.0 million as of December 31, 2024 compared to December 31, 2023, principally in loans and investment securities.

Net income increased as we benefited from the past investment in expansion of our product offerings.

• Total assets increased by $231.2 million to $977.1 million as of December 31, 2025 compared to December 31, 2024, principally in our Strategic Program loans held-for-sale and credit enhanced Strategic Program loans held-for-investment.

We believe our strong capital levels support our current and planned growth strategy.

Strategic Program Service Providers

Fintech Relationships and Program Launches

During the year ended December 31, 2025, we developed the following relationships and program offerings with fintech companies:

• We announced our new strategic lending program with Backd Business Funding (“Backd”) to provide business installment loans to small and medium-sized businesses.

We also provided Backd with access to our credit enhanced balance sheet program.

• We entered into a strategic program agreement with DreamFi, Inc.

to support underserved and underbanked communities.

• We entered into a program management, network issuer processor and servicer agreement with Tallied Technologies, Inc.

(“Tallied”) with the intent to deliver credit card products and card processing solutions to Fintechs, their businesses, and their customers.

As a result of this partnership, FinWise issued two Mastercard co-branded credit cards and purchased an existing credit card portfolio.

FinWise will serve as the issuing bank, provide compliance and risk management oversight and credit enhanced balance sheet support for the card programs.

• Launched existing partner Plannery on MoneyRails TM for payment servicing of loans that the Bank originates.

During the year ended December 31, 2024, we entered into the following new strategic program relationships:

• FinWise Bank and Albert entered into a strategic partnership to jointly launch lending products.

• We enhanced our portfolio of private student loan products through our new strategic lending program with Earnest, to help students and their families with education financing.

• We announced our first strategic payments program with Hank Payments Corp.

to offer modernized payments and cash management solutions to our customers.

• We announced our strategic payments program with FUTR Payments (formerly Hank Payments Corp.) to support automated payment processing and remittance capabilities.

• We announced our new strategic lending program with Plannery to offer a debt consolidation platform exclusively for healthcare professionals.

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• We announced the launch of a new strategic lending program with PowerPay to offer consumers a simple and affordable lending solution for home improvement and elective health care purchases.

We have introduced our Payments (MoneyRails™) and Bank Identification Number (“BIN”) Sponsorship products which, together with our Strategic Programs, comprise the Bank’s Fintech Banking and Payment Solutions offerings.

Payments (MoneyRails™) and BIN Sponsorship connect our customers to the Bank’s API-driven banking services ledger.

Our Payments (MoneyRails™) and Bank Identification Number (“BIN”) Sponsorship products which, together with our Strategic Programs, comprise the Bank’s Fintech Banking and Payment Solutions offerings.

Payments (MoneyRails™) connects our customers to the Bank’s API-driven banking services ledger.

Results of Operations for the Years Ended December 31, 2025 and 2024

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Net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as “volume changes.” It is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing deposits and other borrowed funds, referred to as “rate changes.”

Net interest income increased $4.4 million for the year ended December 31, 2024, compared to the year ended December 31, 2023 primarily due to volume increases in the loans held for investment and loans held-for-sale portfolios and was partially offset by increased volume and rate in the certificates of deposit portfolio which also contributed to the increase in our cost of funds.

Net interest income increased $13.3 million for the year ended December 31, 2025, compared to the year ended December 31, 2024 primarily due to volume increases in the loans held-for-investment and loans held-for-sale portfolios and was partially offset by increased volume in the certificates of deposit portfolio.

Average interest-earning assets increased by $192.1 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, while the related yield on average interest earning assets decreased by 77 basis points to 11.83%.

Average interest-bearing liabilities increased by $101.4 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, while the related cost of funds increased 35 basis points to 4.57%.

NIM decreased to 9.99% for the year ended December 31, 2024 from 11.65% for the year ended December 31, 2023 primarily as a result of our increased lending to lower risk borrowers with lower yields on loans as part

of our strategy to reduce average credit risk in the loan portfolio combined with the increased cost of funds as the Bank competed in the national deposit market for funds to support our asset growth.

Average interest-bearing liabilities increased by $166.4 million for the year ended December 31, 2025 compared to the year ended December 31, 2024, while the related cost of funds decreased 55 basis points to 4.02%.

NIM decreased to 9.23% for the year ended December 31, 2025 from 9.99% for the year ended December 31, 2024 primarily as a result of our increased lending to lower risk borrowers with lower yields on loans as part of our strategy to reduce average credit risk in the loan portfolio, which was offset in part by the growth in the higher yielding credit enhanced portfolio of $107.2 million.

Average Balances and Yields .

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(1) Loans placed on nonaccrual status are included in loan balances.

See “Nonperforming Assets” below.

(2) Interest spread is the weighted average yield on interest-earning assets, less the weighted average rate incurred on interest-bearing liabilities.

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The rate column shows the effects attributable to changes in average rate.

The volume column

shows the effects attributable to changes in average volume.

The volume column shows the effects attributable to changes in average volume.

For purposes of this table, changes attributable to changes in both average rate and average volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.

Years Ended December 31,

Increase (Decrease) Due to Change in Increase (Decrease) Due to Change in

($ in thousands) Rate Volume Total Rate Volume Total

Year Ended December 31,

Increase (Decrease) Due to Change in

($ in thousands) Rate Volume Total

Interest income:

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Provision for Credit Losses

On January 1, 2023, the Company adopted ASU 2016-13, Topic 326 which replaced the incurred loss methodology, allowance for loan losses, with CECL for financial instruments measured at amortized cost and other commitments to extend credit.

The following table presents the components of the provision for credit losses for the periods indicated:

December 31, Change

($ in thousands) 2025 2024 $ %

Provision for credit losses:

Strategic Program loans - with credit enhancement $ 23,924 $ 111 $ 23,813 21,453.2 %

Strategic Program loans - without credit enhancement 8,611 7,729 882 11.4 %

All other loans 5,944 3,408 2,536 74.4 %

Provision for credit losses on loans 38,479 11,248 27,231 242.1 %

Provision for unfunded commitments 94 325 (231) (71.1) %

Provision for credit losses $ 38,573 $ 11,573 $ 27,000 233.3 %

The provision for credit losses is a charge to income to bring our ACL to a level deemed appropriate by management and approved by our board of directors.

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For a description of the factors we considered in determining the ACL see Allowance for credit losses presented in Note 1 - Summary of Significant Accounting Policies included in Part II, Item 8.

