FinWise Bancorp(FINW) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Loan originations in Q3 2024 increased to $1.4 billion, up from an average of approximately$1.1 billion over the previous five quarters and $1.2 billion in Q2 2024 [4][7] - Tangible book value per common share rose to$12.90 from $12.61 in the prior quarter [5] - Net income for Q3 was$3.5 million or $0.25 per diluted common share [12] - Average loan balances increased to$492.9 million from $449.9 million in the prior quarter [12] - Net interest income was$14.8 million, slightly up from $14.6 million in the previous quarter [14] - Net interest margin decreased to 9.7$6.1 million from $5.2 million in the prior quarter, driven by increased origination fees [15] Market Data and Key Metrics Changes - The company noted a modest decrease in originations in early October 2024 compared to Q3 2024, influenced by seasonal factors [8] - NPL balances increased to$30.6 million from $27.9 million in the prior quarter, with unguaranteed NPLs rising slightly to$12.8 million [11] Company Strategy and Development Direction - The company is focused on enhancing long-term growth through strategic lending programs, having announced three new lending programs in 2024 [4][12] - There is an emphasis on expanding market share through new and existing strategic programs and product cross-selling [5] - The company aims to complete the payments hub by the end of 2024, with expectations for revenue generation in 2025 [21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the operational performance and outlook, particularly regarding the strategic lending business rebounding after industry pressures [6] - The company anticipates a gradual improvement in profitability metrics as infrastructure investments are completed [5] - Management expects some relief in NPL metrics as interest rates decline [11][29] Other Important Information - The effective tax rate for Q3 was 25.1%, with expectations for Q4 to remain around the same level [15] - The company is experiencing a deceleration in expense growth, with expectations for further moderation in Q4 2024 [16] Q&A Session Summary Question: Loan production trends and seasonality - Management is optimistic about originations, noting that trends are improving despite expected seasonality from the Earnest program [17] Question: Impact of callable CDs and SBA on margin - Management indicated that NIM is complex to forecast due to various factors, but expects a decline in NIM during Q4 [19] Question: Updates on payments and card revenue - The payments hub is on track for completion by the end of 2024, with revenue expected to materialize in 2025 [21] Question: Incremental callable CDs and timing - Management provided details on callable CDs, indicating plans to call them in two buckets in November and December [22] Question: Average balance of HFS loans - The increase in HFS loans is primarily due to origination volume, with expectations for some moderation in Q4 [23][24] Question: Fee income and valuation of investment in BFG - Management noted that the valuation has been negatively impacted by slower SBA loan generation but expects improvement as activity picks up [25] Question: Expense growth moderation - Management anticipates a slight increase in expenses for Q4, but at a lower growth rate compared to previous quarters [26]