NASDAQ:BWFG Bankwell Financial Group Q2 2025 Earnings Report $39.60 -0.33 (-0.83%) Closing price 04:00 PM EasternExtended Trading$39.60 0.00 (0.00%) As of 04:10 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast Bankwell Financial Group EPS ResultsActual EPS$1.15Consensus EPS $0.87Beat/MissBeat by +$0.28One Year Ago EPSN/ABankwell Financial Group Revenue ResultsActual Revenue$47.14 millionExpected Revenue$24.20 millionBeat/MissBeat by +$22.94 millionYoY Revenue GrowthN/ABankwell Financial Group Announcement DetailsQuarterQ2 2025Date7/28/2025TimeBefore Market OpensConference Call DateMonday, July 28, 2025Conference Call Time11:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Bankwell Financial Group Q2 2025 Earnings Call TranscriptProvided by QuartrJuly 28, 2025 ShareLink copied to clipboard.Key Takeaways Positive Sentiment: GAAP fully diluted earnings per share of $1.15 in Q2, up 32% from Q1, driven by net interest margin expansion and increased SBA loan sales. Positive Sentiment: Net interest margin rose 29 basis points sequentially to 3.10%, prompting an updated full‐year net interest income guidance of $97–98 million. Positive Sentiment: Noninterest-bearing deposits grew by $48 million in the quarter and five private client deposit teams were added, targeting enhanced low‐cost funding. Positive Sentiment: Credit trends improved with a $1.2 million reduction in nonperforming assets, a net recovery, and the NPA ratio falling to 89 basis points of loans. Neutral Sentiment: Full‐year noninterest expense guidance was raised to $58–59 million to reflect ongoing investments in banking teams, SBA platform growth, and risk and technology enhancements. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallBankwell Financial Group Q2 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipantsPresentationSkip to Participants Operator00:00:00Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bankwell Financial Group Inc. Second Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. Operator00:00:20After the speakers' remarks, there will be a question and answer session. I would now like to turn the call over to Bankwell's Chief Financial Officer, Courtney Ficchetti. Courtney, please go ahead. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:00:43Thank you. Good morning, everyone. Welcome to Bankwell's second quarter twenty twenty five earnings conference call. To access the call over the Internet and review the presentation materials that we will reference on the call, please visit our website at investor.mybankwell.com and go to the Events and Presentations tab for supporting materials. Our second quarter earnings release is also available on our website. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:01:06Our remarks today may contain forward looking statements and may refer to non GAAP financial measures. All participants should refer to our SEC filings, including those found on Forms eight ks, 10 Q and 10 ks for a complete discussion of forward looking statements and any factors that could cause actual results to differ from those statements. And now I will turn the call over to Chris Versecki, Bancorp's Chief Executive Officer. Christopher GrusekeCEO & Director at Bankwell Financial Group00:01:30Thanks, Courtney. Welcome and thanks to everyone for joining our second quarter earnings call. This morning, I'm joined by Courtney Sicchetti, our Chief Financial Officer and Matt McNeil, our President and Chief Banking Officer. I'm happy to announce our second quarter results, which demonstrate improved performance trends in virtually every aspect of our business as our investments in people and technology have continued to bear fruit. The company's net interest margin continues to expand. Christopher GrusekeCEO & Director at Bankwell Financial Group00:01:57Our SBA business is on pace to deliver material growth to noninterest income, and credit trends continue to improve with further improvement expected in the quarters ahead. Additionally, with our first quarter results, we had previously announced the addition of two deposit teams in the New York City Metro Area. We've added two more teams during the second quarter and another team in July, bringing our growth in private client teams to five during this fiscal year. We look forward to the potential improvements to our deposit base as we welcome these talented professionals to the bankroll team. Our financial results for the second quarter include GAAP fully diluted earnings of $1.15 per share, which were up 32% relative to the first quarter, a result of significant net interest margin expansion and increased contributions from SBA loan sales. Christopher GrusekeCEO & Director at Bankwell Financial Group00:02:50Banquel had another robust quarter of originations funding 170,000,000 in new loans resulting in $24,000,000 in linked quarter growth. Loan payoffs were $150,000,000 during the second quarter, down from the first quarter's $200,000,000 but still elevated to where we'd expect them to be on a normalized basis. We funded $12,000,000 in SBA loans during the quarter, bringing our year to date SBA originations to 22,000,000 Our pipeline for both commercial and SBA loans remains strong. And although total loan balances were down slightly compared to year end 2024, we reiterate our original guidance of low single digit loan growth for the full year. The bank's funding profile continues to improve as we've grown our non interest bearing deposits and repriced our time deposits meaningfully lower. Christopher GrusekeCEO & Director at Bankwell Financial Group00:03:40Non interest bearing deposits grew by $48,000,000 during the quarter for a year to date increase of $75,000,000 or 23% since year end. It's noteworthy that this increase in non interest bearing balances does not yet reflect the impact of our new team's expected contributions as they begin to open accounts on behalf of new customers. As these teams bring in low and no cost deposits and our balance sheet remains liability sensitive, we anticipate continued margin expansion into 2026. We are constructive on the direction of credit. Positive migration trends continue and we expect continued progress toward reduction in NPAs in the quarters ahead. Christopher GrusekeCEO & Director at Bankwell Financial Group00:04:21Further details regarding NPAs can be found on Slide 21 of our investor presentation. Now to discuss our financial results in greater detail, I'll turn it over to Courtney, our Chief Financial Officer. