Bankwell Financial Group(BWFG) - 2025 Q3 - Quarterly Results

Executive Summary & Highlights Third Quarter 2025 Operating Results Bankwell Financial Group reported increased GAAP net income and diluted earnings per share for the third quarter of 2025 compared to the second quarter of 2025, and declared a quarterly cash dividend | Metric | Q3 2025 | Q2 2025 | | :----- | :------ | :------ | | GAAP Net Income | $10.1 million | $9.1 million | | Diluted EPS | $1.27 | $1.15 | | PPNR | $13.9 million | $11.4 million | - Pre-tax, pre-provision net revenue (PPNR) increased 21.5% relative to the second quarter of 2025[2] - The Board of Directors declared a $0.20 per share cash dividend, payable November 21, 2025[1] CEO's Outlook and Strategic Priorities CEO Christopher R. Gruseke highlighted continued growth and improvement across the business, noting expansion in Return on Average Assets, Net Interest Margin, and funded loan originations, alongside improved efficiency and a positive outlook for future quarters - Return on Average Assets grew to 1.24% for the quarter[3] - Net Interest Margin expanded to 3.34%[3] - Funded loan originations grew to $518 million year-to-date, compared to $328 million for the full year 2024[3] - Efficiency ratio reduced to 51.4% this quarter[3] - Non-performing assets (NPAs) as a percentage of assets now stand at 0.56%, with a positive outlook for the quarters ahead[4] Key Performance Indicators The company demonstrated significant improvements in credit quality, net interest margin, and operational efficiency during Q3 2025, driven by reduced nonperforming assets, lower deposit costs, and increased loan yields and SBA loan sale gains | Metric | Q3 2025 | Q2 2025 | Change | | :------------------------------------ | :------ | :------ | :----- | | Nonperforming assets as % of total assets | 0.56% | 0.78% | -0.22% | | ACL-loans as % of nonperforming loans | 176.7% | 122.5% | +54.2% | | Net Interest Margin | 3.34% | 3.10% | +24 bps | | Deposit costs | 3.30% | 3.40% | -10 bps | | Loan yields | 6.71% | 6.58% | +13 bps | | SBA loan sale gains | $1.4 million | $1.1 million | +$0.3 million | | Noninterest income as % of revenue | 8.76% | 7.76% | +1.00% | | Efficiency ratio | 51.4% | 56.1% | -4.7% | - Nonperforming assets declined $6.9 million from the second quarter, mainly due to collections on SBA guarantees and the sale of a commercial real estate loan[5] - Special Mention loan balances decreased $30 million in the third quarter of 2025[5] Financial Performance Analysis Key Financial Ratios & Trends Bankwell Financial Group demonstrated consistent improvement across key financial ratios from Q3 2024 to Q3 2025, with notable increases in profitability metrics and a reduction in the efficiency ratio | Metric | Sep 30, 2025 | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :----------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Return on average assets | 1.24 % | 1.14 % | 0.86 % | 0.37 % | 0.24 % | | Pre-tax, pre-provision net revenue return on average assets | 1.70 % | 1.43 % | 1.18 % | 1.05 % | 1.13 % | | Return on average shareholders' equity | 13.84 % | 12.98 % | 10.16 % | 4.35 % | 2.83 % | | Net Interest Margin | 3.34 % | 3.10 % | 2.81 % | 2.60 % | 2.72 % | | Efficiency Ratio | 51.4 % | 56.1 % | 59.9 % | 56.4 % | 58.8 % | | Earnings per common share - diluted | $ 1.27 | $ 1.15 | $ 0.87 | $ 0.37 | $ 0.24 | - Fully diluted tangible book value per common share increased to $36.84 as of September 30, 2025, from $33.76 a year prior[6] Pre-Tax, Pre-Provision Net Revenue (PPNR) Pre-Tax, Pre-Provision Net Revenue (PPNR) saw a significant quarter-over-quarter increase, driven by higher total revenues while noninterest expenses remained relatively stable | Metric | Q3 2025 | Q2 2025 | Change | | :-------------------- | :------ | :------ | :----- | | PPNR | $13,851 | $11,402 | +21.5% | | Total revenues | $28,482 | $25,948 | +9.76% | | Total noninterest expense | $14,631 | $14,546 | +0.58% | - The increase in revenues was mainly attributable to increased earning asset yields and increased loan balances, along with growth in gains on sale of SBA loans[12] Net Interest