FinWise Bancorp(US:FINW)2022-07-28 01:14Financial Data and Key Metrics Changes - Total revenue for Q2 2022 was $21.4 million, driven by loan originations of $2.1 billion, down from $2.5 billion in the prior quarter but up from $1.4 billion in Q2 2021 [8][21] - Net income for Q2 2022 was $5.5 million or $0.41 per diluted share, a decrease from $9.4 million in Q1 2022 and $7.7 million in Q2 2021 [9][30] - Net interest income for Q2 was $12.8 million, slightly down from $13 million in Q1 2022 but up from $10.8 million in Q2 2021 [31] - Non-interest income was $8.4 million in Q2 2022, down from $11.7 million in Q1 2022 but slightly up from $8.2 million in Q2 2021 [32] Business Line Data and Key Metrics Changes - Loan originations decreased to $2.1 billion in Q2 2022 from $2.5 billion in Q1 2022, but increased from $1.4 billion in Q2 2021 [21] - Average loan balances were $279.3 million, a decrease of 5.9% from $296.7 million in Q1 2022 but an increase of 11.8% from $249.7 million in Q2 2021 [21] - Non-performing loans declined to $0.6 million as of June 30, 2022, compared to $0.7 million at March 31, 2022 [12] Market Data and Key Metrics Changes - Average interest-bearing deposits declined 4% to $127.2 million during Q2 compared to $132.5 million in Q1 2022, but increased 41% compared to $90.2 million during Q2 2021 [24][25] - Total average interest-earning assets declined 3.8% to $373.2 million during Q2, compared to $387.8 million for Q1 2022, but increased 24% from $301.1 million for Q2 2021 [22] Company Strategy and Development Direction - The company remains focused on generating sustainable net interest income growth over the long term, driven by continued loan growth [10] - The management emphasized maintaining tight underwriting standards and prudent risk management to sustain sound credit quality through varying credit cycles [14] - The company is committed to exploring ways to deploy capital into opportunities that allow it to remain well-positioned for growth when the environment improves [19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging economic environment and indicated that the seasonal rebound in loan originations traditionally seen in the second half of the year could be tempered this year [18] - The company plans to continue investing in strategic foundational aspects while being cautious with production-related expenses [52] - Management expressed confidence in the portfolio underwriting and overall risk management, with strong capital levels providing a cushion against economic uncertainties [41] Other Important Information - The efficiency ratio for Q2 was 52%, compared to 36.7% for Q1 2022 and 37.3% for Q2 2021, indicating increased expenses [35] - The provision for loan losses was $2.9 million for Q2, reflecting growth in unguaranteed loans held for investment [36] Q&A Session Summary Question: Can you provide details on origination volumes by month throughout the quarter? - Management did not disclose monthly run rates but suggested looking at general economic conditions for trends [43] Question: Should we expect origination volumes to decline from the current $2.1 billion level in the back half of the year? - Management indicated uncertainty due to rapidly changing economic conditions but did not rule out the possibility [44] Question: What would need to happen to increase the retention rate on loans? - Stabilization in capital markets would be a key indicator for increasing retention rates [45] Question: Can you provide trends in SBA loans and expectations for sold production volume? - Management noted good origination volumes in the SBA product line but indicated conditions are slightly deteriorating regarding premium amounts [47][48] Question: What investments are prioritized despite falling revenue growth? - Continued investment in compliance, IT, and foundational aspects of the bank are prioritized, while production-related expenses may be reduced [52] Question: What are the expectations for the efficiency ratio in the near term? - The efficiency ratio is expected to remain between mid to upper 30s, but current levels are higher due to increased expenses [54]