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:04:34Thank you, Chris. Our second quarter pre provision net revenue of $11,400,000 or $1.46 per share increased 21% relative to the first quarter with the PPNR return on average assets increasing to 143 basis points versus 118 basis points in the first quarter. We had strong improvement in our net interest margin with the second quarter reported NIM of three ten basis points, a 29 basis point increase relative to the linked quarter. Our net interest margin expansion is a result of our decreasing funding costs, which fell another 20 basis points versus the linked quarter to 3.46%. This is down 41 basis points from our high of 3.87% in the third quarter of twenty twenty four. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:05:19In addition to realizing lower rates on rolling time deposits, we have reduced pricing by approximately 23 basis points on $1,000,000,000 of non maturity interest bearing deposits since the end of twenty twenty four. We've achieved this by lowering rates on key money market and savings products and adjusting exception pricing, a trend that continues as our June exit rate on deposit costs was 3.28. We continue to see our earning asset yields expand as well, with the average loan portfolio yield increasing four basis points to 6.58% in the second quarter when compared to the first quarter. Our new loan originations continued to yield over 8%, benefiting from a more diversified loan mix, including C and I and SBA loans. Given the strong results in the first half of the year and our anticipated margin expansion over the balance of 2025, we will update our net interest income guidance for full year 2025 to a range of 97,000,000 to $98,000,000 This guidance assumes no further actions by the Fed for the balance of this year. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:06:18Non interest income of $2,000,000 increased 34% versus the linked quarter, largely driven by $1,100,000 of SBA gain on sale income, an increase of $600,000 over the last quarter. We reiterate our full year 2025 guidance for noninterest income of 7,000,000 to $8,000,000 And as Chris mentioned, expect SBA gain on sale activity to continue to accelerate over the balance of 2025. On a linked quarter basis, our total non interest expense is up modestly from $14,100,000 to $14,500,000 primarily due to increased salaries and employee benefits. This increase reflects our continued investment in growing our banking teams, SBA platform and supporting risk functions, all aimed at generating revenue and improving efficiency. Despite the $400,000 increase, our efficiency ratio fell to 56.1% in the second quarter compared to 59.9% last quarter, a result of our expanding net interest margin and growth in noninterest income. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:07:17Given the incremental investments made and associated costs beyond our initial guidance, we are increasing our full year 2025 guidance for noninterest expense to $58,000,000 to $59,000,000 Importantly, despite the higher expense guidance, our long term view of driving operating leverage remains unchanged. We expect our efficiency ratio to continue improving over the coming quarters as our profitability continues to expand. We anticipate moderation in our non interest expense to total asset ratio as our balance sheet grows. Switching to credit, second quarter trends were positive with a small net recovery, a decrease in criticized and classified loan balances and a $1,200,000 reduction in nonperforming assets. We had a release of our loan provision in the second quarter of $411,000 This is mainly attributable to our qualitative factors related to loan composition. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:08:08A few final thoughts on our financial condition. Our balance sheet remains well capitalized and liquid with total assets of $3,200,000,000 up slightly versus the linked quarter. The holding company and bank both saw expanding capital ratios during the second quarter with our consolidated common equity Tier one ratio now at 10.17% versus 10.04% in the prior quarter. We repurchased 14,626 shares at a weighted average price of $28.86 per share during the quarter ended 06/30/2025, and have 205,000 shares remaining on our authorization. I'd like to now turn it back over to Chris for his closing remarks. Christopher GrusekeCEO & Director at Bankwell Financial Group00:08:49Thanks, Courtney. To wrap things up, the last several quarters have been a time of material progress at the company. I want to emphasize how gratified we are to see the results of careful planning translate into excellent performance. We continue to execute on key strategic initiatives, including building out our SBA platform, attracting talented deposit teams and making the necessary investments in our risk and technology platforms to ensure that the company is prepared for an era of technological evolution and innovation. None of these achievements would have been possible without the dedication and commitment of so many team members. Christopher GrusekeCEO & Director at Bankwell Financial Group00:09:27On behalf of our board of directors and our shareholders, I'd like to commend the team on a job well done. To reiterate some of the milestones we've achieved, we have meaningfully improved our asset quality with nonperforming loans dropping from a peak of $65,000,000 in the third quarter twenty twenty four to just under $24,000,000 this quarter or 89 basis points of total loans. Concurrently, we've reduced our CRE exposure as a percentage of total risk based capital to 349%, down from 382% at the midpoint of 2024. This represents our lowest concentration in ten years. We've reduced our brokered deposits by over $400,000,000 from their peak and have replaced them with lower cost core deposits. Christopher GrusekeCEO & Director at Bankwell Financial Group00:10:10Our growing SBA platform has shown considerable progress in the first six months of this year and recent additions to our private client groups are expected to further improve our deposit portfolio. Finally, our performance has continued to improve with our net interest margin now reaching three ten basis points and our return on average