Income and Margin Net Interest Margin expanded significantly in Q3 2025, primarily due to increased earning asset yields and a benefit from non-recurring interest income, contributing to higher net interest income | Metric | Q3 2025 | Q2 2025 | Change | | :---------------- | :------ | :------ | :----- | | Net interest income | $25,987 | $23,936 | +$2,051 | | Net Interest Margin | 3.34% | 3.10% | +24 bps | - The increase in Net Interest Margin was mainly due to increased earning asset yields[12] - Net Interest Margin for Q3 2025 benefited by 3 basis points due to non-recurring interest income recognized from the resolution of certain non-performing SBA loans[12] Consolidated Statements of Income Bankwell Financial Group reported strong growth in net income and diluted EPS for Q3 2025 and YTD September 2025, driven by increased net interest income and noninterest income, despite a slight increase in noninterest expense | Metric (in thousands) | Q3 2025 | Q2 2025 | Q3 2024 | YTD Sep 30, 2025 | YTD Sep 30, 2024 | | :--------------------------------- | :------ | :------ | :------ | :--------------- | :--------------- | | Net interest income | $25,987 | $23,936 | $20,717 | $71,989 | $63,083 | | Total noninterest income | $2,495 | $2,012 | $1,156 | $6,012 | $2,754 | | Total noninterest expense | $14,631 | $14,546 | $12,865 | $43,318 | $38,407 | | Net income | $10,078 | $9,088 | $1,926 | $26,054 | $6,807 | | Diluted EPS | $1.27 | $1.15 | $0.24 | $3.29 | $0.86 | - Gains and fees from sales of loans significantly increased to $1,372 thousand in Q3 2025 from $133 thousand in Q3 2024[25] - Income before income tax expense for YTD Sep 30, 2025, was $34,259 thousand, a substantial increase from $9,268 thousand for the same period in 2024[25] Asset Quality Allowance for Credit Losses - Loans (ACL-Loans) The Allowance for Credit Losses - Loans (ACL-Loans) balance slightly increased in Q3 2025, while remaining stable as a percentage of total loans, with a modest provision for credit losses | Metric | Sep 30, 2025 | Jun 30, 2025 | | :-------------------------------- | :----------- | :----------- | | ACL-Loans balance | $30.0 million | $29.3 million | | ACL-Loans as a percentage of total loans | 1.10% | 1.10% | - The provision for credit losses - loans was $0.4 million for the quarter ended September 30, 2025[11] Nonperforming Assets and Loans Bankwell demonstrated significant improvement in asset quality, with a substantial decrease in total nonperforming loans and nonperforming assets as a percentage of total assets, and a strong increase in ACL-loans coverage of nonperforming loans | Metric | Sep 30, 2025 | Jun 30, 2025 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Total nonperforming loans | $16,966 | $23,875 | -$6,909 | | Nonperforming assets as % of total assets | 0.56% | 0.78% | -0.22% | | Nonperforming loans as % of total loans | 0.62% | 0.89% | -0.27% | | ACL-loans as % of nonperforming loans | 176.73% | 122.54% | +54.19% | - Total nonaccrual loans decreased from $23,875 thousand in Q2 2025 to $16,966 thousand in Q3 2025[13] Loan Charge-offs and Recoveries The company reported net loan recoveries in Q3 2025, a positive trend compared to net charge-offs in previous periods, indicating improved loan performance | Metric (in thousands) | Q3 2025 | Q2 2025 | Q1 2025 | Q4 2024 | Q3 2024 | | :------------------------ | :------ | :------ | :------ | :------ | :------ | | Total charge-offs | $(60) | $(20) | $(100) | $(2,963) | $(15,827) | | Total recoveries | $368 | $122 | $40 | $9 | $980 | | Net loan recoveries (charge-offs) | $308 | $102 | $(60) | $(2,954) | $(14,847) | Financial Condition & Capital Balance Sheet Overview As of September 30, 2025, total assets slightly decreased, while gross loans experienced a modest increase and total deposits saw a slight decrease compared to December 31, 2024 | Metric | Sep 30, 2025 | Dec 31, 2024 | Change | | :----------- | :----------- | :----------- | :----- | | Total assets | $3.2 billion | $3.2 billion | -0.7% | | Gross loans | $2.7 billion | $2.7 billion | +0.5% | | Deposits | $2.8 billion | $2.8 billion | -1.1% | - Brokered deposits decreased by $96.3 million, or 13.7%, when compared to December 31, 2024[14] Loan Composition Commercial Real Estate remains the largest component of the loan portfolio, with Commercial Business loans showing significant year-to-date and year-over-year growth, while Residential Real Estate and Consumer loans experienced declines | Loan Type | Sep 30, 2025 | Dec 31, 2024 | Sep 30, 2024 | Current YTD % Change | Year over Year % Change | | :-------------------- | :----------- | :----------- | :----------- | :------------------- | :-------------------- | | Residential Real Estate | $33,625 | $42,766 | $45,553 | (21.4)% | (26.2)% | | Commercial Real Estate | $1,897,896 | $1,899,134 | $1,887,942 | (0.1)% | 0.5% | | Construction | $170,888 | $173,555 | $160,292 | (1.5)% | 6.6% | | Commercial Business | $552,682 | $515,125 | $490,292 | 7.3% | 12.7% | | Consumer | $63,098 | $75,308 | $39,126 | (16.2)% | 61.3% | | Total Loans | $2,718,189 | $2,705,888 | $2,623,205 | 0.5% | 3.6% | Deposit Composition Noninterest bearing demand deposits showed strong year-to-date and year-over-year growth, while time deposits decreased, contributing to an overall slight decrease in total deposits | Deposit Type | Sep 30, 2025 | Dec 31, 2024 | Sep 30, 2024 | Current YTD % Change | Year over Year % Change | | :----------------------- | :----------- | :----------- | :----------- | :------------------- | :-------------------- | | Noninterest bearing demand | $397,408 | $321,875 | $295,552 | 23.5% | 34.5% | | NOW | $84,736 | $105,090 | $76,413 | (19.4)% | 10.9% | | Money Market | $897,387 | $899,413 | $840,234 | (0.2)% | 6.8% | | Savings | $95,242 | $90,220 | $87,212 | 5.6% | 9.2% | | Time | $1,282,642 | $1,370,972 | $1,388,760 | (6.4)% | (7.6)% | | Total Deposits | $2,757,415 | $2,787,570 | $2,688,171 | (1.1)% | 2.6% | Shareholders' Equity and Regulatory Capital Shareholders' equity increased primarily due to year-to-date net income, and the Bank maintained strong regulatory capital ratios, all exceeding 'well capitalized' thresholds - Shareholders' equity totaled $292.8 million as of September 30, 2025, an increase of $22.3 million compared to December 31, 2024, primarily a result of year-to-date net income of $26.1 million[16] | Regulatory Capital Ratio (Sep 30, 2025) | Value | | :------------------------------------ | :---- | | Total risk-based capital | 13.47% | | Common-equity tier 1 capital | 12.38% | | Leverage ratio | 10.70% | - All regulatory capital ratios were above 'well capitalized' values[17] Consolidated Balance Sheets The consolidated balance sheet shows a slight increase in total assets and shareholders' equity from Q2 2025 to Q3 2025, with a notable increase in noninterest bearing deposits | Metric (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :--------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Total assets | $3,243,963 | $3,236,593 | $3,183,893 | $3,268,476 | $3,161,080 | | Total deposits | $2,757,415 | $2,759,281 | $2,750,445 | $2,787,570 | $2,688,171 | | Noninterest bearing deposits | $397,408 | $397,195 | $349,525 | $321,875 | $295,552 | | Total liabilities | $2,951,172 | $2,953,303 | $2,908,679 | $2,997,956 | $2,893,154 | | Total shareholders' equity | $292,791 | $283,290 | $275,214 | $270,520 | $267,926 | - Loans receivable (net of ACL-Loans) increased to $2,684,016 thousand as of September 30, 2025, from $2,635,742 thousand as of June 30, 2025[24] Net Interest Margin Analysis Q3 2025 Net Interest Margin Analysis The Q3 2025 net interest margin analysis shows an expansion in NIM and interest rate spread compared to Q3 2024, driven by higher yields on earning assets, particularly loans, despite increased interest bearing deposit costs | Metric | Sep 30, 2025 | Sep 30, 2024 | | :-------------------- | :----------- | :----------- | | Total earning assets | $3,128,674 | $3,070,362 | | Total interest bearing liabilities | $2,500,562 | $2,524,057 | | Net interest income | $26,128 | $20,839 | | Interest rate spread | 2.44 % | 1.83 % | | Net Interest Margin | 3.34 % | 2.72 % | | Total loans yield | 6.71 % | 6.40 % | | Total interest bearing deposits rate | 3.84 % | 4.30 % | - The yield on cash