Our provision for credit losses was substantially flat at $11.6 million for the years ended December 31, 2024 and 2023.

Although the held-for-investment loan portfolio balances grew by $93.0 million, the growth occurred in lower risk categories, such as lease financing, residential real estate and the secured balance of SBA loans, all of which have lower expected loss factors contributing to the lower provision.

In connection with our review of individual loans migrating to non-performing status for impairment, we released all or a portion of the allowance for credit losses for certain loans, which had the effect of reducing the provision for loan losses, based on strong collateral positions associated with such loans.

These factors contributed to in the minimal increase in the provision for credit losses.

At December 31, 2024, the Company maintained $158.7 million in loan balances that are guaranteed by the SBA compared to $131.7 million in loan balances that are guaranteed by the SBA balances as of December 31, 2023.

The increase in the provision for credit losses for the year ended December 31, 2025, compared to the same period in 2024 resulted primarily from growth in the credit enhancement loan portfolio as well as higher net charge-offs resulting from the adoption of more conservative servicing and administration standards which prompted an accelerated classification of nonperforming loans and charge-offs.

Non-interest Income

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

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

December 31, Change

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Total non-interest income $ 58,483 $ 22,485 $ 35,998 160.1 %

The increase in total non-interest income for the year ended December 31, 2024 , compared to the same period in 2023 , was primarily due to increased fees associated with the higher origination volume of Strategic Program loans, partially offset by a decrease in other miscellaneous income due to a $0.9 million charge-off of unamortized premium on approximately $160.0 million of callable CDs which were called during the fourth quarter of 2024 and replaced with lower cost CDs.

This decrease was partially offset by a $0.5 million gain on sale of the guaranteed portion of SBA loans that occurred during the fourth quarter of 2024.

The increase in total non-interest income for the year ended December 31, 2025 , compared to the same period in 2024 , was primarily due to increases in credit enhanced loan balances of $107.2 million which generated higher credit enhancement income.

Additionally, the increased sales of the guaranteed portions of SBA 7(a) loans led to an increase in gains on loan sales, while higher originations resulted in increased Strategic Program fees.

Other miscellaneous income also increased, largely because of a charge in the prior year period of $0.9 million to remove unamortized broker premiums upon calling $160.0 million of callable certificates of deposits, an increase in dividends received from our investment in BFG of $0.9 million as well as an increase in operating lease rental income of $1.0 million.

Offsetting these non-interest income increases in part was a decrease in SBA loan servicing fees, net, due to an increase in the provision for SBA servicing losses resulting from a change in assumptions used in valuing the SBA servicing asset.

Non-interest Expense

Non-interest expense has increased as we have grown and as we have expanded and modernized our operational infrastructure and continued to implement our plan to build an efficient, integrated fintech banking operation with significant capacity for growth.

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

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

December 31, Change

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Occupancy and equipment expenses 1,877 2,179 (302) (13.9) %

Credit enhancement expense 8 — 8 100.0 %

Credit enhancement servicing expense 1,222 1 1,221 112,134.6 %

Credit enhancement guarantee expense 8,533 8 8,525 111,846.3 %

Other operating expenses 12,783 10,706 2,077 19.4 %

Total non-interest expense $ 70,333 $ 52,835 $ 17,498 33.1 %

The increase in total non-interest expense for the year ended December 31, 2024, compared to the same period in 2023, was primarily due to an increase in salaries and employee benefits due mainly to an increase in the number of employees, expenses related to our increase in commercial operating lease activity as well as software amortization, and other operating expenses primarily driven by increases in data processing costs of $0.8 million, SBA program fees and underwriting related to SBA loans of $0.4 million, and a charge related to potential bad debt expense on our program receivables of $0.3 million.

The increase in total non-interest expense for the year ended December 31, 2025, compared to the same period in 2024, was primarily due to an increase in credit enhancement program expenses related to growth in credit enhanced loans and an increase in salaries and employee benefits of which $1.7 million was attributable to the amortization of deferred compensation awards incurred to retain and motivate our employees.

The increases in other operating expenses were primarily due to expenditures on computer software of $1.5 million and operating lease depreciation of $0.8 million.

Partially offsetting these non-interest expense increases was a decrease in professional services primarily resulting from a reduction in contract services of $1.0 million connected to the development of various programs that launched during 2025.

Provision for Income Taxes

The provision for income taxes totaled $5.7 million at an effective tax rate of 26.1% for the year ended December 31, 2025, compared to $4.2 million at an effective tax rate of 25.0% for the year ended December 31, 2024.

The decrease in

provision for income taxes from the prior year period was primarily due to a reduction in permanent differences impacting income tax expense.

The decrease in net income for the year ended December 31, 2024, compared to the same period in 2023, was primarily the result of the factors discussed above.

The increase in provision for income taxes and the effective tax rate from the prior year period was principally due to an increase in the exclusion of compensation expense for highly compensated individuals and the apportionment of income between states with various tax rates.

The increase in net income for the year ended December 31, 2025, compared to the same period in 2024, was primarily the result of the factors discussed in the foregoing sections.

Segment Results

As further described in Note 17, Segments, in Part I, Item 8 of this Report, during the third quarter of 2025, we implemented segment reporting following the completion of a technology initiative to capture segment-specific financial data and develop reports used by our chief operating decision maker (“CODM”) to review our financial performance and determine how to allocate resources.

Our operations are comprised of three reportable segments:

traditional banking, banking as a service and treasury and administration.

The traditional banking segment provides loan and deposit products and services to consumers and businesses nationally and in and around the Salt Lake City, Utah MSA.

The BaaS segment provides lending, card and payments solutions nationally to fintech brands.

The treasury and administration segment consists of investments, deposits sourced nationally to support the business segments, interest charged to the traditional banking and BaaS segments on funding provided to those businesses, and other items not specific to the traditional banking or BaaS segments.

For periods prior to July 1, 2025, our operations were managed and reported as a single segment, and historical financial data by segment was not maintained.

Accordingly, it is not practicable to present segment information for prior periods.

In the segment reporting below, a non-GAAP subtotal is shown, captioned “Income before other operating expense allocation”.

That subtotal presents an income subtotal before consideration of allocated corporate expenses which might be fixed, semi-fixed or otherwise resist changes without regard to a particular line of business.

