FinWise Bancorp (NASDAQ: FINW) (“FinWise” or the “Company”), parent
company of FinWise Bank (the “Bank”), today announced results for
the quarter ended September 30, 2022.
Third Quarter 2022 Highlights
- Loan originations were $1.5
billion, compared to $2.1 billion for the quarter ended June 30,
2022 and $1.8 billion in the prior year period
- Net interest income was $12.5
million, compared to $12.8 million for the quarter ended June 30,
2022 and $13.5 million in the prior year period
- Net Income was $3.7 million,
compared to $5.5 million for the quarter ended June 30, 2022 and
$8.4 million in the prior year period
- Diluted earnings per share (“EPS”)
were $0.27 for the quarter, compared to $0.41 for the quarter ended
June 30, 2022 and $0.91 for the prior year period
- Efficiency ratio was 42.3%,
compared to 52.0% for the quarter ended June 30, 2022 and 33.7% for
the prior year period
- Maintained strong returns with
annualized return on average equity (ROAE) of 11.0%, compared to
17.2% in the quarter ended June 30, 2022 and 52.2% in the prior
year period
- Asset quality remained solid as
there were no nonperforming loans as of September 30, 2022.
“FinWise delivered a solid third quarter even as
we faced an increasingly challenging macro environment,” said Kent
Landvatter, Chief Executive Officer and President of FinWise. “The
FinWise team remains thoroughly focused on serving our clients
while managing what we can control during the current environment –
prudent underwriting, cost control, and continuing to enhance our
differentiated business model in order to remain well positioned to
capitalize on future growth opportunities when the environment
stabilizes. We believe these factors allow us to continue to follow
our path of long-term operating efficiency and profitability.”
Selected Financial Data
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($s in thousands, except per share amounts, annualized ratios) |
|
|
9/30/2022 |
|
|
6/30/2022 |
|
9/30/2021 |
Net Income |
|
$ |
3,654 |
|
$ |
5,482 |
|
$ |
8,442 |
Diluted EPS |
|
$ |
0.27 |
|
$ |
0.41 |
|
$ |
0.91 |
Return on average assets |
|
3.9% |
|
5.5% |
|
10.8% |
Return on average equity |
|
11.0% |
|
17.2% |
|
52.2% |
Yield on loans |
|
18.94% |
|
18.42% |
|
23.04% |
Cost of deposits |
|
1.16% |
|
0.77% |
|
0.97% |
Net interest margin |
|
14.93% |
|
13.69% |
|
18.31% |
Efficiency Ratio (1) |
|
42.3% |
|
52.0% |
|
33.7% |
Tangible book value per
share |
|
$ |
10.44 |
|
$ |
10.13 |
|
$ |
7.90 |
Tangible shareholders’ equity
to tangible assets (2) |
|
34.8% |
|
35.7% |
|
20.4% |
Leverage Ratio (Bank under
CBLR) |
|
24.9% |
|
21.4% |
|
19.5% |
|
|
|
|
|
|
|
(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. We believe 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. See “Reconciliation of Non-GAAP
to GAAP Financial Measures” for a reconciliation of this measure to
its most comparable GAAP 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. We had no goodwill or other
intangible assets as of any of the dates indicated. We have not
considered loan servicing rights as an intangible asset 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 $3.7 million for the third
quarter of 2022, compared to $5.5 million for the second quarter of
2022, and $8.4 million for the third quarter of 2021. The decline
from the previous quarter was primarily due to higher provision for
income taxes, higher provision for loan losses and lower strategic
program fees, partially offset by a decrease in non-interest
expense. Compared to the prior year period, the decline was
primarily driven by an increase in the provision for loan losses
and non-interest expenses and a decrease in gain-on-sale of loans
and interest income.
Net Interest Income
Net interest income was $12.5 million for the
third quarter of 2022, compared to $12.8 million for the second
quarter of 2022, and $13.5 million for the third quarter of 2021.
The decline from both prior periods was primarily due to lower
average loans held for sale balances.
Loan originations totaled $1.5 billion for the
third quarter of 2022, down from $2.1 billion for the second
quarter of 2022, and down from $1.8 billion for the third quarter
of 2021.
Net interest margin for the third quarter of
2022 increased to 14.93% compared to 13.69% for the second quarter
of 2022 and decreased compared to 18.31% for the third quarter of
2021. The increase from the previous quarter was primarily driven
by an increase in variable rates on SBA 7(a) loans and a loan mix
shift away from loans carrying lower yields within the strategic
program held for sale portfolio. The net interest margin decrease
from the third quarter of 2021 was driven mainly by a loan mix
shift toward loans carrying lower yields.
Provision for Loan Losses
The Company’s provision for loan losses was $4.5
million for the third quarter of 2022, compared to $2.9 million for
the second quarter of 2022 and $3.4 million for the third quarter
of 2021. Compared to the previous quarter and third quarter of
2021, the increase in provision for loan losses for the third
quarter of 2022 was primarily due to higher net charge-offs and
growth of unguaranteed loans held for investment.
Non-interest Income
|
|
For the Three Months Ended |
($s in thousands) |
|
9/30/2022 |
|
6/30/2022 |
|
9/30/2021 |
Non-interest income: |
|
|
|
|
|
|
Strategic program fees |
|
$ |
5,136 |
|
$ |
6,221 |
|
$ |
4,982 |
Gain on sale of loans |
|
1,923 |
|
2,412 |
|
2,876 |
SBA loan servicing fees |
|
327 |
|
342 |
|
337 |
Change in fair value on investment in BFG |
|
65 |
|
(575) |
|
266 |
Other miscellaneous income |
|
72 |
|
31 |
|
14 |
Total non-interest income |
|
$ |
7,523 |
|
$ |
8,431 |
|
$ |
8,475 |
|
|
|
|
|
|
|
|
|
|
Non-interest income was $7.5 million for the
third quarter of 2022, compared to $8.4 million for the second
quarter of 2022 and $8.5 million for the third quarter of 2021. The
decline from the previous quarter was driven primarily by lower
strategic program fees due to the decline in loan origination
volumes and the decline in gain on sale of loans due to a decrease
in the premium received for SBA 7(a) loans sold, partially offset
by a decrease in fair value of the Company’s investment in Business
Funding Group, LLC (“BFG”) in the previous quarter which did not
occur in the third quarter of 2022. Compared to the prior year
period, the decrease was primarily due to lower gain on sale of
loans due to a decrease in the premium received for SBA 7(a) loans
sold and a decrease in the change in fair value of the Company’s
investment in BFG.