assets hitting 114 basis points. As much as we've accomplished over the past year, we remain excited about the bank's future and expect continued improvement in our profitability moving forward. This concludes our prepared remarks. Operator, will you please begin the question and answer session? Operator00:11:04Your first question comes from Betty Strickland with Hovde Group. Please go ahead. Feddie StricklandDirector at Hovde Group00:11:12Hey, good morning. Great to see the DDA growth in the quarter, and it sounds like you have some more stuff in the pipeline. Do you have a longer term target in terms of DDAs to deposits? I think you're at about 14% today. Christopher GrusekeCEO & Director at Bankwell Financial Group00:11:27Morning, Fadi. Thanks for the question. We don't have a hard target in mind. We clearly are looking to expand that percentage. We wanna make sure that we bring the wholesale funding ratio down. Christopher GrusekeCEO & Director at Bankwell Financial Group00:11:38We probably watch that. You know, we do certainly watch that closely. But I think it's safe to say that given the investments we're making, people we're bringing on, the way we we we've restructured our own teams internally over the past year with the platform that we put in place that we're looking to meaningfully expand it. I that that'd be hesitant to put a number on it, and we're gonna be reporting on it regularly. But it's the reason that we're making these plans and these investments. Feddie StricklandDirector at Hovde Group00:12:11Got it. And then just should we expect the level of brokered deposits to continue grinding lower in the future quarters? Or do you think maybe we see that level off just depending on the attractiveness of the rates of the broker versus retail? Christopher GrusekeCEO & Director at Bankwell Financial Group00:12:23I I think it really depends. I we've made a, very meaningful full dent in it. We brought it down by about half. And from here on in, it's a function of, you know, what comes in the door. We certainly want it want it be back in a mode of growing the loan book. Christopher GrusekeCEO & Director at Bankwell Financial Group00:12:40And as deposits come in, then the question becomes, you know, is it doll it certainly won't be dollar for dollar. I would expect a pay down broker with new money, and then it becomes an art form of how much loan growth and what what are what are market rates. But since we've taken them down by half, we're not looking to be as dramatic, I'd say, and it depends on the market opportunities. But the number will get lower over time. It's really a function of, you know, the performance we're gonna get in our deposit gathering efforts. Feddie StricklandDirector at Hovde Group00:13:16Got it. Thanks for that, Chris. And just if I could squeeze in one more for for Matt. If you could just give a little bit of an update on what you're hearing from your health care customers, anything incrementally different? Matthew McNeillPresident & Chief Banking Officer at Bankwell Financial Group00:13:29No. There was some concern around new legislation with the big focus on Medicaid cuts. From the research that we've done and some third parties, it appears that our borrowers are not really impacted by the by the new legislation. So in the in the near term, we're we're feeling really good with the health care book and, you know, continue to see the the book be a profitable source of business here at Bankwell, not only on the loan side, but the fee and the deposit side. Feddie StricklandDirector at Hovde Group00:14:03All right. Great. That's it for me. Thanks for taking my questions. Christopher GrusekeCEO & Director at Bankwell Financial Group00:14:07Thanks, Betty. Operator00:14:08Your next question comes from the line of Steve Moss with Raymond James. Please go ahead. Steve MossDirector at Raymond James Financial00:14:15Hi, good morning. Christopher GrusekeCEO & Director at Bankwell Financial Group00:14:18Good morning. Is this actually Steve? Steve MossDirector at Raymond James Financial00:14:20It is. Yes, Chris. How are doing? Christopher GrusekeCEO & Director at Bankwell Financial Group00:14:22Well, thank you. How about you? Steve MossDirector at Raymond James Financial00:14:24I'm doing pretty good. Maybe just, you know, on the deposit side here following up, you know, with the five teams now that you've hired, you know, that you with the new three teams in particular, just kind of wondering if you could size up the book of business and how, you know, how we could think about that total potential here over the next twelve to twenty four months. Matthew McNeillPresident & Chief Banking Officer at Bankwell Financial Group00:14:46Well, you said the word potential, and I think that's the right way to think about the teams, largely new to the company. So actual production is not driving the growth that we've seen in core deposits. Those are actually the deposit fees that we've been working on over the past several years. But the the potent as we, you know, spoke to the the folks that comprise these teams, all of the teams had, you know, multiple, you know, tens of millions business, hundreds of million dollars in their books of business in prior organizations. And now it's, you know, how how can we make that translate into deposits on our balance sheet? Matthew McNeillPresident & Chief Banking Officer at Bankwell Financial Group00:15:28You know, we've been thinking about this for a while. We successful, including the ability to, you know, open new relationships, new accounts in, you know, same day, next day, which, you know, been a stumbling block in some organizations. So we think that, you know, our planning is gonna pay off in the in the translation of new deposits, but, you know, they're so new to the organization. It's it's really we're waiting for those results to materialize. Christopher GrusekeCEO & Director at Bankwell Financial Group00:15:57And and, Steve, that one day account opening is very important for us and keeping our reputation with new customers and with new team members is important. So any additions that we make going forward, it will absolutely have in mind, you know, what's the right pace because we want everybody to have the the right experience. And once again, I mean, as Matt said, there are hundreds of millions of dollars from former organizations. I don't