Finwise Bancorp Q4 FY2024 earnings call

• Kent Landvatter highlighted solid Q4 results, progress in diversifying revenue, and added 4 new lending programs in 2024, including 2 with credit enhancement, 1 payments, and 1 credit card program.
• Jim Noone discussed loan originations, with $1.3 billion in Q4 loans and $5 billion full-year 2024, SBA 7(a) loan growth, equipment leasing and commercial real estate loan growth, credit quality with provision for credit losses at $3.9 million in Q4, and strategic partner updates with new program pipeline.
• Bob Wahlman reviewed net income of $2.8 million or $0.20 per diluted common share for Q4, net interest income, net interest margin at 10.0%, operating expenses, effective tax rate, and new disclosures for credit enhancement product impact on financial statements.

In the fourth quarter, FinWise Bancorp had solid financial performance. Loan originations for the fourth quarter were $1.3 billion, with total originations for fiscal year 2024 at $5 billion, a 16% increase from the prior year. SBA 7(a) loan originations increased in Q4 versus Q3. Equipment leasing and owner-occupied commercial real estate loans showed solid growth. Net interest income for the quarter was $15.5 million, compared to $14.8 million in the prior quarter, driven by increased loan volumes and lower cost of funds. Noninterest income was $5.6 million in the quarter, down from $6.1 million in the prior quarter. Operating expenses in the fourth quarter were $13.6 million, down from $14 million in the prior quarter, with the efficiency ratio improving to 64.2% from 67.5% in the prior quarter. Approximately 38% of the total staff is employed in compliance, risk management, BSA, and IT functions.

• Expect gradual growth in 2025, with credit enhancement solution as an incremental contributor and BIN Sponsorship and payments having gradual traction.
• Anticipate credit enhanced balances to increase by $50 million to $100 million by year-end 2025.

• Cybersecurity concerns.
• Proper oversight of fintechs.
• Regulatory issues.
• Potential NPL migration due to higher rate environment.

Q: Andrew Liesch with Piper Sandler asked about loan growth and drivers.

A: Jim Noone mentioned minimal quarter-over-quarter increase in SBA and SP HFI, growth in leasing and owner-occupied commercial real estate portfolios.

Q: Joe Yanchunis with Raymond James asked about company outlook in 3-4 years and risk profile.

A: Robert Wahlman discussed exciting times ahead, credit enhanced balance sheet expected to grow substantially, and Kent Landvatter talked about strong pipeline with more mature fintechs.

Q: Andrew Terrell with Stephens asked about net yield of credit enhanced lending vs SBA.

A: Robert Wahlman said they are relatively similar with low credit risk.

Q: Juan Arias asked about benefits to fintechs of credit enhancement product.

A: James Noone said it fills a gap, provides capacity, diversifies funding sources, and reduces administrative parties for fintechs.