Bankwell Financial Group(BWFG) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Operating Results and Highlights The company reported strong Q2 2025 results, driven by significant growth in net income, a notable expansion in net interest margin, and an improved efficiency ratio Q2 2025 vs Q1 2025 Performance | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | GAAP Net Income | $9.1 million | $6.9 million | | Diluted EPS | $1.15 | $0.87 | - The Board of Directors declared a $0.20 per share cash dividend, payable on August 22, 2025, to shareholders of record on August 11, 2025[1] - The net interest margin (NIM) increased to 3.10%, up 29 basis points from the first quarter, primarily due to reduced deposit costs[2][7] - The efficiency ratio improved to 56.1% for Q2 2025, down from 59.9% in Q1 2025, indicating better operational leverage[7] - Return on average assets (ROA) increased to 1.14% for the quarter, demonstrating improved profitability[2] CEO Commentary and 2025 Outlook The CEO highlighted accelerating positive trends and updated the 2025 guidance, raising the net interest income forecast while increasing expense guidance for personnel investments Updated 2025 Full-Year Guidance | Metric | Updated Guidance | Notes | | :--- | :--- | :--- | | Net Interest Income | $97 – $98 million | Increased | | Noninterest Income | $7 - $8 million | Reiterated | | Noninterest Expense | $58 - $59 million | Increased due to investments in people | - The company has hired five new deposit-focused private banking teams during the year to enhance deposit gathering capabilities, with contributions expected to boost deposit growth later in 2025 and more significantly in 2026[3][7] - The SBA lending business is on a path to achieve further scale and profitability, contributing $1.5 million in non-interest income year-to-date and $1.1 million in loan sale gains in Q2 2025[2][7] Financial Performance Analysis The company's Q2 2025 financial performance was marked by strong revenue growth and margin expansion, with a substantial increase in pre-tax, pre-provision net revenue Quarterly Revenue and PPNR (in thousands) | Metric | Q2 2025 | Q1 2025 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $25,948 | $23,571 | 10.1% | | PPNR | $11,402 | $9,430 | 20.9% | Key Performance Indicators (KPIs) Key performance indicators showed broad improvement in Q2 2025, including profitability, net interest margin, and tangible book value per share Key Performance Indicators Trend | KPI | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Return on average assets (ROA) | 1.14 % | 0.86 % | 0.14 % | | Return on average equity (ROE) | 12.98 % | 10.16 % | 1.65 % | | Net interest margin (NIM) | 3.10 % | 2.81 % | 2.75 % | | Efficiency Ratio | 56.1 % | 59.9 % | 45.6 % | | Fully diluted tangible book value per share | $35.65 | $34.56 | $33.61 | Income Statement Analysis The Q2 2025 income statement shows a substantial net income increase, driven by higher net interest and noninterest income and a credit for credit losses Consolidated Income Statement Highlights (in thousands) | Line Item | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $23,936 | $22,066 | $21,219 | | (Credit) Provision for Credit Losses | $(411) | $463 | $8,183 | | Total Noninterest Income | $2,012 | $1,505 | $683 | | Total Noninterest Expense | $14,546 | $14,141 | $12,245 | | Net Income | $9,088 | $6,888 | $1,118 | Asset Quality and Credit Asset quality continued to improve in Q2 2025, with lower nonperforming assets and a stronger allowance for credit losses coverage ratio Asset Quality Metrics | Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Nonperforming assets as a % of total assets | 0.78% | 0.83% | | Nonperforming loans as a % of total loans | 0.89% | 1.00% | | ACL-loans as a % of nonperforming loans | 122.54% | 111.76% | | Total nonperforming loans (in thousands) | $23,875 | $26,383 | - The Allowance for Credit Losses - Loans (ACL-Loans) stood at $29.3 million as of June 30, 2025, representing 1.10% of total loans[12] - The company recorded a net credit for credit losses of $0.3 million for the quarter, reflecting the improvement in overall credit quality and a decrease in nonperforming loans[13][15] Financial Condition and Capital Management The company maintained a strong balance sheet with total assets of $3.2 billion, an improved deposit mix, and robust 'well capitalized' regulatory capital ratios - The deposit mix improved, with noninterest-bearing demand deposits increasing by 23.4% year-to-date, while brokered deposits decreased by 11.5% and time deposits fell by 6.9% since year-end 2024[16][18] Loan Portfolio Composition Change (YTD % Change) | Loan Category | YTD % Change | | :--- | :--- | | Construction | 17.4% | | Commercial Business | 8.6% | | Commercial Real Estate | (5.1)% | | Residential Real Estate | (18.2)% | - The Bank's regulatory capital ratios remain well above 'well capitalized' levels, with a total risk-based capital ratio of 13.28% and a common-equity tier 1 capital ratio of 12.20%[19] - The company repurchased 14,626 shares at a weighted average price of $28.86 per share during the second quarter[19] Reconciliation of GAAP to Non-GAAP Measures This section provides detailed reconciliations for non-GAAP financial measures, including tangible book value and the net interest margin on a fully tax-equivalent basis Tangible Book Value Reconciliation The company's tangible common equity ratio and fully diluted tangible book value per common share both increased during Q2 2025 Tangible Book Value per Share Calculation | Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Tangible common shareholders' equity (in thousands) | $280,701 | $272,625 | | Common shares issued and outstanding | 7,873,387 | 7,888,013 | | Fully Diluted Tangible Book Value per Common Share | $35.65 | $34.56 | Net Interest Margin (NIM) Analysis The fully tax-equivalent net interest margin expanded to 3.10% in Q2 2025, driven by a significant year-over-year decrease in the cost of interest-bearing liabilities Quarterly Net Interest Margin Analysis (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Yield on Earning Assets | 6.22% | 6.11% | | Cost of Interest-Bearing Liabilities | 3.95% | 4.29% | | Net Interest Spread | 2.27% | 1.82% | | Net Interest Margin | 3.10% | 2.75% | - The cost of total interest-bearing deposits decreased to 3.90% in Q2 2025 from 4.27% in Q2 2024, with a notable reduction in the cost of time deposits[31]