- Net Income of $3.3 Million for First Quarter of 2024 - - Diluted Earnings Per Share of $0.25 for First Quarter of 2024 - MURRAY, Utah, April 29, 2024 (GLOBE NEWSWIRE) -- FinWise Bancorp (NASDAQ:FINW) ("FinWise" or the "Company"), parent company of FinWise Bank (the "Bank"), today announced results for the quarter ended March 31, 2024. First Quarter 2024 Highlights Loan originations were $1.1 billion, compared to $1.2 billion for the quarter ended December 31, 2023, and $0.9 billion for the first quarter of the prior year Net interest income was $14.0 million, compared to $14.4 million for the quarter ended December 31, 2023, and $12.1 million for the first quarter of the prior year Net Income was $3.3 million, compared to $4.2 million for the quarter ended December 31, 2023, and $3.9 million for the first quarter of the prior year Diluted earnings per share ("EPS") were $0.25 for the quarter, compared to $0.32 for the quarter ended December 31, 2023, and $0.29 for the first quarter of the prior year Efficiency ratio was 60.6%, compared to 55.8% for the quarter ended December 31, 2023, and 52.5% for the first quarter of the prior year (1) Annualized return on average equity (ROAE) was 8.4%, compared to 10.8% in the quarter ended December 31, 2023, and 11.1% in the first quarter of the prior year Non-performing loans were $26.0 million as of March 31, 2024, compared to $27.1 million as of December 31, 2023, and $1.8 million as of March 31, 2023(2) (1) See "Reconciliation of Non-GAAP to GAAP Financial Measures" for a reconciliation of this non-GAAP measure.(2) Of the non-performing loans $14.8 million, $15.0 million, and $1.1 million, respectively, as of March 31, 2024, December 31, 2023, and March 31, 2023 is guaranteed by the SBA. "We are pleased with the first quarter's robust loan originations and encouraging credit quality performance, which highlights the resiliency of our differentiated business model," said Kent Landvatter, Chief Executive Officer of FinWise. "We also remained laser focused on executing our strategic initiatives during the quarter as we announced new lending and payments agreements, continued to build out our Payments Hub and BIN Sponsorship platform and deepened our executive bench. In addition, given our strong balance sheet and earnings power, we announced a new share repurchase program. We remain on track to deliver on our target to further diversify our business model, which we expect will continue to enhance the Company's long-term growth." Selected Financial Data                   For the Three Months Ended   ($s in thousands, except per share amounts)   3/31/2024   12/31/2023   3/31/2023                   Net Income   $ 3,315     $ 4,156     $ 3,861     Diluted EPS   $ 0.25     $ 0.32     $ 0.29     Return on average assets     2.2 %     2.9 %     3.8 %   Return on average equity     8.4 %     10.8 %     11.1 %   Yield on loans     14.80 %     16.21 %     17.24 %   Cost of deposits     4.71 %     4.82 %     3.18 %   Net interest margin     10.12 %     10.61 %     12.51 %   Efficiency ratio(1)     60.6 %     55.8 %     52.5 %   Tangible book value per share(2)   $ 12.70     $ 12.41     $ 11.26     Tangible shareholders' equity to tangible assets(2)     26.6 %     26.5 %     32.6 %   Leverage Ratio (Bank under CBLR)     20.6 %     20.7 %     24.0 %   Full-time Equivalent (FTEs)     175       162       140     (1) This measure is not a measure recognized under United States generally accepted accounting principles, or GAAP, and is therefore considered to be a non-GAAP financial measure. See "Reconciliation of Non-GAAP to GAAP Financial Measures" for a reconciliation of this measure to its most comparable GAAP measure. The efficiency ratio is defined as total noninterest expense divided by the sum of net interest income and noninterest income. The Company believes this measure is important as an indicator of productivity because it shows the amount of revenue generated for each dollar spent.(2) This measure is not a measure recognized under GAAP and is therefore considered to be a non-GAAP financial measure. Tangible shareholders' equity is defined as total shareholders' equity less goodwill and other intangible assets. The most directly comparable GAAP financial measure is total shareholder's equity. The Company had no goodwill or other intangible assets as of any of the dates indicated. The Company has not considered loan servicing rights or loan trailing fee asset as intangible assets for purposes of this calculation. As a result, tangible shareholders' equity is the same as total shareholders' equity as of each of the dates indicated. Net Income Net income was $3.3 million for the first quarter of 2024, compared to $4.2 million for the fourth quarter of 2023 and $3.9 million for the first quarter of 2023. The decrease from