Bankwell Financial Group, Inc. Q4 FY2025 earnings call

• Fourth quarter GAAP net income was $9.1 million or $1.15 per share, including a $1.5 million one-time tax adjustment. Excluding the adjustment, operating income was $10.7 million or $1.36 per share. - Pre-provision net revenue return on average assets was 180 basis points, up 10 basis points from prior quarter and 75 basis points over 2024. - Loan production remained strong, funding $240 million of new loans in Q4 with total originations for the year at $758 million. - SBA division resumed originations and sales post-government shutdown, with gains on sale in Q4 at $2.2 million and full-year realized gains at $5.1 million. - Credit trends improved, with non-performing assets reduced by $1.9 million, bringing NPA to assets ratio to 49 basis points. - Efficiency ratio improved to 50.8% from 51.4% prior quarter.

In the fourth quarter, net interest income reached $26.9 million. Non-interest income was $3.4 million, with $2.2 million from SBA gain on sale income. Loan production was strong, with $240 million of new loans funded in the fourth quarter, bringing total funded originations for the year to $758 million. Net loan growth for the quarter was $122 million, and full-year net loan growth was $134 million (5% annual loan growth). Floating rate loans comprised 38% of the total loan portfolio at the end of 2025, up from 23% at the end of 2024. Average low-cost deposit balances increased by $22 million (5%) quarter over quarter and $86 million (21%) versus 2024. Non-performing assets as a percentage of total assets fell to 49 basis points from 56 basis points last quarter. Non-interest income now represents 11.4% of total revenue compared to 4.6% in 2024.

• Expect loan growth of 4% to 5% in 2026. - Anticipate net interest income in the range of $111 to $112 million. - Expect non-interest income to increase to approximately $11 million to $12 million. - Estimate total non-interest expense of $64 million to $65 million, incorporating investment in people, infrastructure, and operations.

• Potential impact of government shutdown on SBA business, though SBA has resumed operations but future shutdowns could affect. - Interest rate fluctuations could impact net interest margin, as seen with moderated pace of net interest margin expansion due to increased floating rate loans. - Credit risk associated with loan portfolio, though credit trends have improved but still a factor.

Q: Please go ahead on loan growth. Great to see you're expecting a pickup there in '26. Think it's a little bit above what I have previously modeled. Can you talk about the extent to which payoffs versus new originations drive the net new growth number?

A: Chris and Matthew J. McNeill responded, mentioning volume of payoffs in early 2025 was unexpected, now anticipating runoff balance sheet earlier, C&I heavy in loan pipeline Q: What do you expect the low-cost deposit growth to be this coming year?

A: Courtney E. Sacchetti stated average low-cost deposits grew 5% q/q and 21% y/y, expecting steady improvement Q: On the fee income side, kind of with the SBA kind of dominating the number. Just wondered should we think about in the guide for the total year any seasonality of that quarter to quarter? How should we base that out?

A: Chris and Courtney E. Sacchetti responded, saying smooth production throughout the year unless government shutdown Q: In terms of the outlook here, just kind of curious what you expect to be the drivers on expense growth here in '26?

A: Christopher R. Gruseke mentioned people and processes, with headcount increase and investments in mind Q: Just in it's just what you we have a strong opinion that if you don't invest, stay current. You're out of business. So we wanna make sure that we're always ready for the future. And just in terms of just kinda loan pricing here, you know, curious you know, how are, you know, new origination coupons holding up these days? If there's been any spread compression just any color you can give on that front.

A: Courtney E. Sacchetti responded, saying no recent spread compression, floating rate loans and fixed rate pricing off treasury, loan demand supporting spreads