Finwise BancorpFINW
Finwise Bancorp Fair Value Disclosure
Fair Value of Financial Instruments
The Company measures and discloses certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (that is, not a forced liquidation or distressed sale). U.S. GAAP establishes a consistent framework for measuring fair value and disclosure requirements about fair value measurements. Among other things, the standard requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s estimates for market assumptions. These two types of inputs create the following fair value hierarchy.
Level 1 – Quoted prices in active markets for identical instruments. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.
Level 2 – Observable inputs other than Level 1 including quoted prices in active markets for similar instruments, quoted prices in less active markets for identical or similar instruments, or other observable inputs that can be corroborated by observable market data.
Level 3 – Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation also includes observable inputs from nonbinding single dealer quotes not corroborated by observable market data. In developing Level 3 measurements, management incorporates whatever market data might be available and uses discounted cash flow models where appropriate. These calculations include projections of future cash flows, including appropriate default and loss assumptions, and market-based discount rates.
The estimated fair value amounts of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize at a future date. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. In addition, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates that must be made given the absence of active secondary markets for many of the financial instruments. This lack of uniform valuation methodologies also introduces a greater degree of subjectivity to these estimated fair values. Transfers between levels of the fair value hierarchy are deemed to occur at the end of the reporting period. There were no transfers between fair value levels for the years ended December 31, 2025 and 2024.
The following methods were used to estimate the fair value of each class of financial instruments on a recurring basis:
Investment securities available-for-sale: Investment securities AFS consist of U.S. Treasury securities and are carried at fair value. The Company estimates the fair value of investment securities AFS using current active market quotes, if available, which are considered Level 1 measurements. Level 1 measurements include securities issued by the U.S. Treasury.
Investment in BFG: The Company’s valuation technique utilized the average of the discounted cash flow method and the Guideline Public Company method. A 4.50% discount for non-voting shares was applied to the valuation to arrive at fair value as of December 31, 2025 and December 31, 2024. The calculation of fair value utilized significant unobservable inputs, including projected cash flows, growth rates, and discount rates.
Derivative instruments: The Company’s derivative instruments consist of interest rate swaps accounted for as cash flow hedges. The Company’s derivative instruments are carried at fair value and considered Level 2 measurements. The Company measures fair value of interest rate swaps utilizing market observable inputs, such as forecasted yield curves.
The table below presents the Company’s financial instruments valued on a recurring basis as of the periods indicated:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||
| ($ in thousands) | Level | Estimated Fair Value | Estimated Fair Value | ||||||||||||||
| Financial assets: | |||||||||||||||||
U.S. Treasury securities | 1 | $ | 27,755 | $ | 29,930 | ||||||||||||
| Investment in BFG | 3 | $ | 9,000 | $ | 7,700 | ||||||||||||
Derivative asset | 2 | $ | — | $ | 509 | ||||||||||||
| Financial liabilities: | |||||||||||||||||
| Derivative liability | 2 | $ | 148 | $ | — | ||||||||||||
The table below presents a reconciliation of the Company’s investment in BFG classified as a Level 3 financial instrument and measured at fair value on a recurring basis for the periods indicated:
| Years Ended December 31, | |||||||||||
| ($ in thousands) | 2025 | 2024 | |||||||||
| Beginning balance | $ | 7,700 | $ | 4,200 | |||||||
| Purchase of BFG ownership interest | — | 4,125 | |||||||||
| Change in fair value of BFG | 1,300 | (625) | |||||||||
| Ending balance | $ | 9,000 | $ | 7,700 | |||||||
The table below presents the Company’s financial instruments valued on a nonrecurring basis as of the periods indicated:
| ($ in thousands) | Fair Value Measurements Using | ||||||||||||||||||||||
| Description of Financial Instrument | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Nonrecurring assets: | |||||||||||||||||||||||
| Individually evaluated loans | $ | 43,217 | $ | — | $ | — | $ | 43,217 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Nonrecurring assets: | |||||||||||||||||||||||
| Individually evaluated loans | $ | 35,723 | $ | — | $ | — | $ | 35,723 | |||||||||||||||
Individually evaluated loans – The loan amount above represents loans individually evaluated that have been adjusted to the lower of cost or fair value. When collateral-dependent loans are individually evaluated, they are measured using the current fair value of the collateral securing these loans, less selling costs. The fair value of real estate collateral is determined using collateral valuations or a discounted cash flow analysis using inputs such as discount rates, sale prices of similar assets, and term of expected disposition. Some appraised values are adjusted based on management’s review and analysis, which may include historical knowledge, changes in market conditions, estimated selling and other anticipated costs, and/or expertise and knowledge. The loss, if any, represents charge-offs on loans when the fair value of the collateral is less than the carrying amount of the loan.