Non-interest Expense
|
|
For the Three Months Ended |
($s in thousands) |
|
9/30/2022 |
|
|
6/30/2022 |
|
9/30/2021 |
Non-interest expense: |
|
|
|
|
|
|
|
Salaries and employee benefits |
|
$ |
5,137 |
|
|
$ |
6,594 |
|
$ |
5,930 |
Occupancy and equipment expenses |
|
640 |
|
|
419 |
|
205 |
(Recovery) impairment of SBA servicing asset |
|
(127 |
) |
|
1,135 |
|
- |
Other operating expenses |
|
2,819 |
|
|
2,871 |
|
1,263 |
Total non-interest
expense |
|
$ |
8,469 |
|
|
$ |
11,019 |
|
$ |
7,398 |
|
|
|
|
|
|
|
|
Non-interest expense was $8.5 million for the
third quarter of 2022, compared to $11.0 million for the second
quarter of 2022 and $7.4 million for the third quarter of 2021. The
decrease over the previous quarter was primarily due to the
cessation in June 2022 of commission accruals related to the
Company’s strategic lending program and an impairment on the
Company’s SBA servicing asset in the previous quarter which did not
occur in the third quarter of 2022. The increase compared to the
third quarter of 2021 was primarily due to increased other
operating expenses relating primarily to an increase in consulting
fees, partially offset by the cessation in June 2022 of commission
accruals related to the Company’s strategic lending program.
The Company’s efficiency ratio was 42.3% for the
third quarter of 2022 as compared to 52.0% for the second quarter
of 2022 and 33.7% for the third quarter of 2021.
Tax Rate
The Company’s effective tax rate was
approximately 48.7% for the third quarter of 2022, compared to
24.6% for the second quarter of 2022 and 24.5% for the third
quarter of 2021. During the final preparation for filing of the
Company’s 2021 income tax returns an immaterial error in the
calculation of the Company’s tax provision was identified that
understated the income tax expense. This error was corrected during
the third quarter of 2022.
Balance Sheet
The Company’s total assets were $385.6 million
at September 30, 2022, an increase from $366.0 million at June 30,
2022 and an increase from $338.3 million at September 30, 2021. The
increase over the prior period was mainly due to an increase in
deposits utilized to fund the Company’s growth in held for
investment loan portfolio and the Strategic Program held for sale
loan portfolio. The increase in total assets compared to September
30, 2021 was mainly due to an increase in cash from the Company’s
public stock offering, growth in deposits to fund the Company’s
held for investment loan portfolio, partially offset by a decrease
in deposits utilized to fund the Company’s held for sale loan
portfolio.
The following table shows the loan portfolio as
of the dates indicated:
|
|
As of |
|
|
9/30/2022 |
|
6/30/2022 |
|
9/30/2021 |
($s in thousands) |
|
Amount |
|
% of total loans |
|
Amount |
|
% of total loans |
|
Amount |
|
% of total loans |
SBA |
|
$ |
127,455 |
|
49.6% |
|
$ |
124,477 |
|
53.6% |
|
$ |
125,192 |
|
50.2% |
Commercial, non real estate |
|
12,970 |
|
5.1% |
|
7,847 |
|
3.4% |
|
3,955 |
|
1.6% |
Residential real estate |
|
34,501 |
|
13.4% |
|
30,965 |
|
13.3% |
|
25,105 |
|
10.1% |
Strategic Program loans |
|
70,290 |
|
27.4% |
|
59,066 |
|
25.5% |
|
87,876 |
|
35.3% |
Commercial real estate |
|
6,149 |
|
2.4% |
|
4,722 |
|
2.0% |
|
2,357 |
|
0.9% |
Consumer |
|
5,455 |
|
2.1% |
|
5,062 |
|
2.2% |
|
4,729 |
|
1.9% |
Total period end loans |
|
$ |
256,820 |
|
100.0% |
|
$ |
232,139 |
|
100.0% |
|
$ |
249,214 |
|
100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: SBA loans as of September 30, 2022, June 30, 2022 and
September 30, 2021 include $0.7 million, $0.7 million and $2.3
million in PPP loans, respectively. SBA loans as of September
30, 2022, June 30, 2022 and September 30, 2021 include $42.6
million, $46.0 million and $59.9 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 September 30, 2022, June 30, 2022 and September 30,
2021 was $10.2 million, $12.0 million and $9.5 million,
respectively. |
Total loans receivable at September 30, 2022
increased to $256.8 million from $232.1 million at June 30, 2022
and increased from $249.2 million at September 30, 2021. The
increase in loans receivable compared to the amount at June 30,
2022 was due primarily to increases in strategic program held for
sale loans, SBA 7(a) loan balances that are not guaranteed by the
SBA, and commercial, non real estate loans. The increase in loans
receivable compared to the amount at September 30, 2021 was due
primarily to increases in SBA 7(a) loan balances that are not
guaranteed by the SBA, residential real estate loans, and
commercial, non real estate loans, partially offset by decreases in
strategic program held for sale loans and SBA 7(a) loan balances
that are guaranteed by the SBA.
