FinWise Bancorp(US:FINW)2023-08-14 16:00Financial Performance - Net income for the three months ended June 30, 2023 decreased by $0.8 million to $4.6 million compared to the same period in 2022, primarily due to lower strategic program fees and higher interest expenses [193]. - Net income for the six months ended June 30, 2023 was $8.5 million, a decrease of 43.0% from $14.9 million for the same period in 2022 [199]. - Net income for Q2 2023 was $4.6 million, a decrease of 15.5% from $5.5 million in Q2 2022, primarily due to a $2.2 million decline in strategic program fees and a $2.0 million increase in interest expense [215]. - The company experienced a $10.3 million decrease in non-interest income, primarily due to an 88.1% reduction in the gain on sale of loans [199]. - Total noninterest income decreased by $10.3 million, or 51.2%, to $9.8 million for the six months ended June 30, 2023, compared to the same period in 2022 [242]. Interest Income and Expenses - Interest income increased by 21.9% to $15.9 million for the three months ended June 30, 2023, compared to $13.0 million for the same period in 2022 [198]. - Total interest expense increased by 798.3% to $2.2 million for the three months ended June 30, 2023, compared to $0.2 million for the same period in 2022 [198]. - Net interest income for the six months ended June 30, 2023, increased by $0.1 million, or 0.2%, to $25.8 million compared to the same period in 2022 [202]. - The cost of funds on interest-bearing liabilities increased by 288 basis points to 3.65%, with an average balance increase of $61.9 million, or 47.4%, to $192.5 million compared to the prior year [202]. - The cost of funds on interest-bearing liabilities increased by 325 basis points to 4.01% for Q2 2023, with average interest-bearing liabilities rising by $91.5 million, or 71.6% [217]. Loan Performance - Originations of Strategic Program loans held-for-sale decreased by $0.9 billion to $1.2 billion for the three months ended June 30, 2023, compared to the same period in 2022 [196]. - The average balance of loans held for sale decreased by $33.4 million, contributing to the decline in net interest margin [213]. - SBA 7(a) loans increased to $189.0 million, representing 65.0% of total loans held for investment as of June 30, 2023, up from 61.3% [249]. - Strategic Program loans held for investment decreased to $20.7 million, representing 7.1% of total loans held for investment as of June 30, 2023 [259]. - Commercial non-real estate loans increased to $24.9 million, representing 8.5% of total loans held for investment as of June 30, 2023 [257]. Asset and Equity Growth - Total assets increased by $94.8 million to $495.6 million as of June 30, 2023, primarily due to a $53.4 million increase in net loans receivable [214]. - Total deposits rose by $89.5 million, or 36.8%, to $332.5 million as of June 30, 2023 [247]. - Total shareholders' equity increased by $6.99 million, or 5.0%, to $147.4 million as of June 30, 2023 [247]. - Loans receivable, net, increased by $53.4 million, or 23.8%, to $277.7 million as of June 30, 2023 [247]. Tax and Regulatory Matters - The effective income tax rate for the six months ended June 30, 2023 was 26.1%, compared to 25.1% for the same period in 2022 [180]. - The Company plans to acquire an additional 10% of BFG's membership interests in exchange for 372,132 shares of its stock, subject to regulatory approval [188]. Risks and Challenges - The company faces risks related to potential losses from loan defaults and nonperformance on loans [282]. - The adequacy of the company's allowance for credit losses (ACL) is a critical factor for financial performance [273]. - The company is subject to increased competition in the financial services industry, particularly from regional and national institutions [281]. - The company is exposed to interest rate risk, which affects its interest-earning assets and liabilities [282]. - The company is reliant on third-party service providers for core systems support and other processing services [281]. Non-Interest Income - Non-interest income decreased by 37.3% to $5.3 million for the three months ended June 30, 2023, compared to $8.4 million for the same period in 2022 [198]. - Total noninterest expense decreased by $1.0 million, or 9.3%, to $10.0 million for the three months ended June 30, 2023, compared to the same period in 2022 [244]. - Total noninterest expense decreased by $1.0 million, or 9.3%, to $10.0 million in Q2 2023, attributed to a recovery on the SBA servicing asset and a reduction in salaries and employee benefits [227].