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FinWise Bancorp Reports Second Quarter 2022 Results

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FinWise Bank
FinWise Bank

- Net Income of $5.5 Million -

- Diluted Earnings Per Share of $0.41 -

MURRAY, Utah, July 27, 2022 (GLOBE NEWSWIRE) -- FinWise Bancorp (NASDAQ: FINW) (“FinWise” or the “Company”), parent company of FinWise Bank (the “Bank”), today announced results for the quarter ended June 30, 2022.

Second Quarter 2022 Highlights

  • Loan originations were $2.1 billion, compared to $2.5 billion for the quarter ended March 31, 2022 and $1.4 billion in the prior year period

  • Net interest income was $12.8 million, compared to $13.0 million for the quarter ended March 31, 2022 and $10.8 million in the prior year period

  • Net Income was $5.5 million, compared to $9.4 million for the quarter ended March 31, 2022 and $7.7 million in the prior year period

  • Diluted earnings per share (“EPS”) were $0.41 for the quarter, compared to $0.70 for the quarter ended March 31, 2022 and $0.84 for the prior year period

  • Efficiency ratio was 52.0%, compared to 36.7% for the quarter ended March 31, 2022 and 37.3% for the prior year period

  • Maintained industry-leading returns with annualized return on average equity (ROAE) of 17.2%, compared to 31.4% in the quarter ended March 31, 2022 and 55.0% in the prior year period

  • Asset quality remained strong with a nonperforming loans to total loans ratio of 0.3%

“The FinWise team executed admirably during the second quarter and our results further validate the Company’s strong and differentiated business model,” said Kent Landvatter, Chief Executive Officer and President of FinWise. “Amid an economic environment that deteriorated rapidly, we delivered favorable results, including solid originations, strong credit quality and industry-leading returns. Despite challenging external macro factors, we remain committed to managing the business for the long term and will continue to focus on what we can control so that we remain well positioned to take advantage of growth opportunities when the environment improves.”

Results of Operations

The Company’s second quarter of 2022 was highlighted by solid loan originations across its primary lines of business and industry-leading returns.

Selected Financial Data

 

 

For the Three Months Ended

($s in thousands, except per share amounts, annualized ratios)

 

6/30/2022

 

3/31/2022

 

6/30/2021

Net Income

 

$

5,482

 

 

$

9,434

 

 

$

7,739

 

Diluted EPS

 

$

0.41

 

 

$

0.70

 

 

$

0.84

 

Return on average assets

 

 

5.5

%

 

 

9.4

%

 

 

10.0

%

Return on average equity

 

 

17.2

%

 

 

31.4

%

 

 

55.0

%

Yield on loans

 

 

18.42

%

 

 

17.74

%

 

 

17.81

%

Cost of deposits

 

 

0.77

%

 

 

0.79

%

 

 

1.29

%

Net interest margin

 

 

13.69

%

 

 

13.37

%

 

 

20.29

%

Efficiency Ratio (1)

 

 

52.0

%

 

 

36.7

%

 

 

37.3

%

Tangible book value per share

 

$

10.13

 

 

$

9.77

 

 

$

6.92

 

Tangible shareholders’ equity to tangible assets (2)

 

 

35.7

%

 

 

29.4

%

 

 

20.9

%

Leverage Ratio (Bank under CBLR)

 

 

21.4

%

 

 

19.1

%

 

 

19.2

%

 

 

 

 

 

 

 

(1) This measure is not a measure recognized under United States generally accepted accounting principles, or GAAP, and is therefore considered to be non-GAAP financial measures. 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 non-GAAP financial measures. 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 $5.5 million for the second quarter of 2022, compared to $9.4 million for the first quarter of 2022, and $7.7 million for the second quarter of 2021. The decline from the previous quarter was primarily due to lower gain-on-sale of loans and an impairment of the Company’s SBA servicing asset. Compared to the prior year period, the decline was primarily driven by an increase in non-interest expenses and a decrease in fair value of the Company’s investment in Business Funding Group, LLC (“BFG”), partially offset by increases in non-interest income and net interest income.

Net Interest Income

Net interest income was $12.8 million for the second quarter of 2022, compared to $13.0 million for the first quarter of 2022, and $10.8 million for the second quarter of 2021. The decline from the previous quarter was primarily due to lower average loans held for sale balances. Growth over the prior year period primarily reflected strong loan growth resulting in higher average balances and an increase in the other interest earning asset classes.

