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Bankwell Financial Group(BWFG) - 2024 Q3 - Earnings Call Transcript
BWFGBankwell Financial Group(BWFG)2024-10-29 19:36
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Financial Data and Key Metrics Changes - The company reported GAAP fully diluted earnings per share (EPS) of 0.24,negativelyimpactedbyan0.24, negatively impacted by an 8.2 million charge-off against an office loan, which reduced the EPS by approximately 0.79[6][18]−Pre−provisionnetrevenue(PPNR)was0.79 [6][18] - Pre-provision net revenue (PPNR) was 9 million, down slightly quarter-over-quarter, representing 113 basis points of PPNR return on average assets [14] - Reported net interest margin (NIM) for the third quarter was 272 basis points, a 3 basis point reduction relative to the linked quarter [14] Business Line Data and Key Metrics Changes - The office portfolio exposure was reduced to 166million,approximately6166 million, approximately 6% of the total portfolio, with the majority having credit enhancements [11] - Non-interest income was 1.2 million, benefiting slightly from higher SBA gain on sale revenue and improved trends in service charges [16] - The company anticipates 500millioninloanstorepriceormatureoverthenext12months,whichcouldbenefitNIMbyanadditional15to20basispoints[15]MarketDataandKeyMetricsChanges−Thecompanyhasmadesignificantstridesinimprovingthequalityanddiversityofitsdepositbase,reducingbrokerdepositsby500 million in loans to reprice or mature over the next 12 months, which could benefit NIM by an additional 15 to 20 basis points [15] Market Data and Key Metrics Changes - The company has made significant strides in improving the quality and diversity of its deposit base, reducing broker deposits by 168 million since the beginning of the year [8] - The average deposit for the Bankwell Direct pilot was 60,000,costingjust11basispointsinmarketingcosts[41]CompanyStrategyandDevelopmentDirection−Thecompanyaimstoembraceinnovationandfosteranentrepreneurialculture,focusingontechnologyandtalentaskeystodifferentiation[20][22]−StrategicinitiativesincludethelaunchofBankwellDirect,anationalconsumerdigitalbank,andasmallbusinessgrowthloanprogramtosupportlocalbusinesses[41][42]−Thecompanyisfocusedonprovidinganelitecustomerexperienceandhasinitiatedanewcustomerexperienceprogram[25]Management′sCommentsonOperatingEnvironmentandFutureOutlook−ManagementremainsoptimisticaboutfutureearningsgrowthduetobalancesheetpositioningandpotentialfurtherratecutsbytheFed[20]−Thecompanyexpectsmeaningfulmarginexpansioninto2025asshort−termratesmovelower,largelyduetosignificantCDmaturities[49]−Managementemphasizedtheimportanceofmaintainingastableassetbasewhileimprovingprofitabilityandreducingbrokerdeposits[48]OtherImportantInformation−Thecompanyrepurchased9,670sharesofBankwellstockatanaveragepriceof60,000, costing just 11 basis points in marketing costs [41] Company Strategy and Development Direction - The company aims to embrace innovation and foster an entrepreneurial culture, focusing on technology and talent as keys to differentiation [20][22] - Strategic initiatives include the launch of Bankwell Direct, a national consumer digital bank, and a small business growth loan program to support local businesses [41][42] - The company is focused on providing an elite customer experience and has initiated a new customer experience program [25] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about future earnings growth due to balance sheet positioning and potential further rate cuts by the Fed [20] - The company expects meaningful margin expansion into 2025 as short-term rates move lower, largely due to significant CD maturities [49] - Management emphasized the importance of maintaining a stable asset base while improving profitability and reducing broker deposits [48] Other Important Information - The company repurchased 9,670 shares of Bankwell stock at an average price of 23.86 during the third quarter [18] - The board has authorized a new 250,000 share repurchase program [18] Q&A Session Summary Question: What are the average rates for loans repricing over the next year? - The average rates for loans repricing are approximately in the mid-6s [53] Question: What is the spot margin for September? - The spot margin for September is skewed due to unusual items, but the estimated NIM for the fourth quarter is around 2.70 [54] Question: What are the expectations for loan growth from new initiatives? - The company expects relatively flat balance sheet growth, with modest growth not necessarily attributable to SBA loans [61] Question: What is the long-term target for the CET1 ratio? - The long-term target for the consolidated CET1 position is to be north of 11% by the end of 2026 [65] Question: What is the expected tax rate going forward? - The company is striving for a tax rate of around 24.5% under a more normal income profile [79]