Bankwell Financial Group(BWFG) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a GAAP net income of $9.1 million, or $1.15 per share, which includes a one-time adjustment of $1.5 million related to income tax provisions [3][9] - Pre-provision net revenue return on average assets was 180 basis points, an increase of 10 basis points from the prior quarter and 75 basis points from Q4 2024 [4][9] - Net interest margin expanded to 340 basis points, up 6 basis points from the prior quarter, driven by a reduction in deposit costs [9][10] Business Line Data and Key Metrics Changes - The SBA division contributed significantly to non-interest income, with gains on sale increasing to $2.2 million for the quarter [6][11] - Total funded originations for the year reached $758 million, with net loan growth of $122 million in Q4 [5][9] - Non-interest income increased to $3.4 million, representing 11.4% of total revenue, compared to 4.6% in Q4 2024 [11] Market Data and Key Metrics Changes - Floating-rate loans comprised 38% of the total loan portfolio, up from 23% at the end of 2024 [5] - Average low-cost deposit balances increased by $22 million, or 5%, over the prior quarter and by $86 million, or 21%, versus Q4 2024 [5][9] Company Strategy and Development Direction - The company aims to strengthen credit, improve the funding mix, build non-interest income, and generate high-quality growth while investing in technology and personnel [14][16] - The focus on diversified recurring sources of revenue is yielding positive results, particularly with the growth of the SBA division [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in entering 2026 with a strong position, expecting loan growth of 4%-5% and net interest income in the range of $111 million-$112 million [16] - The company anticipates non-interest income to increase to approximately $11 million-$12 million, with total non-interest expense estimated at $64 million-$65 million [16] Other Important Information - Non-performing assets as a percentage of total assets fell to 49 basis points, down from 56 basis points in the previous quarter [7][11] - The allowance for credit losses stands at 108 basis points of total loans, with coverage of non-performing loans increasing to 188% [12] Q&A Session Summary Question: Loan growth expectations for 2026 - Management indicated that loan growth is expected to pick up in 2026, driven by a balance of payoffs and new originations [19][20] Question: Makeup of the loan pipeline - The loan pipeline is currently 60% commercial and industrial (C&I) loans, with a focus on maintaining strong C&I real estate originations [25] Question: Low-cost deposit growth expectations - While no specific guidance was provided, management expects steady improvement in low-cost deposits, which grew 5% from the previous quarter and 21% year-over-year [29][33] Question: SBA originations in 2026 - Management expects to achieve significant SBA originations in 2026, building on the first full year of the SBA division's operations [39][44] Question: Expense growth outlook for 2026 - Expense growth is expected to be driven by investments in people and processes, with a headcount increase of over 10% in the previous year [49][50]