FinWise Bancorp (FINW) Q2 Earnings call transcript Jul 25, 2024

In FinWise Bancorp's second quarter earnings call for 2024, the company showcased a robust financial performance with a solid revenue growth, stable credit quality, and a strategic focus on diversification and innovation. The call, led by CEO Kent Landvatter, President Jim Noone, and CFO Bob Wahlman, highlighted the company's strong foundation and strategic initiatives that are poised to drive future growth.

Strong Financial Performance and Diversification

The call began with Kent Landvatter highlighting FinWise's solid performance in the second quarter, with loan originations nearing $1.2 billion, solid revenue, and stable credit quality. Notably, the company's profitable results were achieved without contributions from recent strategic initiatives, underscoring the strength and resiliency of its existing business.

Landvatter also emphasized the company's strategic moves since its November 2021 IPO. These include strengthening and diversifying the business through enhanced product offerings, improved strategic program lending diversification, and a lower-risk loan portfolio. This strategic focus on diversification and risk management has positioned FinWise as a formidable competitor in the fintech lending space.

Credit Quality and Loan Portfolio

Jim Noone delved into the details of the company's credit quality, which has been a significant focus for FinWise. The bank's loss rate in its SBA portfolio has been more than 70% lower than the industry average, a testament to the company's disciplined underwriting and risk management practices. The net charge-off rate improved to 1.9% in the second quarter, down from 3.5% in the first quarter, reflecting the decisions made by the company to reduce certain categories of its loan portfolio while growing lower-yielding and safer assets.

Noone also provided an update on the company's business initiatives, including the launch of its first card product, the start of a credit enhanced balance sheet program, and the progress on its Payments Hub initiative. These strategic moves are expected to deepen relationships with fintech programs, diversify revenue, and improve deposit costs.

Financial Metrics and Future Outlook

Robert Wahlman provided a comprehensive review of the company's financial metrics, including a net income of $3.2 million and a net interest margin of 10.31%. Despite an increase in expenses, the company remains confident in its ability to generate operating leverage in 2025 as the significant level of investments starts to decelerate.

Wahlman also addressed concerns about strategic program yields, noting that the higher yields could be an aberration rather than a long-term trend. He also provided insights into the company's expense trends, expecting the pace of growth to slow down in the second half of 2024.

Conclusion

FinWise Bancorp's second quarter earnings call underscored the company's strong financial performance and strategic focus on diversification and innovation. With a solid foundation and a clear path for future growth, FinWise is well-positioned to navigate the evolving fintech landscape and capitalize on opportunities in payments, cards, and strategic partnerships. The company's disciplined approach to risk management, credit quality, and strategic initiatives bodes well for its long-term prospects, making it an attractive investment proposition for shareholders.