The following table shows the Company’s deposit composition as
of the dates indicated:
|
|
As of |
|
|
9/30/2022 |
|
6/30/2022 |
|
9/30/2021 |
($s in thousands) |
|
Total |
|
Percent |
|
Total |
|
Percent |
|
Total |
|
Percent |
Noninterest-bearing demand deposits |
|
$ |
97,654 |
|
42.0% |
|
$ |
83,490 |
|
38.1% |
|
$ |
109,459 |
|
43.4% |
Interest-bearing
deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
Demand |
|
55,152 |
|
23.6% |
|
11,360 |
|
5.1% |
|
5,398 |
|
2.1% |
Savings |
|
7,252 |
|
3.1% |
|
7,462 |
|
3.4% |
|
8,146 |
|
3.2% |
Money markets |
|
12,281 |
|
5.3% |
|
48,273 |
|
22.0% |
|
25,679 |
|
10.1% |
Time certificates of deposit |
|
60,499 |
|
26.0% |
|
68,774 |
|
31.4% |
|
104,354 |
|
41.2% |
Total period end deposits |
|
$ |
232,838 |
|
100.0% |
|
$ |
219,359 |
|
100.0% |
|
$ |
253,036 |
|
100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits at September 30, 2022 increased
to $232.8 million from $219.4 million at June 30, 2022, and
decreased from $253.0 million at September 30, 2021. The increase
from the amount at June 30, 2022 was driven primarily by an
increase in interest-bearing demand and noninterest-bearing demand
deposits, partially offset by decreases in money market deposits
and time certificates of deposits. The decrease from
the amount at September 30, 2021 was driven by decreases in time
certificates of deposit, money market deposits, and
noninterest-bearing demand deposits, partially offset by an
increase in interest-bearing demand deposits. The increase in
interest-bearing demand deposits over both periods is primarily due
to new HSA deposits from Lively, Inc., a technology focused Health
Savings Account provider.
Total shareholders’ equity at September 30, 2022
increased $3.8 million, to $134.3 million from $130.5 million at
June 30, 2022. Compared to September 30, 2021, total shareholders’
equity at September 30, 2022 increased $65.2 million from $69.1
million. The increase in shareholders’ equity over the prior
quarter was mainly driven by net income for the third quarter of
2022. The increase over the prior year period was primarily due to
the Company’s initial public offering and net income.
Bank Regulatory Capital Ratios
The following table presents the leverage ratios for the Bank as
of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
2022 |
|
2021 |
|
|
9/30/2022 |
|
6/30/2022 |
|
9/30/2021 |
|
Well-Capitalized Requirement |
|
Well-Capitalized Requirement |
Leverage Ratio (Bank under
CBLR) |
|
24.9% |
|
21.4% |
|
19.5% |
|
9.0% |
|
8.5% |
|
|
|
|
|
|
|
|
|
|
|
The Bank’s capital levels remain significantly above
well-capitalized guidelines as of the end of the third quarter of
2022.
Share Repurchase Program
On August 18, 2022, the Company’s Board of
Directors authorized a share repurchase program pursuant to which
the Company may repurchase up to 5% of outstanding common stock as
of August 16, 2022, or 644,241 shares of the Company’s common
stock, through August 31, 2024. As of September 30, 2022, the
Company has repurchased a total of 20,000 shares for a total of
$0.2 million.
Asset Quality
The Company did not have any nonperforming loans
at September 30, 2022, compared to $0.6 million or 0.3% of total
loans receivable at June 30, 2022 and $0.8 million or 0.3% of total
loans receivable at September 30, 2021. As noted above, the
provision for loan losses was $4.5 million for the third quarter of
2022, compared to $2.9 million for the second quarter of 2022 and
$3.4 million for the third quarter of 2021. The Company’s allowance
for loan losses to total loans (less PPP loans) was 4.7% at
September 30, 2022 compared to 4.6% at June 30, 2022 and 3.9% at
September 30, 2021.
For the third quarter of 2022, the Company’s net
charge-offs were $3.1 million, compared to $2.3 million for the
second quarter of 2022 and $1.0 million for the third quarter of
2021. The increase in net charge-offs for the third quarter of 2022
compared to the second quarter of 2022 was primarily driven by
higher net charge-offs related to strategic programs and
charge-offs related to SBA 7(a) loan balances that are not
guaranteed by the SBA that have been carried as classified assets
since 2019. The increase in net charge-offs during the third
quarter of 2022 compared to the third quarter of 2021 was mainly
driven by some normalization of credit losses to pre-pandemic
market conditions and growth in the Company’s held for investment
balances.