know that we we're not gonna feel comfortable putting a number on what comes over and what what what that translates to at this point because it's so early in the game. But, certainly, we would not be making these investments if we were not expecting significant, numbers, and we'll be reporting on it regularly. Christopher GrusekeCEO & Director at Bankwell Financial Group00:16:43So more data as the quarters unfold, but we're very constructive on it. And the experience we've had, we feel like we've hired the right people, and, and we're getting incoming calls. Should say that too. Steve MossDirector at Raymond James Financial00:16:56Okay. Appreciate that color there. And then on credit here, just wondering, you kinda hinted, Chris, at resolution, stuff over time here. Just curious, you know, what that timeline could look like, you know, the third or fourth quarter, or might some some of the stuff stretch into 2026? Any part would just be helpful. Christopher GrusekeCEO & Director at Bankwell Financial Group00:17:16Are you specifically talking about the couple of non performers we got left? Steve MossDirector at Raymond James Financial00:17:21Correct. Especially the two bigger ones. Yes. Christopher GrusekeCEO & Director at Bankwell Financial Group00:17:23Yeah. We have those two. So we've got one beside the page and I'll hand it over to you, Matt. Matthew McNeillPresident & Chief Banking Officer at Bankwell Financial Group00:17:27Sure. Page 21 has some detail there. Loan one, which is a retail, building in suburban Westchester. We we feel pretty good about that one. We think it could refinance away from us in a relatively shorter amount of time. Matthew McNeillPresident & Chief Banking Officer at Bankwell Financial Group00:17:47Two quarters you know, that's gonna depend on execution on other banks. So I I can't be certain of timing there, but we we feel like that one is going away from us in in the the next several months. So more to come there. Loan two, not not as hopeful that that'll be resolved anytime soon. That's a that's a multi bank participation. Matthew McNeillPresident & Chief Banking Officer at Bankwell Financial Group00:18:10You know, there's common a sponsor that has, you know, more trouble other than just one loan. So, I think that one's going to take a little bit longer to unfold. Steve MossDirector at Raymond James Financial00:18:23Okay. Appreciate that. And then, you know, on on the margin here in terms of, you know, being liability sensitive, just kinda curious, you know, what do you guys think, 25 basis point cut by the fed would imply for would would do your margin? Christopher GrusekeCEO & Director at Bankwell Financial Group00:18:40Well, at this point, it wouldn't let Courtney answer the question, but that will be a 2,026 event in terms of margin. And if it happens at this point in the year, we feel its impact later. But, Courtney Steve MossDirector at Raymond James Financial00:18:53Yeah. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:18:53So, you know, I I still you know, we we were very successful with repricing our CDs in the first half of the year, about $750,000,000 on average, 80 basis points lower. We still have more room to go with the remainder of our rolling off brokered in time. But a further rate cut, I would say, even without a rate cut right now, probably another five to 10 basis points on NIM just on where rates are today. So us being able to reprice our time deposits down even further, offset by our variable rate loans, probably another 10 basis points on top of that. But, yeah, we are very optimistic as far as where we think our NIM will end up at the end of this year just given what we have to reprice in our existing book without rate cuts. Steve MossDirector at Raymond James Financial00:19:42Great. Well, I really appreciate all the color here. Thank you very much. Nice quarter. Christopher GrusekeCEO & Director at Bankwell Financial Group00:19:47Okay. Thanks so much. Operator00:19:50Your final question comes from the line of David Conrad Please go ahead. David KonradMD - Equity Research at Keefe, Bruyette & Woods (KBW)00:19:57Yes, good morning. Nice quarter. Good morning, David. Thank you. Steve MossDirector at Raymond James Financial00:20:01Yes. Most David KonradMD - Equity Research at Keefe, Bruyette & Woods (KBW)00:20:02of my questions, if not all, have been asked and answered, so I appreciate that. But just maybe one on expenses. I think the guidance implies maybe $30,000,000 in the back half. With all the teams kind of just hired, does the progression maybe go up to $15,000,000 a quarter flat? Or should it will it build kind of throughout the year? Courtney SacchettiEVP & CFO at Bankwell Financial Group00:20:23It should stay relatively flat. I mean, I think that's a fair assumption, the 15,000,000. You know, we we we've done some investment in the first half of this year, and, you know, we've we've added teams in the second quarter, and we're starting to adjust for our compensation structure as those teams have come on. So we anticipate it to to level off in the back half. David KonradMD - Equity Research at Keefe, Bruyette & Woods (KBW)00:20:46Got it. Thank you. Christopher GrusekeCEO & Director at Bankwell Financial Group00:20:47Thanks, David. Operator00:20:51Ladies and gentlemen, this will conclude today's call. We thank you all for joining. You may now disconnect.Read moreParticipantsExecutivesCourtney SacchettiEVP & CFOChristopher GrusekeCEO & DirectorMatthew McNeillPresident & Chief Banking OfficerAnalystsFeddie StricklandDirector at Hovde GroupSteve MossDirector at Raymond James FinancialDavid KonradMD - Equity Research at Keefe, Bruyette & Woods (KBW)Powered by Earnings DocumentsSlide DeckPress Release(8-K) Bankwell Financial Group Earnings HeadlinesBankwell Financial Group (NASDAQ:BWFG) Upgraded at Wall Street ZenAugust 5 at 2:13 AM | americanbankingnews.comBankwell Financial Group, Inc. (NASDAQ:BWFG) Q2 2025 Earnings Call TranscriptJuly 30, 2025 | insidermonkey.comCrypto Income (almost instantly)How would you like to collect a small percentage of the $4 billion changing hands daily in the crypto market? Depending on when you watch this new training, crypto income could be hitting your account as early as tonight!August 5 at 2:00 AM | Awesomely, LLC (Ad)Bankwell Financial Group's Improving Margins Tell A StoryJuly 30, 2025 | seekingalpha.comBankwell