FinWise Bancorp Q1 profit falls on elevated charge-offs

Overview

• U.S. fintech-focused bank's Q1 loan originations rose 38% yr/yr to $1.7 bln

• Net income and diluted EPS declined yr/yr amid elevated charge-offs and higher expenses

• Nonperforming loan balances increased, mainly due to higher SBA 7(a) loan nonaccruals

Outlook

• Company expects SBA charge-offs to remain elevated over the next few quarters

• FinWise expects efficiency ratio to improve with increased revenues from credit enhanced loan balances

• Company says partner pipeline continues to strengthen and platform is scaling

Result Drivers

• INTEREST INCOME ALLOCATION - Net interest income rose, driven by a change in estimate on allocation of interest received on credit enhanced loans and growth in average balances

• ELEVATED CHARGE-OFFS - Net income was affected by higher net charge-offs, particularly in the credit enhanced portfolio and legacy SBA credits

• HIGHER NON-INTEREST EXPENSES - Non-interest expenses increased mainly due to higher credit enhancement guarantee and servicing costs tied to portfolio growth and interest income allocation changes

Company press release: ID:nGNX5Dqq9h

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 3 "strong buy" or "buy", no "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the banks peer group is "buy"

• Wall Street's median 12-month price target for Finwise Bancorp is $21.00, about 31.9% above its April 29 closing price of $15.93

• The stock recently traded at 9 times the next 12-month earnings vs. a P/E of 10 three months ago

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