The following table presents a summary of
changes in the allowance for loan losses and asset quality ratios
for the periods indicated:
|
|
For the Three Months Ended |
($s in thousands) |
|
9/30/2022 |
|
6/30/2022 |
|
9/30/2021 |
Allowance for Loan &
Lease Losses: |
|
|
|
|
|
|
Beginning Balance |
|
$ |
10,602 |
|
$ |
9,987 |
|
$ |
7,239 |
Provision |
|
4,457 |
|
2,913 |
|
3,367 |
Charge
offs |
|
|
|
|
|
|
SBA |
|
(259) |
|
(102) |
|
(1) |
Commercial, non real estate |
|
- |
|
- |
|
- |
Residential real estate |
|
- |
|
- |
|
- |
Strategic Program loans |
|
(3,070) |
|
(2,560) |
|
(1,105) |
Commercial real estate |
|
- |
|
- |
|
- |
Consumer |
|
(4) |
|
- |
|
- |
Recoveries |
|
|
|
|
|
|
SBA |
|
9 |
|
48 |
|
30 |
Commercial, non real estate |
|
- |
|
1 |
|
11 |
Residential real estate |
|
- |
|
- |
|
- |
Strategic Program loans |
|
233 |
|
315 |
|
99 |
Commercial real estate |
|
- |
|
- |
|
- |
Consumer |
|
- |
|
- |
|
- |
Ending Balance |
|
$ |
11,968 |
|
$ |
10,602 |
|
$ |
9,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality Ratios |
|
As of and For the Three Months Ended |
($s in thousands, annualized ratios) |
|
9/30/2022 |
|
6/30/2022 |
|
9/30/2021 |
Nonperforming loans |
|
$ |
- |
|
$ |
633 |
|
$ |
757 |
Nonperforming loans to total
loans |
|
0.0% |
|
0.3% |
|
0.3% |
Net charge offs to average
loans |
|
4.7% |
|
3.3% |
|
1.6% |
Allowance for loan losses to
loans held for investment |
|
5.6% |
|
5.3% |
|
5.2% |
Allowance for loan losses to
total loans |
|
4.7% |
|
4.6% |
|
3.9% |
Allowance for loan losses to
total loans (less PPP loans) (1) |
|
4.7% |
|
4.6% |
|
3.9% |
Net charge-offs |
|
$ |
3,091 |
|
$ |
2,298 |
|
$ |
966 |
|
|
|
|
|
|
|
(1) This measure is not a measure recognized under 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. Allowance for loan losses to total loans (less PPP
loans) is defined as the allowance for loan losses divided by total
loans minus PPP loans. The most directly comparable GAAP financial
measure is allowance for loan losses to total loans. |
Webcast and
Conference
Call
Information
FinWise will host a conference call today at
5:30 PM ET to discuss its financial results for the third quarter
of 2022. A simultaneous audio webcast of the conference call will
be available on the Company’s investor relations section of the
website at
https://finwisebank.gcs-web.com/events/event-details/finwise-bancorp-third-quarter-2022-earnings-conference-call.
The dial-in number for the conference call is (877) 423-9813
(toll-free) or (201) 689-8573 (international). Please dial the
number 10 minutes prior to the scheduled start time.
A webcast replay of the call will be available
on the Company’s website at https://finwisebank.gcs-web.com for six
months following the call.
Website Information
The Company intends to use its website,
www.finwisebancorp.com, as a means of disclosing material
non-public information and for complying with its disclosure
obligations under Regulation FD. Such disclosures will be included
in the Company’s website’s Investor Relations section. Accordingly,
investors should monitor the Investor Relations portion of the
Company’s website, in addition to following its press releases,
filings with the Securities and Exchange Commission (“SEC”), public
conference calls, and webcasts. To subscribe to the Company’s
e-mail alert service, please click the “Email Alerts” link in the
Investor Relations section of its website and submit your email
address. The information contained in, or that may be accessed
through, the Company’s website is not incorporated by reference
into or a part of this document or any other report or document it
files with or furnishes to the SEC, and any references to the
Company’s website are intended to be inactive textual references
only.
About FinWise Bancorp
FinWise Bancorp is a Utah bank holding company
headquartered in Murray, Utah. FinWise operates through its
wholly-owned subsidiary, FinWise Bank, a Utah state-chartered
non-member bank. FinWise currently operates one full-service
banking location in Sandy, Utah. FinWise is a nationwide lender to
and takes deposits from consumers and small businesses. Learn more
at www.finwisebancorp.com.
Contacts
investors@finwisebank.commedia@finwisebank.com
"Safe Harbor" Statement Under the Private Securities
Litigation Reform Act of 1995
This release contains forward-looking statements
made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements reflect the Company’s current views with respect to,
among other things, future events and its financial performance.
These statements are often, but not always, made through the use of
words or phrases such as “may,” “might,” “should,” “could,”
“predict,” “potential,” “believe,” “will likely result,” “expect,”
“continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,”
“plan,” “project,” “projection,” “forecast,” “budget,” “goal,”
“target,” “would,” “aim” and “outlook,” or the negative version of
those words or other comparable words or phrases of a future or
forward-looking nature. These forward-looking statements are not
historical facts, and are based on current expectations, estimates
and projections about the Company’s industry and management’s
beliefs and certain assumptions made by management, many of which,
by their nature, are inherently uncertain and beyond the Company’s
control. The inclusion of these forward-looking statements should
not be regarded as a representation by the Company or any other
person that such expectations, estimates and projections will be
achieved. Accordingly, the Company cautions you that any such
forward-looking statements are not guarantees of future performance
and are subject to risks, assumptions and uncertainties that are
difficult to predict. Although the Company believes that the
expectations reflected in these forward-looking statements are
reasonable as of the date made, actual results may prove to be
materially different from the results expressed or implied by the
forward-looking statements.