Financial Group (NASDAQ:BWFG) Price Target Raised to $42.00 at Hovde GroupJuly 30, 2025 | americanbankingnews.comBankwell Financial Group Reports Operating Results for the Second Quarter, Declares Third Quarter DividendJuly 29, 2025 | finance.yahoo.comSee More Bankwell Financial Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Bankwell Financial Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Bankwell Financial Group and other key companies, straight to your email. Email Address About Bankwell Financial GroupBankwell Financial Group (NASDAQ:BWFG) operates as the bank holding company for Bankwell Bank that provides various banking services for individual and commercial customers. It offers various traditional depository products, including checking, savings, money market, and certificates of deposit. The company also provides first mortgage loans secured by one-to-four family owner occupied residential properties for personal use; home equity loans and home equity lines of credit secured by owner occupied one-to-four family residential properties; loans secured by commercial real estate, multi-family dwellings, owner-occupied commercial real estate, and investor-owned one-to-four family dwellings; commercial construction loans for commercial development projects, including apartment buildings and condominiums, as well as office buildings, retail, and other income producing properties; land loans; commercial business loans secured by assignments of corporate assets and personal guarantees of the business owners; loans to finance insurance premiums; overdraft lines of credit; and unsecured personal loans. It operates branches in New Canaan, Stamford, Fairfield, Westport, Darien, Norwalk, and Hamden, Connecticut. The company was formerly known as BNC Financial Group, Inc. and changed its name to Bankwell Financial Group, Inc. in September 2013. Bankwell Financial Group, Inc. was founded in 2002 and is headquartered in New Canaan, Connecticut.View Bankwell Financial Group ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Palantir Stock Soars After Blowout Earnings ReportAmazon's Earnings: What Comes Next and How to Play ItApple Stock: Big Earnings, Small Move—Time to Buy?Why Robinhood Just Added Upside Potential After a Q2 Earnings DipMicrosoft Blasts Past Earnings—What’s Next for MSFT?Visa Beats Q3 Earnings Expectations, So Why Did the Market Panic?Spotify's Q2 Earnings Plunge: An Opportunity or Ominous Signal? 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PresentationSkip to Participants Operator00:00:00Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bankwell Financial Group Inc. Second Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. Operator00:00:20After the speakers' remarks, there will be a question and answer session. I would now like to turn the call over to Bankwell's Chief Financial Officer, Courtney Ficchetti. Courtney, please go ahead. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:00:43Thank you. Good morning, everyone. Welcome to Bankwell's second quarter twenty twenty five earnings conference call. To access the call over the Internet and review the presentation materials that we will reference on the call, please visit our website at investor.mybankwell.com and go to the Events and Presentations tab for supporting materials. Our second quarter earnings release is also available on our website. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:01:06Our remarks today may contain forward looking statements and may refer to non GAAP financial measures. All participants should refer to our SEC filings, including those found on Forms eight ks, 10 Q and 10 ks for a complete discussion of forward looking statements and any factors that could cause actual results to differ from those statements. And now I will turn the call over to Chris Versecki, Bancorp's Chief Executive Officer. Christopher GrusekeCEO & Director at Bankwell Financial Group00:01:30Thanks, Courtney. Welcome and thanks to everyone for joining our second quarter earnings call. This morning, I'm joined by Courtney Sicchetti, our Chief Financial Officer and Matt McNeil, our President and Chief Banking Officer. I'm happy to announce our second quarter results, which demonstrate improved performance trends in virtually every aspect of our business as our investments in people and technology have continued to bear fruit. The company's net interest margin continues to expand. Christopher GrusekeCEO & Director at Bankwell Financial Group00:01:57Our SBA business is on pace to deliver material growth to noninterest income, and credit trends continue to improve with further improvement expected in the quarters ahead. Additionally, with our first quarter results, we had previously announced the addition of two deposit teams in the New York City Metro Area. We've added two more teams during the second quarter and another team in July, bringing our growth in private client teams to five during this fiscal year. We look forward to the potential improvements to our deposit base as we welcome these talented professionals to the bankroll team. Our financial results for the second quarter include GAAP fully diluted earnings of $1.15 per share, which were up 32% relative to the first quarter, a result of significant net interest margin expansion and increased contributions from SBA loan sales. Christopher GrusekeCEO & Director at Bankwell Financial Group00:02:50Banquel had another robust quarter of originations funding 170,000,000 in new loans resulting in $24,000,000 in linked quarter growth. Loan payoffs were $150,000,000 during the second quarter, down from the first quarter's $200,000,000 but still elevated to where we'd expect them to be on a normalized basis. We funded $12,000,000 in SBA loans during the quarter, bringing our year to date SBA originations to 22,000,000 Our pipeline for both commercial and SBA loans remains strong. And although total loan balances were down slightly compared to year end 2024, we reiterate our original guidance of low single digit loan growth for the full year. The bank's funding profile continues to improve as we've grown our non interest bearing deposits and repriced our time deposits meaningfully lower. Christopher GrusekeCEO & Director at Bankwell Financial Group00:03:40Non interest bearing deposits grew by $48,000,000 during the quarter for a year to date increase of $75,000,000 or 23% since year end. It's noteworthy that this increase in non interest bearing balances does not yet reflect the impact of our new team's expected contributions as they begin to open accounts on behalf of new customers. As these teams bring in low and no cost deposits and our balance sheet remains liability sensitive, we anticipate continued margin expansion into 2026. We are constructive on the direction of credit. Positive migration trends continue and we expect continued progress toward reduction in NPAs in the quarters ahead. Christopher GrusekeCEO & Director at Bankwell Financial Group00:04:21Further details regarding NPAs can be found on Slide 21 of our investor presentation. Now to discuss our financial results in greater detail, I'll turn it over to Courtney, our Chief Financial Officer. