FinWise Bancorp (FINW) 24 Oct 242024 Q3 Earnings call transcript

Greetings, and welcome to the FinWise Bancorp Third Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Juan Arias, Head of Corporate Management and Investor Relations. Thank you.

You may begin.

you XXXX us Earnings thank Bancorp's for and Quarter Third Conference afternoon, for today joining FinWise Good Call. investors.finwisebancorp.com. Earlier release today, at and earnings posted to we our investor filed our website webcast conference on Today's being is recorded the website. call company's and investors.finwisebancorp.com.

answers results On may your those to subject risks differ contain remarks that and today. are questions and that from to uncertainties today's statements could prepared call, to management's and forward-looking cause discussed actual

any no forward-looking expectations estimates, in and and obligation current to management's assumes update represent statements future. Forward-looking statements FinWise the beliefs Bancorp

We to turn Bob these are filings today Commission. listeners CFO. Wahlman, call press the review encourage Exchange discussions the I call and Kent. to over and related forward-looking company's Kent With that, more Landvatter, to with release the in and the detailed the CEO; Securities statements will Jim contained Hosting President; earnings Noone,

Good afternoon, everyone.

of growth. third actions as the during long-term company's taken quarter of results have well we XXXX Our as existing the our reflect the business enhance the resiliency to

grew X Loan prior up fees, a in our the originations of strategic during the revenue, generated average originations particularly growth. $X.X deceleration to $X.X the solid with approximately from expense program a Furthermore, billion we step quarters. coupled notable billion, of quarter

traction new gain to continue we Moreover, strategic programs. with

to These announced pipeline. During card products. strength programs far total of to with payments in includes and program, fintech the X the quarter, lending, X our platform which which leading we are so optimistic the are XXXX. lending new brings testament a about deposit, our FinWise And multiproduct companies we

offering, programs as strong new market oversight to coupled increasingly and see expand with recognize the our our through and As existing the of compliance we benefits enhanced companies strategic cross-selling. well more product opportunity our product as fintech risk share management, with

to the book from company's quarter's common per $XX.XX prior $XX.XX. share increased The tangible value

capital initiatives. Similarly, our build-out been on support our to impacted strategic a and of partly is planned levels. organic high also the growth over has the year suppressed average partly equity profitability past infrastructure key As reminder, our company's by investments return by

optimistic investments on strategic will have with these that the most Overall, capital and We continue I'm of of effectively, as company, completed metrics operational our are the outlook. we pleased am performance initiatives, I we utilize to gradually excited as the about improve. incremental

Specifically, to our business strategic industry-wide continues pressures rebound gradually XXXX. lending facing after in

We ahead of and President. we are to new our in initiatives seeing turn growth. over Noone, call delivering are me a tangible on results that, With Jim strategic our expense let deceleration the schedule,

on review and Thank you, our Kent. color originations, an some trends then the close portfolio update I on with will provide now initiatives. product

originations totaled quarter X of 'XX. $X.X $X.X compared Third $X.X prior quarters step-up solid the the billion billion the in and billion, average of QX to a

well our quarter this announced as from from Plannery, the programs. This which we year Earnest a includes rebound earlier legacy gradual meaningful and first contribution as

the the of originations programs. a is increase programs the X quarter of are first modestly and in weeks quarter-over-quarter strategic the the the than Through legacy XXXX new Specifically, incremental from pace third of from the October change originations, is at roughly lower tracking XXXX, remainder X/X originations.

lag include a we as of QX, the from in contribution expected contribution not of until level same first X QX. reminder, We a expect the from is not programs. Earnest, see seasonal weeks couple QX included do loan announced Powerpay, there do the contribution pickup during quarters an any we and we that of student As notable of Also, agreement from new a program, our October a typically

started X(a) versus SBA this qualified to lower. as loan driven applicants a in by quarter, increased Our gradual last have originations quarter pickup rates move

volumes to interest rates. in if outlook about optimistic see a the for cautiously reduction are SBA decisive continue we We

of Both meaningfully leasing and solid diversification. continue also and to see overall levels our in origination We estate commercial loans. our contribute equipment which to real portfolio owner-occupied

During quarter portion balances the a these of guaranteed SBA our increased retain guaranteed loans. of sequential On we quarter, basis, continued all X.X%. the to

of Our loans were our sale, for end credit commercial growth leases drivers increase increased guaranteed portfolio, loans loans. in X.X% carry XX.X% strategic which held SBA quarter-over-quarter. up And XX.X% the the held and along guaranteed investment. SBA At with made total HFS total of of our program our primary risk, the including the QX, both balances for balance lower of