Loan originations totaled $2.1 billion for the second quarter of 2022, down from $2.5 billion for the first quarter of 2022, and up from $1.4 billion for the second quarter of 2021.

Net interest margin for the second quarter of 2022 increased to 13.69% compared to 13.37% for the first quarter of 2022 and decreased compared to 20.29% for the second quarter of 2021. The increase from the previous quarter was primarily driven by 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 second quarter of 2021 was driven mainly by the substantial increase in lower yielding cash and cash equivalents raised in the Company’s initial public offering and a loan mix shift toward loans carrying lower yields within the strategic program held for sale portfolio.

Provision for Loan Losses

The Company’s provision for loan losses was $2.9 million for the second quarter of 2022, compared to $2.9 million for the first quarter of 2022 and $1.5 million for the second quarter of 2021. Compared to the previous quarter, the provision for the second quarter of 2022 reflected growth of unguaranteed loans held for investment and lower net charge-offs compared to the first quarter of 2022. The increase in the Company’s provision for loan losses for the second quarter of 2022 compared to the second quarter of 2021 was primarily due to substantial non-PPP loan growth and an increase in net charge-offs.

Non-interest Income

 

 

For the Three Months Ended

($s in thousands)

 

6/30/2022

 

3/31/2022

 

6/30/2021

Non-interest income:

 

 

 

 

 

 

Strategic program fees

 

$

6,221

 

 

$

6,623

 

 

$

3,942

 

Gain on sale of loans

 

 

2,412

 

 

 

5,052

 

 

 

2,397

 

SBA loan servicing fees

 

 

342

 

 

 

387

 

 

 

311

 

Change in fair value on investment in BFG

 

 

(575

)

 

 

(398

)

 

 

1,501

 

Other miscellaneous income

 

 

31

 

 

 

18

 

 

 

10

 

Total non-interest income

 

$

8,431

 

 

$

11,682

 

 

$

8,161

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest income was $8.4 million for the second quarter of 2022, compared to $11.7 million for the first quarter of 2022 and $8.2 million for the second quarter of 2021. The decline from the previous quarter was driven primarily by lower gain on sale of loans due to a decrease in the number of SBA 7(a) loans sold. Compared to the prior year period, the increase was primarily due to an increase in strategic program fees due to significant loan origination volume growth, partially offset by a decrease in fair value of the Company’s investment in BFG.

Non-interest Expense

 

 

For the Three Months Ended

($s in thousands)

 

6/30/2022

 

3/31/2022

 

6/30/2021

Non-interest expense:

 

 

 

 

 

 

Salaries and employee benefits

 

$

7,182

 

 

$

7,092

 

 

$

5,488

 

Occupancy and equipment expenses

 

 

419

 

 

 

302

 

 

 

203

 

(Recovery) impairment of SBA servicing asset

 

 

1,135

 

 

 

(59

)

 

 

-

 

Other operating expenses

 

 

2,283

 

 

 

1,713

 

 

 

1,388

 

Total non-interest expense

 

$

11,019

 

 

$

9,048

 

 

$

7,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest expense was $11.0 million for the second quarter of 2022, compared to $9.0 million for the first quarter of 2022 and $7.1 million for the second quarter of 2021. The increase over the previous quarter was primarily due to an impairment of the Company’s SBA servicing asset in the second quarter of 2022 due to rising market interest rates and market-wide increasing prepayment speeds on SBA loans. The increase compared to the second quarter of 2021 was primarily due to increased expenses from higher employee head count related to an increase in strategic program loan volume and an impairment of the Company’s SBA servicing asset.

The Company’s efficiency ratio was 52.0% for the second quarter of 2022 as compared to 36.7% for the first quarter of 2022 and 37.3% for the second quarter of 2021.

Tax Rate

The Company’s effective tax rate was approximately 24.6% for the second quarter of 2022, compared to 25.4% for the first quarter of 2022 and 25.2% for the second quarter of 2021.

Balance Sheet  

The Company’s total assets were $366.0 million at June 30, 2022, a decrease from $424.5 million at March 31, 2022 and an increase from $288.2 million at June 30, 2021. The decrease over the prior period was mainly due to a decline in deposits required to fund the Company’s Strategic Program loan portfolio. The increase in total assets compared to June 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 Strategic Program loan portfolio and an increase in deposits to fund SBA 7(a) loans offset by a decrease in borrowings under the PPP Liquidity Facility due to a decline in PPP loans outstanding.

