FinWise Bancorp

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

Good afternoon and thank you for joining us today for FinWise Bancorp's second quarter 2026 earnings conference call. Earlier today, we filed our earnings release and investor deck and posted them to our investor website at investorsfinwisebancorp.com. Today's conference call is being recorded and webcast on the company's investor website, as previously mentioned. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Forward-looking statements represent management's current estimates, expectations and beliefs and FinWise Bancorp assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements, including factors that may negatively impact them contained in the company's earnings press release and filings with the Securities and Exchange Commission. Hosting the call today are CEO Jim Noone, CFO Bob Wahlman, and Executive Chairman Kent Landvatter. Jim, please go ahead.

Good afternoon, everyone. Our second quarter earnings of 15 cents per share were short of our expectations, driven by higher provision expense on the loans where we retain credit risk. We are proactively managing these credit trends and will continue to empower our credit and compliance teams to identify and reduce risk across the portfolio, as they did during the second quarter, resulting in meaningful reductions in our MPA balances. I'd like to start by giving you more detail on credit quality. Total provision for credit losses was $22.7 million for the second quarter compared to $10.6 million in the prior quarter. Of the $22.7 million, $16.7 million related to credit enhancement loans, which is offset by corresponding credit enhancement income and does not affect net results. The remaining $6 million in provision reflected increased provisioning in the core loan portfolio, driven by losses recognized on the liquidation of nonperforming loans, higher reserves on nonperforming and classified loans, and the more conservative servicing standards we have implemented. As noted earlier, nonperforming loan balances declined in the second quarter, from nearly $50 million last quarter to approximately $38 million this quarter. A meaningful improvement driven primarily by a reduction in SBA 7A loans classified as non-accrual. This was the result of loan collateral resolutions and paydowns. Of this $38 million, approximately $19 million is guaranteed by the federal government, and the remaining $19 million is unguaranteed. Total net charge-offs, excluding those from loans with credit enhancement, were $5.2 million. slightly above our guided range of $4 to $5 million. Net charge-offs within the core portfolio remain concentrated in the loans with the identified attributes we discussed last quarter. Approximately 80% of this quarter's charge-offs within the core portfolio came from this legacy pool. This is a finite, well-defined pool with approximately $50 million in performing balances outstanding at the end of the quarter. We are proactively managing this portfolio and will provide additional updates in future quarters as we continue to make progress. Let me walk through net charge-offs in each of our three key portfolios in more detail. First, SBA net charge-offs were 2.9 million versus 2.2 million in the prior quarter, with the vast majority tied to legacy credits referenced earlier. This largely reflects specific industry and loan attributes which we have materially tightened via policy changes. These charge-offs are likely to remain elevated over the next few quarters. Second, net charge-offs on strategic programs with credit enhancement were $7.9 million versus $4.8 million in Q1. The sequential increase continues to reflect normal seasoning of a larger credit-enhanced portfolio and FinWise is fully reimbursed for any losses. Finally, net charge-offs on strategic program loans without credit enhancement were 2.3 million in Q2 versus $2.3 million in Q1, reflecting normal repayment behavior across the balances we manage here. To summarize, we remain very comfortable with the overall quality of our portfolio. The issues we've described are ring fence, Understood, Finite, and Being Actively Managed. Outside of this pool, credit performance across the book remains healthy and as generally expected. In terms of originations, we delivered $1.6 billion this quarter, ahead of our expectations for $1.4 billion and down modestly from an elevated $1.7 billion in the prior quarter. The sequential change reflects seasonally lower volume in the student loan program, partially offset by growth across several of our established programs. This resilience and origination reflects the benefit of a more diversified partner base, which is a deliberate part of our strategy and increasingly lets us absorb variability in any single program. We are also pleased to announce on this call the contract signing of a new strategic partnership subsequent to the end of the second quarter. And we expect to share the partner's name in the coming quarters as we get closer to launching the products with them. This is a well-established prepaid card provider that will use a combination of our BIN sponsorship and MoneyRail services. The cards issued under this program will be offered on the MasterCard network. And based on the current pace of implementation, we expect the program to go live during the fourth quarter. This partner chose FinWise for our expertise in bin sponsorship and our disciplined approach to program execution, the same qualities that continue to differentiate us in the market. Our sales pipeline remains very strong, and we anticipate signing additional and more meaningful deals before year-end. It's worth putting this in context. The pipeline we're seeing today, built by our expanded sales team and led by our Chief FinTech Officer, Sarah Grada, is materially stronger and potentially more meaningful to our bottom line than the pipeline we had just a few years ago. This quarter, we also welcomed a new salesperson with years of industry experience across both lending and cards, bringing our business development team to five, including our chief intake officer. Turning to our credit enhanced product, balances were 121 million at the end of the second quarter. As we noted in the tallied press release last week, Our prior guidance of approximately $217 million in credit-enhanced balances by year-end 2026 no longer applies, reflecting the change in how those balances are now structured. We're pleased with the tradeoff since we retain the full and higher economics described earlier. Importantly, we still expect some further growth in credit-enhanced balances in 2026. The largest partner we mentioned last quarter, whose pace had slowed is picking back up. We also remain in active discussions with several prospects. We'll continue to provide quarterly updates going forward. Looking ahead, meaningful credit enhanced balance growth beyond 2026 will come from new partner additions. The product continues to be a meaningful growth driver for our long-term plans and building that pipeline is where our focus needs to be. In closing, taken together, This quarter reinforces our conviction in the company's strong long-term trajectory and in our three key priorities. First, we will continue to empower our credit and compliance teams to prune risk proactively, as you are seeing us do within the legacy pool within our core portfolio. Second, we will continue to support the momentum in our sales pipeline that's already coming through from our business development team and which we highlight in the investor deck this quarter. Finally, we will continue to support the multi-product platform we have built at FinWise because we believe this carries enormous value for both potential partners and our shareholders. That same model that took us from zero to $100 million in credit-enhanced balances in six months, build the infrastructure, pilot it, market it, then launch the right partners, is now turning the corner in cards, payments, and deposit sponsorships. So in the same way that our compliance investments positioned us during a previous cycle, these product investments are positioning us for exactly the cycle we're now entering. I believe we will have a very strong period for new partnerships over the next 12 to 24 months. The strategic plan we set out on three years ago has not changed. What's changing is the pace of opportunity in front of us. And my job is to make sure we capitalize on it for the long-term benefit of our shareholders. I will now turn the call over to our CFO, Bob Wahlman, to provide more detail on our financial results.