COVID to $X.X slightly its The higher primarily to of quarter. the decrease an qualitative related mostly to HFI charge-offs, $X.X the portfolio. by credit offset for second increase removal partially in company's QX factor provision in quality. credit SP was and the other from periodic stemming the in of implications, The resulting and the was million to Moving qualitative million due losses factors, in compared factors assessment the

net X.X% year. The held quarter for from third same the quarter a to the the lower as loans average the of up last rate investment quarter second ticked charge-off was and percentage in X.X% than for slightly in X.X%

the this million to modestly million up in versus were million by million, balances the total $XX.X government. is quarter the Of federal quarter. guaranteed prior NPL $XX.X $XX.X $XX.X

unguaranteed Importantly, million prior in quarter to the only modestly NPL $XX.X quarter. balances increased versus our this $XX.X million

this on discussed some an increase quarters. in as will NPLs the likely were NPLs calls, to have X rates As increases elevated, prior see you in lead sporadic expected in next and to

NIM, the the total to NPL policies should limited our collateral on in risk million bank's balances, impact net $XX.X is help credit mitigate charge-offs. the believe have we and While strict our unguaranteed balances an NPL

are if it we Positively, metrics. optimistic to on a time, decline, gradually rates that over could have interest impact positive NPL continue our

to success lending year new lending our programs, Powerpay announcing third update an on by this program with the build year during QX. this on In of string terms strategic continued we of our

will them health the As placed part We and us. offer the in FinWise consumer and to agreement, bank they for welcome home our the of elective family, purchases. trust thank loans for Power Pay improvement care

pipeline. we turn the strategic terms Kent And provide to I on our what Wahlman, in earlier, proud far summarize, to we To as the are of now over of initiatives. very mentioned CFO, so have Bob will financial about optimistic detail call results. accomplished 'XX we our more in are

some afternoon. comprising third and will prior quarter. million common now million $XXX.X metrics I million the we good as per Jim, provide Thank insight in held quarter investment key In or share. compared and $X.X Average loan quarter, of sale for briefly balances $X.XX review were income loans you, generated held diluted the net appropriate. financial and $XXX.X for the to during

were our sequential an increase program quarter This primarily demand commercial in $XXX.X and continued loans certificates quarter, broker strategic programs, primarily SBA for million deposits X(a) in increase growth million compared driven driven this time held and increase by in to deposits. was was interest-bearing and prior lease sale. $XXX.X the Average interest-bearing consumer program by of deposits

for for was loans portfolios Moving for in $XX.X the to million sale loans by the $XX.X both quarter, held by driven the million Net income to investment income partly compared and in the in statement. held increased prior decreases yield quarter interest offset volumes portfolios.

During QX adjustment for the with periods, determined onetime were in quarter, interest by that we third interest prior nonperforming to accrued had approximately which a be loans income in $XXX,XXX. net associated decreased

interest is quarter. described the onetime adjustment average mentioned this this quarter, from was compared income. prior attributable company's as interest net in reduce quarter that change well to XX.XX% credit decreased to onetime just adjustment includes strategy The margin the continued net the risk X.X% previously portfolio to the last which Our as

are NIM Federal I due in point during to to items Reserve's will basis September. next There that interest quarter's XX affect want reduction X rates highlight that the

First, our rate and beginning of quarter. with SBA each generally portfolio flows prime the reset at

our callable to QX, call in program wholesale initiated rate lower with CDs a we early Second, them replace and funding.

compared our quarter $XX expense quarter $X.X million Noninterest the million quarter. increase driven in programs. the Noninterest an the compared income in was to related second prior increase $X.X fees quarter, quarter in origination strategic prior the was primarily million to in the to $XX.X in million by was sequential

to pace due quarter included benefits The expense change and quarter in of onetime to in expense. performance catch-up discussed $XXX,XXX happened salaries quarter, employee of accrual the in expenses reflect decelerated as even a which our sequential growth updated including onetime third accrual an estimates. increase the in was The bonus catch-up second bonus call, in we approximately what primarily on award

decelerate continue finish build-out initiatives. quarter the fourth to the We in the expect growth further new to XXXX we pace as expenses our of of of in

incremental forward As we to expenses XXXX, increases move we expect be also headcount-related more through production. aligned in with

was for third tax XX.X% to the quarter prior the rate our in effective compared XX.X% Finally, quarter.

that, tax full Operator? around As XX.X% for of the QX like questions XX.X%. to would expect to answers. run rate we XXXX now, and we call open for around effective With year run to XXXX the and

Liesch, Andrew Piper Instructions] [Operator Sandler.

