Bankwell Financial Group, Inc. Q3 FY2025 earnings call

• Bankwell had GAAP net income of $10.1 million or $1.27 per share, up from previous quarter.
• Pre-provision net revenue return on assets was 1.7% for the quarter, up 27 basis points.
• Net interest margin expanded due to repricing of ~$1 billion of time deposits, increased asset yields, and growth of low-cost deposit balances.
• SBA division had gains on sale of $1.4 million, with SBA originations $22 million in Q3, year-to-date $44 million.
• Nonperforming asset balances reduced, NPA to assets ratio at 56 basis points.
• Efficiency ratio improved to 51.4% in Q3.
• Loan fundings strong in first 3 quarters, with $500 million funded by 9/30, but net loan growth only $49 million in Q3.

Bankwell delivered a strong quarter with GAAP net income of $10.1 million or $1.27 per share, up from $9.1 million or $1.15 per share last quarter. Net interest income reached $26 million, with the net interest margin expanding to 3.34%, up 24 basis points. Noninterest income was $2.5 million, driven by $1.4 million in SBA gains on sale. Nonperforming assets as a percentage of total assets fell to 56 basis points compared to 78 basis points last quarter. Low-cost deposits (noninterest-bearing and NOW accounts at rates of 50 basis points or lower) averaged balances grew by $20 million over the prior quarter and $64 million or 16% since Q4 2024. Loan originations totaled $220 million in Q3, with year-to-date fundings over $500 million. SBA originations were $22 million in Q3, year-to-date total $44 million.

• Revised loan growth guidance from low single-digit to flat for the year.
• Affirmed noninterest income guidance of $7 million to $8 million for full year, with resumption of SBA program additive.
• Affirmed net interest income guidance of $97 million to $98 million.
• Affirmed noninterest expense guidance of $58 million to $59 million.
• Will provide additional guidance on 2026 outlook with Q4 earnings in January.

• Government shutdown has potential to temporarily impact SBA results for remainder of 2025.
• Recent interest rate cuts may hold net interest margin relatively flat in Q4, but expected to improve as term deposits mature.

Q: Steve Moss from Raymond James asked about loan pricing, elevated payoffs carrying over to 2026 A: Courtney Sacchetti said year-to-date originations weighted average rate was 7.86% as of 9/30. Matthew McNeill noted strong loan demand, lack of material loan growth due to timing and velocity of payoffs, with strong payoffs expected in Q4 and loan demand still present Q: Asked about core deposit initiative with teams brought over A: Matthew McNeill said teams hired in April and subsequent quarters, already producing deposits, full production expected in 2026, targeting teams with large noninterest-bearing deposits Q: Asked about deposit beta with Fed A: Courtney Sacchetti said ~$1 billion of non-maturity interest-bearing deposits, ~$250-260 million indexed to Fed funds, recent rate cut led to 100% beta repricing on CDs, achieving 50% beta on $1 billion of deposits Q: Asked about SBA ramp and government shutdown impact A: Matthew McNeill said government shutdown duration affects SBA, Bankwell is preferred lender but can't get in-place guarantees or fund previously originated, depends on shutdown duration; Bankwell hired Michael Johnston from ReadyCap, SBA division has operating leverage to scale beyond $50 million production