Bankwell Financial Group's Q4 2024 Earnings Call: Unpacking Contradictions in Loan Yields, CET1 Targets, and CRE Strategies

Credit Performance and Non-Performing Assets:
- Bankwell experienced no credit deterioration in Q4, with a GAAP fully diluted earnings per share of $0.32, affected by $3 million in net charge-offs.
- Sale of non-performing assets resulted in a 25 basis point reduction in the non-performing asset ratio, with a neutral impact on future net income.
- The bank disposed of a nonperforming C&I loan with a book balance of $1.7 million and transferred another nonperforming construction loan to OREO, reducing the nonperforming asset ratio by 25 basis points.

Deposit Growth and Cost Management:
- Bankwell's core deposits grew by $169 million in Q4, while broker deposits fell by $78 million.
- The bank improved its total deposit costs by 9 basis points, attributed to favorable movements in time and money market pricing.
- The growth in core deposits is part of the bank's strategy to reduce its reliance on broker deposits.

Net Interest Margin and Deposit Repricing:
- Bankwell's reported net interest margin was 260 basis points, declining by 12 basis points from the previous quarter.
- The bank anticipates a 14 basis point margin expansion in 2025 due to repricing of $1.3 billion in time deposits and $560 million in brokered CDs.
- The anticipated margin expansion is supported by significant repricing activity, which should lead to approximately $4.4 million in annualized savings.

SBA Lending Expansion:
- Bankwell initiated its SBA lending division in December 2024, with the expectation of $50 million in originations in 2025.
- The bank aims to double its noninterest income to $7 million to $8 million in 2025, primarily driven by the growth of its SBA lending activities.
- This expansion is supported by strategic investments in infrastructure and personnel to facilitate smaller loan origination.