FinWise Bancorp(US:FINW)2024-04-30 02:06Financial Data and Key Metrics Changes - The company reported net income of $3.3 million or $0.25 per diluted common share for Q1 2024, with a return on average assets of 2.2% and a return on average equity of 8.4% [12] - Average loan balances increased to $429.8 million from $396.2 million in the prior quarter, driven by growth in SBA 7(a) and commercial lease programs [12] - Net interest income for the quarter was $14 million, down from $14.4 million in the prior quarter, with a net interest margin of 10.12% compared to 10.61% [60][61] Business Line Data and Key Metrics Changes - The provision for credit losses was $3.2 million in Q1 2024, slightly down from $3.3 million in the prior quarter, with net charge-off rate declining to 3.5% from 3.8% [9][10] - SBA 7(a) loan originations were lower sequentially due to reduced application demand, but early success was noted in newer products like equipment leasing and owner-occupied commercial real estate loans [46][55] - The guaranteed portion of SBA loans increased by 7.6%, contributing to a 5% growth in total loans held for investment [47] Market Data and Key Metrics Changes - Average interest-bearing deposits rose to $310.7 million from $303.4 million, primarily due to increases in demand deposits and brokered CDs [12] - The company is experiencing a cautious environment among small business owners, impacting SBA loan originations [46] Company Strategy and Development Direction - The company is focused on diversifying its business model and expanding its fintech banking solutions, with new partnerships announced to enhance lending and payment programs [8][42] - A new share repurchase program was initiated to buy up to 5% of outstanding shares, viewed as an accretive use of capital [5][27] - The management emphasizes a compliance-first culture and strict onboarding processes to maintain a competitive edge in the fintech banking sector [43] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about originations despite a challenging macro backdrop, with expectations for continued growth in the second half of the year [55][66] - The company anticipates a material increase in expenses in Q2 2024, followed by a deceleration in growth rates in the latter half of the year as new initiatives are completed [57][69] - Management noted that the current regulatory landscape has not negatively impacted their initiatives, and they see a stronger pipeline for new fintech partnerships [66] Other Important Information - The effective tax rate for Q1 was 26.5%, down from 28.5% in the prior quarter, with expectations for this rate to remain consistent for the rest of 2024 [63] - Non-interest income decreased to $5.5 million from $6 million in the prior quarter, attributed to lower strategic program fees and a decrease in the fair value of an investment [61] Q&A Session Summary Question: What is the outlook for the extended held-for-sale option for the fintech? - Management indicated that the balance generated from this option is sensitive and did not disclose specific figures, but noted it could impact production positively [58] Question: How do you view the regulatory landscape for BaaS banks? - Management stated that recent regulatory announcements have not changed their investment strategy and they see a robust pipeline for new fintech partners [34][66] Question: What are the expectations for expenses in Q2? - Management expects a similar increase in expenses as seen in Q1, with a focus on salaries and benefits driving the majority of the growth [19][69]