The following table provides segment information for the period indicated (dollars in thousands):

For the Year Ended December 31, 2025

Traditional Banking BaaS Treasury/Other Intersegment Eliminations (1)

Interest income $ 33,438 $ 53,673 $ 18,611 $ (13,244) $ 92,478

Interest expense 13,992 2,957 16,590 (13,244) 20,295

Net interest income 19,446 50,716 2,021 — 72,183

Non-interest income 12,448 44,582 2,804 — 59,834

Non-interest expense:

Salaries and benefits 4,241 8,951 818 — 14,010

Other non-interest expense 5,389 14,340 346 — 20,075

Provision for credit losses 5,917 32,656 — — 38,573

Income before other operating expense allocations 16,347 39,351 3,661 — 59,359

Other operating expense allocations 12,450 25,149 — — 37,599

Income before taxes 3,897 14,202 3,661 — 21,760

Income tax expense 1,015 3,700 954 — 5,669

Net income $ 2,882 $ 10,502 $ 2,707 $ — $ 16,091

(1) Interest income and expense are allocated to segments based on their respective funding requirements using an internal transfer pricing methodology.

The treasury and administration segment earns interest income from providing funds to the traditional banking and BaaS segments, and incurs interest expense for the deposits or borrowings obtained to support the businesses.

The internal interest flows are eliminated at the consolidated level through the intersegment/eliminations column.

The BaaS segment’s strong performance for the year ended December 31, 2025 underscores the success of our Strategic Program initiatives, while traditional banking continues to provide a stable business.

Treasury and administration remains focused on optimizing liquidity and supporting the funding needs of our other operating segments.

Looking ahead, we expect continued growth in BaaS as we expand our fintech partnerships and product offerings.

Traditional banking performance will be influenced by interest rate trends and treasury and administration will remain focused on optimizing liquidity and supporting business growth.

We continue to monitor regulatory developments and market conditions that may impact segment performance.

Financial Condition

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Interest-Bearing Deposits in Other Banks

The decrease in interest-bearing deposits in other banks from December 31, 2024 to December 31, 2023, was primarily due to the purchase of the investment securities available-for-sale.

Aside from minimal balances held with our correspondent banks, the majority of our interest-bearing deposits are at the Federal Reserve.

The increase in interest-bearing deposits in other banks from December 31, 2025 to December 31, 2024, was primarily due to deposits received in late December from strategic partners with student loan programs in anticipation of increased activity in January 2026.

Aside from minimal balances held with our correspondent banks, the majority of our interest-bearing deposits are held at the Federal Reserve.

We use our securities portfolio to provide a source of liquidity, provide an appropriate return on funds invested, manage interest rate risk, meet collateral requirements and meet regulatory capital requirements.

We classify investment securities as either HTM or AFS based on our intentions and our ability to hold such securities until maturity.

In determining such classifications, securities that we have the positive intent and the ability to hold until maturity are classified as HTM and carried at amortized cost.

We classify investment securities as either held-to-maturity (“HTM”) or available-for-sale (“AFS”) based on our intentions and our ability to hold such securities until maturity.

In determining such classifications, securities that we have the intent and the ability to hold until maturity are classified as HTM and carried at amortized cost.

All other securities are designated as AFS and carried at estimated fair value with unrealized gains and losses included in shareholders’ equity on an after-tax basis.

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Total 4.32 % 4.14 % 1.33 % 2.22 % 3.66 %

There were no calls, sales or maturities of securities during the years ended December 31, 2024 and December 31, 2023.

At December 31, 2024, there were 22 securities, consisting of eight collateralized mortgage obligations, four U.S.

Treasuries and ten mortgage-backed securities, in an unrealized loss position as of December 31, 2024 and 19 securities, consisting of nine collateralized mortgage obligations and ten mortgage-backed securities, in an unrealized loss position as of December 31, 2023.

There were no sales or transfers of investment securities between classifications during the years ended December 31, 2025 and December 31, 2024.

At December 31, 2025, there were seventeen securities, consisting of eight collateralized mortgage obligations and nine mortgage-backed securities, in an unrealized loss position as of December 31, 2025 and twenty-two securities, consisting of four U.S.

Treasuries, eight collateralized mortgage obligations and ten mortgage-backed securities, in an unrealized loss position as of December 31, 2024.

Strategic Program Loans Held-for-Sale

We, through our Strategic Program service providers, issue, on a nationwide basis, unsecured and secured consumer and business loans to borrowers within certain approved credit profiles.

We, through our Strategic Program service providers, offer unsecured and secured consumer and business loans to borrowers within certain approved credit profiles nationwide.

Loans originated through these programs are limited to predetermined Bank underwriting criteria, which has been approved by our board of directors.

The Company generally retains the loans and/or receivables for a number of business days after origination before selling the loans and/or receivables to the Strategic Program provider or another investor.

Interest income is earned by the Company while holding the loans.

We generally retain the loans and/or receivables for one to four business days after origination before selling the loans and/or receivables to the Strategic Program provider or another investor.

Interest income is earned by us while holding the loans.

These loans are classified as held-for-sale on the balance sheet and measured at the lower of cost or market.

Our Strategic Program loans held-for-sale increased $44.1 million as of December 31, 2024 compared to December 31, 2023, primarily as a result of greater hold periods for new originations for certain programs and a higher level of originations in the fourth quarter of 2024 compared to the same period in 2023.

Our Strategic Program loans held-for-sale increased $54.9 million as of December 31, 2025 compared to December 31, 2024, primarily as a result of greater hold periods for new originations for certain programs and a higher level of originations in 2025 compared to 2024.

Loans Held-for-Investment Portfolio

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Strategic Program loans:

Strategic Program loans - with credit enhancement 108,131 18.5 % 891 0.2 %

Strategic Program loans - without credit enhancement 21,637 3.7 % 19,231 4.1 %

Commercial real estate:

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We also monitor the impact of identified and estimated losses on capital as well as the pricing characteristics of each product.

The following provides a general description and the risk characteristics relevant to each of the products.

The following provides a general description and the risk characteristics relevant to each of our loan products.

Each loan is assigned a risk grade during the origination and closing process by credit administration personnel based on criteria described later in this section.

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This ratings analysis is performed at least quarterly.

We originate and service loans partially guaranteed by the SBA under its Section 7(a) loan program for small businesses and professionals throughout the USA.

We originate and service loans partially guaranteed by the SBA under its Section 7(a) loan program for small businesses and professionals throughout the United States.

