• Loan Originations: Approximately $1.3 billion in loans originated during Q1 2025.
• Tangible Book Value per Share: Ended the quarter at $13.42, up from $13.15 in the prior quarter.
• Tangible Shareholders' Equity to Assets Ratio: 22%, down from 23.3% at year-end 2024.
• Provision for Credit Losses: $3.3 million in Q1, down from $3.9 million in the prior quarter.
• Net Charge-Offs (NCOs): $2.2 million in Q1, down from $3.2 million in the prior quarter.
• Non-Performing Assets (NPAs): Reduced to $29.9 million from $36.5 million in the prior quarter.
• Net Income: $3.2 million or $0.23 per diluted common share for Q1 2025.
• Net Interest Income: $14.3 million, down from $15.5 million in the prior quarter.
• Net Interest Margin (NIM): Declined to 8.27% from 10% in the prior quarter.
• Fee Income: $7.8 million, up from $5.6 million in the prior quarter.
• Noninterest Expense: $14.3 million, up from $13.6 million in the prior quarter.
• Efficiency Ratio: 64.8%, relatively flat compared to 64.2% in the prior quarter.
• Effective Tax Rate: 28.1% for Q1, compared to 24.3% in the prior quarter.

• Warning! GuruFocus has detected 4 Warning Signs with FINW.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• FinWise Bancorp (NASDAQ:FINW) originated approximately $1.3 billion in loans during the first quarter, demonstrating strong loan origination capabilities.
• The company posted solid asset growth and improved credit quality, with both non-performing loan balances and net charge-offs declining compared to the previous quarter.
• FinWise Bancorp (NASDAQ:FINW) remains well-capitalized, with a tangible shareholders' equity to assets ratio of 22%, significantly above regulatory guidelines.
• The company announced a new strategic program agreement with fintech Backd, which is expected to provide business installment loans to small- and medium-sized businesses.
• Fee income increased to $7.8 million in the quarter, driven by a pickup in strategic program fees and favorable changes in the fair value of investments.

Negative Points

• Net interest income declined to $14.3 million from $15.5 million in the prior quarter, primarily due to a change in the mix of loan originations and lower rates on new loans.
• The net interest margin decreased to 8.27% from 10% in the prior quarter, reflecting a shift towards lower-risk, lower-yielding loans.
• Noninterest expense increased to $14.3 million from $13.6 million in the prior quarter, driven by higher salaries and professional services expenses.
• The efficiency ratio remained relatively flat at 64.8%, indicating limited improvement in operational efficiency.
• The provision for credit losses was $3.3 million in Q1, although it decreased from $3.9 million in the prior quarter, indicating ongoing credit risk management challenges.

Q & A Highlights

Q: Can you provide insights on the expense run rate and any changes in expense levels for technology, people, or back office? A: Robert Wahlman, CFO: We are currently at about a 65% efficiency ratio, which is relatively flat compared to the last period. The build in our BIN Sponsorship and payments business is substantially complete, though we will see some additional expenses. Our expenses this period were mainly due to compensation-related taxes and normal fluctuations. We expect expenses to remain relatively flat, increasing as revenues increase.

Q: What is the outlook for net interest income (NII) growth given the margin decline? A: Robert Wahlman, CFO: We expect NII growth to come from two sources: the seasonal decline in high-yielding partners is expected to recover, and loan portfolio growth from traditional banking products and credit-enhanced portfolios. While NII will grow, the net interest margin (NIM) will likely decline due to lower-yielding loans.

Q: Why didn't you buy back any stock this quarter, and are there levels at which you would consider buybacks? A: Robert Wahlman, CFO: We typically exercise buyback options if the share price drops below book value, which hasn't happened recently. We also balance buybacks against the need to maintain liquidity in our stock.

Q: Can you reach the $50 million to $100 million year-end target for credit-enhanced loan balances with current partners, and how quickly can Backd contribute? A: James Noone, Bank CEO: Yes, we can reach the target with existing partners. Backd is expected to scale up more in Q4, while other partners will contribute to the target by year-end.

Q: What is driving the growth in owner-occupied commercial real estate, and what are the yields compared to credit-enhanced lending? A: James Noone, Bank CEO: The growth is driven by our relationship with Business Lending Group and the need for better LTV products. The owner-occupied commercial real estate yields are about 300-350 basis points below credit-enhanced lending, but both products are newer, and yields may vary.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.