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:04:34Thank you, Chris. Our second quarter pre provision net revenue of $11,400,000 or $1.46 per share increased 21% relative to the first quarter with the PPNR return on average assets increasing to 143 basis points versus 118 basis points in the first quarter. We had strong improvement in our net interest margin with the second quarter reported NIM of three ten basis points, a 29 basis point increase relative to the linked quarter. Our net interest margin expansion is a result of our decreasing funding costs, which fell another 20 basis points versus the linked quarter to 3.46%. This is down 41 basis points from our high of 3.87% in the third quarter of twenty twenty four. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:05:19In addition to realizing lower rates on rolling time deposits, we have reduced pricing by approximately 23 basis points on $1,000,000,000 of non maturity interest bearing deposits since the end of twenty twenty four. We've achieved this by lowering rates on key money market and savings products and adjusting exception pricing, a trend that continues as our June exit rate on deposit costs was 3.28. We continue to see our earning asset yields expand as well, with the average loan portfolio yield increasing four basis points to 6.58% in the second quarter when compared to the first quarter. Our new loan originations continued to yield over 8%, benefiting from a more diversified loan mix, including C and I and SBA loans. Given the strong results in the first half of the year and our anticipated margin expansion over the balance of 2025, we will update our net interest income guidance for full year 2025 to a range of 97,000,000 to $98,000,000 This guidance assumes no further actions by the Fed for the balance of this year. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:06:18Non interest income of $2,000,000 increased 34% versus the linked quarter, largely driven by $1,100,000 of SBA gain on sale income, an increase of $600,000 over the last quarter. We reiterate our full year 2025 guidance for noninterest income of 7,000,000 to $8,000,000 And as Chris mentioned, expect SBA gain on sale activity to continue to accelerate over the balance of 2025. On a linked quarter basis, our total non interest expense is up modestly from $14,100,000 to $14,500,000 primarily due to increased salaries and employee benefits. This increase reflects our continued investment in growing our banking teams, SBA platform and supporting risk functions, all aimed at generating revenue and improving efficiency. Despite the $400,000 increase, our efficiency ratio fell to 56.1% in the second quarter compared to 59.9% last quarter, a result of our expanding net interest margin and growth in noninterest income. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:07:17Given the incremental investments made and associated costs beyond our initial guidance, we are increasing our full year 2025 guidance for noninterest expense to $58,000,000 to $59,000,000 Importantly, despite the higher expense guidance, our long term view of driving operating leverage remains unchanged. We expect our efficiency ratio to continue improving over the coming quarters as our profitability continues to expand. We anticipate moderation in our non interest expense to total asset ratio as our balance sheet grows. Switching to credit, second quarter trends were positive with a small net recovery, a decrease in criticized and classified loan balances and a $1,200,000 reduction in nonperforming assets. We had a release of our loan provision in the second quarter of $411,000 This is mainly attributable to our qualitative factors related to loan composition. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:08:08A few final thoughts on our financial condition. Our balance sheet remains well capitalized and liquid with total assets of $3,200,000,000 up slightly versus the linked quarter. The holding company and bank both saw expanding capital ratios during the second quarter with our consolidated common equity Tier one ratio now at 10.17% versus 10.04% in the prior quarter. We repurchased 14,626 shares at a weighted average price of $28.86 per share during the quarter ended 06/30/2025, and have 205,000 shares remaining on our authorization. I'd like to now turn it back over to Chris for his closing remarks. Christopher GrusekeCEO & Director at Bankwell Financial Group00:08:49Thanks, Courtney. To wrap things up, the last several quarters have been a time of material progress at the company. I want to emphasize how gratified we are to see the results of careful planning translate into excellent performance. We continue to execute on key strategic initiatives, including building out our SBA platform, attracting talented deposit teams and making the necessary investments in our risk and technology platforms to ensure that the company is prepared for an era of technological evolution and innovation. None of these achievements would have been possible without the dedication and commitment of so many team members. Christopher GrusekeCEO & Director at Bankwell Financial Group00:09:27On behalf of our board of directors and our shareholders, I'd like to commend the team on a job well done. To reiterate some of the milestones we've achieved, we have meaningfully improved our asset quality with nonperforming loans dropping from a peak of $65,000,000 in the third quarter twenty twenty four to just under $24,000,000 this quarter or 89 basis points of total loans. Concurrently, we've reduced our