The following table shows the loan portfolio as of the dates indicated:

 

 

As of

 

 

6/30/2022

 

3/31/2022

 

6/30/2021

($s in thousands)

 

Amount

 

% of total loans

 

Amount

 

% of total loans

 

Amount

 

% of total loans

SBA

 

$

124,477

 

 

53.6

%

 

$

127,778

 

 

46.9

%

 

$

128,841

 

 

55.2

%

Commercial, non real estate

 

 

7,847

 

 

3.4

%

 

 

3,285

 

 

1.2

%

 

 

3,627

 

 

1.6

%

Residential real estate

 

 

30,965

 

 

13.3

%

 

 

30,772

 

 

11.3

%

 

 

22,410

 

 

9.6

%

Strategic Program loans

 

 

59,066

 

 

25.5

%

 

 

101,819

 

 

37.4

%

 

 

71,235

 

 

30.6

%

Commercial real estate

 

 

4,722

 

 

2.0

%

 

 

4,187

 

 

1.5

%

 

 

2,316

 

 

1.0

%

Consumer

 

 

5,062

 

 

2.2

%

 

 

4,711

 

 

1.7

%

 

 

4,624

 

 

2.0

%

Total period end loans

 

$

232,139

 

 

100.0

%

 

$

272,552

 

 

100.0

%

 

$

233,053

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: SBA loans as of June 30, 2022, March 31, 2022 and June 30, 2021 include $0.7 million, $1.0 million and $17.3 million in PPP loans, respectively. SBA loans as of June 30, 2022, March 31, 2022 and June 30, 2021 include $46.0 million, $53.2 million and $54.4 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 June 30, 2022, March 31, 2022 and June 30, 2021 was $12.0 million, $13.8 million and $0.0 million, respectively.

Total loans receivable at June 30, 2022 decreased to $232.1 million from $272.6 million at March 31, 2022 and decreased from $233.1 million at June 30, 2021. The decrease in loans receivable over the prior period was due primarily to decreases in strategic program held for sale loans and SBA 7(a) loan balances that are guaranteed by the SBA, partially offset by increases in commercial non real estate loans and SBA 7(a) loans that are not guaranteed by the SBA. The decrease in loans receivable compared to June 30, 2021 was due primarily to decreases in strategic program held for sale loans and PPP loans, substantially offset by increases in SBA 7(a) loans that are not guaranteed by the SBA, strategic program held for investment loans, residential real estate, and commercial non real estate loans. Decreases in strategic program held for sale loans over both prior periods were primarily due to a more challenging economic environment.

The following table shows the Company’s deposit composition as of the dates indicated:

 

 

As of

 

 

6/30/2022

 

3/31/2022

 

6/30/2021

($s in thousands)

 

Total

 

Percent

 

Total

 

Percent

 

Total

 

Percent

Noninterest-bearing demand deposits

 

$

83,490

 

 

38.1

%

 

$

127,330

 

 

45.9

%

 

$

105,134

 

 

53.0

%

Interest-bearing deposits:

 

 

 

 

 

 

 

 

 

 

 

 

Demand

 

 

11,360

 

 

5.1

%

 

 

7,919

 

 

2.8

%

 

 

5,058

 

 

2.5

%

Savings

 

 

7,462

 

 

3.4

%

 

 

7,089

 

 

2.6

%

 

 

8,724

 

 

4.4

%

Money markets

 

 

48,273

 

 

22.0

%

 

 

53,434

 

 

19.3

%

 

 

20,129

 

 

10.1

%

Time certificates of deposit

 

 

68,774

 

 

31.4

%

 

 

81,688

 

 

29.4

%

 

 

59,551

 

 

30.0

%

Total period end deposits

 

$

219,359

 

 

100.0

%

 

$

277,460

 

 

100.0

%

 

$

198,596

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total deposits at June 30, 2022 decreased to $219.4 million from $277.5 million at March 31, 2022, and increased from $198.6 million at June 30, 2021. The decrease from the first quarter of 2022 was driven primarily by a decrease in noninterest-bearing demand, time certificates of deposits, and money market. The increase from the second quarter of 2021 was driven by increases in money market, time certificates of deposit, and interest-bearing demand deposits, partially offset by a decrease in noninterest-bearing demand deposits.