There are or will be important factors that
could cause the Company’s actual results to differ materially from
those indicated in these forward-looking statements, including, but
not limited to, the following: (a) conditions relating to the
Covid-19 pandemic, including the severity and duration of the
associated economic slowdown either nationally or in the Company’s
market areas, and the response of governmental authorities to the
Covid-19 pandemic and the Company’s participation in
Covid-19-related government programs such as the PPP; (b) system
failure or cybersecurity breaches of the Company’s network
security; (c) the success of the financial technology industry, the
development and acceptance of which is subject to a high degree of
uncertainty, as well as the continued evolution of the regulation
of this industry; (d) the Company’s ability to keep pace with rapid
technological changes in the industry or implement new technology
effectively; (e) the Company’s reliance on third-party service
providers for core systems support, informational website hosting,
internet services, online account opening and other processing
services; (f) general economic conditions, either nationally or in
the Company’s market areas (including interest rate environment,
government economic and monetary policies, the strength of global
financial markets and inflation and deflation), that impact the
financial services industry and/or the Company’s business; (g)
increased competition in the financial services industry,
particularly from regional and national institutions and other
companies that offer banking services; (h) the Company’s ability to
measure and manage its credit risk effectively and the potential
deterioration of the business and economic conditions in the
Company’s primary market areas; (i) the adequacy of the Company’s
risk management framework; (j) the adequacy of the Company’s
allowance for loan losses; (k) the financial soundness of other
financial institutions; (l) new lines of business or new products
and services; (m) changes in SBA rules, regulations and loan
products, including specifically the Section 7(a) program, changes
in SBA standard operating procedures or changes to the status of
the Bank as an SBA Preferred Lender; (n) changes in the value of
collateral securing the Company’s loans; (o) possible increases in
the Company’s levels of nonperforming assets; (p) potential losses
from loan defaults and nonperformance on loans; (q) the Company’s
ability to protect its intellectual property and the risks it faces
with respect to claims and litigation initiated against the
Company; (r) the inability of small- and medium-sized businesses to
whom the Company lends to weather adverse business conditions and
repay loans; (s) the Company’s ability to implement aspects of its
growth strategy and to sustain its historic rate of growth; (t) the
Company’s ability to continue to originate, sell and retain loans,
including through its Strategic Programs; (u) the concentration of
the Company’s lending and depositor relationships through Strategic
Programs in the financial technology industry generally; (v) the
Company’s ability to attract additional merchants and retain and
grow its existing merchant relationships; (w) interest rate risk
associated with the Company’s business, including sensitivity of
its interest earning assets and interest-bearing liabilities to
interest rates, and the impact to its earnings from changes in
interest rates; (x) the effectiveness of the Company’s internal
control over financial reporting and its ability to remediate any
future material weakness in its internal control over financial
reporting; (y) potential exposure to fraud, negligence, computer
theft and cyber-crime and other disruptions in the Company’s
computer systems relating to its development and use of new
technology platforms; (z) the Company’s dependence on its
management team and changes in management composition; (aa) the
sufficiency of the Company’s capital, including sources of capital
and the extent to which it may be required to raise additional
capital to meet its goals; (bb) compliance with laws and
regulations, supervisory actions, the Dodd-Frank Act, the
Regulatory Relief Act, capital requirements, the Bank Secrecy Act,
anti-money laundering laws, predatory lending laws, and other
statutes and regulations; (cc) changes in the laws, rules,
regulations, interpretations or policies relating to financial
institutions, accounting, tax, trade, monetary and fiscal matters;
(dd) the Company’s ability to maintain a strong core deposit base
or other low-cost funding sources; (ee) results of examinations of
the Company by the Company’s regulators, including the possibility
that its regulators may, among other things, require the Company to
increase its allowance for loan losses or to write-down assets;
(ff) the Company’s involvement from time to time in legal
proceedings, examinations and remedial actions by regulators; (gg)
further government intervention in the U.S. financial system; (hh)
the ability of the Company’s Strategic Program service providers to
comply with regulatory regimes, including laws and regulations
applicable to consumer credit transactions, and the Company’s
ability to adequately oversee and monitor its Strategic Program
service providers; (ii) the Company’s ability to maintain and grow
its relationships with its Strategic Program service providers;
(jj) natural disasters and adverse weather, acts of terrorism,
pandemics, an outbreak of hostilities or other international or
domestic calamities, and other matters beyond the Company’s
control; (kk) future equity and debt issuances; and (ll) other
factors listed from time to time in the Company’s filings with the
Securities and Exchange Commission, including, without limitation,
its Annual Report on Form 10-K for the year ended December 31, 2021
and subsequent reports on Form 10-Q and Form 8-K.
The timing and amount of purchases under the
Company’s share repurchase program will be determined by management
based upon market conditions and other factors. Purchases may be
made pursuant to a program adopted under Rule 10b5-1 under the
Securities Exchange Act of 1934, as amended. The program does not
require the Company to purchase any specific number or amount of
shares and may be suspended or reinstated at any time in the
Company’s discretion and without notice.
The foregoing factors should not be construed as
exhaustive. If one or more events related to these or other risks
or uncertainties materialize, or if the Company’s underlying
assumptions prove to be incorrect, actual results may differ
materially from its forward-looking statements. Accordingly, you
should not place undue reliance on any such forward-looking
statements. Any forward-looking statement speaks only as of the
date of this release, and the Company does not undertake any
obligation to publicly update or review any forward-looking
statement, whether because of new information, future developments
or otherwise, except as required by law. New risks and
uncertainties may emerge from time to time, and it is not possible
for the Company to predict their occurrence. In addition, the
Company cannot assess the impact of each risk and uncertainty on
its business or the extent to which any risk or uncertainty, or
combination of risks and uncertainties, may cause actual results to
differ materially from those contained in any forward-looking
statements.
