Bankwell Financial Group(BWFG) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents the unaudited consolidated financial statements for Q1 2025, encompassing balance sheets, income, and cash flow statements, along with detailed notes Consolidated Balance Sheets Total assets decreased to $3.18 billion as of March 31, 2025, from $3.27 billion, primarily due to reduced loans receivable, with liabilities also declining Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $3,183,893 | $3,268,476 | | Loans receivable, net | $2,611,495 | $2,672,959 | | Total investment securities | $135,963 | $146,099 | | Cash and cash equivalents | $304,928 | $307,524 | | Total Liabilities | $2,908,679 | $2,997,956 | | Total deposits | $2,750,445 | $2,787,570 | | Advances from the FHLB | $40,000 | $90,000 | | Total Shareholders' Equity | $275,214 | $270,520 | Consolidated Statements of Income Net income for Q1 2025 significantly increased to $6.89 million from $3.76 million, driven by higher net interest income and a substantial decrease in the provision for credit losses Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest Income | $22,066 | $21,147 | | Provision for credit losses | $463 | $3,683 | | Noninterest Income | $1,505 | $915 | | Noninterest Expense | $14,141 | $13,297 | | Net Income | $6,888 | $3,763 | | Diluted EPS | $0.87 | $0.48 | Notes to Consolidated Financial Statements This section provides detailed explanations of accounting policies and financial data, covering operations, credit risk, ACL methodology, and portfolio composition - The company operates as a single reportable segment, with the CEO as the Chief Operating Decision Maker (CODM), assessing all activities as a single unit[19][20] - The company has a significant concentration of credit risk in commercial real estate loans located in Connecticut and the New York metro area[22] - The Allowance for Credit Losses (ACL) is calculated using a third-party software model, which is calibrated using a "peer scalar" to better reflect the Company's specific loan portfolio characteristics and regional concentration in the Northeast[25] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q1 2025 financial performance, noting increased net income, decreased total assets, and improved asset quality, while maintaining strong capital and liquidity - Revenues (net interest income plus noninterest income) for Q1 2025 were $23.6 million, up from $22.1 million in Q1 2024, driven by decreased interest expense and increased fee income[177] - The provision for credit losses was significantly lower at $0.5 million for Q1 2025 compared to $3.7 million for Q1 2024[189] - Total assets decreased by $84.6 million (2.6%) to $3.2 billion at March 31, 2025, compared to year-end 2024, while gross loans decreased by $61.0 million (2.3%)[194] - Nonperforming assets decreased to $26.4 million (0.83% of total assets) at March 31, 2025, from $61.6 million (1.88% of total assets) at December 31, 2024, primarily due to the sale of a $27.1 million nonperforming commercial real estate loan[210] Results of Operations Net income for Q1 2025 increased to $6.9 million, primarily due to higher net interest income and a significant reduction in the provision for credit losses, despite increased noninterest expenses Net Interest Income Analysis (Q1 2025 vs Q1 2024) | Component | Change | Reason | | :--- | :--- | :--- | | Net Interest Income | +$1.0M | Increased loan yields and lower deposit interest expense | | Interest Income | +$0.3M | Higher overall loan yields | | Interest Expense | -$0.7M | Decrease in rates on interest-bearing deposits | Noninterest Income and Expense Changes (Q1 2025 vs Q1 2024, in thousands) | Category | Q1 2025 | Q1 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Noninterest Income | $1,505 | $915 | $590 | 64.5% | | Service charges and fees | $602 | $304 | $298 | 98.0% | | Noninterest Expense | $14,141 | $13,297 | $844 | 6.3% | | Salaries and employee benefits | $7,052 | $6,291 | $761 | 12.1% | | Professional services | $1,529 | $1,065 | $464 | 43.6% | Financial Condition Total assets decreased to $3.2 billion as of March 31, 2025, with a 2.3% reduction in the loan portfolio, while asset quality improved and nonaccrual loans dropped significantly Loan Portfolio Composition (in thousands) | Loan Type | March 31, 2025 | Dec 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Commercial Real Estate | $1,810,923 | $1,899,134 | ($88,211) | | Construction | $188,339 | $173,555 | $14,784 | | Commercial Business | $529,000 | $515,125 | $13,875 | | Total Loans | $2,644,903 | $2,705,888 | ($60,985) | Asset Quality Metrics | Metric | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Nonperforming assets to total assets | 0.83% | 1.88% | | Nonaccrual loans to total gross loans | 1.00% | 1.97% | | ACL-Loans as a % of total loans | 1.11% | 1.07% | - The commercial real estate portfolio includes $160.4 million in office loans (8.9% of total loans) and $253.6 million in multifamily loans (9.6% of total loans), with 96.6% of the office portfolio pass-rated[201] Liquidity and Capital Resources The company maintains strong liquidity, primarily from deposits and FHLB access, and both the Bank and Company exceed all regulatory capital requirements to be considered 'well-capitalized' - As of March 31, 2025, the Bank had immediate availability to borrow an additional $373.1 million from the FHLB[224] Bank Capital Ratios (as of March 31, 2025) | Ratio | Actual | Well-Capitalized Minimum | | :--- | :--- | :--- | | Common Equity Tier 1 Capital Ratio | 12.10% | 6.50% | | Tier 1 Capital Ratio | 12.10% | 8.00% | | Total Capital Ratio | 13.21% | 10.00% | | Tier 1 Leverage Ratio | 10.14% | 5.00% | Item 3. Quantitative and Qualitative Disclosures About Market Risk Interest rate risk is the company's primary market risk, with inflation affecting operating costs but interest rates having a more significant impact on performance - The company's primary market risk is interest rate risk, which is managed through asset/liability strategies[240] - Inflation affects the company's operating costs and the value of its monetary assets and liabilities, but interest rates are considered to have a more significant impact on performance[242] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of the end of the reporting period[243] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to affect, these controls[244] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings, but management anticipates no material loss from pending lawsuits - In the opinion of management, no material loss is expected from any pending lawsuits[245] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 were reported - No material changes in risk factors were reported for the period[246] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 29,924 shares of common stock during Q1 2025 under a new plan authorized in October 2024 for up to 250,000 shares Issuer Purchases of Equity Securities (Q1 2025) | Period | Shares Purchased | Average Price Paid | | :--- | :--- | :--- | | Jan 2025 | 0 | $ - | | Feb 2025 | 10,628 | $31.15 | | Mar 2025 | 19,296 | $30.08 | | Total | 29,924 | $30.46 | - A new share repurchase plan for up to 250,000 shares was authorized on October 23, 2024, terminating the prior plan, with 220,076 shares remaining available for repurchase under the new plan as of March 31, 2025[249][248] - Subsequent to March 31, 2025, the Company purchased an additional 14,626 shares at a weighted average price of $28.86 per share[251] Item 3. Defaults Upon Senior Securities None reported - None[252] Item 4. Mine Safety Disclosures Not applicable - None[253] Item 5. Other Information None reported - None[254] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements formatted in Inline XBRL - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32) and financial data in Inline XBRL format (101, 104)[255]