Total shareholders’ equity at June 30, 2022 increased $5.5 million, to $130.5 million from $125.0 million at March 31, 2022. Compared to June 30, 2021, total shareholders’ equity at June 30, 2022 increased $70.2 million, or more than doubled from $60.3 million. The increase in shareholders’ equity over the prior quarter was mainly driven by net income for the second 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

 

 

6/30/2022

 

3/31/2022

 

6/30/2021

 

Well-Capitalized Requirement

 

Well-Capitalized Requirement

Leverage Ratio (Bank under CBLR)

 

21.4

%

 

19.1

%

 

19.2

%

 

9.0

%

 

8.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Bank’s capital levels remain significantly above well-capitalized guidelines as of the end of the second quarter of 2022.

Asset Quality

Nonperforming loans were $0.6 million or 0.3% of total loans receivable at June 30, 2022, compared to $0.7 million or 0.2% of total loans receivable at March 31, 2022 and $0.8 million or 0.3% of total loans receivable at June 30, 2021. As noted above, the provision for loan losses was $2.9 million for the second quarter of 2022, compared to $2.9 million for the first quarter of 2022 and $1.5 million for the second quarter of 2021. The Company’s allowance for loan losses to total loans (less PPP loans) was 4.6% at June 30, 2022 compared to 3.7% at March 31, 2022 and 3.4% at June 30, 2021.

For the second quarter of 2022, the Company’s net charge-offs were $2.3 million, compared to $2.8 million for the first quarter of 2022 and $0.5 million for the second quarter of 2021. The decrease in net charge-offs for the second quarter of 2022 compared to the first quarter of 2022 was primarily driven by lower gross charge-offs and increased recoveries related to strategic programs. The increase in net charge-offs during the second quarter of 2022 compared to the second quarter of 2021 was mainly driven by growth in the Company’s held for investment balances and some normalization of credit losses to pre-pandemic market conditions.

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)

 

6/30/2022

 

3/31/2022

 

6/30/2021

Allowance for Loan & Lease Losses:

 

 

 

 

 

 

Beginning Balance

 

$

9,987

 

 

$

9,855

 

 

$

6,184

 

Provision

 

 

2,913

 

 

 

2,947

 

 

 

1,536

 

Charge offs

 

 

 

 

 

 

SBA

 

 

(102

)

 

 

(31

)

 

 

(47

)

Commercial, non real estate

 

 

-

 

 

 

-

 

 

 

(22

)

Residential real estate

 

 

-

 

 

 

-

 

 

 

-

 

Strategic Program loans

 

 

(2,560

)

 

 

(2,878

)

 

 

(541

)

Commercial real estate

 

 

-

 

 

 

-

 

 

 

-

 

Consumer

 

 

-

 

 

 

-

 

 

 

(1

)

Recoveries

 

 

 

 

 

 

SBA

 

 

48

 

 

 

-

 

 

 

-

 

Commercial, non real estate

 

 

1

 

 

 

1

 

 

 

81

 

Residential real estate

 

 

-

 

 

 

-

 

 

 

-

 

Strategic Program loans

 

 

315

 

 

 

93

 

 

 

48

 

Commercial real estate

 

 

-

 

 

 

-

 

 

 

-

 

Consumer

 

 

-

 

 

 

-

 

 

 

1

 

Ending Balance

 

$

10,602

 

 

$

9,987

 

 

$

7,239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset Quality Ratios

 

As of and For the Three Months Ended

($s in thousands, annualized ratios)

 

6/30/2022

 

3/31/2022

 

6/30/2021

Nonperforming loans

 

$

633

 

 

$

658

 

 

$

786

 

Nonperforming loans to total loans

 

 

0.3

%

 

 

0.2

%

 

 

0.3

%

Net charge offs to average loans

 

 

3.3

%

 

 

3.8

%

 

 

0.8

%

Allowance for loan losses to loans held for investment

 

 

5.3

%

 

 

5.0

%

 

 

4.2

%

Allowance for loan losses to total loans

 

 

4.6

%

 

 

3.7

%

 

 

3.1

%

Allowance for loan losses to total loans (less PPP loans) (1)

 

 

4.6

%

 

 

3.7

%

 

 

3.4

%

Net charge-offs

 

$

2,298

 

 

$

2,815

 

 

$

482

 

 

 

 

 

 

 

 

(1) This measure is not a measure recognized under GAAP and is therefore considered to be non-GAAP financial measures. 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 second 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-second-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, SEC filings, 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 and a loan production office in Rockville Centre, New York. FinWise is a nationwide lender to and takes deposits from consumers and small businesses. Learn more at www.finwisebancorp.com.