FINWISE BANCORP CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION($s in thousands;
unaudited)
|
|
As of |
($s in thousands) |
|
9/30/2022 |
|
6/30/2022 |
|
9/30/2021 |
ASSETS |
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
Cash and due from banks |
|
$ |
410 |
|
$ |
397 |
|
$ |
410 |
Interest bearing deposits |
|
92,053 |
|
96,131 |
|
67,696 |
Total cash and cash equivalents |
|
92,463 |
|
96,528 |
|
68,106 |
Investment securities held-to-maturity, at cost |
|
13,925 |
|
12,463 |
|
4,414 |
Investment in Federal Home Loan Bank (FHLB) stock, at cost |
|
449 |
|
449 |
|
377 |
Loans receivable, net |
|
200,485 |
|
189,670 |
|
178,748 |
Strategic Program loans held-for-sale, at lower of cost or fair
value |
|
43,606 |
|
31,599 |
|
62,702 |
Premises and equipment, net |
|
6,830 |
|
5,834 |
|
2,484 |
Accrued interest receivable |
|
1,672 |
|
1,422 |
|
1,297 |
Deferred taxes, net |
|
2,164 |
|
2,018 |
|
1,597 |
SBA servicing asset, net |
|
5,269 |
|
4,586 |
|
4,368 |
Investment in Business Funding Group (BFG), at fair
value |
|
4,500 |
|
4,600 |
|
5,241 |
Investment in Finwise Investments, LLC |
|
271 |
|
80 |
|
- |
Operating lease right-of-use ("ROU") assets |
|
6,691 |
|
6,935 |
|
- |
Income taxes receivable, net |
|
- |
|
1,843 |
|
- |
Other assets |
|
7,244 |
|
7,960 |
|
8,982 |
Total assets |
|
$ |
385,569 |
|
$ |
365,987 |
|
$ |
338,316 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
Noninterest bearing |
|
$ |
97,654 |
|
$ |
83,490 |
|
$ |
109,459 |
Interest bearing |
|
135,184 |
|
135,869 |
|
143,577 |
Total deposits |
|
232,838 |
|
219,359 |
|
253,036 |
Accrued interest payable |
|
30 |
|
34 |
|
43 |
Income taxes payable, net |
|
1,066 |
|
- |
|
823 |
PPP Liquidity Facility |
|
345 |
|
376 |
|
2,259 |
Operating lease liabilities |
|
7,249 |
|
7,393 |
|
- |
Other liabilities |
|
9,756 |
|
8,288 |
|
13,017 |
Total liabilities |
|
251,284 |
|
235,450 |
|
269,178 |
|
|
|
|
|
|
|
Shareholders'
equity |
|
|
|
|
|
|
Common stock |
|
13 |
|
13 |
|
9 |
Additional paid-in-capital |
|
55,113 |
|
55,015 |
|
18,647 |
Retained earnings |
|
79,159 |
|
75,509 |
|
50,482 |
Total shareholders'
equity |
|
134,285 |
|
130,537 |
|
69,138 |
Total liabilities
and shareholders' equity |
|
$ |
385,569 |
|
$ |
365,987 |
|
$ |
338,316 |
FINWISE BANCORPCONDENSED CONSOLIDATED
STATEMENTS OF INCOME ($s in thousands, except per
share amounts; unaudited)
|
|
For the Three Months Ended |
($s in thousands, except per
share amounts) |
|
9/30/2022 |
|
6/30/2022 |
|
9/30/2021 |
Interest income |
|
|
|
|
|
|
Interest and fees on loans |
|
$ |
12,481 |
|
$ |
12,864 |
|
$ |
13,726 |
Interest on securities |
|
52 |
|
44 |
|
7 |
Other interest income |
|
290 |
|
105 |
|
16 |
Total interest income |
|
12,823 |
|
13,013 |
|
13,749 |
|
|
|
|
|
|
|
Interest
expense |
|
|
|
|
|
|
Interest on deposits |
|
303 |
|
244 |
|
271 |
Interest on PPP Liquidity Facility |
|
1 |
|
- |
|
8 |
Total interest expense |
|
304 |
|
244 |
|
279 |
Net interest income |
|
12,519 |
|
12,769 |
|
13,470 |
|
|
|
|
|
|
|
Provision for loan losses |
|
4,457 |
|
2,913 |
|
3,367 |
Net interest income after
provision for loan losses |
|
8,062 |
|
9,856 |
|
10,103 |
|
|
|
|
|
|
|
Non-interest
income |
|
|
|
|
|
|
Strategic Program fees |
|
5,136 |
|
6,221 |
|
4,982 |
Gain on sale of loans |
|
1,923 |
|
2,412 |
|
2,876 |
SBA loan servicing fees |
|
327 |
|
342 |
|
337 |
Change in fair value on investment in BFG |
|
65 |
|
(575) |
|
266 |
Other miscellaneous income |
|
72 |
|
31 |
|
14 |
Total non-interest income |
|
7,523 |
|
8,431 |
|
8,475 |
|
|
|
|
|
|
|
Non-interest
expense |
|
|
|
|
|
|
Salaries and employee benefits |
|
5,137 |
|
6,594 |
|
5,930 |
Occupancy and equipment expenses |
|
640 |
|
419 |
|
205 |
(Recovery) impairment of SBA servicing asset |
|
(127) |
|
1,135 |
|
- |
Other operating expenses |
|
2,819 |
|
2,871 |
|
1,263 |
Total non-interest
expense |
|
8,469 |
|
11,019 |
|
7,398 |
Income before income tax expense |
|
7,116 |
|
7,268 |
|
11,180 |
|
|
|
|
|
|
|
Provision for income taxes |
|
3,462 |
|
1,786 |
|
2,738 |
Net
income |
|
$ |
3,654 |
|
$ |
5,482 |
|
$ |
8,442 |
|
|
|
|
|
|
|
Earnings per share, basic |
|
$ |
0.28 |
|
$ |
0.43 |
|
$ |
0.97 |
Earnings per share,
diluted |
|
$ |
0.27 |
|
$ |
0.41 |
|
$ |
0.91 |
|
|
|
|
|
|
|
Weighted average shares
outstanding, basic |
|
12,784,298 |
|
12,716,010 |
|
8,255,953 |
Weighted average shares
outstanding, diluted |
|
13,324,059 |
|
13,417,390 |
|
8,810,829 |
Shares outstanding at end of
period |
|
12,864,821 |
|
12,884,821 |
|
8,746,110 |
|
|
|
|
|
|
|
FINWISE BANCORPAVERAGE BALANCES,
YIELDS, AND RATES - QUARTERLY($s in thousands;
unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
For the Three Months Ended |
|
For the Three Months Ended |
|
|
9/30/2022 |
|
6/30/2022 |
|
9/30/2021 |
($s in thousands, annualized
ratios) |
|
Average Balance |
|
|
Interest |
|
Average Yield/Rate |
|
Average Balance |
|
|
Interest |
|
Average Yield/Rate |
|
Average Balance |
|
|
Interest |
|
Average Yield/Rate |
Interest earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits with the Federal Reserve, non-U.S.