the prior quarter was primarily due to a decrease in non-interest income resulting from a decline in the fair value of the Company's investment in Business Funding Group ("BFG") and lower strategic program fees, an increase in non-interest expense due to increases in salaries and employee benefits and other operating expenses driven by increased spending on business infrastructure, and a decrease in net interest income as our exposure to high rate consumer loans continues to decline. The decrease from the prior year period was primarily due to increases in salaries and employee benefits expense and other expenses driven by increased spending on business infrastructure and was offset in part by increases in net interest income driven by growth in the loans held for investment portfolio and non-interest income resulting from higher fees and gains on sale of loans. Net Interest Income Net interest income was $14.0 million for the first quarter of 2024, compared to $14.4 million for the fourth quarter of 2023 and $12.1 million for the first quarter of 2023. The decrease from the prior quarter was primarily due to lower yields earned on the Bank's loan balances as the Bank continues to step away from high yield loans, partially offset by increases on the Bank's average balances for the loans held for investment portfolio. The increase from the prior year period was primarily due to increases in the Bank's average balances for the loans held for investment portfolio, partially offset by increased interest rates paid on deposits and increased average interest-bearing deposit balances. Loan originations totaled $1.1 billion for the first quarter of 2024, compared to $1.2 billion for the prior quarter and $0.9 billion for the prior year period. Through the first four weeks of April, originations are tracking at roughly the same level as first quarter of 2024 originations. Net interest margin for the first quarter of 2024 was 10.12%, compared to 10.61% for the prior quarter and 12.51% for the prior year period. The decrease from the prior quarter is primarily attributable to the decreased yields and average balances in the loans held for sale portfolio and was partially offset by volume increases in the loans held for investment portfolio. The decrease from the prior year period was primarily due to increases in net earning assets while the yield on those assets declined coupled with an increase in the funding costs. Provision for Credit Losses The Company's provision for credit losses was $3.2 million for the first quarter of 2024, compared to $3.2 million for the prior quarter and $2.7 million for the prior year period. The provision remained stable when compared to the prior quarter as we continue to reduce the Strategic Program loans held for investment while growing our loan portfolio. Provision for credit losses for the first quarter of 2024 increased when compared to the prior year period due primarily to qualitative factor adjustments based on the increase in nonperforming assets primarily related to the SBA portfolio toward the latter part of 2023. Non-performing assets stabilized in the first quarter of 2024 compared to recent quarters. Non-interest Income   For the Three Months Ended ($ in thousands) 3/31/2024   12/31/2023   3/31/2023 Noninterest income:           Strategic Program fees $ 3,965     $ 4,229   $ 3,685   Gain on sale of loans   415       440     187   SBA loan servicing fees   466       450     591   Change in fair value on investment in BFG   (124 )     200     (300 ) Other miscellaneous income   742       716     364   Total noninterest income $ 5,464     $ 6,035   $ 4,527   Non-interest income was $5.5 million for the first quarter of 2024, compared to $6.0 million for the prior quarter and $4.5 million for the prior year period. The decrease from the prior quarter was primarily due to the change in the fair value of the Company's investment in BFG and a decrease in Strategic Program fees primarily due to lower originations. The increase from the prior year period was mainly due to an increase in miscellaneous income related to increased revenue from growth in the Company's commercial operating lease portfolio and higher Strategic Program fees and gain on sales. Non-interest Expense   For the Three Months Ended ($ in thousands) 3/31/2024   12/31/2023   3/31/2023 Non-interest expense           Salaries and employee benefits $ 7,562     $ 7,396     $ 5,257   Professional services   1,567       1,433       1,474   Occupancy and equipment expenses   980       923       712   (Recovery) impairment of SBA servicing asset   (198 )     (122 )     (253 ) Other operating expenses   1,896       1,751       1,547   Total noninterest expense $ 11,807     $ 11,381     $ 8,737   Non-interest expense was $11.8 million for the first quarter of 2024, compared