Contacts

investors@finwisebank.com

media@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 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)

6/30/2022

 

3/31/2022

 

6/30/2021

ASSETS

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

Cash and due from banks

$

397

 

 

$

414

 

 

$

380

 

Interest bearing deposits

 

96,131

 

 

 

116,232

 

 

 

39,486

 

Total cash and cash equivalents

 

96,528

 

 

 

116,646

 

 

 

39,866

 

Investment securities held-to-maturity, at cost

 

12,463

 

 

 

10,986

 

 

 

1,533

 

Investment in Federal Home Loan Bank (FHLB) stock, at cost

 

449

 

 

 

449

 

 

 

377

 

Loans receivable, net

 

189,670

 

 

 

189,549

 

 

 

167,838

 

Strategic Program loans held-for-sale, at lower of cost or fair value

 

31,599

 

 

 

73,805

 

 

 

58,776

 

Premises and equipment, net

 

5,834

 

 

 

4,531

 

 

 

1,534

 

Accrued interest receivable

 

1,422

 

 

 

1,347

 

 

 

1,212

 

Deferred taxes, net

 

2,018

 

 

 

1,788

 

 

 

1,008

 

SBA servicing asset, net

 

4,586

 

 

 

5,225

 

 

 

3,725

 

Investment in Business Funding Group (BFG), at fair value

 

4,600

 

 

 

5,400

 

 

 

5,200

 

Investment in Finwise Investments, LLC

 

80

 

 

 

80

 

 

 

-

 

Operating lease right-of-use ("ROU") assets

 

6,935

 

 

 

7,178

 

 

 

-

 

Income taxes receivable, net

 

1,843

 

 

 

-

 

 

 

-

 

Other assets

 

7,960

 

 

 

7,500

 

 

 

7,085

 

Total assets

$

365,987

 

 

$

424,484

 

 

$

288,154

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

Liabilities

 

 

 

 

 

Deposits

 

 

 

 

 

Noninterest bearing

$

83,490

 

 

$

127,330

 

 

$

105,134

 

Interest bearing

 

135,869

 

 

 

150,130

 

 

 

93,462

 

Total deposits

 

219,359

 

 

 

277,460

 

 

 

198,596

 

Accrued interest payable

 

34

 

 

 

39

 

 

 

84

 

Income taxes payable, net

 

-

 

 

 

3,411

 

 

 

416

 

PPP Liquidity Facility

 

376

 

 

 

952

 

 

 

17,526

 

Operating lease liabilities

 

7,393

 

 

 

7,386

 

 

 

-

 

Other liabilities

 

8,288

 

 

 

10,281

 

 

 

11,209

 

Total liabilities

 

235,450

 

 

 

299,529

 

 

 

227,831

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

Common stock

 

13

 

 

 

13

 

 

 

9

 

Additional paid-in-capital

 

55,015

 

 

 

54,915

 

 

 

18,274

 

Retained earnings

 

75,509

 

 

 

70,027

 

 

 

42,040

 

Total shareholders' equity

 

130,537

 

 

 

124,955

 

 

 

60,323

 

Total liabilities and shareholders' equity

$

365,987

 

 

$

424,484

 

 

$

288,154

 

 

 

 

 

 

 

 

 

 

 

 

 

FINWISE BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
($s in thousands, except per share amounts; unaudited)

 

 

For the Three Months Ended

($s in thousands, except per share amounts)

 

6/30/2022

 

3/31/2022

 

6/30/2021

Interest income

 

 

 

 

 

 

Interest and fees on loans

 

$

12,864

 

 

$

13,156

 

 

$

11,119

 

Interest on securities

 

 

44

 

 

 

39

 

 

 

6

 

Other interest income

 

 

105

 

 

 

28

 

 

 

10

 

Total interest income

 

 

13,013

 

 

 

13,223

 

 

 

11,135

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

Interest on deposits

 

 

244

 

 

 

261

 

 

 

291

 

Interest on PPP Liquidity Facility

 

 

-

 

 

 

1

 

 

 

42

 

Total interest expense

 

 

244

 

 

 

262

 

 

 

333

 

Net interest income

 

 

12,769

 

 

 

12,961

 

 

 

10,802

 

 

 

 

 

 

 

 

Provision for loan losses

 

 

2,913

 

 

 

2,947

 

 

 

1,536

 

Net interest income after provision for loan losses

 

 