CRE exposure as a percentage of total risk based capital to 349%, down from 382% at the midpoint of 2024. This represents our lowest concentration in ten years. We've reduced our brokered deposits by over $400,000,000 from their peak and have replaced them with lower cost core deposits. Christopher GrusekeCEO & Director at Bankwell Financial Group00:10:10Our growing SBA platform has shown considerable progress in the first six months of this year and recent additions to our private client groups are expected to further improve our deposit portfolio. Finally, our performance has continued to improve with our net interest margin now reaching three ten basis points and our return on average assets hitting 114 basis points. As much as we've accomplished over the past year, we remain excited about the bank's future and expect continued improvement in our profitability moving forward. This concludes our prepared remarks. Operator, will you please begin the question and answer session? Operator00:11:04Your first question comes from Betty Strickland with Hovde Group. Please go ahead. Feddie StricklandDirector at Hovde Group00:11:12Hey, good morning. Great to see the DDA growth in the quarter, and it sounds like you have some more stuff in the pipeline. Do you have a longer term target in terms of DDAs to deposits? I think you're at about 14% today. Christopher GrusekeCEO & Director at Bankwell Financial Group00:11:27Morning, Fadi. Thanks for the question. We don't have a hard target in mind. We clearly are looking to expand that percentage. We wanna make sure that we bring the wholesale funding ratio down. Christopher GrusekeCEO & Director at Bankwell Financial Group00:11:38We probably watch that. You know, we do certainly watch that closely. But I think it's safe to say that given the investments we're making, people we're bringing on, the way we we we've restructured our own teams internally over the past year with the platform that we put in place that we're looking to meaningfully expand it. I that that'd be hesitant to put a number on it, and we're gonna be reporting on it regularly. But it's the reason that we're making these plans and these investments. Feddie StricklandDirector at Hovde Group00:12:11Got it. And then just should we expect the level of brokered deposits to continue grinding lower in the future quarters? Or do you think maybe we see that level off just depending on the attractiveness of the rates of the broker versus retail? Christopher GrusekeCEO & Director at Bankwell Financial Group00:12:23I I think it really depends. I we've made a, very meaningful full dent in it. We brought it down by about half. And from here on in, it's a function of, you know, what comes in the door. We certainly want it want it be back in a mode of growing the loan book. Christopher GrusekeCEO & Director at Bankwell Financial Group00:12:40And as deposits come in, then the question becomes, you know, is it doll it certainly won't be dollar for dollar. I would expect a pay down broker with new money, and then it becomes an art form of how much loan growth and what what are what are market rates. But since we've taken them down by half, we're not looking to be as dramatic, I'd say, and it depends on the market opportunities. But the number will get lower over time. It's really a function of, you know, the performance we're gonna get in our deposit gathering efforts. Feddie StricklandDirector at Hovde Group00:13:16Got it. Thanks for that, Chris. And just if I could squeeze in one more for for Matt. If you could just give a little bit of an update on what you're hearing from your health care customers, anything incrementally different? Matthew McNeillPresident & Chief Banking Officer at Bankwell Financial Group00:13:29No. There was some concern around new legislation with the big focus on Medicaid cuts. From the research that we've done and some third parties, it appears that our borrowers are not really impacted by the by the new legislation. So in the in the near term, we're we're feeling really good with the health care book and, you know, continue to see the the book be a profitable source of business here at Bankwell, not only on the loan side, but the fee and the deposit side. Feddie StricklandDirector at Hovde Group00:14:03All right. Great. That's it for me. Thanks for taking my questions. Christopher GrusekeCEO & Director at Bankwell Financial Group00:14:07Thanks, Betty. Operator00:14:08Your next question comes from the line of Steve Moss with Raymond James. Please go ahead. Steve MossDirector at Raymond James Financial00:14:15Hi, good morning. Christopher GrusekeCEO & Director at Bankwell Financial Group00:14:18Good morning. Is this actually Steve? Steve MossDirector at Raymond James Financial00:14:20It is. Yes, Chris. How are doing? Christopher GrusekeCEO & Director at Bankwell Financial Group00:14:22Well, thank you. How about you? Steve MossDirector at Raymond James Financial00:14:24I'm doing pretty good. Maybe just, you know, on the deposit side here following up, you know, with the five teams now that you've hired, you know, that you with the new three teams in particular, just kind of wondering if you could size up the book of business and how, you know, how we could think about that total potential here over the next twelve to twenty four months. Matthew McNeillPresident & Chief Banking Officer at Bankwell Financial Group00:14:46Well, you said the word potential, and I think that's the right way to think about the teams, largely new to the company. So actual production is not driving the growth that we've seen in core deposits. Those are actually the deposit fees that we've been working on over the past several years. But the the potent as we, you know, spoke to the the folks that comprise these teams, all of the teams had, you know, multiple, you know, tens of millions business, hundreds of million dollars in their books of business in prior organizations. And now it's, you know, how how can we make that translate into deposits on our balance sheet? Matthew McNeillPresident & Chief Banking Officer at Bankwell Financial Group00:15:28You know, we've been thinking about this for a while. We successful, including the ability to, you know, open new relationships, new accounts in, you know, same day, next day, which, you know, been a stumbling block in some organizations. So we think that, you know, our