The stock markets have experienced significant volatility since last month, erasing the election rally gains. FinWise Bancorp FINW, a Utah-based bank holding company, has not been immune to this broader market meltdown.

In the past three months, FINW shares have dropped 7.8%. However, it has outperformed the industry and the S&P 500 index.  Also, the stock has fared better than its close peers — BOK Financial Corporation BOKF and First Financial Bankshares, Inc. FFIN.

Three-Month Price Performance

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The recent market slump is largely because of the ongoing tariff war, as President Trump’s tariffs resulted in retaliation, raising concerns of a full-scale trade war. Also, economic data indicates a slowdown in the U.S. economy, with manufacturing and business activity stalling, job growth weakening, and consumer confidence declining. Inflationary pressure is mounting, too, fueled by rising prices of groceries, gasoline and rent, with consumer inflation expectations reaching their highest level since November 2023. These factors resulted in ambiguity and fear in the market, further exacerbating the downturn.

Given the uncertain and volatile backdrop, let’s decipher whether FinWise stock is worth adding to your portfolio.

Factors That Support FinWise Stock

Solid Loan Growth Efforts to Aid Revenues: FinWise’s revenue growth has been impressive over the past few years, driven by solid loan growth and higher interest rates. The company’s revenue and net loans held for investments have witnessed a compound annual growth rate (CAGR) of 17.9% over the last four years (2020-2024).

Revenue Trend

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FINW has been focusing on loan growth through strategic programs to diversify its loan origination and has been streamlining its origination process by leveraging technology to mitigate costs. Given solid loan growth, the company’s net interest income (NII) reflected a CAGR of 20.7% over the four years ended 2024, driven by higher yields as interest rates increased partially offset by higher funding costs.

Nonetheless, the company’s net interest margin (NIM) declined in 2023 and 2024 due to higher funding costs. Though the Federal Reserve has started reducing interest rates, which will stabilize deposit costs to some extent, relatively higher rates will likely continue to exert pressure on NII and NIM in the near term.

However, the company’s solid origination volumes and growth in fee income will continue to support revenues. FINW’s non-interest income reflected a CAGR of 11.8% over the four years ended 2024, primarily driven by strategic program fees. In 2024, the bank originated roughly $5 billion worth of loans compared with $4.3 billion in 2023.

Further, rising total addressable market will aid the company’s revenue growth in the future.

Sales Estimates

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Loan & Funding Diversification Efforts: FinWise has strategically diversified its loan portfolio and funding sources to enhance stability and mitigate risk. The company has reduced its dependence on small business administration (SBA) loans from 64.5% of total loans in 2023 to 54.8% in 2024 while expanding into commercial lending, owner-occupied real estate, and multi-state equipment financing. This shift strengthens revenue streams and lowers concentration risk.

On the funding side, deposits recorded a four-year CAGR of 34.9% ended 2024, driven by strong growth in time certificates of deposit (CDs) and diversified deposit sources. The bank continues to rely on a mix of core deposits, institutional deposits, brokered deposits, and Health Savings Accounts (HSA) to ensure a balanced funding structure. Additionally, its Strategic Programs require partners to maintain reserve deposit accounts, adding financial security.

By strategically expanding its lending and funding profile, FinWise aims to achieve a resilient and well-capitalized position for sustainable growth in a rapidly changing financial landscape.

Encouraging Capital Distributions: As of Dec. 31, 2024, FinWise's cash and cash equivalents totaled $109.2 million. It had other liabilities of $15.1 million as of the same date. Further, the company had a leverage ratio of 20.6%, which is well above the regulatory requirement of 9%. Thus, this indicates solid liquidity and capital position.

Similarly, as of the same date, BOKF and FFIN had leverage ratios of 9.97% and 9.98%, respectively.

Despite its solid liquidity position, FINW has never paid dividends since its inception. The company relies on share repurchases to reward shareholders. Last year, it repurchased 44,608 shares for $0.5 million under the share repurchase program, which expired on Dec. 31, 2024.

The company’s strong liquidity and capital position, alongside its diversified funding profile, will likely help to maintain sustainable share buybacks going forward.

Bullish Analyst Sentiments for FINW Stock

FinWise’s efforts to expand strategically are expected to boost profitability going forward.

Over the past month, the Zacks Consensus Estimate for 2025 earnings of $1.12 has been revised 8.7% upward, while the same for 2026 earnings has been raised marginally to $1.81 per share.

Estimate Revision Trend

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The projected figures imply growth of 20.4% and 61.3% for 2025 and 2026, respectively.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

FinWise Shares Undervalued

In terms of valuation, FinWise’s price-to-book ratio (P/B) of 1.36X is lower than the industry's 1.81X. Thus, the stock is trading at a discount. This suggests that investors may be paying a lower price relative to the company's expected earnings growth.

P/B Ratio

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How to Play FinWise Stock Now

FinWise is well-positioned for growth on the back of decent loan growth, diversified funding base and solid capital position. Despite recent market weakness, its robust origination volumes and lucrative valuation make it a compelling investment. Bullish analyst sentiment and strategic diversification efforts are other positives.
 
However, a steady rise in expenses is a headwind. The company recorded a four-year CAGR of 24.8% (ended 2024), mainly due to higher salaries & employee benefits and occupancy and equipment expenses. Overall costs are expected to remain elevated in the near term due to the company’s organic growth efforts.

Expense Trend

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Further, FinWise is not utilizing shareholders’ funds efficiently. This is demonstrated by the company’s return on equity (ROE) of 7.67%, which compares unfavorably with the industry’s ROE of 10.13%.

Return on Equity Trend

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Nonetheless, a shift toward lower-risk lending and technology-driven loan origination is likely to boost operational efficiency in the long run. Moreover, a solid balance sheet suggests financial stability.

Thus, FinWise stock remains a lucrative bet for long-term investors.
 
Currently, FINW sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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BOK Financial Corporation (BOKF) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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