FinWise Q3 Earnings Rise as Credit-Enhanced Lending Expands

FinWise Bancorp (NASDAQ: FINW) reported a sharp increase in third-quarter 2026 earnings as revenue expanded across its lending and fee-based activities, while a $6.5 million bargain purchase gain tied to the Tallied transaction also supported results. Net income reached $10.0 million, or $0.73 per diluted share, compared with $4.9 million, or $0.34 per share, a year earlier.

Total operating revenue rose to $102.7 million from $36.7 million in the third quarter of 2025 and $51.5 million in the preceding quarter. Net interest income increased to $41.9 million from $18.6 million a year earlier, while non-interest income climbed to $60.8 million from $18.1 million. Continuing operations generated net income of $10.4 million, partly offset by a $376,000 loss from discontinued operations.

The quarter’s results were affected by the Tallied transaction and related purchase-accounting adjustments, which had no comparable impact in prior periods. The transaction accounted for the $6.5 million bargain purchase gain recorded in non-interest income. Discontinued operations associated with the transaction were reflected in the third quarter and recast in the second quarter.

Credit-enhanced lending expands

Growth in FinWise’s credit-enhanced lending program was a major factor behind the higher reported revenue, provisions and expenses. Credit-enhanced balances rose to $146.2 million at September 30 from $74.2 million at June 30 and $41.4 million a year earlier.

Under the program, fintech partners agree to cover credit losses and maintain cash reserve deposits at FinWise that can be used to recover charge-offs. As a result, the provision associated with these loans is offset by expected recoveries under partner guarantees, which are recognized as credit-enhancement income in non-interest income.

FinWise recorded a $46.7 million provision for credit losses, up from $12.8 million a year earlier. The company said the increase partly reflected higher credit-enhanced balances and differed from provisions on its core portfolio because of the corresponding partner guarantees. Credit-enhancement income totaled $45.4 million, compared with $8.8 million a year earlier.

Non-interest expense increased to $42.7 million from $17.4 million, largely because credit-enhancement servicing and guarantee expense rose as the portfolio expanded. Excluding credit-enhancement program expenses, adjusted non-interest expense was $18.4 million, compared with $15.5 million a year earlier.

The GAAP-based non-GAAP efficiency ratio improved to 41.6% from 47.6% a year earlier. FinWise’s adjusted efficiency ratio, which excludes credit-enhancement income and related program expenses, was 55.8%, compared with 59.7% in the prior-year quarter.

Originations and balance sheet growth

Loan originations totaled $2.07 billion during the quarter, up from $1.79 billion a year earlier and $1.63 billion in the second quarter. Loans held for investment were $505.3 million at quarter-end, down from $533.3 million a year earlier but above $482.3 million at June 30. Strategic program loans held for sale declined to $134.7 million from $156.7 million a year earlier.

Total assets increased to $958.3 million from $899.9 million at September 30, 2025. Deposits rose to $707.6 million from $682.3 million, while shareholders’ equity increased to $208.1 million from $187.8 million. Non-GAAP tangible book value per share advanced to $15.14 from $13.84.

Annualized return on average assets was 4.3%, and annualized return on average equity was 19.9%. Net interest margin reached 19.58%, reflecting lending activity that included the growth of the credit-enhanced portfolio.

FinWise said 45% of its total loan portfolio consisted of SBA-guaranteed loans, strategic program loans held for sale and strategic program loans held for investment with credit enhancement. The company described those categories as carrying lower credit risk because of government guarantees, reserve deposits or contractual reimbursement arrangements. Its allowance for credit losses equaled 13.6% of total gross loans held for investment at quarter-end.

Fintech programs and outlook

FinWise and Upstart mutually agreed to end their lending sponsorship relationship effective September 30, 2026. Separately, FinWise signed a strategic partnership with an established prepaid-card provider that is expected to use its MoneyRails payments platform and BIN sponsorship services. The company said it expects to disclose the partner’s name in coming quarters.

Management said it remains focused on positive operating leverage and expects expense growth to be correlated with revenue production. The company also identified an opportunity to gradually shift its deposit mix away from higher-cost certificates of deposit to reduce funding costs.

FinWise ended the quarter with 209 full-time employees, including 68 in information technology, compliance, risk management and Bank Secrecy Act and anti-money-laundering functions. The bank’s capital remained above the 8% well-capitalized requirement under the Community Bank Leverage Ratio framework.

The company cautioned that its outlook is subject to regulatory developments affecting financial technology and banking-as-a-service, dependence on service providers, cybersecurity and technology risks, credit conditions, collateral values and nonperforming assets. Other identified uncertainties include changes to SBA programs and brokered-deposit rules, inflation, trade policy, geopolitical conflict and potential regulatory investigations or enforcement actions.