to $11.4 million for the prior quarter and $8.7 million for the prior year period. The increase from the prior quarter was primarily due to an increase in salaries and employee benefits and other operating expenses driven by spending to develop the business infrastructure to stand up the new initiatives and support our growing business. The increase from the prior year period was primarily due to an increase in salaries and employee benefits and other operating expenses driven by increased spending on business infrastructure along with an increase in occupancy and equipment expenses reflecting the growth in our business. Reflecting the expenses incurred to develop our business infrastructure build, the Company's efficiency ratio was 60.6% for the first quarter of 2024, compared to 55.8% for the prior quarter and 52.5% for the prior year period. Tax Rate The Company's effective tax rate was 26.5% for the first quarter of 2024, compared to 28.5% for the prior quarter and 26.1% for the prior year period. The decrease from the prior quarter was due primarily to resolution of state tax matters in the prior quarter. Balance Sheet The Company's total assets were $610.8 million as of March 31, 2024, an increase from $586.2 million as of December 31, 2023 and $442.3 million as of March 31, 2023. The increase from December 31, 2023 was primarily due to continued growth in the Company's commercial leases, SBA, and Strategic Program loans held-for-sale loan portfolios. The increase in total assets compared to March 31, 2023 was primarily due to increases in deposits to support growth in the Company's SBA, commercial leases, Strategic Program loans held-for-sale, and owner occupied commercial real estate loan portfolios. Also contributing to the total asset increase for both comparison periods was the Company's ownership increase in its investment in Business Funding Group ("BFG"). The growth in the loan assets was funded in large part by the growth in deposits. The following table shows the gross loans held for investment balances as of the dates indicated:   3/31/2024   12/31/2023   3/31/2023 ($s in thousands) Amount   % of total loans   Amount   % of total loans   Amount   % of total loans SBA $ 247,810   63.4 %   $ 239,922   64.5 %   $ 178,663   65.6 % Commercial leases   46,690   11.9 %     38,110   10.2 %     15,057   5.5 % Commercial, non-real estate   2,077   0.5 %     2,457   0.7 %     2,833   1.0 % Residential real estate   39,006   10.0 %     38,123   10.2 %     30,994   11.4 % Strategic Program loans   17,216   4.4 %     19,408   5.2 %     21,393   7.9 % Commercial real estate:                       Owner occupied   21,300   5.4 %     20,798   5.6 %     15,161   5.6 % Non-owner occupied   2,155   0.6 %     2,025   0.5 %     1,861   0.7 % Consumer   14,689   3.8 %     11,372   3.1 %     6,351   2.3 % Total period end loans $ 390,943   100.0 %   $ 372,215   100.0 %   $ 272,313   100.0 % Note: SBA loans as of March 31, 2024, December 31, 2023 and March 31, 2023 include $141.7 million, $131.7 million and $75.9 million, respectively, of SBA 7(a) loan balances that are guaranteed by the SBA. The held for investment balance on Strategic Programs with annual interest rates below 36% as of March 31, 2024, December 31, 2023 and March 31, 2023 was $2.7 million, $3.6 million and $6.9 million, respectively. Total gross loans held for investment as of March 31, 2024 were $390.9 million, an increase from $372.2 million and $272.3 million as of December 31, 2023 and March 31, 2023, respectively. The increase compared to December 31, 2023 was primarily due to increases in the commercial leases, SBA 7(a), and consumer loan portfolios. The increase compared to March 31, 2023 was primarily due to increases in the SBA 7(a), commercial leases, consumer, and residential real estate loan portfolios. The following table shows the Company's deposit composition as of the dates indicated:   As of ​ 3/31/2024   12/31/2023   3/31/2023 ($s in thousands) Amount   Percent   Amount   Percent   Amount   Percent Noninterest-bearing demand deposits $ 107,076   25.2 %   $ 95,486   23.6 %   $ 79,930   28.3 % Interest-bearing deposits:                       Demand   48,279   11.4 %     50,058   12.4 %     42,031   14.8 % Savings   11,206   2.6 %     8,633   2.1 %     7,963   2.8 % Money market   9,935   2.3 %     11,661   2.8 %     12,993   4.6 % Time certificates of deposit   247,600   58.4 %     238,995   59.0 %     140,276   49.5 % Total period end deposits $ 424,096   100.0 %   $ 404,833   100.0 %   $ 283,193   100.0 % Total deposits as of March 31, 2024 increased to $424.1 million from $404.8 million and $283.2 million as of December 31, 2023 and March 31, 2023, respectively. The increase from December 31, 2023 was driven primarily by an increase in noninterest-bearing demand deposits and