9,856

 

 

 

10,014

 

 

 

9,266

 

 

 

 

 

 

 

 

Non-interest income

 

 

 

 

 

 

Strategic Program fees

 

 

6,221

 

 

 

6,623

 

 

 

3,942

 

Gain on sale of loans

 

 

2,412

 

 

 

5,052

 

 

 

2,397

 

SBA loan servicing fees

 

 

342

 

 

 

387

 

 

 

311

 

Change in fair value on investment in BFG

 

 

(575

)

 

 

(398

)

 

 

1,501

 

Other miscellaneous income

 

 

31

 

 

 

18

 

 

 

10

 

Total non-interest income

 

 

8,431

 

 

 

11,682

 

 

 

8,161

 

 

 

 

 

 

 

 

Non-interest expense

 

 

 

 

 

 

Salaries and employee benefits

 

 

7,182

 

 

 

7,092

 

 

 

5,488

 

Occupancy and equipment expenses

 

 

419

 

 

 

302

 

 

 

203

 

(Recovery) impairment of SBA servicing asset

 

 

1,135

 

 

 

(59

)

 

 

-

 

Other operating expenses

 

 

2,283

 

 

 

1,713

 

 

 

1,388

 

Total non-interest expense

 

 

11,019

 

 

 

9,048

 

 

 

7,079

 

Income before income tax expense

 

 

7,268

 

 

 

12,648

 

 

 

10,348

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

1,786

 

 

 

3,214

 

 

 

2,609

 

Net income

 

$

5,482

 

 

$

9,434

 

 

$

7,739

 

 

 

 

 

 

 

 

Earnings per share, basic

 

$

0.43

 

 

$

0.74

 

 

$

0.89

 

Earnings per share, diluted

 

$

0.41

 

 

$

0.70

 

 

$

0.84

 

 

 

 

 

 

 

 

Weighted average shares outstanding, basic

 

 

12,716,010

 

 

 

12,777,237

 

 

 

8,183,774

 

Weighted average shares outstanding, diluted

 

 

13,417,390

 

 

 

13,567,311

 

 

 

8,650,956

 

Shares outstanding at end of period

 

 

12,884,821

 

 

 

12,788,810

 

 

 

8,716,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINWISE BANCORP
AVERAGE BALANCES, YIELDS, AND RATES - QUARTERLY
($s in thousands; unaudited)

 

 

For the Three Months Ended

 

For the Three Months Ended

 

For the Three Months Ended

 

 

6/30/2022

 

3/31/2022

 

6/30/2021

($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

 

$

82,046

 

 

105

 

0.51

%

 

$

79,855

 

 

 

28

 

0.14

%

 

$

49,682

 

 

 

10

 

0.08

%

Investment securities

 

 

11,837

 

 

44

 

1.49

%

 

 

11,263

 

 

 

39

 

1.39

%

 

 

1,622

 

 

 

6

 

1.48

%

Loans held for sale

 

 

74,800

 

 

5,949

 

31.81

%

 

 

94,610

 

 

 

6,765

 

28.60

%

 

 

49,684

 

 

 

5,049

 

40.65

%

Loans held for investment

 

 

204,501

 

 

6,915

 

13.53

%

 

 

202,052

 

 

 

6,391

 

12.65

%

 

 

200,062

 

 

 

6,070

 

12.14

%

Total interest earning assets

 

 

373,184

 

 

13,013

 

13.95

%

 

 

387,780

 

 

 

13,223

 

13.64

%

 

 

301,050

 

 

 

11,135

 

14.79

%

Less: allowance for loan losses

 

 

(10,425

)

 

 

 

 

 

 

(10,366

)

 

 

 

 

 

 

(6,334

)

 

 

 

 

Non-interest earning assets

 

 

32,558

 

 

 

 

 

 

 

24,160

 

 

 

 

 

 

 

13,214

 

 

 

 

 

Total assets

 

$

395,317

 

 

 

 

 

 

$

401,574

 

 

 

 

 

 

$

307,930

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand

 

$

7,587

 

 

27

 

1.42

%

 

$

6,344

 

 

$

14

 

0.88

%

 

$

5,533

 

 

 

13

 

0.94

%

Savings

 

 

7,430

 

 

1

 

0.05

%

 

 

6,678

 

 

 

1

 

0.06

%

 

 

8,328

 

 

 

3

 

0.14

%

Money market accounts

 

 

29,318

 

 

21

 

0.29

%

 

