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Finwise Bancorp (FINW)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered stable net interest income ($15.53M) and a 10.00% NIM, but EPS fell to $0.20 on higher provision and a non-core $0.895M loss from calling ~$160M of brokered CDs; core EPS would be ~$0.25 per CFO’s Q&A clarification .
  • Originations were $1.30B (down vs Q3’s $1.45B; up vs Q4’23 $1.18B); nonperforming loans rose to $36.4M (53% SBA-guaranteed), less than the ~$10M migration flagged last quarter; management expects ~$12M NPA migration in Q1 2025 .
  • Guidance catalysts: credit-enhanced balances targeted to increase $50–$100M by YE2025; 2–3 new lending programs in 2025; deposit costs to benefit further in Q1 from CD calls; NIM to gradually compress given lower-risk mix .
  • Street consensus from S&P Global was unavailable during this session; investors should treat the non-core CD loss and the growing low-risk product mix as key drivers of near-term estimate revisions (EPS mix, NIM path).

What Went Well and What Went Wrong

What Went Well

  • Net interest income grew sequentially (+$0.77M q/q to $15.53M) on loan balance growth and lower deposit costs after CD repricing; NIM improved to 10.00% (from 9.70%) .
  • Strategic Program fees held up ($4.90M, slightly up q/q) despite seasonal originations softness, reflecting partner diversification; “diversification of partners helped actually shore that up” (CEO/CFO) .
  • Clear 2025 growth roadmap: “credit enhancement solution to be a meaningful incremental contributor,” with BIN Sponsorship and Payments “now live” and expected to ramp through 2025 (CEO) .

What Went Wrong

  • EPS and net income declined q/q and y/y ($0.20/$2.79M vs $0.25/$3.45M and $0.32/$4.16M), driven by higher provision ($3.88M) and non-core $0.895M CD call charge reducing other income .
  • NPLs increased to $36.4M (7.8% of HFI), with unguaranteed portion at $17.2M; management still flags elevated rate environment impacts and expects ~$12M potential NPA migration in Q1 2025 .
  • Efficiency ratio (non-GAAP) remains elevated at 64.2% due to infrastructure build-out; management expects it to stay somewhat high until new program revenues materialize .

Financial Results

P&L and Margins (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Net Interest Income ($USD Millions)$14.62 $14.76 $15.53
Total Non-Interest Income ($USD Millions)$4.84 $6.05 $5.60
Adjusted Operating Revenue (NII + Non-Interest Income) ($USD Millions, non-GAAP)$19.45 $20.82 $21.13
Net Income ($USD Millions)$3.18 $3.45 $2.79
Diluted EPS ($USD)$0.24 $0.25 $0.20
Net Interest Margin (%)10.31% 9.70% 10.00%
Efficiency Ratio (%) (non-GAAP)66.3% 67.5% 64.2%

Year-over-Year (Q4 2023 vs Q4 2024)

MetricQ4 2023Q4 2024
Net Interest Income ($USD Millions)$14.37 $15.53
Total Non-Interest Income ($USD Millions)$6.16 $5.60
Adjusted Operating Revenue ($USD Millions, non-GAAP)$20.52 $21.13
Net Income ($USD Millions)$4.16 $2.79
Diluted EPS ($USD)$0.32 $0.20
Net Interest Margin (%)10.61% 10.00%
Efficiency Ratio (%) (non-GAAP)56.0% 64.2%

Non-Interest Income Breakdown (Quarterly)

Component ($USD Thousands)Q2 2024Q3 2024Q4 2024
Strategic Program Fees$4,035 $4,862 $4,899
Gain on Sale of Loans$356 $393 $872
SBA Servicing Fees, net-$124 $87 $181
Change in Fair Value (BFG)-$200 -$100 -$200
Credit Enhancement Income——$25
Other Misc. Income$771 $812 -$174
Total Non-Interest Income$4,838 $6,054 $5,603