Through our diversification efforts, we have built an SBA 7(a) portfolio that we believe positions us to better withstand economic shifts.

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Loans are sourced primarily through our referral relationship with BFG.

Although BFG actively markets throughout the USA, because of its physical location in the New York area we have developed a lending presence in the New York and New Jersey geographies.

Although BFG actively markets throughout the United States, we have developed a lending presence in the New York and New Jersey geographies due to its physical location in New York.

The maximum SBA 7(a) loan amount is $5.0 million.

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Historically, we have generally sold the SBA-guaranteed portion (typically 75% of the principal balance) of a majority of the loans we originate at a premium in the secondary market while retaining all servicing rights and the unguaranteed portion.

In light of suppressed gain-on-sale premiums and increasing variable loan rates during 2023, we retained on our balance sheet a greater percentage of the guaranteed portion of certain SBA loans that we originated than we have historically, which we believe will benefit us through stronger government guaranteed held-for-investment loan growth and an increased recurring stream of interest income and partially offset the decline in gain-on-sale revenue.

loan growth and an increased recurring stream of interest income and partially offset the decline in gain-on-sale revenue.

During the third quarter of 2024 and considering the wider spreads on sale of SBA loans available, FinWise resumed selling limited amounts of SBA loans.

Commercial leases

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Underwriting for larger credit requests from customers is generally based on commercial credit metrics where the primary repayment source considered is borrower cash flow, secondary is personal guarantor cash flow (when applicable) and tertiary is the sale of collateral pledged.

The nature of the business, use of proceeds, length of time in business, management experience, repayment ability, credit history, ratio calculations and assessment of collateral adequacy are also considerations.

These leases are generally secured by liens on business assets leased or purchased with our funds.

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Any loan, lease, line of credit, or letter of credit (including any unfunded commitments) and any interest obtained in such loans made by another lender to individuals, sole proprietorships, partnerships, corporations, or other business enterprises for commercial, industrial, agricultural, or professional purposes, not secured by real estate, but not for personal expenditure purposes are included in this category.

For example, commercial vehicle term loans and commercial working capital term loans.

For example, commercial vehicle term loans and commercial working capital term loans are included in this product loan category.

Underwriting is generally based on commercial credit metrics where the primary repayment source is borrower cash flow, secondary is personal guarantor cash flow (when applicable) and tertiary is the sale of collateral pledged.

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At the completion of the construction project, if the loan is converted to permanent financing by us or if scheduled loan amortization begins, it is then reclassified from construction to single-family dwelling.

Underwriting of construction and development loans typically includes analysis of not only the borrower’s financial condition and ability to meet the required debt obligations, but also the general market conditions associated with the area and type of project being funded.

Underwriting of construction and development loans typically includes analysis of the general market conditions associated with the area and type of project being funded in addition to the borrower’s financial condition and ability to meet the required debt obligation.

These loans are generally secured by mortgages for residential property located primarily in the Salt Lake City, Utah MSA, and we obtain guarantees from responsible parties.

Historically, we have retained these loans on our balance sheet for investment.

Historically, we have retained these loans on our consolidated balance sheets for investment.

Strategic Program loans

We, through our Strategic Program service providers, issue, on a nationwide basis, unsecured and secured consumer and business loans to borrowers within certain approved credit profiles.

Through our Strategic Program service providers, we issue unsecured and secured consumer and business loans to borrowers within certain approved credit profiles nationwide.

Although we have generally sold most of these loans, we may choose to hold more of the funded loans and/or receivables based on a number of factors including the amount of our available capital.

As of December 31, 2024 and December 31, 2023, we had total Strategic Program loans held-for-investment of $20.1 million and $19.4 million, respectively, representing 4.3% and 5.2% of our total loans held-for-investment, respectively.

Loans originated through these programs are limited to predetermined Bank underwriting criteria, which has been approved by our board of directors.

The primary form of repayment on these loans is from personal or business cash flow.

Loans originated through the Strategic Program are limited to predetermined Bank underwriting criteria, which has been approved by our board of directors.

The primary form of repayment on these loans is from the borrower’s personal or business cash flow.

Secured loans are secured by liens on consumer or business assets, as applicable.

We reserve the right to sell any portion of funded loans and/or receivables directly to the Strategic Program service providers or other investors.

We reserve the right to sell any portion of funded loans and/or receivables directly to the Strategic Program service providers or

other investors.

We generally retain the legal right to service all these loans, but contract with the Strategic Program service provider or another approved sub-servicer to service these loans on our behalf.

Strategic Program loans with credit enhancement

The Strategic Program loans with credit enhancement are distinct from our traditional loan portfolio in that the sponsoring fintech company guarantees the credit and fraud losses associated with these loans.

Credit enhanced Strategic Program loans totaled $108.1 million and $0.9 million as of December 31, 2025 and 2024, representing 18.5% and 0.2% of our total loans held-for-investment, respectively.

This significant increase reflects the expansion of the credit enhanced program and its impact on our balance sheet.

The Reconciliations of Non-GAAP Financial Measures section of this report below further details the impact of the credit enhancement program on our allowance for credit losses and related non-GAAP financial measures.

Strategic Program loans without credit enhancement

Strategic Program loans without credit enhancement totaled $21.6 million and $19.2 million as of December 31, 2025 and December 31, 2024, representing 3.7% and 4.1% of our total loans held-for-investment, respectively.

Unlike the credit enhanced loans, these non-credit enhanced loans do not benefit from a third-party guarantee or indemnification of credit and fraud losses by the Strategic Program service provider.

As a result, the Bank retains the full credit and fraud losses associated with these loans, and they are subject to our standard credit risk management, monitoring, and allowance for credit losses under the CECL model.

The accounting for non-credit enhanced Strategic Program loans is consistent with our other held-for-investment loan portfolios.

While the non-credit enhanced Strategic Program loans represent a smaller portion of our overall loan portfolio, they provide additional diversification and support our broader fintech strategy.

Commercial real estate

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Consumer lending provides financing for personal, family, or household purposes on a nationwide basis.

Most of these loans are originated through our POS platform and come from a variety of sources, including other approved merchant or dealer relationships and lending platforms.

Most of these loans are originated through our loan origination system platform and come from a variety of sources, including other approved merchant or dealer relationships and lending platforms.

As of December 31, 2025 and December 31, 2024, we had total consumer loans of $21.9 million and $22.2 million, respectively, representing 3.8% and 4.8% of our total loans held-for-investment, respectively.