get going to to quarter. the -- the seen Just I the the in you've be that's what if couple production benefit to some Earnest? there's trying offset Is know Like a of so by far, of quarter. next up the that fourth out the pick been we see loan seasonality production seasonality this could flow in the sense months. here going past, from in to on

this Noone. Yes. is Andrew, Jim

excited seasonality about that forward. quarter during optimistic expected originations Even quarter. the outlook this of really the Earnest third and we're that the in trends about seeing So out we're going in backing the happened We're originations. the step-up again

third that you starting some far new the programs, strategic trends, overall, optimistic programs. or seeing The then earlier we're environment some so some the the for of we're from SBA I'd say lower of student there specific but I'd of within programs also legacy pipeline is benefits in improving also loan that originations, see increased the we're the And Earnest our as all early optimistic, the in in then activity for to take and announced as rates, academic signs is seasonality year. the year. if from quarter we're partners. say And of about

sense Bob, think going then, the a you maybe have be on trying guess, these lag commentary accounts? to can other I on and offsetting? quarter SBA the margin All be are CDs. on what callable net right. helpful. there how interest on to income just do the a rate it. the deposit on I'm those That's fourth trend the Got margin, actions then, other you And get moves the done early actions. And CDs with on here on Will the and

rate will is our NIM area going to hard Yes. happen a loan saw What there in higher quarter. what's so that related the it, at. it's to reversals And prime things we the many particularly And volume Sure, assets significant complicated here rate. the in is Andrew. quickly the higher forecast always to what And to rate on portfolios, SBA look quality, programs, origination a funding, are affect because to take interest increases and in how happens nonperforming with happens growing that lower this we're loan

how callable CDs. we're replacing our this with

a to NIM opposite expect, things the in just the and Federal it's future I is -- actions, to I -- continue say, So any decline work variable a in I I put all during these to you would how it activities. quarter. different of put absent can't going fork be directions. much we can't do these -- fourth because this and that can't tell overall, and a Reserve expect stick

of a have have million them the to about bit tell we our little $XXX quarters about ability the we of which of and more during -- We those But that call you the callable $XX call of had And rest we half will $XXX called $XXX about called that can the second is of of that -- done. have CDs first called we million of date. called what of I next million and CDs, will be to we currently, we callable are CDs those million year. those

the the X.X%. that were replace about to I'm at X.X%. rate we a funding of of sure on market were And about interest And has average moved. able those, not those cost

the we're We but to that a advantage October. the in sure to it at the quick take after can are do sure to. of Not rest take going we in market look able at them of early dip try and rate,

see the of Got revenue. lot X investments to there. a And for very and for, gone on line, it. for revenue that of Obviously, update been on to a question just Any have sort helpful. the waiting last card just That's and the when bottom folks there. have update in to get fall start then could we payments me, something an hope just while

a at Kent. maybe I'll Well, is that. take first stab This

to by payments we're still year. track the will the -- end complete this We hub of on

have reminder, year, also partner this launched partner As this we earlier card a X earlier X year.

of and those that to revenues launching ready expansion. to before pilot be of insight those. call, at like our a an we year assessment specific We little full for the time take and looks to hope to on what them, hope -- full some we I the seeing really in you readiness before from a for do But expect quarter. have helps. expand We external or XXXX to KPIs this do more we we have anything want year this earnings have don't but QX We full

Our next Stephens Terrell, question comes Incorporated. from Andrew

me. for questions few a Just

So you call callable, of CD the sense to the incremental just million on have able a funding? $XX Can that but you the have for $XXX replace think cost of side, you some that higher could you timing yet called been total. I million you us what's of said of give kind not to potentially look brokered

just probably today. We them time. that to in want rate, we a other market average about million be So December few don't out It to the November and And probably in today, do will about upon eligible X change we'll go $XX point interest we X.X%. X And other X in the call in choose doing carries that same at the buckets. the unless timing, what time. bucket facts circumstances point X about are everything in call depending to at

it. Got

this if origination quarter. some increasing intentional, partner that's just that lot curious some the on all then as quarter, the up and a loans, helpful. loans related average balance the kind about balance is to I'm this new a average in the I'm looking stepped really whether And of we've this That's the launches times of of at point past, this the to Okay. increase quite HFS contributed quarter? talked you're

And around million is territory of we hovering HFS million this per loans should a quarter then new like of the a $XX for just overall, just normal? I kind of average it expect while. kind $XX was know

we $XX is kind So think about? new average million of should the balance

Yes.

the in of as that's HFS quarter. origination volume the far derivative mostly Andrew, As balance, the

But see comments seasonal We're We partners. some the legacy the student I originations with factor and optimistic. to So would there's step baseline go the from there. new in programs. of back up did another kind program loan also X

talked to we to Earnest modeling, we new help was the generate originations that's since will same wanted the in in your change remarks, the origination programs. quarter-over-quarter about highlight. key point the QX. at going They're just X/X to QX incremental from level of school kind not prepared the think that's still I of the really of our be with start as And year. that that about in And

Got it.