 

31,889

 

 

 

22

 

0.28

%

 

 

18,872

 

 

 

18

 

0.38

%

Certificates of deposit

 

 

82,870

 

 

195

 

0.94

%

 

 

87,626

 

 

 

224

 

1.02

%

 

 

57,468

 

 

 

257

 

1.79

%

Total deposits

 

 

127,205

 

 

244

 

0.77

%

 

 

132,537

 

 

 

261

 

0.79

%

 

 

90,201

 

 

 

291

 

1.29

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other borrowings

 

 

601

 

 

-

 

0.35

%

 

 

985

 

 

 

1

 

0.41

%

 

 

48,621

 

 

 

42

 

0.35

%

Total interest bearing liabilities

 

 

127,806

 

 

244

 

0.76

%

 

 

133,522

 

 

 

262

 

0.79

%

 

 

138,822

 

 

 

333

 

0.96

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest bearing deposits

 

 

120,359

 

 

 

 

 

 

 

137,750

 

 

 

 

 

 

 

105,459

 

 

 

 

 

Non-interest bearing liabilities

 

 

19,429

 

 

 

 

 

 

 

11,553

 

 

 

 

 

 

 

9,464

 

 

 

 

 

Shareholders’ equity

 

 

127,723

 

 

 

 

 

 

 

118,749

 

 

 

 

 

 

 

54,185

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

395,317

 

 

 

 

 

 

$

401,574

 

 

 

 

 

 

$

307,930

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income and interest rate spread

 

 

 

12,769

 

13.18

%

 

 

 

$

12,961

 

12.85

%

 

 

 

$

15,272

 

13.84

%

Net interest margin

 

 

 

 

 

13.69

%

 

 

 

 

 

13.37

%

 

 

 

 

 

20.29

%

Ratio of average interest-earning assets to average interest- bearing liabilities

 

 

 

 

 

291.99

%

 

 

 

 

 

290.42

%

 

 

 

 

 

216.86

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: Average PPP loans for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021 were $0.9 million, $1.0 million and $46.2 million, respectively.

FINWISE BANCORP
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
($s in thousands, except per share amounts; unaudited)

 

 

As of and for the Three Months Ended

($s in thousands, except for per share data, annualized ratios)

 

6/30/2022

 

3/31/2022

 

6/30/2021

Selected Loan Metrics

 

 

 

 

 

 

Amount of loans originated

 

$

2,088,843

 

 

$

2,511,306

 

 

$

1,424,261

 

Selected Income Statement Data

 

 

 

 

 

 

Interest income

 

$

13,013

 

 

$

13,223

 

 

$

11,135

 

Interest expense

 

 

244

 

 

 

262

 

 

 

333

 

Net interest income

 

 

12,769

 

 

 

12,961

 

 

 

10,802

 

Provision for loan losses

 

 

2,913

 

 

 

2,947

 

 

 

1,536

 

Net interest income after provision for loan losses

 

 

9,856

 

 

 

10,014

 

 

 

9,266

 

Non-interest income

 

 

8,431

 

 

 

11,682

 

 

 

8,161

 

Non-interest expense

 

 

11,019

 

 

 

9,048

 

 

 

7,079

 

Provision for income taxes

 

 

1,786

 

 

 

3,214

 

 

 

2,609

 

Net income

 

 

5,482

 

 

 

9,434

 

 

 

7,739

 

Selected Balance Sheet Data

 

 

 

 

 

 

Total Assets

 

$

365,987

 

 

$

424,484

 

 

$

288,154

 

Cash and cash equivalents

 

 

96,528

 

 

 

116,646

 

 

 

39,866

 

Investment securities held-to-maturity, at cost

 

 

12,463

 

 

 

10,986

 

 

 

1,533

 

Loans receivable, net

 

 

189,670

 

 

 

189,549

 

 

 

167,838

 

Strategic Program loans held-for-sale, at lower of cost or fair value

 

 

31,599

 

 

 

73,805

 

 

 

58,776

 

SBA servicing asset, net

 

 

4,586

 

 

 

5,225

 

 

 

3,725

 

Investment in Business Funding Group, at fair value

 

 

4,600

 

 

 

5,400

 

 

 

5,200

 

Deposits

 

 

219,359

 

 

 

277,460

 

 

 

198,596

 

PPP Liquidity Facility

 

 

376

 

 

 

952

 

 

 

17,526

 

Total shareholders' equity

 

 