We use a debt-to-income (“DTI”) ratio to determine whether an applicant will be able to service the debt.

We use a debt-to-income (“DTI”) ratio test to determine whether an applicant will be able to service the debt.

The DTI ratio compares the applicant’s anticipated monthly expenses and total monthly obligations to the applicant’s monthly gross income.

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All exceptions are documented and reported.

While the loans are generally for the purchase of goods which may afford us a purchase money security interest, they are underwritten as if they were unsecured.

While the loans are generally for the purchase of goods which may afford us a purchase money security interest, these loans are underwritten as if they were unsecured.

On larger loans, we may file a Uniform Commercial Code financing form.

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Loan Maturity

As of December 31, 2024, $279.8 million, or 60.1%, of the total held-for-investment loan balance matures in less than five years.

Loans maturing in greater than five years totaled $185.4 million as of December 31, 2024.

The variable rate portion of our total held-for-investment loan portfolio at December 31, 2024 was $329.7 million or 70.9%.

The variable rate portion of the total held-for-investment loans reflects our strategy of limiting interest rate risk through the use of variable rate products.

The following table details the contractual maturity ranges of loans in our loan portfolio and the amount of such loans with fixed and variable rates in each maturity range as of December 31, 2025:

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Loans may be placed on nonaccrual status regardless of whether such loans are actually past due.

In general, we place loans on nonaccrual status when they become 90 days past due.

We also generally place loans on nonaccrual status if they are less than 90 days past due if the collection of principal or interest is in doubt.

In general, we place loans on nonaccrual status when they become 90 days past due unless they are both well secured and in the process of collection.

We also place loans on nonaccrual status if they are less than 90 days past due if the collection of principal or interest is in doubt.

When interest accrual is discontinued, all unpaid accrued interest is reversed from income.

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A nonaccrual asset may be restored to accrual status when (1) none of its principal and interest is due and unpaid, and we expect repayment of the remaining contractual principal and interest, or (2) when asset otherwise becomes well secured and is not in the process of collection.

Any loan which we deem to be uncollectible, in whole or in part, is charged off to the extent of the anticipated loss.

In general, commercial loans that are past due for 90 days or more are charged off unless the loan is both well secured and in the process of collection.

Consumer loans and credit card balances are charged off at 120 days and 180 days, respectively.

Any loan, or portion of a loan, which we deem to be uncollectible is charged off to the extent of the anticipated loss.

In general, the reported balance of commercial loans that are past due for 90 days or more are reduced to the estimated net realizable value.

Consumer loans and credit card balances are charged off at no later than 120 days and 180 days, respectively.

We believe our disciplined lending approach and focused management of nonperforming assets has resulted in sound asset quality and timely resolution of problem assets.

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The amount of nonperforming assets as of December 31, 2024 includes $19.2 million of SBA 7(a) loan balances that are guaranteed by the SBA.

The increase in nonperforming assets and material loan modifications from the prior period was primarily attributable to multiple loans in the SBA 7(a) loan portfolio moving to nonperforming status.

Due to elevated interest rates, the slowdown of consumer spending and the variable rate nature of our SBA portfolio, the risk of default is elevated and may result in additional delinquencies in future periods.

The increase in nonperforming assets and material loan modifications from the prior year was primarily attributable to the increase in the SBA 7(a) loan portfolio being classified as nonaccrual mainly due to the negative impact of sustained elevated interest rates on our small business borrowers.

Due to elevated interest rates, the slowdown of consumer spending and the variable rate nature of our SBA portfolio, the risk of default has become and continues to be elevated and may result in additional delinquencies in future periods.

Our Strategic Program service providers also provide for loan modifications to borrowers.

As of December 31, 2024 and 2023, the balance of outstanding modified loans to individuals in the Strategic Program retained portfolio was approximately $4.4 million and $4.5 million, respectively.

The service providers are authorized to make the loan modifications without prior FinWise consent to react immediately to borrower contact and optimize collections.

As of December 31, 2025 and 2024, the balance of outstanding loan modifications was approximately $0.2 million and $4.4 million, respectively.

Credit Risk Profile

We believe that we underwrite loans carefully and thoroughly, limiting our lending activities to those products and services where we have the resources and expertise to lend profitably without undue credit risk.

We require all loans to conform to policy (or otherwise be identified as exceptions to policy and monitored and reported on, at minimum, quarterly) and be granted on a sound basis.

We require all loans to conform to our underwriting policies (or otherwise be identified as exceptions to policy and monitored and reported on, at minimum, quarterly) and be granted on a sound basis.

Loans are made with a primary emphasis on loan profitability, credit risk and concentration exposures.

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When considering how to best diversify our loan portfolio, we consider several factors including our aggregate and product-line specific concentration risks, our business line expertise, and the ability of our infrastructure to appropriately support the product.

While certain product lines generate higher net charge-offs, our exposure is carefully monitored and mitigated by our concentration policies and reserved for by the loan loss allowance we maintain.

While certain product lines generate higher net charge-offs, our exposure is carefully monitored and mitigated by our concentration policies and reserved for by the credit loss allowance we maintain.

Specifically, retention of certain Strategic Program loans with higher default rates accounts for a disproportionate amount of our charge-offs.

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Among other things, we use loan risk grading information for loan pricing, risk and collection management and determining credit loss reserve adequacy.

Further, on a quarterly basis, the Loan Committee holds a Loan Risk Grade meeting, wherein all loans in our portfolio are reviewed for accurate risk grading.

Any changes are made after the Loan Risk Grade meeting to provide for accurate reporting.

Further, on a quarterly basis, the Loan Committee holds a Loan Risk Grade meeting, to review all loans in our portfolio for accurate risk grading.

Any required changes to the loan risk grading are made after the Loan Risk Grade meeting to provide

for accurate reporting.

Reporting is achieved in Loan Committee minutes, which minutes are reviewed by the Board.

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The grade is periodically evaluated and adjusted as performance dictates.

Internal loan grades are based on current financial information, historical payment experience, and credit

documentation, among other factors.

Internal loan grades are based on current financial information, historical payment experience, and credit documentation, among other factors.

The following guidelines govern the assignment of these risk grades.

We do not currently grade Strategic Program loans held for investment due to their small balances and homogenous nature.

We do not currently grade Strategic Program loans held-for-investment due to their small balances and similar characteristics.