brokered time certificates of deposit. The increase from March 31, 2023 was driven primarily by an increase in brokered time certificate of deposits and noninterest-bearing demand deposits. As of March 31, 2024, 32.4% of deposits at the Bank level were uninsured, compared to 31.1% as of December 31, 2023, and 36.1% as of March 31, 2023. As of March 31, 2024, 5.9% of total deposits at the Bank were required under the Company's Strategic Program agreements and an additional 9.6% were associated with other accounts owned by the Company or the Bank. Total shareholders' equity as of March 31, 2024 increased $7.4 million to $162.5 million from $155.1 million at December 31, 2023. Compared to March 31, 2023, total shareholders' equity increased by $18.1 million from $144.4 million. The increase from December 31, 2023 was primarily due to the additional capital issued in exchange for the Company's increased ownership in BFG as well as the Company's net income. The increase from March 31, 2023 was primarily due to the Company's net income as well as the aforementioned BFG transaction, partially offset by the repurchase of common stock under the Company's various repurchase programs. Bank Regulatory Capital Ratios The following table presents the leverage ratios for the Bank as of the dates indicated as determined under the Community Bank Leverage Ratio Framework of the Federal Deposit Insurance Corporation: ​ As of     Capital Ratios 3/31/2024   12/31/2023   3/31/2023   Well-Capitalized Requirement Leverage Ratio 20.6 %   20.7 %   24.0 %   9.0 % The leverage ratio decrease from the prior year period primarily results from the growth in the loan portfolio. The Bank's capital levels remain significantly above well-capitalized guidelines as of March 31, 2024. Share Repurchase Program As of March 31, 2024, the Company has repurchased a total of 17,697 shares for $0.2 million under the Company's share repurchase program announced in March 2024. Definitive Agreement The Company entered into a definitive agreement, dated as of July 25, 2023, as amended, with BFG and four members of BFG to acquire an additional 10% of its nonvoting ownership interests in exchange for 339,176 shares of the Company's stock, subject to regulatory approval and other customary closing conditions. On February 5, 2024, the transaction closed increasing the Company's total equity ownership of BFG to 20%. Asset Quality Nonperforming loans were $26.0 million, or 6.6% of total loans receivable, as of March 31, 2024, compared to $27.1 million or 7.3% of total loans receivable, as of December 31, 2023 and $1.8 million or 0.7% as of March 31, 2023. Of the $26.0 million, $27.1 million, and $1.8 million nonperforming loans as of March 31, 2024, December 31, 2023, and March 31, 2023, respectively, $14.8 million, $15.0 million, and $1.1 million, respectively, are guaranteed by the SBA and $11.2 million, $12.1 million, and $0.7 million, respectively, is the balance of loans which do not carry SBA guarantees. The decrease in nonperforming loans from the prior quarter was primarily attributable to loans returning to performing status and charge-offs. The increase in nonperforming loans from the prior year was primarily attributable to several loans in the SBA 7(a) loan portfolio moving to non-accrual status due mainly to the negative impact of elevated interest rates on the Company's small business borrowers. The Company's allowance for credit losses to total loans held for investment was 3.2% as of March 31, 2024 compared to 3.5% as of December 31, 2023 and 4.4% as of March 31, 2023. The Company's increased retention of most of the originated guaranteed portions in its SBA 7(a) loan program has been the primary factor in the decrease in this ratio from the prior quarter and year. For the first quarter of 2024, the Company's net charge-offs were $3.4 million consistent with the net charge-offs recorded during the prior quarter and $2.9 million for the prior year period. The increase compared to the first quarter of 2023 was primarily due to increased charge-offs related to the Company's SBA portfolio, lease financing receivables and consumer loans. The following table presents a summary of changes in the allowance for credit losses and asset quality ratios for the periods indicated:   For the Three Months Ended ​($s in thousands) 3/31/2024   12/31/2023   3/31/2023 Allowance for Credit Losses:           Beginning Balance(1) $ 12,888     $ 12,986     $ 11,985   Impact of ASU 2016-13 Adoption   —       —       257   Adjusted Beginning Balance   12,888       12,986       12,242   Provision for Credit Losses(2)   3,145       3,272       2,668   Charge offs           Construction and land development   —       —       —   Residential real estate   (64 )     (104 )     —   Residential real estate multifamily   —       —