Okay.

some moderation the maybe around tracking there, loan originations? just kind of So the predicated of

Correct.

it's in Okay. get Got it. I value in wanted drag to the is? continued ask this is? investment on the it's fluctuate the valuation they expect of fee past some, value every income just on side. fair BFG baseline can the but current of I'm fees few should negative the what Or seems kind the a it been And of your I change been quarters. investment curious on we like kind year. quarter

there? kind expectations any of So updated

revenues that paid generate origination revenue SBA generation it fees the of that SBA that been loans. generation a that -- has a below has so bit past running generated the been behind loans the slower running what that a bit they expectations. and have years they the for SBA program loans and those a are of the fees relates they market or And in had Well, amount paid has budgeted are little little that the for the of generated the significant to

generation the the that then valuation. is And lending it's but we the are up. and it's signs -- that And picking SBA -- of to so seeing revenue driver

the expect way. that picks few around a quarters, negative while the to that as other valuation And develop we activity turn other up see business and and it's do as they been go last activities, so

Yes.

Okay. think, the moderation Makes expense house, side the it impressive, the quarter. The was incentive this I expense growth, pretty even of catch-up acknowledging sense. onetime accrual

comments prepared lower pace if growth. operating in this level you expense back expense that of quarter. mind, of back that if some think I declines in continued out, going I'm your like the in even the an obviously, about growth to of remarks With just

like we a the of also should got quarter? to an assumption expenses reinvestment is XQ we shot I it the in expenses of normalize fourth to fourth flat as you've to off that at this unfair seems core the decent out of build slowing. were quarter, rate rate into Or guess kind $XXX,XXX if base? going the Is expect run owning continue

-- in in happen growth Well, call, for during quarter in the the what of is happened anticipate the said and rate about QX the second what we about what half what said of the we we happened third expected looking to of to QX. forward rate to quarter half growth --

would of flat little leave bit that bit QX. little not with a so of us And but growth a in growth

don't model, I think So think aggressive. no what mean, -- you I model, in expenses I I a to increase I bit might guess, is don't -- be choose but you what little

[Operator like at Instructions] questions Arias I It more any doesn't to further Juan look to any for the remarks. floor like we back turn this have time. would

few questions operator. via Thanks, receive did a e-mail. We

So you us of with potential I'll some XQ 'XX? on the those increase read amount just for the NPLs in out. provide Can detail

Yes. is this Warren, Jim.

from there's we the there's rate balances no Aside stress as This the the broad-based really portfolio. NPL high environment, from the to point areas far is lingering in mostly portfolio -- as in stress higher of is, not rates. would what

uptick quarter-over-quarter If you NPLs, XX.X% unguaranteed to XX.X%. are those look from modest balance in at the of moving

into your at coming as and I'd about we're through decline, have something SBA And NPL sporadic about now were pickups some to with migrate in expectations $XX is due and outlook, the is line delinquencies then But in around higher say the MCOs, rates. total million started on for to may the addressing relatively see to This on if And to optimistic provide our flat you'll question year-over-year. look is rates those this comments you the expect to start And $X borrowers. million you report. relief what and what call -- quarter. prior could day XX-plus fourth

A expanded offerings given existing your couple the product questions e-mail. and expanded platform? Great. to to more new opportunity different your via cross-sell partners given product What's

take really are And in. and of and We these of about with existing platform. now we've new Sure. partners. both payments I a got excited have the cards. we're discussions coming can inquiries that most lot reversing one. Yes, And really lending, multiproduct

see, continue very leadership So to the it's something our on that we're to build position industry. happy in

the product really set made. investments ultimately stickiness rationale and the our increase the the It's to also revenue. that for expand increase we It's of relationship

last And the in. question that came

You've XXXX. accomplished see in you XXXX? And from FinWise? How quite do about should a feel we expect bit what to

proud Yes, very I'll We're what take we've one, that 'XX. accomplished in of Juan.

have do XXXX. We said schedule. very done we to of would of ahead lot foundation strong everything that a a importantly, it for leads and But

multiproduct for out platform So expect of a now stable initiatives, we we to diversify from start stream. revenue originally which XXXX, the benefits and stronger some reaping the including set to

very So we're about is we've foundation the what excited created created for and 'XX.

more operator. There are no questions. Thanks,

for today's you. Thank This And participants. today's conclude thank you teleconference. Okay. does

may time. this disconnect lines You at your