As credit quality for Strategic Program loans have been highly correlated with delinquency levels, the Strategic Program loans are evaluated collectively for impairment.

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Allowance for Credit Losses

We adopted Financial Accounting Standards Board Accounting Standards Update No.

2016–13, Financial Instruments – Credit Losses (Topic 326) , commonly referred to as the “CECL model,” on January 1, 2023.

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Beginning balance $ 13,176 $ 12,888

Impact of ASU 2016-13 adoption(1) — 257

Adjusted beginning balance 12,888 12,242

Provision for loan losses 11,248 11,525

Provision for credit losses 38,479 11,248

Construction and land development — —

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Commercial and industrial 15 17

Consumer 18 6

Commercial leases

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Ending balance $ 36,796 $ 13,176

(1) ASU 2016-13 (CECL) was adopted January 1, 2023.

The following tables show the allocation of the ACL as of December 31, 2024, and 2023.

The following table shows the allocation of the ACL and the percentage of loans in each category to total loans as of December 31, 2025, and 2024.

The ACL related to Strategic Programs constitutes 77.0% and 47.8% of the total ACL while comprising 22.2% and 4.3%, respectively, of total loans held-for-investment as of December 31, 2025 and 2024, respectively.

The percentage of ACL related to Strategic Program loans retained reflects the increased credit risks associated with certain retained Strategic Program loans.

December 31, 2024

($ in thousands) Amount % of

Construction and land development $ 374 2.8 %

Residential real estate 788 6.0 %

Residential real estate multifamily 38 0.3 %

Commercial real estate

Owner occupied 2,834 21.5 %

Non-owner occupied 113 0.9 %

Commercial and industrial 700 5.3 %

Consumer 638 4.8 %

Commercial leases

Strategic Program loans 6,304 47.8 %

Total $ 13,176 100.0 %

December 31, 2023

($ in thousands) Amount % of

December 31, 2025 December 31, 2024

($ in thousands) Amount Percent of Loans in Category to Total Loans Amount Percent of Loans in Category to Total Loans

Construction and land development $ 970 8.4 % $ 374 9.1 %

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Commercial leases

1,838 13.5 % 1,387 15.0 %

Strategic Program loans:

Strategic Program loans - with credit enhancement 22,396 18.5 % 111 0.2 %

Strategic Program loans - without credit enhancement 5,930 3.7 % 6,193 4.1 %

Total $ 36,796 100.0 % $ 13,176 100.0 %

The following table reflects the ratios of the ACL to total LHFI, nonaccrual loans to total loans held-for-investment, and the ACL to nonaccrual loans by CECL loan category as of December 31, 2024.

The following table reflects the ratios of the ACL to total LHFI, nonaccrual loans to total LHFI, and the ACL to nonaccrual loans by CECL loan category as of December 31, 2025:

LHFI Nonaccrual loans

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Total 6.3 % 7.4 % 85.1 %

The following table reflects the ratios of the ACL to total LHFI, nonaccrual loans to total loans held-for-investment, and the ACL to nonaccrual loans by CECL loan category as of December 31, 2023.

The following table reflects the ratios of the ACL to total LHFI, nonaccrual loans to total LHFI, and the ACL to nonaccrual loans by CECL loan category as of December 31, 2024:

($ in thousands) ACL to

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Total 2.8 % 7.7 % 36.9 %

When comparing December 31, 2024 to December 31, 2023, the decrease in ACL to total LHFI as well as the decrease in ACL to total nonaccrual loans was primarily due to the shifting of SBA loans from the collectively assessed population to the individually assessed population where the loans are assessed based on the net realizable value of the collateral .

The increase in nonaccrual loans to total loans held-for-investment from December 31, 2023 to December 31, 2024 was primarily related to SBA loans that were moved to nonaccrual status during 2024.

When comparing December 31, 2025 to December 31, 2024, the increase in ACL to total LHFI was primarily due to the growth in the credit enhanced loans included in the Strategic Program loans held-for-investment.

The decrease in nonaccrual loans to total loans held-for-investment from December 31, 2024 to December 31, 2025 was primarily due to the growth in the loans held-for-investment portfolio.

The increase in the ACL to nonaccrual loans ratio as shown above primarily pertained to growth in the credit enhanced loans included in the Strategic Program loans held-for-investment offset in part by the increase in nonaccrual loans, concentrated in the SBA product.

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

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Total $ 14,859 $ 535,671 2.8 % $ 10,960 $ 417,207 2.6 %

The ratio of net charge-offs to average loans outstanding by loan category was lower during the year ended December 31, 2024 as compared to the year ended December 31, 2023, due primarily to the increase in our average loans held-for-investment balances.

The decrease in the ratio for Strategic Programs loans was primarily due to a reduction in the average loan balances as well as a reduction in net charge-offs during the year ended December 31, 2024.

The ratio of net charge-offs to average loans outstanding by loan category increased slightly during the year ended December 31, 2025 as compared to the year ended December 31, 2024, due primarily to a higher growth rate in the average balances of Strategic Program loans related to the credit enhanced program when compared to the growth rate of net charge-offs in that program.

Total assets at December 31, 2025 were $977.1 million , an increase of $231.2 million from December 31, 2024.

The increase in total assets was due primarily to increases in loans receivable, net, of $89.3 million, Strategic Program loans held-for-sale of $44.1 million, and investment securities available-for-sale of $29.9 million.

These increases were partially offset by a decrease in interest-bearing deposits in other banks of $7.8 million.

These changes were consistent with our strategy to grow assets in lower risk revenue producing products.

The increase in total assets was due primarily to increases in loans held-for-investment, net, of $93.7 million, Strategic Program loans held-for-sale of $54.9 million, interest-bearing cash deposits of $51.8 million, and credit enhancement asset of $22.3 million.

The increased loan balances are generally consistent with our strategy to grow the loan portfolio with higher quality lower risk assets.

Deposits are the major source of funding for us.

2 unchanged sentences

We also generate deposits in relation to our Strategic Programs in the form of reserve accounts as discussed above.

These deposits add an element of flexibility in that they tend to increase or decrease in relation to the size of or Strategic Program loan portfolio.

These deposits add an element of flexibility in that they tend to increase or decrease in relation to the size of our Strategic Program loan portfolio.

In addition to the reserve account, some Strategic Program loan originators maintain operating deposit accounts with us.

