- Net Income of $3.5 Million -
- Diluted Earnings Per Share of $0.25 -
- Loan Originations Increase to $1.4 Billion -
MURRAY, Utah, Oct. 24, 2024 (GLOBE NEWSWIRE) -- FinWise Bancorp (NASDAQ: FINW) ("FinWise” or the "Company”), parent company of FinWise Bank (the "Bank”), today announced results for the quarter ended September 30, 2024.
Third Quarter 2024 Highlights
- Loan originations increased to $1.4 billion, compared to $1.2 billion for the quarter ended June 30, 2024, and $1.1 billion for the third quarter of the prior year
- Net interest income was $14.8 million, compared to $14.6 million for the quarter ended June 30, 2024, and $14.4 million for the third quarter of the prior year
- Net income was $3.5 million, compared to $3.2 million for the quarter ended June 30, 2024, and $4.8 million for the third quarter of the prior year
- Diluted earnings per share ("EPS”) were $0.25 for the quarter, compared to $0.24 for the quarter ended June 30, 2024, and $0.37 for the third quarter of the prior year
- Efficiency ratio1 was 67.5%, compared to 66.3% for the quarter ended June 30, 2024, and 50.4% for the third quarter of the prior year
- Annualized return on average equity was 8.3%, compared to 7.9% for the quarter ended June 30, 2024, and 12.8% for the third quarter of the prior year
- The recorded balances of nonperforming loans were $30.6 million as of September 30, 2024, compared to $27.9 million as of June 30, 2024, and $10.7 million as of September 30, 2023. The balance of nonperforming loans guaranteed by the Small Business Administration ("SBA”) was $17.8 million, $16.0 million, and $4.7 million as of September 30, 2024, June 30, 2024, and September 30, 2023, respectively
"Our results during the third quarter reflect the resiliency of our existing business as well as the actions we've taken to enhance long-term growth,” said Kent Landvatter, CEO of FinWise. "We saw a notable step-up in loan originations and generated solid revenue coupled with a deceleration of our expense growth. Additionally, we continued to gain traction with new strategic programs, as we announced one new lending program in the quarter, which brings the total new lending programs to three so far this year. Overall, I am pleased with the operational performance of our company and I am excited about the outlook. We will remain laser focused on continuing to grow our business and will strive to continue to deliver long-term value for all our stakeholders.”
Selected Financial and Other Data
| ($ in thousands, except per share amounts and FTEs) | As of and for the Three Months Ended | ||||||||||
| 9/30/2024 | 6/30/2024 | 9/30/2023 | |||||||||
| Amount of loans originated | $ | 1,448,251 | $ | 1,170,904 | $ | 1,061,327 | |||||
| Net income | $ | 3,454 | $ | 3,180 | $ | 4,804 | |||||
| Diluted EPS | $ | 0.25 | $ | 0.24 | $ | 0.37 | |||||
| Return on average assets | 2.1 | % | 2.1 | % | 3.7 | % | |||||
| Return on average equity | 8.3 | % | 7.9 | % | 12.8 | % | |||||
| Yield on loans | 14.16 | % | 14.89 | % | 17.40 | % | |||||
| Cost of interest-bearing deposits | 4.85 | % | 4.80 | % | 4.34 | % | |||||
| Net interest margin | 9.70 | % | 10.31 | % | 11.77 | % | |||||
| Efficiency ratio(1) | 67.5 | % | 66.3 | % | 50.4 | % | |||||
| Tangible book value per share(2) | $ | 12.90 | $ | 12.61 | $ | 12.04 | |||||
| Tangible shareholders' equity to tangible assets(2) | 24.9 | % | 26.8 | % | 27.1 | % | |||||
| Leverage ratio (Bank under CBLR) | 20.3 | % | 20.8 | % | 22.1 | % | |||||
| Full-time equivalent ("FTEs”) | 194 | 191 | 158 | ||||||||
(2) Tangible shareholders' equity to tangible assets is considered a non-GAAP financial measure. Tangible shareholders' equity is defined as total shareholders' equity less goodwill and other intangible assets. The most directly comparable GAAP financial measure is total shareholder's equity to total assets. The Company had no goodwill or other intangible assets at the end of any period indicated. The Company has not considered loan servicing rights or loan trailing fee assets as intangible assets for purposes of this calculation. As a result, tangible shareholders' equity is the same as total shareholders' equity at the end of each of the periods indicated.
Net Interest Income
Net interest income was $14.8 million for the third quarter of 2024, compared to $14.6 million for the prior quarter and $14.4 million for the prior year period. The increase from the prior quarter was primarily due to average balance increases in the loans held-for-sale and loans held for investment portfolios and was partially offset by yield decreases in both the loans held-for-sale and loans held for investment portfolios. The increase from the prior year period was primarily due to increases in the average balances of the Company's loans held-for-sale and loans held for investment portfolios and was partially offset by yield decreases on those same portfolios as well as increased rates and volumes on the certificate of deposit balances. Third quarter 2024 net interest income includes a $0.5 million one-time decrease for accrued interest not previously reversed at the time loans were deemed nonperforming.
Loan originations totaled $1.4 billion for the third quarter of 2024, compared to $1.2 billion for the prior quarter and $1.1 billion for the prior year period. Originations through the first three weeks of October 2024 are tracking at a pace modestly lower than third quarter 2024 originations, which included an expected seasonal increase from the Company's student loan strategic program.
