FinWise Bancorp(US:FINW)2022-10-26 23:05Financial Data and Key Metrics Changes - Total revenue for Q3 2022 was $20.3 million, with loan originations of $1.5 billion [7] - Net income decreased to $3.7 million in Q3 2022 from $5.5 million in Q2 2022 and $8.4 million in Q3 2021, primarily due to a one-time tax expense correction and higher provision for loan losses [18] - Net interest income for Q3 was $12.5 million, down from $12.8 million in Q2 2022 and $13.5 million in Q3 2021 [19] - The efficiency ratio improved to 42.3% from 52% in the previous quarter [9][26] - The tangible book value per common share increased by 32% year-over-year to $10.44 [7] Business Line Data and Key Metrics Changes - Average loan balances for held for sale and held for investment loans were $263.6 million in Q3 2022, down from $279.3 million in Q2 2022 [15] - Non-interest income was $7.5 million in Q3 2022, compared to $8.4 million in Q2 2022 and $8.5 million in Q3 2021, driven by lower strategic program fees [23] - The provision for loan losses increased to $4.5 million in Q3 2022 from $2.9 million in Q2 2022 [28] Market Data and Key Metrics Changes - Average interest-earning assets were $335.4 million in Q3 2022, down from $373.2 million in Q2 2022 [16] - Average interest-bearing deposits were $104.8 million in Q3 2022, compared to $127.2 million in Q2 2022 [17] Company Strategy and Development Direction - The company plans to retain a higher portion of guaranteed SBA loans due to decreasing gain on sale premiums and increasing variable loan rates, which is expected to enhance interest income [8][24] - Management remains focused on prudent expense management while preparing for potential economic downturns [12][13] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate challenging economic conditions while maintaining sound credit quality [11][12] - The company anticipates that loan origination growth may be pressured if the current economic environment continues to deteriorate [16][46] Other Important Information - The company did not have any non-performing loans in the current quarter, compared to 0.3% in the previous quarter [10][27] - The effective tax rate for Q3 was 48.7%, significantly higher than previous quarters due to a correction of an immaterial error in tax provision calculations [32] Q&A Session Summary Question: What was the normalized tax rate impact this quarter? - The tax expense correction was due to an understatement of 2021's tax expense of approximately $939,000, with an expected impact of less than 5% on 2022 [34][35] Question: What is the appetite for retaining guaranteed SBA loans? - The company does not have a specific target but intends to retain a meaningful amount of guaranteed loans based on current market conditions [37] Question: How do the current charge-offs compare to expectations? - Net charge-offs for the quarter were in line with expectations, with no specific weaknesses identified in the portfolios [53]