Loan Portfolio Composition (HFI, Period-End)

Loan Type ($USD Thousands)Q3 2024Q4 2024
SBA$251,439 (57.9%) $255,056 (54.8%)
Commercial Leases$64,277 (14.8%) $70,153 (15.1%)
Commercial, non-RE$3,025 (0.7%) $3,691 (0.8%)
Residential RE$41,391 (9.5%) $51,574 (11.1%)
Strategic Program Loans$19,409 (4.5%) $20,122 (4.3%)
Owner-Occupied CRE$32,480 (7.5%) $41,046 (8.8%)
Non-Owner-Occupied CRE$2,736 (0.7%) $1,379 (0.3%)
Consumer$19,206 (4.4%) $22,212 (4.8%)
Total Loans HFI$433,963 $465,233

Deposit Composition (Period-End)

Deposit Category ($USD Thousands)Q3 2024Q4 2024
Noninterest-Bearing DDA$142,785 (29.2%) $126,782 (23.3%)
Interest-Bearing Demand$58,984 (12.1%) $71,403 (13.1%)
Savings$9,592 (1.9%) $9,287 (1.7%)
Money Market$15,027 (3.1%) $16,709 (3.0%)
Time CDs$262,271 (53.7%) $320,771 (58.9%)
Total Deposits$488,659 $544,952

KPIs and Asset Quality

KPIQ2 2024Q3 2024Q4 2024
Originations ($USD Thousands)$1,170,904 $1,448,251 $1,305,028
ROAA (%)2.1% 2.1% 1.6%
ROAE (%)7.9% 8.3% 6.5%
Yield on Loans (%)14.89% 14.16% 14.01%
Cost of Interest-Bearing Deposits (%)4.80% 4.85% 4.30%
NPLs ($USD Thousands)$28,091 $30,648 $36,431
NPLs / Loans HFI (%)6.5% 7.1% 7.8%
ACL / Loans HFI (%)3.2% 2.9% 2.8%
Leverage Ratio (Bank, CBLR) (%)20.8% 20.3% 20.6%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Credit-Enhanced Loan Balances (HFI)FY2025 YENoneIncrease by $50M–$100MNew
Effective Tax RateFY2025Q4’24 ≈25.1%, FY’24 ≈25.5% 25.0%–25.5%New period (maintained range)
New Lending ProgramsFY20252–3 programs expected (maintained) 2–3 lending programs expectedMaintained
NIM Trajectory2025Expect decline in Q4’24 Gradual compression over timeMaintained downward trend
NPA MigrationQ1 2025Q4’24 migration ~$10M expected Potential ~$12M migrationRaised near-term risk
Deposit Cost ReliefQ1 2025Initiated callable CD program Further relief in Q1 from full-quarter benefitMaintained improvement

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 and Q3)Current Period (Q4)Trend
Credit Enhancement productInitiated with Plannery; immaterial impact (Q2) ; ramp expected (Q3) Meaningful contributor in 2025; disclosures added; YE2025 +$50–$100M target Building/Ramping
Payments & BIN SponsorshipFirst payments partner and card pilot (Q2); Payments Hub by YE’24 (Q3) Both live; gradual traction expected through 2025 (CEO) Scaling in 2025
Expense discipline/efficiencyElevated but decelerating; headcount investments (Q2/Q3) Efficiency ratio 64.2%; expenses to be production-driven Improving leverage over time
NPLs/NPA migrationNPL tick-up with elevated rates (Q2/Q3) NPLs $36.4M; Q4 increase less than prior expectation; Q1 potential ~$12M Elevated near-term, constructive management
SBA originationsModestly lower (Q2); increased again (Q3) Increased again vs Q3; gains on sale reinitiated Improving modestly
Deposit costs (callable CDs)Program initiated (Q3) ~$160M called; $0.895M non-core loss; benefit extends into Q1 Lower COF tailwind
Capital/leverage ratioHigh leverage ratio; plan to use capital (Q3) Comfortable mid-teens over time at bank/holdco Deploying capital prudently
Partner pipeline qualityPipeline strong; new programs (Q3) More mature, stronger fintechs; 2–3 programs targeted Positive mix shift