and Fed funds sold decreased from 5.03% in Q3 2024 to 4.06% in Q3 2025[29] YTD September 30, 2025 Net Interest Margin Analysis For the nine months ended September 30, 2025, the net interest margin and interest rate spread improved compared to the same period in 2024, reflecting higher earning asset yields and effective management of interest-bearing liabilities | Metric | YTD Sep 30, 2025 | YTD Sep 30, 2024 | | :-------------------- | :--------------- | :--------------- | | Total earning assets | $3,131,509 | $3,095,128 | | Total interest bearing liabilities | $2,534,234 | $2,517,284 | | Net interest income | $72,416 | $63,322 | | Interest rate spread | 2.24 % | 1.83 % | | Net Interest Margin | 3.08 % | 2.73 % | | Total loans yield | 6.61 % | 6.38 % | | Total interest bearing deposits rate | 3.95 % | 4.28 % | - Interest and fees on loans increased to $133,931 thousand YTD Sep 30, 2025, from $129,981 thousand YTD Sep 30, 2024[31] Non-GAAP Financial Measures & Reconciliations Non-GAAP Financial Measures Explanation Bankwell Financial Group utilizes various non-GAAP financial measures to provide investors with a more comprehensive understanding of its core operating performance, performance trends, and financial position, supplementing GAAP results - Management evaluates non-GAAP measures such as efficiency ratio, tangible common equity, and pre-tax, pre-provision net revenue to assess financial performance and capital position[23] - These measures are used for internal planning and forecasting and are believed to be useful for investors in understanding the company's core business by removing volatility from certain one-time or discrete items[23] Reconciliation of GAAP to Non-GAAP Measures The reconciliation of GAAP to non-GAAP measures demonstrates consistent improvement in tangible common equity to tangible assets and fully diluted tangible book value per common share across recent quarters | Metric | Sep 30, 2025 | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :------------------------------------ | :----------- | :----------- | :----------- | :----------- | :----------- | | Tangible Common Equity | $290,202 | $280,701 | $272,625 | $267,931 | $265,337 | | Tangible Assets | $3,241,374 | $3,234,004 | $3,181,304 | $3,265,887 | $3,158,491 | | Tangible Common Equity to Tangible Assets | 8.95 % | 8.68 % | 8.57 % | 8.20 % | 8.40 % | | Fully Diluted Tangible Book Value per Common Share | $36.84 | $35.65 | $34.56 | $34.09 | $33.76 | Company Information & Disclosures Investor Relations & Conference Call Bankwell Financial Group provided details for accessing its Third Quarter 2025 Investor Presentation and information regarding the upcoming conference call to discuss financial results and business outlook - The Third Quarter 2025 Investor Presentation is available at https://investor.mybankwell.com/events-and-presentations/[18](index=18&type=chunk) - A conference call to discuss financial results and business outlook was scheduled for October 23, 2025, at 11:00 a.m. E.T., accessible via telephone and webcast[18] About Bankwell Financial Group Bankwell Financial Group, Inc. is the holding company for Bankwell Bank, a full-service commercial bank headquartered in New Canaan, CT, offering a range of commercial financing products and treasury management services - Bankwell Bank provides commercial financing products including working capital lines of credit, SBA loans, acquisition loans, and commercial mortgages[19] - The bank also offers treasury management and deposit services[19] Forward-Looking Statements This section serves as a cautionary statement, indicating that the press release contains forward-looking statements subject to inherent risks and uncertainties that could cause actual results to differ materially from expectations - Forward-looking statements are identified by words such as 'believe,' 'expect,' 'anticipate,' 'estimate,' and 'intend' or future/conditional verbs[22] - Factors that could cause actual results to differ include increased competitive pressures, changes in the interest rate environment, general economic conditions, and legislative and regulatory changes[22]