130,537

 

 

 

124,955

 

 

 

60,323

 

Tangible shareholders’ equity (1)

 

 

130,537

 

 

 

124,955

 

 

 

60,323

 

Share and Per Share Data

 

 

 

 

 

 

Earnings per share - basic

 

$

0.43

 

 

$

0.74

 

 

$

0.89

 

Earnings per share - diluted

 

$

0.41

 

 

$

0.70

 

 

$

0.84

 

Book value per share

 

$

10.13

 

 

$

9.77

 

 

$

6.92

 

Tangible book value per share

 

$

10.13

 

 

$

9.77

 

 

$

6.92

 

Weighted avg outstanding shares - basic

 

 

12,716,010

 

 

 

12,777,237

 

 

 

8,183,774

 

Weighted avg outstanding shares - diluted

 

 

13,417,390

 

 

 

13,567,311

 

 

 

8,650,956

 

Shares outstanding at end of period

 

 

12,884,821

 

 

 

12,788,810

 

 

 

8,716,110

 

Asset Quality Ratios

 

 

 

 

 

 

Nonperforming loans to total loans

 

 

0.3

%

 

 

0.2

%

 

 

0.3

%

Net charge offs to average loans

 

 

3.3

%

 

 

3.8

%

 

 

0.8

%

Allowance for loan losses to loans held for investment

 

 

5.3

%

 

 

5.0

%

 

 

4.2

%

Allowance for loan losses to total loans

 

 

4.6

%

 

 

3.7

%

 

 

3.1

%

Allowance for loan losses to total loans (less PPP loans) (2)

 

 

4.6

%

 

 

3.7

%

 

 

3.4

%

Capital Ratios

 

 

 

 

 

 

Total shareholders' equity to total assets

 

 

35.7

%

 

 

29.4

%

 

 

20.9

%

Tangible shareholders’ equity to tangible assets (1)

 

 

35.7

%

 

 

29.4

%

 

 

20.9

%

Leverage Ratio (Bank under CBLR)

 

 

21.4

%

 

 

19.1

%

 

 

19.2

%

 

 

 

 

 

 

 

(1) This measure is not a measure recognized under United States generally accepted accounting principles, or GAAP, and is therefore considered to be non-GAAP financial measures. 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 non-GAAP financial measures. 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)

 

6/30/2022

 

3/31/2022

 

6/30/2021

Non-interest expense

 

$

11,019

 

 

$

9,048

 

 

$

7,079

 

Net interest income

 

 

12,769

 

 

 

12,961

 

 

 

10,802

 

Total non-interest income

 

 

8,431

 

 

 

11,682

 

 

 

8,161

 

Adjusted operating revenue

 

$

21,200

 

 

$

24,643

 

 

$

18,963

 

Efficiency ratio

 

 

52.0

%

 

 

36.7

%

 

 

37.3

%

 

 

 

 

 

 

 

Allowance for loan losses to total loans (less PPP Loans)

 

 

 

 

 

 

 

 

As of

 

 

6/30/2022

 

3/31/2022

 

6/30/2021

($s in thousands)

 

 

 

 

 

 

Allowance for loan losses

 

$

10,602

 

 

$

9,987

 

 

$

7,239

 

Total Loans

 

 

232,139

 

 

 

272,552

 

 

 

233,053

 

PPP Loans

 

 

734

 

 

 

991

 

 

 

17,314

 

Total Loans less PPP Loans

 

$

231,405

 

 

$

271,561

 

 

$

215,739

 

Allowance for loan losses to total loans (less PPP Loans)

 

 

4.6

%

 

 

3.7

%

 

 

3.4

%

 

 

 

 

 

 

 

Total nonperforming assets and troubled debt restructurings to total assets (less PPP loans)

 

 

 

 

As of

 

 

6/30/2022

 

3/31/2022

 

6/30/2021

($s in thousands)

 

 

 

 

 

 

Total Assets

 

$

365,987

 

 

$

424,484

 

 

$

288,154

 

PPP Loans

 

 

734

 

 

 

991

 

 

 

17,314

 

Total Assets less PPP Loans

 

$

365,253

 

 

$

423,493

 

 

$

270,840

 

Total nonperforming assets and troubled debt restructurings

 

$

728

 

 

$

754

 

 

$

918

 

Total nonperforming assets and troubled debt restructurings to total assets (less PPP loans)

 

 

0.2

%

 

 

0.2

%

 

 

0.3

%