The following tables present the end of period and average balances of our deposit portfolio for the periods indicated (average balances have been calculated using daily averages):

The following table presents the end of period balances of our deposit portfolio for the periods indicated:

December 31, 2025 December 31, 2024

7 unchanged sentences

Total period end deposits $ 754,561 100.0 % $ 544,952 100.0 %

The increase in total deposits as of December 31, 2024, compared to December 31, 2023, was primarily due to an increase in brokered time deposits and noninterest bearing demand deposits utilized in the funding of our lending programs.

Also, during the fourth quarter of 2024, we called $160.0 million of higher-yielding time certificates of deposit and replaced them with lower cost time certificates of deposit.

The increase in total deposits as of December 31, 2025, compared to December 31, 2024, was primarily due to an increase in brokered time deposits of $153.4 million, which were added to fund loan growth and increase balance sheet liquidity.

Additionally, noninterest bearing demand deposits increased $41.7 million, primarily related to collateral deposits by certain strategic programs in anticipation of increased volumes in student loan fundings in January 2026.

As an FDIC-insured institution, our deposits are insured up to applicable limits by the DIF of the FDIC.

10 unchanged sentences

Total Liabilities

Total liabilities increased from $431.2 million at December 31, 2023 to $572.3 million at December 31, 2024 primarily due to an increase in total deposits as discussed above.

Total liabilities increased from $572.3 million at December 31, 2024 to $783.9 million at December 31, 2025 primarily due to an increase in deposits as discussed above.

Liquidity and Capital Resources

16 unchanged sentences

We primarily utilize short-term and long-term borrowings to supplement deposits to fund our lending and investment activities.

At December 31, 2024, we had the ability to access $239.2 million from the FRB’s Discount Window on a collateralized basis.

The Bank had an available unsecured line of credit with two correspondent banks to borrow up to $6.1 million in overnight funds.

We also maintain a $25.0 million line of credit with Federal Home Loan Bank, secured by specific pledged loans.

At December 31, 2025, we had the ability to access $193.8 million from the Federal Reserve Bank on a collateralized basis.

The Bank had an available unsecured line of credit with three correspondent banks to borrow up to $16.1 million in overnight funds.

W e also maintain a $20.5 million line of credit with Federal Home Loan Bank, secured by specific pledged loans.

We had no outstanding balances on any unsecured or secured lines of credit as of December 31, 2025.

In long term borrowings, we had $0.1 million outstanding at December 31, 2024 related to the PPPLF.

The PPPLF is secured by pledged PPP loans.

Our most liquid assets are cash and cash equivalents.

1 unchanged sentence

At December 31, 2025, liquid assets (defined as cash and due from banks and interest-bearing deposits) totaled $163.4 million and constituted 16.7% of total assets.

In a ddition, during the third quarter of 2024, we purchased U.S.

Treasury securities, which are classified as investment securities AFS.

These investment securities totaled $29.9 million at December 31, 2024 (4.0% of total assets) and can be readily sold.

We believe that our liquid assets combined with the available lines of credit and our ability to generate core and non-core funding provides adequate liquidity to meet our current financial obligations for at least the next 12 months.

3 unchanged sentences

Expected future use or activities for which capital may be set aside include balance sheet growth and associated relative increases in market or credit exposure, investment activity, potential product and business expansions, acquisitions and strategic or infrastructure investments.

Shareholders’ equity increased $18.7 million to $173.7 million at December 31, 2024 compared to $155.1 million at December 31, 2023, primarily due to the purchase of additional equity interests in BFG in exchange for $4.1 million in FinWise Bancorp common stock and net income of $12.7 million.

Shareholders’ equity increased $19.5 million to $193.2 million at December 31, 2025 compared to $173.7 million at December 31, 2024, primarily due to earnings of $16.1 million reported for the period.

The Company did not pay a dividend in 2024 or 2025.

We use several indicators of capital strength.

14 unchanged sentences

We have a stock repurchase program authorized by our Board of Directors.

The stock repurchase program became effective as of March 6, 2024 and authorizes us to repurchase up to 641,832 shares of our common stock in the aggregate in open market transactions, privately negotiated transactions, or any manner that complies with the provisions of Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as pursuant to a trading plan under Rule 10b5-1 under the Exchange Act.

The stock repurchase program became effective as of March 6, 2024 and authorizes us to repurchase up to 641,832 shares of our common stock in the aggregate in open market transactions, privately negotiated transactions, or any manner that complies with the provisions of Rule 10b-18 of the Exchange Act, as well as pursuant to a trading plan under Rule 10b5-1 under the Exchange Act.

Our decision to repurchase shares will depend on a variety of factors, including but not limited to, the market price and trading volume of our common stock, general market and economic conditions, the ongoing assessment of our capital needs, and applicable legal and regulatory requirements.

2 unchanged sentences

During the three months ended December 31, 2025, there were no open-market share repurchases.

Since the repurchase program’s inception, we have repurchased and subsequently retired a total of 44,608 shares for $0.5 million at an average price of $10.30 per share.

Since the repurchase program’s inception, we have repurchased and subsequently retired a tota l of 44,608 shares for $0.5 million at an average price of $10.30 per share.

See Note 1 - Summary of Significant Accounting Policies to the consolidated financial statements included in Part II, Item 8 for more information.

13 unchanged sentences

Our exposure to credit loss is represented by the contractual amounts of these commitments.

The same credit policies and procedures are used in making these commitments as for on-balance sheet instruments.

The same credit policies and

procedures are used in making these commitments as for on-balance sheet instruments.

With the exception of these off-balance sheet arrangements, we have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

8 unchanged sentences

FinWise has entered into agreements with certain of its Strategic Program service providers pursuant to which the service providers provide credit enhancement on loans which protects the Bank by indemnifying or reimbursing the Bank for incurred credit and fraud losses.

We estimate and record a provision for expected losses for these Strategic Program loans in accordance with U.S.

GAAP, which requires estimation of the provision without consideration of the credit enhancement.

When the provision for expected losses over the life of the loans that are subject to such credit enhancement is recorded, a credit enhancement asset reflecting the potential future recovery of those losses is also recorded on the balance sheet in the form of non-interest income (credit enhancement income).

We estimate and record a provision for expected losses for these Strategic Program loans in accordance with GAAP, which requires estimation of the provision without consideration of the credit enhancement.

