FinWise Bancorp

Greetings. Welcome to FinWise Bancorp's third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A 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. Please note this conference is being recorded. I will now turn the conference over to Nathan Mills, Investor Relations. Thank you. You may begin.

Thank you, Operator. Good afternoon and welcome to FinWise Bank Corp's third quarter 2023 conference call. The earnings press release is available on the investor relations section of the company's website at investors.finwisebankcorp.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 statements. I refer you to the company's filings made with the SEC, including its earnings press 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 this call. Additionally, certain non-GAAP financial measures will be discussed on this conference call. Our 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 our filings with the SEC, including our earnings press release issued earlier today at www.sec.gov. Hosting the call today are Mr. Kent Landatter, CEO and President of FinWise Bank Co-op, Mr. Javis Jacobson, Chief Financial Officer, and Mr. Jim Noon, president of FinWise Bank. With that, I will turn the call over to Mr. Landbetter.

Good afternoon, everyone, and thank you for joining us on our third quarter 2023 earnings conference call. On today's call, we will discuss our third quarter financial results, provide color on how we navigated the turbulence in the macro economy, and share progress on our strategic priorities. We delivered yet another quarter of solid results driven by 16.2% quarter-over-quarter growth in our loans held for investment portfolio, coupled with steady originations in our strategic program's line of business. Our third-party-focused business model, along with prudent underwriting, effective portfolio management, and exceptional execution in our core competencies, have remained sources of strength for us. During the third quarter, FINWISE remained profitable and our loan portfolios continued to perform generally as anticipated. Our credit quality remained solid as evidenced in the relatively low charge-offs for the quarter, notwithstanding an expected rise in non-performing loans. These factors, along with our above-pure average capital, enabled us to continue investing in our core competencies and laying the groundwork for future growth. For the third quarter of 2023, we generated revenue of $22.4 million, led by interest from our growing loan portfolio and loan originations of $1.1 billion. This resulted in net income of $4.8 million or diluted earnings per share of $0.37, with a return on average equity of 12.8%. While we are pleased with these results, we believe that the higher for longer interest rate outlook and tight capital markets will continue to weigh on industry-wide loan originations and that this softness may persist throughout the remainder of 2023 and potentially well into 2024. Despite these macro challenges, we continue to actively manage what we can control. Our focus on providing reliable and uninterrupted services with our current third-party relationships remains strong. and we are actively forging new relationships. This is integral to our strategy and is expected to continue to drive our success. Importantly, we have demonstrated our ability to perform well in this current environment and believe we remain well positioned for growth as the economy begins to recover. Turning to capital, at the end of the third quarter, the company's tangible bulk value per common share was 1204 as compared to 1159 at the end of the prior quarter. Our bank capital levels remain significantly above well-capitalized guidelines with a bank leverage ratio of 22.1%. While our total shareholders' equity to total assets ratio remains high, it is important to note that since the end of 2022, the ratio has declined as our balance sheet continued to grow and as we repurchased our stock. During the third quarter, we repurchased all remaining shares under the board-approved buyback plan. While management and our board of directors are always evaluating our use of capital, our primary focus has been the deployment of capital to support organic growth opportunities, to expand the business, and to maintain balance sheet flexibility during what is an uncertain economic and geopolitical environment. I will now provide an update on our key objectives as we move through the remainder of 2023 and beyond. Our strategic lending programs have been a key driver of our revenues and our support for existing platforms continued throughout the quarter. Our teams have also been actively working to bring new relationships through due diligence to expand and diversify revenue in this business line. Our SBA 7-8 lending continued to be a key driver of our portfolio growth and we are pleased with both the growth and performance in the quarter. While our expected increase in non-performing loans in the quarter was primarily attributable to our SBA loans, we are confident in our team's underwriting and collateral management expertise and have historically managed credit performance quite effectively. Expenses remain well managed with the third quarter efficiency ratio of 51.3% compared to 52.7% in the previous quarter and 42.3% in the same period last year. However, it is important to note that the approximate 0.6 million of the miscellaneous income recognized on the resolution of the forbearance agreement related to a previously reported non-accrual SBA loan played a part in the improved efficiency ratio during the quarter. While this level of miscellaneous income is not expected on a recurring basis, it does demonstrate the expertise of our portfolio and collateral management teams in maximizing bank proceeds related to the non-accrual balances. As previously noted, we expect our efficiency ratio to fluctuate and remain elevated as we bring our new initiatives online. We believe this investment is critical to expanding our business relationships and will serve to further diversify and support our revenue in the years ahead. In summary, we continue to be excited about our pipeline of potential lending programs, the growth and performance of our SBA portfolio, and the continued progress we've made on the expansion of our banking as a service initiative. We remain disciplined and focused on the items that we can control, including risk management, third-party programs, capital management, our underwriting and collateral management, and investment for future growth opportunities of the bank. With that, let me turn the call over to Jim Noon, our bank president, who will provide you with more detail on strategic program initiatives and credit performance.