central banks and other banks |
|
$ |
59,337 |
|
|
290 |
|
1.95% |
|
$ |
82,046 |
|
|
105 |
|
0.51% |
|
$ |
54,261 |
|
|
16 |
|
0.12% |
Investment securities |
|
12,418 |
|
|
52 |
|
1.67% |
|
11,837 |
|
|
44 |
|
1.49% |
|
1,689 |
|
|
7 |
|
1.66% |
Loans held for sale |
|
50,516 |
|
|
4,533 |
|
35.89% |
|
74,800 |
|
|
5,949 |
|
31.81% |
|
65,273 |
|
|
6,293 |
|
38.56% |
Loans held for investment |
|
213,080 |
|
|
7,948 |
|
14.92% |
|
204,501 |
|
|
6,915 |
|
13.53% |
|
173,068 |
|
|
7,433 |
|
17.18% |
Total interest earning
assets |
|
335,351 |
|
|
12,823 |
|
15.30% |
|
373,184 |
|
|
13,013 |
|
13.95% |
|
294,291 |
|
|
13,749 |
|
18.69% |
Less: allowance for loan
losses |
|
(10,768 |
) |
|
|
|
|
|
(10,425 |
) |
|
|
|
|
|
(8,083 |
) |
|
|
|
|
Non-interest earning
assets |
|
32,626 |
|
|
|
|
|
|
32,558 |
|
|
|
|
|
|
18,846 |
|
|
|
|
|
Total assets |
|
$ |
357,209 |
|
|
|
|
|
|
$ |
395,317 |
|
|
|
|
|
|
$ |
305,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing
liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand |
|
$ |
11,857 |
|
|
113 |
|
3.81% |
|
$ |
7,587 |
|
|
$ |
27 |
|
1.42% |
|
$ |
5,007 |
|
|
11 |
|
0.88% |
Savings |
|
7,514 |
|
|
1 |
|
0.05% |
|
7,430 |
|
|
1 |
|
0.05% |
|
8,818 |
|
|
3 |
|
0.14% |
Money market accounts |
|
20,615 |
|
|
29 |
|
0.56% |
|
29,318 |
|
|
21 |
|
0.29% |
|
22,274 |
|
|
21 |
|
0.38% |
Certificates of deposit |
|
64,789 |
|
|
160 |
|
0.99% |
|
82,870 |
|
|
195 |
|
0.94% |
|
76,127 |
|
|
236 |
|
1.24% |
Total deposits |
|
104,775 |
|
|
303 |
|
1.16% |
|
127,205 |
|
|
244 |
|
0.77% |
|
112,226 |
|
|
271 |
|
0.97% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other borrowings |
|
360 |
|
|
1 |
|
0.35% |
|
601 |
|
|
- |
|
0.35% |
|
9,365 |
|
|
8 |
|
0.34% |
Total interest bearing liabilities |
|
105,135 |
|
|
304 |
|
1.16% |
|
127,806 |
|
|
244 |
|
0.76% |
|
121,591 |
|
|
279 |
|
0.92% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest bearing
deposits |
|
102,575 |
|
|
|
|
|
|
120,359 |
|
|
|
|
|
|
107,342 |
|
|
|
|
|
Non-interest bearing
liabilities |
|
17,542 |
|
|
|
|
|
|
19,429 |
|
|
|
|
|
|
13,076 |
|
|
|
|
|
Shareholders’ equity |
|
131,957 |
|
|
|
|
|
|
127,723 |
|
|
|
|
|
|
63,045 |
|
|
|
|
|
Total liabilities and
shareholders’ equity |
|
$ |
357,209 |
|
|
|
|
|
|
$ |
395,317 |
|
|
|
|
|
|
$ |
305,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income and
interest rate spread |
|
|
|
|
12,519 |
|
14.14% |
|
|
|
|
$ |
12,769 |
|
13.18% |
|
|
|
|
$ |
13,470 |
|
17.77% |
Net interest margin |
|
|
|
|
|
|
14.93% |
|
|
|
|
|
|
13.69% |
|
|
|
|
|
|
18.31% |
Ratio of average
interest-earning assets to average interest- bearing
liabilities |
|
|
|
|
|
|
318.97% |
|
|
|
|
|
|
291.99% |
|
|
|
|
|
|
242.03% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Average PPP
loans for the three months ended September 30, 2022, June 30, 2022
and September 30, 2021 were $0.7 million, $0.9 million and $8.8
million, respectively. |
|
|
|
FINWISE BANCORPSELECTED HISTORICAL
CONSOLIDATED FINANCIAL AND OTHER DATA ($s in
thousands, except per share amounts; unaudited)
($s in thousands, except for per share data, annualized
ratios) |
|
As of and for the Three Months Ended |
|
|
9/30/2022 |
|
6/30/2022 |
|
9/30/2021 |
Selected Loan
Metrics |
|
|
|
|
|
|
Amount of loans originated |
|
$ |
1,506,100 |
|
$ |
2,088,843 |
|
$ |
1,822,942 |
Selected Income
Statement Data |
|
|
|
|
|
|
Interest income |
|
$ |
12,823 |
|
$ |
13,013 |
|
$ |
13,749 |
Interest expense |
|
304 |
|
244 |
|
279 |
Net interest income |
|
12,519 |
|
12,769 |
|
13,470 |
Provision for loan losses |
|
4,457 |
|
2,913 |
|
3,367 |
Net interest income after
provision for loan losses |
|
8,062 |
|
9,856 |
|
10,103 |
Non-interest income |
|
7,523 |
|
8,431 |
|
8,475 |
Non-interest expense |
|
8,469 |
|
11,019 |
|
7,398 |
Provision for income
taxes |
|
3,462 |
|
1,786 |
|
2,738 |
Net income |
|
3,654 |
|
5,482 |
|
8,442 |
Selected Balance Sheet
Data |
|
|
|
|
|
|
Total Assets |
|
$ |
385,569 |
|
$ |
365,987 |
|
$ |
338,316 |
Cash and cash equivalents |
|
92,463 |
|
96,528 |
|
68,106 |
Investment securities held-to-maturity, at cost |
|
13,925 |
|