When the provision for expected losses over the life of the loans that are subject to such credit enhancement is recorded, a credit enhancement asset reflecting the future recovery of those estimated credit losses pursuant to the strategic partner’s guarantee to assume the Bank’s credit losses on each of the loans in the respective guaranteed portfolio is also recorded on the balance sheet in the form of non-interest income (credit enhancement income).

Reimbursement or indemnification for incurred losses is provided for in the form of a deposit reserve account that is replenished periodically by the respective Strategic Program service provider.

Any remaining income on such loans in excess of the amounts retained by FinWise and placed in the deposit reserve account are paid to the Strategic Program service provider.

Income on such loans in excess of amounts retained by FinWise are expensed for services provided by the Strategic Program service provider including its legal commitment to indemnify or reimburse all credit or fraud losses pursuant to credit enhancement agreements.

The credit enhancement asset is reduced as credit enhancement payments and recoveries are received from the Strategic Program service provider or taken from its cash reserve account.

If the Strategic Program service provider is unable to fulfill its contracted obligations under its credit enhancement agreement, then the Bank could be exposed to the loss of the reimbursement and credit enhancement income as a result of this counterparty risk.

In the event the Strategic Program service provider is not able to perform according to the contractual terms, the Bank is entitled to receive all the income on the loans.

The Bank incurs expenses for the amounts owed to the strategic partner for the credit guarantee and for servicing of the credit enhanced portfolio, if applicable (credit enhancement program expenses).

See the following reconciliations of non-GAAP measures for the impact of the credit enhancement on our financial condition and results.

The following non-GAAP measures are presented to illustrate the impact of certain credit enhancement expenses on total interest income on loans HFI and average yield on loans HFI:

As of and for the Year Ended

The following non-GAAP measures are presented to illustrate the impact of certain credit enhancement program expenses on total interest income on LHFI and average yield on LHFI:

As of and for the Year Ended As of and for the Year Ended

December 31, 2025

December 31, 2024

($ in thousands;

unaudited) Total Average Loans HFI Total Interest Income on Loans HFI Average Yield on Loans HFI

unaudited) Total Average LHFI Total Interest Income on LHFI Average Yield on LHFI Total Average LHFI Total Interest Income on LHFI Average Yield on LHFI

Before adjustment for credit enhancement $ 535,671 $ 65,203 12.17 % $ 417,207 $ 51,194 12.27 %

credit enhancement expense (8)

Net of adjustment for credit enhancement expenses $ 417,207 $ 51,186 12.27 %

Total interest income on loans HFI net of credit enhancement expense and the average yield on loans HFI are non-GAAP measures that include the impact of credit enhancement expense on total interest income on loans HFI and the respective average yield on loans HFI, the most directly comparable GAAP measures.

The following non-GAAP measures are presented to illustrate the impact of certain credit enhancement expenses on net interest income and NIM:

As of and for the Year Ended

credit enhancement program expenses (9,755) (9)

Net of adjustment for credit enhancement program expenses $ 535,671 $ 55,448 10.35 % $ 417,207 $ 51,185 12.27 %

Total interest income on LHFI net of credit enhancement program expenses and the average yield on LHFI are non-GAAP measures that include the impact of credit enhancement program expenses on total interest income on LHFI and the respective average yield on LHFI, the most directly comparable GAAP measures.

The following non-GAAP measures are presented to illustrate the impact of certain credit enhancement program expenses on net interest income and NIM:

As of and for the Year Ended As of and for the Year Ended

December 31, 2025

December 31, 2024

($ in thousands;

unaudited) Total Average Interest-Earning Assets Net Interest Income Net Interest Margin

unaudited) Total Average Interest-Earning Assets Net Interest Income Net Interest Margin Total Average Interest-Earning Assets Net Interest Income Net Interest Margin

Before adjustment for credit enhancement $ 782,005 $ 72,183 9.23 % $ 589,880 $ 58,912 9.99 %

credit enhancement expense (8)

Net of adjustment for credit enhancement expenses $ 589,880 $ 58,904 9.99 %

Net interest income and net interest margin net of credit enhancement expense are non-GAAP measures that include the impact of credit enhancement expenses on net interest income and net interest margin, the most directly comparable GAAP measures.

Non-interest expenses less credit enhancement expenses is a non-GAAP measure presented to illustrate the impact of credit enhancement expense on non-interest expense:

credit enhancement program expenses (9,755) (9)

Net of adjustment for credit enhancement program expenses $ 782,005 $ 62,428 7.98 % $ 589,880 $ 58,903 9.99 %

Net interest income and net interest margin net of credit enhancement program expenses are non-GAAP measures that include the impact of credit enhancement program expenses on net interest income and net interest margin, the most directly comparable GAAP measures.

Non-interest expenses less credit enhancement program expenses is a non-GAAP measure presented to illustrate the impact of credit enhancement program expenses on non-interest expense:

($ in thousands;

unaudited) Year Ended December 31, 2025

Year Ended December 31, 2024

Total non-interest expense $ 70,333 $ 52,835

credit enhancement expense (8)

Total non-interest expense less credit enhancement expenses $ 52,827

Total non-interest expense less credit enhancement expense is a non-GAAP measure that illustrates the impact of credit enhancement expenses on non-interest expense, the most directly comparable GAAP measure.

credit enhancement program expenses (9,755) (9)

Total non-interest expense less credit enhancement program expenses $ 60,578 $ 52,826

Total non-interest expense less credit enhancement program expenses is a non-GAAP measure that illustrates the impact of credit enhancement program expenses on non-interest expense, the most directly comparable GAAP measure.

Total non-interest income less credit enhancement income is a non-GAAP measure to illustrate the impact of credit enhancement income resulting from credit enhanced loans on non-interest income:

1 unchanged sentence

unaudited) Year Ended December 31, 2025

Year Ended December 31, 2024

Total non-interest income $ 58,483 $ 22,485

6 unchanged sentences

unaudited) As of December 31, 2025

As of December 31, 2024

Allowance for credit losses $ 36,796 $ 13,176

2 unchanged sentences

The allowance for credit losses excluding the effect of the allowance for credit losses related to credit enhanced loans is a non-GAAP measure that reflects the effect of the credit enhancement program on the allowance for credit losses.

The total outstanding balance of loans held-for-investment with credit enhancement as of December 31, 2024 was approximately $0.9 million.

The total outstanding balance of loans held-for-investment with credit enhancement as of December 31, 2025 and 2024 was approximately $108.1 million and $0.9 million, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis