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Finwise Bancorp (FINW)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered steady originations ($1.26B) and sequential improvement in credit metrics (NPLs down to $29.9M; NCOs down to $2.2M), but net interest margin compressed to 8.27% reflecting mix shift to lower-risk, lower-yielding assets and seasonal softness in high-yield HFS programs .
  • EPS was $0.23 on net income of $3.2M, down year over year, with fee income strengthening to $7.8M on higher Strategic Program fees, BFG fair value improvement, and lease portfolio growth .
  • Against S&P Global consensus, FINW missed Q1 2025 EPS (actual $0.23 vs $0.255*) and revenue (actual $18.8M vs $22.6M*), largely due to NIM compression and mix shift; management reiterated that NIM will decline as the balance sheet derisks while NII should grow with asset growth .
  • Execution catalysts for 2025: ramp of the Credit Enhanced Balance Sheet program to $50–$100M by YE, extended HFS product contribution, and expected deposit inflows from BIN sponsorship, payments, and online account opening—supporting funding and operating leverage in H2 2025 .

What Went Well and What Went Wrong

What Went Well

  • Sequential asset quality improvement: NPLs fell to $29.9M (6.1% of HFI) from $36.5M (7.8%), aided by repayments/payoffs; NCOs declined to $2.2M (1.9% annualized) from $3.2M (2.8%) .
  • Fee income strengthened to $7.8M (vs $5.6M in Q4) on higher Strategic Program fees, favorable BFG fair value change, and lease portfolio growth, with reversal of a Q4 callable CD premium charge .
  • Strategic program momentum: new Backd partnership to deliver SMB installment loans and utilize the Credit Enhanced Balance Sheet, broadening low-risk revenue avenues and capital-efficient balance sheet usage .

Management quotes:

  • “We posted solid loan originations and encouraging credit quality metrics, as both non-performing loan balances and net charge-offs declined sequentially… we continued to migrate our loan portfolio to a lower risk profile” — CEO Kent Landvatter .
  • “We continue to expect our credit enhanced balance sheet program… to be a meaningful contributor to our earnings in 2025, with most of the growth coming in the second half” — CEO Kent Landvatter .

What Went Wrong

  • NIM compression to 8.27% (from 10.00% in Q4; 10.12% in Q1’24) driven by seasonal decline in high-yield HFS originations, repricing of variable-rate SBA loans after Q4 rate cuts, and deliberate mix shift to lower-yielding, lower-risk loans .
  • Net interest income fell to $14.3M (vs $15.5M in Q4), pressured by yields and HFI mix; management expects NIM to continue trending down as risk is reduced, even as NII grows with volume .
  • Operating expenses rose to $14.3M (vs $13.6M in Q4), mainly due to FICA payroll taxes and higher professional services following Q4 accrual adjustments; efficiency ratio ticked up to 64.8% .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Adjusted Operating Revenue ($USD Millions, non-GAAP)$19.668 $21.132 $22.090
Net Interest Income ($USD Millions)$14.006 $15.529 $14.280
Total Non-interest Income ($USD Millions)$5.662 $5.603 $7.810
Net Income ($USD Millions)$3.315 $2.793 $3.189
Diluted EPS ($USD)$0.25 $0.20 $0.23
Net Interest Margin (%)10.12% 10.00% 8.27%
Efficiency Ratio (%)61.0% 64.2% 64.8%

Q1 2025 Actual vs Consensus (S&P Global):

MetricActualConsensusSurprise
EPS ($USD)$0.23 $0.255*-$0.025 (miss)*
Revenue ($USD Millions)$18.754*$22.634*-$3.880 (miss)*

Values retrieved from S&P Global.*

Segment/Portfolio Mix (Loans HFI):

CategoryQ1 2024 Amount / %Q4 2024 Amount / %Q1 2025 Amount / %
SBA$247.810M / 63.4% $255.056M / 54.8% $246.004M / 50.0%
Commercial leases$46.690M / 11.9% $70.153M / 15.1% $76.823M / 15.6%
Residential real estate$39.006M / 10.0% $51.574M / 11.1% $55.814M / 11.3%
Owner-occupied CRE$21.300M / 5.4% $41.046M / 8.8% $65.920M / 13.4%
Non-owner CRE$2.155M / 0.6% $1.379M / 0.3% $1.390M / 0.3%
Strategic Program loans$17.216M / 4.4% $20.122M / 4.3% $19.916M / 4.1%
Consumer$14.689M / 3.8% $22.212M / 4.8% $22.806M / 4.6%
Total HFI loans$390.943M / 100.0% $465.233M / 100.0% $492.223M / 100.0%

KPIs and Balance Sheet

KPIQ1 2024Q4 2024Q1 2025
Loan originations ($USD Billions)$1.091B $1.305B $1.265B
NPLs ($USD Millions)$26.0 $36.5 $29.9
NPLs / HFI (%)6.6% 7.8% 6.1%
Net charge-offs ($USD Millions)$3.401 $3.249 $2.248
NCOs / Avg HFI (annualized)3.5% 2.8% 1.9%
ROA (%)2.2% 1.6% 1.7%
ROE (%)8.4% 6.5% 7.4%
Tangible book value per share ($)$12.70 $13.15 $13.42
Leverage ratio (Bank CBLR) (%)20.6% 20.6% 18.8%
Total assets ($USD Millions)$610.833 $745.976 $804.129
Total deposits ($USD Millions)$424.096 $544.952 $605.759
Cost of interest-bearing deposits (%)4.71% 4.30% 4.01%
Yield on loans (%)14.80% 14.01% 12.31%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Credit Enhanced Balance Sheet balancesYE 2025$50–$100M (Q4 call) $50–$100M Maintained
Effective tax rateFY 2025N/A~27.5% New disclosure
Originations paceQ2 2025 (early tracking)N/A~$1.2B quarterly run-rate tracked in first 4 weeks of April Informational
Net interest margin trajectoryMulti-quarterExpect decline with derisking (qualitative) Continue decline; pace depends on HFS vs lower-risk asset funding Maintained (qualitative)
Deposits/funding2025N/AExpect meaningful deposit growth from BIN sponsorship, Payments, and online account opening New disclosure (qualitative)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24 and Q4’24)Current Period (Q1’25)Trend
NIM and mix shiftNIM down to 9.70% in Q3 on derisking and cost of funds; 10.00% in Q4 aided by lower CD costs and portfolio growth NIM declines to 8.27% due to seasonal HFS volume drop, variable-rate repricing post Q4 cuts, and growth in lower-yield HFI Downward progression (managed)
Credit Enhanced Balance SheetTwo CE programs live by YE 2024; targeted ramp in 2025 Guidance maintained for $50–$100M by YE; balances ~$2M exiting Q1; extended HFS product launched Building (2H ramp)
SBA portfolio & NPLsNPLs increased in Q3/Q4 mainly due to elevated rates; significant SBA guaranteed portion retained NPLs decline sequentially to $29.9M; $15.1M guaranteed; allowance 2.9% of HFI Sequential improvement
Expenses & efficiencyElevated efficiency ratio with infrastructure build; expected to remain high until new programs monetize Efficiency ratio 64.8%; management expects declines as revenue from new programs is realized; Q1 expense uptick from FICA and pro services Near-term stable; medium-term improvement
Funding & depositsBrokered CDs used to fund growth; cost management improving Plan to drive deposits via BIN sponsorship, Payments, and online account opening Positive funding optionality

Management Commentary

  • Strategic posture: “We remain excited about the outlook for our business and will maintain our focus on executing our business strategy to continue to position the Company for long-term growth and shareholder value creation.” — CEO Kent Landvatter .
  • 2025 drivers: “We continue to expect our credit enhanced balance sheet program… to be a meaningful contributor to our earnings in 2025, with most of the growth coming in the second half of the year.” — CEO Kent Landvatter .
  • Margin/NII mechanics: “Our net interest margin declined to 8.27%… driven primarily by seasonal decline in origination volume from our three highest-yielding HFS programs, lower-yielding additions to HFI, and repricing of prime-based variable rate loans.” — CFO Robert Wahlman .
  • Funding plan: “We expect to see significant deposit growth as it relates to both BIN sponsorship and the payments business… [and] launching our online account opening.” — Bank CEO James Noone .

Q&A Highlights

  • Expense trajectory and efficiency: Build for BIN and Payments “substantially complete”; Q1 expense uptick due to FICA reset and Q4 accrual clean-up; expect expenses to rise with revenue, efficiency ratio to decline over time .
  • NIM and NII path: NII expected to grow with asset volume (OO-CRE, leases, CE portfolio) while NIM continues to dilute from lower-risk mix; seasonal HFS rebound anticipated (2/3 to 3/4 recovery in Q2) .
  • Buyback stance: No repurchases in Q1; prioritize buybacks only if shares trade below book and balanced against liquidity considerations .
  • Credit Enhanced balances: ~$2M at quarter-end; confident reaching $50–$100M YE target with current partners; Backd likely ramps in Q4 .
  • CRE growth specifics: Owner-occupied CRE (prime minus ~100 bps gross yield) sourced via BFG; margins narrower vs other products but lower credit risk; growth path meaningful but not primary asset driver .

Estimates Context

  • Q1 2025 EPS: actual $0.23 vs consensus $0.255* — bold miss driven by NIM compression and yield/mix dynamics; 4 EPS estimates in the consensus panel* .
  • Q1 2025 Revenue: actual $18.8M vs consensus $22.6M* — miss; note company’s non-GAAP Adjusted Operating Revenue was $22.09M, reflecting Net Interest Income + Non-interest Income .
  • Consensus backdrop: Target Price Consensus Mean $22, with 3 covering analysts*.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Sequential credit improvement and stable originations offset NIM pressure; watch for continued NPL downtrend and lower annualized NCOs as a positive driver .
  • Expect NIM dilution to persist as FINW shifts toward lower-risk assets; trading implications: valuation may hinge on visibility into NII growth and H2 CE ramp to offset margin compression .
  • Fee income momentum is notable, aided by Strategic Program fees and lease portfolio growth; sustained non-interest income can buffer NIM volatility .
  • Funding optionality via BIN sponsorship, payments, and online account opening could reduce reliance on brokered CDs and support spread stability over time .
  • Credit Enhanced Balance Sheet ramp ($50–$100M by YE 2025) and extended HFS product are key H2 catalysts; monitor implementation timelines and partner volumes (e.g., Backd scaling in Q4) .
  • Capital remains strong (CBLR 18.8% at bank) with capacity to grow assets above $1B while maintaining a >14% leverage floor; supports balance sheet expansion plan .
  • Buyback remains opportunistic; expect cash flows prioritized to growth initiatives unless shares trade below book; limited near-term EPS accretion from repurchases .