Quantitative information for Level 3 fair value measurements – The following table presents information about quantitative inputs and assumptions used to fair value Level 3 nonrecurring assets as of December 31, 2025 and 2024:
| ($ in thousands) | Fair Value | Valuation Technique | Unobservable Input | Range (Weighted Average) | ||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||
| Individually evaluated loans | $ | 43,217 | Market comparable | Discount to appraisal value for estimated selling costs | 11.40 | % | ||||||||||||||
| December 31, 2024 | ||||||||||||||||||||
| Individually evaluated loans | $ | 35,723 | Market comparable | Discount to appraisal value for estimated selling costs | 11.40 | % | ||||||||||||||
The range and weighted average of the significant unobservable inputs used to fair value the investment in BFG as of December 31, 2025 and as of December 31, 2024 are shown in the following table:
| ($ in thousands) | December 31, 2025 Range (Weighted Average) | December 31, 2024 Range (Weighted Average) | |||||||||
| Discounted Cash Flows | |||||||||||
| Revenue growth rate | 12.9 | % | 15.3 | % | |||||||
| Expense growth rate | 14.8 | % | 14.9 | % | |||||||
| Discount rate | 25.0 | % | 27.5 | % | |||||||
| Lack of marketability discount | 20.0 | % | 20.0 | % | |||||||
| Guideline Public Company | |||||||||||
| Multiples of enterprise value | 3.5x to 5.3x | 3.5x to 5.8x | |||||||||
The tables below present the carrying amount and estimated fair value of the Company's financial instruments at the periods indicated:
| December 31, 2025 | Fair Value Measurements Using | |||||||||||||||||||||||||||||||
| ($ in thousands) | Carrying Amount | Estimated Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 163,400 | $ | 163,400 | $ | 163,400 | $ | — | $ | — | ||||||||||||||||||||||
| Investment securities available-for-sale | 27,755 | 27,755 | 27,755 | — | — | |||||||||||||||||||||||||||
| Investment securities held-to-maturity | 9,927 | 8,982 | — | 8,982 | — | |||||||||||||||||||||||||||
| Investment in FHLB stock | 440 | 440 | — | 440 | — | |||||||||||||||||||||||||||
| Loans held-for-investment, net | 541,551 | 576,270 | — | — | 576,270 | |||||||||||||||||||||||||||
| Strategic Program loans held-for-sale | 146,473 | 146,473 | — | 146,473 | — | |||||||||||||||||||||||||||
| Accrued interest receivable | 3,707 | 3,707 | — | 3,707 | — | |||||||||||||||||||||||||||
| SBA servicing asset, net | 3,547 | 3,547 | — | 3,547 | — | |||||||||||||||||||||||||||
| Investment in BFG | 9,000 | 9,000 | — | — | 9,000 | |||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||||||||
| Total deposits | $ | 754,561 | $ | 727,637 | $ | — | $ | 727,637 | $ | — | ||||||||||||||||||||||
| Accrued interest payable | 2,632 | 2,632 | — | 2,632 | — | |||||||||||||||||||||||||||
| Derivative liability | 148 | 148 | — | 148 | — | |||||||||||||||||||||||||||
December 31, 2024 | Fair Value Measurements Using | |||||||||||||||||||||||||||||||
| ($ in thousands) | Carrying Amount | Estimated Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 109,162 | $ | 109,162 | $ | 109,162 | $ | — | $ | — | ||||||||||||||||||||||
| Investment securities available-for-sale | 29,930 | 29,930 | 29,930 | — | — | |||||||||||||||||||||||||||
| Investment securities held-to-maturity | 12,565 | 11,057 | — | 11,057 | — | |||||||||||||||||||||||||||
| Investment in FHLB stock | 349 | 349 | — | 349 | — | |||||||||||||||||||||||||||
| Loans held-for-investment, net | 447,812 | 478,919 | — | — | 478,919 | |||||||||||||||||||||||||||
| Strategic Program loans held-for-sale | 91,588 | 91,588 | — | 91,588 | — | |||||||||||||||||||||||||||
| Accrued interest receivable | 3,566 | 3,566 | — | 3,566 | — | |||||||||||||||||||||||||||
| SBA servicing asset, net | 3,273 | 3,273 | — | 3,273 | — | |||||||||||||||||||||||||||
| Investment in BFG | 7,700 | 7,700 | — | — | 7,700 | |||||||||||||||||||||||||||
Derivative asset | 509 | 509 | — | 509 | — | |||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||||||||
| Total deposits | $ | 544,952 | $ | 528,253 | $ | — | $ | 528,253 | $ | — | ||||||||||||||||||||||
| Accrued interest payable | 1,494 | 1,494 | — | 1,494 | — | |||||||||||||||||||||||||||
| PPPLF | 64 | 64 | — | 64 | — | |||||||||||||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 23, 2026 | Showing above |
| 2024 | Mar 26, 2025 | |
| 2023 | Mar 25, 2024 | |
| 2022 | Mar 30, 2023 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.