Bankwell Financial's Q1 2025: Key Contradictions in SBA Loan Originations and Growth Outlook

SBA loan origination and pipeline expectations, progress in resolving non-performing loan sales and credit issues, loan growth outlook, and SBA pipeline and originations are the key contradictions discussed in Bankwell Financial's latest 2025Q1 earnings call.



Strong Financial Performance:
- Bankwell reported GAAP fully diluted earnings per share of $0.87 for the first quarter, up 135% relative to the fourth quarter and 81% versus the first quarter of 2024.
- The growth was driven by a lower, more normalized provision expense, an expanding net interest margin, and an increased contribution from SBA gain on sale, along with modest share buyback activity.

Loan and Deposit Trends:
- Loan growth was influenced by elevated payoff activity of $200 million, offsetting strong origination activity of $130 million, resulting in a modest reduction in net balances.
- Brokered deposits declined by $81 million, while core deposits grew by $43 million, with a notable increase of $28 million in noninterest-bearing deposits.

Net Interest Margin and Cost of Funds:
- The reported net interest margin for the quarter was 281 basis points, representing a 21 basis point increase relative to the linked quarter.
- This expansion was primarily due to a decrease in the total cost of funds, which fell by another 12 basis points to 3.60% versus the linked quarter.

Noninterest Income and Expense:
- Noninterest income of $1.5 million increased by 56% versus the linked quarter, largely driven by $424,000 of SBA gain on sale income.
- The total noninterest expense increased to $14.1 million, primarily due to higher salaries and benefits, and initiative-related costs, with an efficiency ratio of 59.9%.

Credit Quality and Nonperforming Assets:
- The provision expense for the first quarter was $463,000, a significant improvement from $4.5 million in the prior quarter.
- This was attributed to the successful disposal of nonperforming assets, including an $8.3 million OREO asset and a $27.1 million multifamily loan, which drove nonperforming assets as a percentage of total assets down by 105 basis points.