• Loan Originations: $1.3 billion in Q4 2024; $5 billion for fiscal year 2024, a 16% increase from $4.3 billion in 2023.
• Net Income: $2.8 million in Q4 2024; $0.20 per diluted common share.
• Full Year Earnings Per Share: $0.93 per diluted common share for 2024.
• Average Loan Balances: $522.2 million in Q4 2024, up from $492.9 million in Q3 2024.
• Net Interest Income: $15.5 million in Q4 2024, compared to $14.8 million in Q3 2024.
• Net Interest Margin: 10.0% in Q4 2024, up from 9.70% in Q3 2024.
• Noninterest Income: $5.6 million in Q4 2024, down from $6.1 million in Q3 2024.
• Operating Expenses: $13.6 million in Q4 2024, down from $14 million in Q3 2024.
• Efficiency Ratio: Improved to 64.2% in Q4 2024 from 67.5% in Q3 2024.
• Effective Tax Rate: 24.3% in Q4 2024, compared to 25.1% in Q3 2024.
• Provision for Credit Losses: $3.9 million in Q4 2024, up from $2.2 million in Q3 2024.
• Nonperforming Loan Balances: $36.4 million in Q4 2024, up from $30.6 million in Q3 2024.

• Warning! GuruFocus has detected 3 Warning Signs with FINW.

Release Date: January 30, 2025

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

Positive Points

• FinWise Bancorp (NASDAQ:FINW) reported a solid financial performance for the fourth quarter, with a rebound in originations from existing programs and stable revenue.
• The company remains well-capitalized, significantly above federal regulatory standards, which provides a strong foundation for future growth.
• FinWise Bancorp (NASDAQ:FINW) successfully added four new lending programs, including credit enhancement and payments programs, which are expected to contribute to future growth.
• The company has invested heavily in compliance and risk management infrastructure, with approximately 38% of staff employed in these functions, ensuring robust regulatory compliance.
• FinWise Bancorp (NASDAQ:FINW) achieved a 16% increase in loan originations for fiscal year 2024, reaching $5 billion, indicating strong growth momentum.

Negative Points

• The provision for credit losses increased to $3.9 million in Q4, up from $2.2 million in the previous quarter, primarily due to net charge-offs on non-guaranteed SBA loans.
• Nonperforming loan balances rose to $36.4 million this quarter, an increase from $30.6 million in the prior quarter, reflecting ongoing challenges in credit quality.
• The company experienced a seasonal deceleration in originations from private student lending programs, impacting overall loan growth.
• Net interest margin is expected to gradually compress over time due to a proactive strategy to reduce credit risk in the portfolio.
• A one-time $895,000 loss from calling higher-yielding brokered callable CDs negatively impacted the fourth quarter's miscellaneous income.

Q & A Highlights

Q: What drove the 7% growth in the loan portfolio during the quarter? A: James Noone, President, Chief Strategy Officer, Chief Credit Officer of FinWise Bank, explained that the growth was due to minimal increases in SBA loans, leasing portfolios, and owner-occupied commercial real estate loans. The bank feels confident about the credit quality and types of assets being generated.

Q: How should we view the growth of the held-for-investment loan portfolio, given the 24% increase for the full year? A: James Noone noted that much of the growth has come from SBA guaranteed portions. The bank has started selling some of these guaranteed portions, which may affect future growth rates. The mix may shift as the credit-enhanced balance sheet product gains traction in 2025.

Q: What is the expected revenue ramp from new card and payments initiatives, and how will the risk profile evolve with the Credit Enhancement program? A: Robert Wahlman, CFO, stated that the next three to four years are expected to be exciting, with substantial growth anticipated in the credit-enhanced balance sheet. The bank expects credit-enhanced balances to increase by $50 million to $100 million by the end of 2025.

Q: How does FinWise Bancorp select strategic partners, and will future partners be involved in the card or payment program? A: Kent Landvatter, CEO, mentioned that the bank is focusing on mature, established fintechs. The expansion into payments, card sponsorship, and credit-enhanced balance sheets has attracted larger, stronger partners.

Q: What are the main concerns for FinWise Bancorp moving forward? A: Kent Landvatter highlighted concerns about cybersecurity, fintech oversight, and regulatory issues. The bank remains vigilant in these areas to manage risks effectively.

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