Net interest margin for the third quarter of 2024 was 9.70%, compared to 10.31% for the prior quarter and 11.77% for the prior year period. The decrease in net interest margin from the prior quarter is primarily attributable to the Company's strategy to reduce the average credit risk in the loan portfolio by increasing its investment in higher quality but lower yielding loans and the previously described one-time decrease in net interest income. The net interest margin decrease from the prior year period resulted primarily from the Company's strategy to reduce average credit risk in the portfolio combined with the increased cost of funds as the Bank competed in the national market for funds to support the asset growth.
Provision for Credit Losses
The Company's provision for credit losses was $2.2 million for the third quarter of 2024, compared to $2.4 million for the prior quarter and $3.1 million for the prior year period. The provision for credit losses decreased when compared to the prior quarter due primarily to the Company's periodic assessment of the qualitative factors resulting in the removal of the qualitative factor related to COVID, partially offset by an increase in other qualitative factors and slightly higher charge-offs. The decrease from the prior year period was primarily related to qualitative factors which had been adjusted upward in the third quarter of 2023 due to an increase in special mention, non-accrual and nonperforming assets primarily related to the SBA portfolio.
Non-interest Income
| Three Months Ended | |||||||||||
| ($ in thousands) | 9/30/2024 | 6/30/2024 | 9/30/2023 | ||||||||
| Non-interest income | |||||||||||
| Strategic Program fees | $ | 4,862 | $ | 4,035 | $ | 3,945 | |||||
| Gain on sale of loans | 393 | 356 | 357 | ||||||||
| SBA loan servicing fees and servicing asset amortization | 87 | 204 | (138 | ) | |||||||
| Change in fair value on investment in BFG | (100 | ) | (200 | ) | (500 | ) | |||||
| Other miscellaneous income | 812 | 771 | 1,228 | ||||||||
| Total non-interest income | $ | 6,054 | $ | 5,166 | $ | 4,892 | |||||
Non-interest Expense
| Three Months Ended | ||||||||
| ($ in thousands) | 9/30/2024 | 6/30/2024 | 9/30/2023 | |||||
| Non-interest expense | ||||||||
| Salaries and employee benefits | $ | 9,659 | $ | 8,609 | $ | 6,416 | ||
| Professional services | 1,331 | 1,282 | 750 | |||||
| Occupancy and equipment expenses | 1,046 | 1,121 | 958 | |||||
| Other operating expenses | 2,013 | 2,206 | 1,609 | |||||
| Total non-interest expense | $ | 14,048 | $ | 13,218 | $ | 9,733 | ||
Reflecting the expenses incurred to develop the Company's business infrastructure, the Company's efficiency ratio was 67.5% for the third quarter of 2024, compared to 66.3% for the prior quarter and 50.4% for the prior year period. As a result of the infrastructure build, the Company anticipates the efficiency ratio will remain elevated until the Company begins to realize the revenues associated with the new programs being developed.
Tax Rate
The Company's effective tax rate was 25.1% for the third quarter of 2024, compared to 23.9% for the prior quarter and 26.1% for the prior year period. The increase from the prior quarter was due primarily to more favorable resolution of historical state tax matters during the second quarter of 2024. The decrease from the prior year period was primarily due to a reduction in permanent differences impacting income tax expense.
Net Income
Net income was $3.5 million for the third quarter of 2024, compared to $3.2 million for the prior quarter and $4.8 million for the prior year period. The changes in net income for the three months ended September 30, 2024 compared to the prior quarter and prior year period are the result of the factors discussed above.
Balance Sheet
The Company's total assets were $683.0 million as of September 30, 2024, an increase from $617.8 million as of June 30, 2024 and $555.1 million as of September 30, 2023. The increase in total assets from June 30, 2024 was primarily due to an increase of $30.5 million in investment securities available-for-sale and continued growth in the Company's loans held for investment, net, and loans held-for-sale portfolios of $19.6 million and $17.5 million, respectively. The increase in total assets compared to September 30, 2023 was primarily due to increases in the Company's loans held for investment, net, and loans held-for-sale portfolios of $93.9 million and $38.3 million, respectively, as well as an increase in investment securities available-for-sale of $30.5 million, partially offset by a decrease of $48.3 million in interest-bearing cash deposits.
The following table shows the gross loans held for investment balances as of the dates indicated:
| 9/30/2024 | 6/30/2024 | 9/30/2023 | |||||||||||||||
| ($ in thousands) | Amount | % of total loans | Amount | % of total loans | Amount | % of total loans | |||||||||||
| SBA | $ | 251,439 | 57.9 | % | $ | 249,281 | 60.2 | % | $ | 219,305 | 64.9 | % | |||||
| Commercial leases | 64,277 | 14.8 | % | 56,529 | 13.7 | % | 31,466 | 9.3 | % | ||||||||
| Commercial, non-real estate | 3,025 | 0.7 | % | 1,999 | 0.5 | % | 2,578 | 0.8 | % | ||||||||
| Residential real estate | 41,391 | 9.5 | % | 42,317 | 10.2 | % | 34,891 | 10.3 | % | ||||||||
| Strategic Program loans | 19,409 | 4.5 | % | 17,861 | 4.3 | % | 20,040 | 5.9 | % | ||||||||
| Commercial real estate: | |||||||||||||||||
| Owner occupied | 32,480 | 7.5 | % | 28,340 | 6.8 | % | 17,092 | 5.1 | % | ||||||||
| Non-owner occupied | 2,736 | 0.7 | % | 2,134 | 0.5 | % | 4,588 | 1.4 | % | ||||||||
| Consumer | 19,206 | 4.4 | % | 15,880 | 3.8 | % | 7,675 | 2.3 | % | ||||||||
| Total period end loans | $ | 433,963 | 100.0 | % | $ | 414,341 |
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