FinWise Bancorp

Greetings and welcome to the FINEWISE Bancorp First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Combe, Investor Relations. Thank you, Brad. You may begin.

Thank you, Operator. Good afternoon and welcome to FinWise Bancorp's first quarter 2023 conference call. The earnings press release is available on the Investor Relations section of the company's website at investors.finwisebancorp.com. Note that this conference call is being recorded. I would like to remind you that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statement. I refer you to the company's filings made with the SEC, including its earnings release issued earlier today, for a more detailed discussion of the risks and factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. The company undertakes no duty to update any forward-looking statements that may be made during the course of the call. Additionally, certain non-GAAP financial measures will be discussed on this conference call. Presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliation of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be accessed through the company's filings with the SEC, including its earnings release issued earlier today at www.sec.gov. Hosting the call today are Mr. Kent Landvetter, CEO and President of Finwise Bank Corp. Mr. Javis Jacobson, Chief Financial Officer, and Mr. Jim Noon, President of Finwise Bank. With that, I will turn the call over to Mr. Landvetter. Kent?

Good afternoon, everyone, and thank you for joining us on our first quarter 2023 earnings conference calls. On today's call, we will provide an update on our first quarter financial results, discuss the impact of the macroeconomic environment on the company, and the continued evolution of our business model. Despite the challenging macroeconomic backdrop, our business remains resilient. Our differentiated and diverse business model coupled with strong execution allowed us to navigate these macro headwinds successfully during the quarter. As a result, our business remained profitable, credit quality was in line with our expectations, and we are investing in the business for future expansion and to grow capital for our shareholders. In addition, following the recent bank liquidity crisis, we are pleased to report that our balance sheet and liquidity positions remained strong, deposits continued to grow, and exposure to interest rate risk on our investment securities remained minimal. For the first quarter of 2023, despite ongoing contraction in capital markets for certain loan assets, we generated revenue of $18 million led by loan originations of $0.9 billion, net income of $3.9 million, and diluted earnings per share of $0.29. While general credit tightening has impacted our loan growth in the quarter, we believe that the tradeoff between credit and growth is appropriate in this environment. Despite these factors, we produced a return on average equity of 11.1% during the quarter, maintaining our profitability. Furthermore, we continue to manage our capital prudently by investing in our business to fuel future growth and repurchasing our stock below tangible book value. At the end of the first quarter, the company's tangible book value per common share was $11.26 as compared to $10.95 per share at the end of the prior quarter. As we communicated on our 2022 year-end call, we had anticipated that pressures from the economy would persist throughout 2023. However, what was not as clear was how abrupt the change in industry-wide originations would be in the first quarter. As we look ahead, we believe that we are prepared to deal with similarly challenging economic headwinds should they persist over the next few quarters. While it remains our intent to continue to invest and build on our past success to further diversify our income and funding streams, this will take time. That said, we continue to focus on producing diversified, sustainable, and profitable growth as the environment evolves over time. In short, even with a challenging start to the year, our long-term strategy and focus remain intact. Let me provide an update on our key objectives as we move through 2023. We remain committed to securing additional revenue growth opportunities and continued execution in our existing business lines. Focusing for a few minutes on our strategic programs business, the effort to support our current platforms remains strong, and we continue to work to forge new relationships and bring new platforms on board. As we look to the future, the importance of securing new strategic programs to drive and diversify growth for Fenway's remains a key priority. However, as we've discussed previously, it can be a multi-year process to build a relationship that contributes meaningfully to our revenue. Specifically, based on past experience, In any given year, it can take one to two quarters to launch a strategic program, and beyond that, it can take many more quarters before we would see originations related to a new program contribute significantly. Thus, in line with our long-term strategy, we continue to pursue new opportunities to engage with new platforms. Another area of focus is the further expansion of our footprint in the banking as a service ecosystem. where we see strategic growth opportunities. In support of this focus, we have made key personnel hires during the quarter, including Robert Kyle as our Chief FinTech Officer, along with two additional well-established banking as a service sales professionals. During the quarter, despite recent increases in market interest rates, SBA 7A loan originations remain strong. None of the guaranteed portions of these loans were sold during the quarter, which meaningfully impacted our SBA gain-on-sale revenue compared to prior periods. However, we continue to believe that over the longer term, this shift will result in stronger held-for-investment loan growth and support incremental growth to our net interest income. In addition, as part of our strategy to diversify revenue streams, We are working to further grow and expand our legacy commercial leasing business, which started over 10 years ago. As anticipated, our efficiency ratio rose in the quarter. This was due primarily to our decision to focus on positioning the company for future growth opportunities. This meant the continued investment in people and infrastructure, including administrative support, technology, systems, and the expansion of our banking as a service product line. An important and exciting development that we believe further strengthens the leadership team is the first quarter promotion of Jim Noon to president of the bank. We believe that Jim's vast industry experience, vision, and past contributions will serve Fenway's well and speaks to our effort to develop a strong team of leaders to support our growth. Beyond investing in the team, we expect to continue to make investments to deepen relationships with our current customers, pursue new customers, and be positioned to take advantage of growth opportunities, particularly as a macro economy improves. As part of our ongoing efforts to effectively navigate the environment with reduced loan originations, we are seeking to identify additional ways to utilize our balance sheet, including prudently adding credit risk as we discussed on prior calls. One area we remain extremely vigilant in is underwriting and maintaining our disciplined approach to growth. We believe we have demonstrated strong risk management efforts that have enabled us to sustain sound credit quality through varying credit cycles. In the first quarter, as anticipated, the overall credit performance of our portfolio has remained strong, with no significant deteriorations beyond the ongoing industry-wide normalization of credit to pre-pandemic levels. However, as we've discussed in the past, we remain committed to ensuring our credit quality remains a core focus. While this thoughtful approach could hinder the rate of growth, we know it is critical to stay disciplined. This is our conscious decision to operate in this manner, given the uncertain macro environment. We know that some of our long origination platforms have seen larger declines than others as a percentage of total originations. As we look at year-over-year comparison, this dispersion continued to evolve, reducing our reliance on the originations of any one platform. As we look ahead, while macro uncertainties remain, we believe that our long-term business fundamentals remain intact and we are well positioned to navigate the current environment and for long-term growth of our business. We are committed to maximizing long-term shareholder value by positioning the business to capitalize on growth opportunities that may emerge when the market stabilizes and the industry returns to growth. With that, let me turn the call over to Javis Jacobson, our CFO, who will provide you with more detail on our financial results.