12,463 |
|
4,414 |
Loans receivable, net |
|
200,485 |
|
189,670 |
|
178,748 |
Strategic Program loans
held-for-sale, at lower of cost or fair value |
|
43,606 |
|
31,599 |
|
62,702 |
SBA servicing asset, net |
|
5,269 |
|
4,586 |
|
4,368 |
Investment in Business Funding
Group, at fair value |
|
4,500 |
|
4,600 |
|
5,241 |
Deposits |
|
232,838 |
|
219,359 |
|
253,036 |
PPP Liquidity Facility |
|
345 |
|
376 |
|
2,259 |
Total shareholders'
equity |
|
134,285 |
|
130,537 |
|
69,138 |
Tangible shareholders’ equity
(1) |
|
134,285 |
|
130,537 |
|
69,138 |
Share and Per Share
Data |
|
|
|
|
|
|
Earnings per share -
basic |
|
$ |
0.28 |
|
$ |
0.43 |
|
$ |
0.97 |
Earnings per share -
diluted |
|
$ |
0.27 |
|
$ |
0.41 |
|
$ |
0.91 |
Book value per share |
|
$ |
10.44 |
|
$ |
10.13 |
|
$ |
7.90 |
Tangible book value per share
(1) |
|
$ |
10.44 |
|
$ |
10.13 |
|
$ |
7.90 |
Weighted avg outstanding
shares - basic |
|
12,784,298 |
|
12,716,010 |
|
8,255,953 |
Weighted avg outstanding
shares - diluted |
|
13,324,059 |
|
13,417,390 |
|
8,810,829 |
Shares outstanding at end of
period |
|
12,864,821 |
|
12,884,821 |
|
8,746,110 |
Asset Quality
Ratios |
|
|
|
|
|
|
Nonperforming loans to total
loans |
|
0.0% |
|
0.3% |
|
0.3% |
Net charge offs to average
loans |
|
4.7% |
|
3.3% |
|
1.6% |
Allowance for loan losses to
loans held for investment |
|
5.6% |
|
5.3% |
|
5.2% |
Allowance for loan losses to
total loans |
|
4.7% |
|
4.6% |
|
3.9% |
Allowance for loan losses to
total loans (less PPP loans) (2) |
|
4.7% |
|
4.6% |
|
3.9% |
Capital
Ratios |
|
|
|
|
|
|
Total shareholders' equity to
total assets |
|
34.8% |
|
35.7% |
|
20.4% |
Tangible shareholders’ equity
to tangible assets (1) |
|
34.8% |
|
35.7% |
|
20.4% |
Leverage Ratio (Bank under
CBLR) |
|
24.9% |
|
21.4% |
|
19.5% |
|
|
|
|
|
|
|
(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. 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. We had no
goodwill or other intangible assets as of any of the dates
indicated. We have not considered loan servicing rights as an
intangible asset 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. (2) This measure is not a
measure recognized under 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. Allowance for loan losses to
total loans (less PPP loans) is defined as the allowance for loan
losses divided by total loans minus PPP loans. The most directly
comparable GAAP financial measure is allowance for loan losses to
total loans. |
Reconciliation of Non-GAAP to GAAP Financial
Measures
|
|
|
|
|
|
|
Efficiency
ratio |
|
|
|
|
|
|
|
|
For Three Months Ended |
($s in thousands, annualized
ratios) |
|
9/30/2022 |
|
6/30/2022 |
|
9/30/2021 |
Non-interest expense |
|
$ |
8,469 |
|
$ |
11,019 |
|
$ |
7,398 |
Net interest income |
|
12,519 |
|
12,769 |
|
13,470 |
Total non-interest income |
|
7,523 |
|
8,431 |
|
8,475 |
Adjusted operating revenue |
|
$ |
20,042 |
|
$ |
21,200 |
|
$ |
21,945 |
Efficiency ratio |
|
42.3% |
|
52.0% |
|
33.7% |
|
|
|
|
|
|
|
Allowance for loan
losses to total loans (less PPP Loans) |
|
|
|
|
|
|
|
|
As of |
|
|
9/30/2022 |
|
6/30/2022 |
|
9/30/2021 |
($s in thousands) |
|
|
|
|
|
|
Allowance for loan losses |
|
$ |
11,968 |
|
$ |
10,602 |
|
$ |
9,640 |
Total Loans |
|
256,820 |
|
232,139 |
|
249,214 |
PPP Loans |
|
679 |
|
734 |
|
2,303 |
Total Loans less PPP
Loans |
|
$ |
256,141 |
|
$ |
231,405 |
|
$ |
246,911 |
Allowance for loan losses to
total loans (less PPP Loans) |
|
4.7% |
|
4.6% |
|
3.9% |
|
|
|
|
|
|
|
Total
nonperforming assets and troubled debt restructurings to total
assets (less PPP loans) |
|
|
|
|
As of |
|
|
9/30/2022 |
|
6/30/2022 |
|
9/30/2021 |
($s in thousands) |
|
|
|
|
|
|
Total Assets |
|
$ |
385,569 |
|
$ |
365,987 |
|
$ |
338,316 |
PPP Loans |
|
679 |
|
734 |
|
2,303 |
Total Assets less PPP
Loans |
|
$ |
384,890 |
|
$ |
365,253 |
|
$ |
336,013 |
Total nonperforming assets and
troubled debt restructurings |
|
$ |
95 |
|
$ |
728 |
|
$ |
864 |
Total nonperforming assets and
troubled debt restructurings to total assets (less PPP loans) |
|
0.0% |
|
0.2% |
|
0.3% |
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