planning is gonna pay off in the in the translation of new deposits, but, you know, they're so new to the organization. It's it's really we're waiting for those results to materialize. Christopher GrusekeCEO & Director at Bankwell Financial Group00:15:57And and, Steve, that one day account opening is very important for us and keeping our reputation with new customers and with new team members is important. So any additions that we make going forward, it will absolutely have in mind, you know, what's the right pace because we want everybody to have the the right experience. And once again, I mean, as Matt said, there are hundreds of millions of dollars from former organizations. I don't know that we we're not gonna feel comfortable putting a number on what comes over and what what what that translates to at this point because it's so early in the game. But, certainly, we would not be making these investments if we were not expecting significant, numbers, and we'll be reporting on it regularly. Christopher GrusekeCEO & Director at Bankwell Financial Group00:16:43So more data as the quarters unfold, but we're very constructive on it. And the experience we've had, we feel like we've hired the right people, and, and we're getting incoming calls. Should say that too. Steve MossDirector at Raymond James Financial00:16:56Okay. Appreciate that color there. And then on credit here, just wondering, you kinda hinted, Chris, at resolution, stuff over time here. Just curious, you know, what that timeline could look like, you know, the third or fourth quarter, or might some some of the stuff stretch into 2026? Any part would just be helpful. Christopher GrusekeCEO & Director at Bankwell Financial Group00:17:16Are you specifically talking about the couple of non performers we got left? Steve MossDirector at Raymond James Financial00:17:21Correct. Especially the two bigger ones. Yes. Christopher GrusekeCEO & Director at Bankwell Financial Group00:17:23Yeah. We have those two. So we've got one beside the page and I'll hand it over to you, Matt. Matthew McNeillPresident & Chief Banking Officer at Bankwell Financial Group00:17:27Sure. Page 21 has some detail there. Loan one, which is a retail, building in suburban Westchester. We we feel pretty good about that one. We think it could refinance away from us in a relatively shorter amount of time. Matthew McNeillPresident & Chief Banking Officer at Bankwell Financial Group00:17:47Two quarters you know, that's gonna depend on execution on other banks. So I I can't be certain of timing there, but we we feel like that one is going away from us in in the the next several months. So more to come there. Loan two, not not as hopeful that that'll be resolved anytime soon. That's a that's a multi bank participation. Matthew McNeillPresident & Chief Banking Officer at Bankwell Financial Group00:18:10You know, there's common a sponsor that has, you know, more trouble other than just one loan. So, I think that one's going to take a little bit longer to unfold. Steve MossDirector at Raymond James Financial00:18:23Okay. Appreciate that. And then, you know, on on the margin here in terms of, you know, being liability sensitive, just kinda curious, you know, what do you guys think, 25 basis point cut by the fed would imply for would would do your margin? Christopher GrusekeCEO & Director at Bankwell Financial Group00:18:40Well, at this point, it wouldn't let Courtney answer the question, but that will be a 2,026 event in terms of margin. And if it happens at this point in the year, we feel its impact later. But, Courtney Steve MossDirector at Raymond James Financial00:18:53Yeah. Courtney SacchettiEVP & CFO at Bankwell Financial Group00:18:53So, you know, I I still you know, we we were very successful with repricing our CDs in the first half of the year, about $750,000,000 on average, 80 basis points lower. We still have more room to go with the remainder of our rolling off brokered in time. But a further rate cut, I would say, even without a rate cut right now, probably another five to 10 basis points on NIM just on where rates are today. So us being able to reprice our time deposits down even further, offset by our variable rate loans, probably another 10 basis points on top of that. But, yeah, we are very optimistic as far as where we think our NIM will end up at the end of this year just given what we have to reprice in our existing book without rate cuts. Steve MossDirector at Raymond James Financial00:19:42Great. Well, I really appreciate all the color here. Thank you very much. Nice quarter. Christopher GrusekeCEO & Director at Bankwell Financial Group00:19:47Okay. Thanks so much. Operator00:19:50Your final question comes from the line of David Conrad Please go ahead. David KonradMD - Equity Research at Keefe, Bruyette & Woods (KBW)00:19:57Yes, good morning. Nice quarter. Good morning, David. Thank you. Steve MossDirector at Raymond James Financial00:20:01Yes. Most David KonradMD - Equity Research at Keefe, Bruyette & Woods (KBW)00:20:02of my questions, if not all, have been asked and answered, so I appreciate that. But just maybe one on expenses. I think the guidance implies maybe $30,000,000 in the back half. With all the teams kind of just hired, does the progression maybe go up to $15,000,000 a quarter flat? Or should it will it build kind of throughout the year? Courtney SacchettiEVP & CFO at Bankwell Financial Group00:20:23It should stay relatively flat. I mean, I think that's a fair assumption, the 15,000,000. You know, we we we've done some investment in the first half of this year, and, you know, we've we've added teams in the second quarter, and we're starting to adjust for our compensation structure as those teams have come on. So we anticipate it to to level off in the back half. David KonradMD - Equity Research at Keefe, Bruyette & Woods (KBW)00:20:46Got it. Thank you. Christopher GrusekeCEO & Director at Bankwell Financial Group00:20:47Thanks, David. Operator00:20:51Ladies and gentlemen, this will conclude today's call. We thank you all for joining. You may now disconnect.Read moreParticipantsExecutivesCourtney SacchettiEVP & CFOChristopher GrusekeCEO & DirectorMatthew McNeillPresident & Chief Banking OfficerAnalystsFeddie StricklandDirector at Hovde GroupSteve MossDirector at Raymond James FinancialDavid KonradMD - Equity Research at Keefe, Bruyette & Woods (KBW)Powered by