FinWise Bancorp(US:FINW)2023-04-29 20:56Financial Data and Key Metrics Changes - For Q1 2023, the company generated revenue of $18 million, net income of $3.9 million, and diluted earnings per share of $0.29, compared to $6.5 million in net income for Q4 2022 and $9.4 million for Q1 2022 [10][25] - The return on average equity was 11.1% for the quarter, and the tangible value per common share increased to $11.26 from $10.95 in the previous quarter [10][10] - Net interest income for Q1 was $12.1 million, down from $12.6 million in Q4 2022 and $13 million in Q1 2022, with a net interest margin of 12.51%, which is lower than 14.27% in Q4 2022 and 13.37% in Q1 2022 [25][26] Business Line Data and Key Metrics Changes - Loan originations totaled $0.9 billion in Q1 2023, down from $1.2 billion in Q4 2022 and $2.5 billion in Q1 2022, primarily due to a contraction in capital markets and conservative underwriting [20][21] - Average loan balances were $290.4 million, an 11% increase from $261.4 million in Q4 2022, but a 2% decrease from $296.7 million in Q1 2022 [22] - Noninterest income was $4.5 million in Q1, significantly lower than $9.8 million in Q4 2022 and $11.7 million in Q1 2022, mainly due to a reduction in loan sales and strategic program fees [27] Market Data and Key Metrics Changes - Average interest-bearing deposits increased to $165.2 million in Q1 2023 from $126.1 million in Q4 2022 and $132.5 million in Q1 2022, driven by an increase in certificates of deposit [23][24] - The company reported that approximately 85% of deposits are insured by the FDIC or are its own capital, with a significant portion of uninsured deposits being its own capital [53] Company Strategy and Development Direction - The company aims to secure additional revenue growth opportunities and diversify income and funding streams, focusing on strategic programs and expanding its footprint in the Banking-as-a-Service ecosystem [12][14] - Investments in personnel and infrastructure are ongoing to position the company for future growth, with a focus on maintaining strong credit quality and risk management [15][18] - The company is committed to maximizing long-term shareholder value and is prepared to navigate economic headwinds while pursuing growth opportunities [19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macroeconomic environment but expressed confidence in the company's resilience and ability to maintain profitability [9][11] - The company anticipates that the industry-wide slowdown in loan originations may persist throughout 2023, but remains focused on long-term growth strategies [20][21] - Management emphasized the importance of disciplined underwriting and maintaining credit quality amid economic uncertainties [18][32] Other Important Information - The company's efficiency ratio increased to 52.5% in Q1 2023 from 45.6% in Q4 2022 and 36.7% in Q1 2022, reflecting ongoing investments in infrastructure [28] - The company implemented CECL credit accounting on January 1, 2023, which requires provisioning for estimated lifetime credit losses [30] Q&A Session Summary Question: What is the tone regarding strategic programs on origination volume? - Management indicated that origination levels were under pressure in Q1 and foresee a continuation of this trend throughout 2023, with Q1 potentially being the high point for the year [34] Question: How is SBA loan production trending? - Management noted that while there is growth in the market, demand for SBA loans may soften as rates rise, and there are no seasonal patterns affecting this growth [35] Question: Can you provide insights on expense trends and hiring? - Management confirmed that the decrease in bonuses impacted expenses, and they continue to hire professionals in the Banking-as-a-Service area, indicating a modest growth in expenses moving forward [36][58] Question: What are the drivers of the CECL model for the company? - Management highlighted that the high watermark methodology for the SP HFI portfolio is a significant driver, more so than general economic indicators [40][41] Question: What percentage of originations is driven by the largest partner? - Management did not disclose specific percentages but noted that there is greater diversification among partners compared to the previous year [50][51] Question: Can you discuss noninterest-bearing deposit growth? - Management explained that a significant portion of deposits is insured or consists of their own capital, with growth in noninterest-bearing deposits being correlated with strategic business volume [52][53]