Management Commentary

  • CEO: “We look for our credit enhancement solution to be a meaningful incremental contributor in 2025 and also expect gradual traction in our BIN Sponsorship and payments initiatives, both of which are now live” .
  • President: “SBA 7(a) loan originations increased again in Q4 versus Q3…we began selling some of the guaranteed portions of our SBA loans, which led to the pickup in gain on sale income” .
  • CFO: “Q4 results included an $895,000 loss resulting from calling roughly $160 million of higher-yielding brokered callable CDs and replacing them with…lower rate [funding]…We consider this item to be a noncore reduction of income” .
  • CFO (Tax): “We expect the effective tax rate for 2025 to run around 25.0% to 25.5%” .
  • CFO (NIM): “We expect the net interest margin to gradually compress over time, driven by our proactive strategy to reduce credit risk in the portfolio” .

Q&A Highlights

  • Loan growth drivers: sequential growth came from leasing and owner-occupied CRE, with SBA balances modestly up; credit quality in those assets viewed favorably .
  • Strategic Program fees resilience: fees were flat/up slightly q/q despite lower originations; pricing structures and partner diversification supported stability .
  • Credit enhancement economics vs SBA: net yield economics viewed as “relatively similar” given low credit risk on both portfolios .
  • Deposit cost trajectory: ~$80M of CDs called mid-October and ~$80M later; full-quarter benefit expected in Q1, aiding cost of funds .
  • Onboarding timelines: mature partners tilt toward faster launches; overall range ~2.5 to 12 months, commonly ~6–7 months based on product complexity and partner maturity .
  • Core EPS: adjusting for the $0.895M non-core CD call loss (tax-affected) implies ~$0.25 core EPS for Q4 (non-GAAP concept acknowledged by CFO) .

Estimates Context

  • S&P Global Wall Street consensus for Q4 2024 was unavailable during this session (SPGI API limit exceeded); therefore, direct EPS/revenue vs consensus comparisons are not provided. Values retrieved from S&P Global would normally be shown here.
  • Near-term estimate considerations: analysts may adjust for the non-core CD call loss (core EPS ~$0.25), incorporate NIM compression guidance, and model credit-enhanced balances ramp (+$50–$100M by YE2025) and incremental fees from Payments/BIN Sponsorship initiatives .

Key Takeaways for Investors

  • Core earnings power stronger than GAAP headline: backing out the non-core CD call loss yields ~$0.25 core EPS, with lower deposit costs a tailwind into Q1 2025 .
  • Growth pivot toward low-risk, recurring models: credit enhancement (de-risked interest income), SBA (guaranteed balances and gain-on-sale), and Payments/BIN Sponsorship (fee income) should diversify and stabilize revenue in 2025 .
  • NIM to compress as risk declines: expect gradual NIM pressure from portfolio mix, partly offset by deposit cost actions; focus on operating leverage as new programs scale .
  • Asset quality watchlist: NPLs rose to 7.8% of HFI, but over half are SBA-guaranteed; management flags ~$12M potential migration in Q1—monitor unguaranteed balances and recoveries .
  • Capital deployment flexibility: management comfortable letting leverage ratio move to mid-teens as low-risk assets grow, enabling balance sheet expansion without undue risk .
  • Short-term trading: headline EPS miss risk from non-core items may be discounted; catalysts include updates on new partner launches, progress in Payments/BIN, and credit-enhanced balance growth .
  • Medium-term thesis: diversified, compliance-first fintech banking platform with growing fee streams and lower-risk interest income offers defensible profitability once initiatives reach scale and efficiency ratio normalizes .