FinWise Bancorp(US:FINW)2023-05-14 16:00Financial Performance - Net income for Q1 2023 was $3.9 million, a decrease of $5.6 million or 59.1% from $9.4 million in Q1 2022, primarily due to a $7.2 million or 61.3% drop in non-interest income[41]. - Net interest income decreased by $0.9 million, or 6.6%, to $12.1 million for Q1 2023 compared to Q1 2022, attributed to decreases in loans held for sale balances and increased rates on certificates of deposit[33]. - Non-interest income decreased by $7.2 million or 61.3% to $4.5 million, driven by a $4.9 million or 96.3% reduction in gain on sale of loans and a $2.9 million or 44.4% decline in strategic program fees[51]. - The return on average equity was 11.1% for Q1 2023, down from 31.4% in Q1 2022, while the return on average assets was 3.8%, down from 9.4%[39]. - The effective income tax rate for the three months ended March 31, 2023, was 26.1%, compared to 25.4% for the same period in 2022[131]. Asset and Liability Management - Total assets increased by $41.5 million to $442.3 million as of March 31, 2023, driven by a $36.0 million increase in net loans receivable and a $5.0 million increase in interest-bearing deposits[29]. - Total liabilities increased to $297.9 million, a 14.5% increase from $260.3 million as of December 31, 2022, primarily due to an increase in brokered deposits for Strategic Programs[117]. - Total deposits increased to $283.2 million as of March 31, 2023, from $243.0 million as of December 31, 2022, representing a growth of $40.2 million, or 16.5%[122]. - The average balance of interest-bearing liabilities increased by $31.9 million, or 23.9%, to $165.5 million for Q1 2023 compared to the prior year period[33]. - Interest-bearing deposits in other banks rose to $105.2 million at March 31, 2023, up $5.0 million or 5.0% from $100.2 million at December 31, 2022[109]. Loan Portfolio - The total loan portfolio reached $297.7 million as of March 31, 2023, compared to $260.2 million as of December 31, 2022[66]. - The company reported a significant increase in SBA 7(a) loans, totaling $178.7 million as of March 31, 2023, up from $145.2 million at the end of 2022, representing 60.0% of total loans[57]. - Total residential real estate loans decreased to $31.0 million (10.4% of total loans) as of March 31, 2023, from $37.8 million (14.5%) as of December 31, 2022[60]. - Strategic Program loans totaled $46.8 million (15.7% of total loans) as of March 31, 2023, down from $47.8 million (18.4%) as of December 31, 2022[61]. - Commercial real estate loans increased to $17.0 million (5.7% of total loans) as of March 31, 2023, compared to $12.1 million (4.7%) as of December 31, 2022[62]. Credit Quality and Risk Management - The provision for credit losses was $2.7 million for Q1 2023, slightly down from $2.9 million in Q1 2022, reflecting a decrease in strategic program loans held for investment[47]. - The allowance for loan losses (ALL) related to Strategic Programs constituted 55.9% of the total ALL as of December 31, 2022, while comprising 10.3% of total loans[101]. - The ratio of net charge-offs to average loans outstanding was 1.1% for the three months ended March 31, 2023, compared to 1.4% for the same period in 2022[108]. - The ACL to total loans ratio was 4.4% as of March 31, 2023, with nonaccrual loans to total loans at 0.3%[105]. - The company emphasizes proactive identification and resolution of problem loans to maintain asset quality[90]. Capital and Equity - Shareholders' equity increased by $3.9 million to $144.4 million at March 31, 2023, primarily due to net income recognized of $3.9 million[38]. - The leverage ratio under the Community Bank Leverage Ratio framework was 24.0% as of March 31, 2023, compared to 25.1% as of December 31, 2022, well above the 9.0% requirement[145]. - The ending balance of the allowance for credit losses (ACL) was $12,034 thousand as of March 31, 2023, with a provision for loan losses of $2,668 thousand during the period[99]. - The company aims to maintain adequate capital to support anticipated asset growth and ensure compliance with regulatory capital guidelines[40]. - Total contractual obligations amount to $269,761,000, with $225,634,000 due in less than one year[153]. Strategic Initiatives - The company launched an HSA deposit product in 2022 and plans to leverage online and mobile banking to enhance customer service without expanding physical branches[73]. - The company utilizes brokered deposits and a rate listing service to attract deposits, maintaining competitive rates to draw in funds[127]. - Originations of Strategic Program loans held-for-sale decreased by $1.6 billion to $0.9 billion for the three months ended March 31, 2023, due mainly to market deceleration[138]. - The company maintains a disciplined lending approach and monitors delinquency levels to manage credit risk effectively[91]. - The company had $0.7 million in nonperforming assets as of March 31, 2023, compared to no nonperforming assets at December 31, 2022[89].