Bankwell Financial Group (BWFG 6.50%), a regional bank serving southern Connecticut and nearby markets, reported strong results on July 28, 2025. The most important news: earnings per share (GAAP) reached $1.15, far exceeding the consensus GAAP estimate of $0.84. Revenue (GAAP) landed at $25.9 million, surpassing GAAP expectations of $24.31 million. Compared with the prior-year quarter, both earnings and profitability metrics showed major gains (GAAP). Management also upgraded its full-year 2025 outlook for net interest income. Overall, the period reflected broad improvement in margin, efficiency, and credit quality, placing the company in a notably stronger competitive position for the rest of 2025.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $1.15 | $0.84 | $0.14 | 721.4% |
| Revenue (GAAP) | $25.9 million | $24.31 million | $21.9 million | 18.1% |
| Net Interest Margin | 3.10% | 2.75% | 0.35 pp | |
| Efficiency Ratio | 56.1% | 45.6% | 10.5 pp | |
| Return on Average Assets | 1.14% | 0.14% | 1.00 pp |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
About Bankwell Financial Group and Its Focus
Bankwell Financial Group is a community-focused bank serving business and individual clients through nine branches in Connecticut. It aims to build long-term relationships by offering a mix of commercial lending, middle-market business loans, and tailored banking services. With assets of roughly $3.2 billion, its strategy relies on a disciplined approach to both risk management and regulatory compliance.
In recent periods, the bank has focused on expanding fee-based income, especially from U.S. Small Business Administration (SBA) lending, while improving its funding mix by reducing reliance on high-cost brokered deposits. For example, in Q1 2025, brokered deposits declined by $80.6 million, and the company reported growing contributions from SBA gain-on-sale income. Key factors for success include disciplined credit controls, operational efficiency, and growing core deposits—especially noninterest-bearing accounts. Investments in technology and dedicated private banking teams remain central to its future growth strategy.
Quarter in Review: Key Drivers and Performance
The period saw the company generate $1.15 earnings per share on GAAP net income of $9.1 million, a dramatic improvement from $0.14 per share and $1.1 million (GAAP) in Q2 2024. Revenue (GAAP) of $25.9 million marked an 18% increase from Q2 2024. Both GAAP earnings and revenue beat analysts’ expectations by substantial margins, underscoring notable operational momentum.
Net interest margin (non-GAAP), a key measure of profitability for banks, rose to 3.10% from 2.75% in Q2 2024. This metric reflects the difference between interest income on loans and the cost of funding, and is important for bank profitability. The expansion was primarily driven by lowering the average cost of deposits to 3.40%, as the company repriced around $745 million of time deposits roughly 80 basis points lower and cut rates on $1.0 billion in non-maturity deposits during the first half of 2025. This ongoing reduction in funding costs was furthered by an 11.5% year-to-date decrease in brokered deposits, and a shift toward noninterest-bearing demand deposits, which grew 23.4% since the start of the year (from December 31, 2024 to June 30, 2025).
The period also marked progress in the bank's SBA lending business. SBA loans are government-backed loans designed to support small businesses. Bankwell originated $11.8 million in SBA loans, generating $1.1 million in loan sale gains—nearly double the prior quarter's $0.4 million. Total noninterest income, which includes SBA loan gains and service charges, rose to $2.0 million from $0.68 million a year earlier. These gains show the impact of recent investments in the bank's SBA platform, with management expecting further scale in coming quarters.
Asset quality improved as nonperforming assets fell to 0.78% of total assets from 1.79% as of Q2 2024. Nonperforming assets are loans or properties where borrowers are not making required payments, so a decline is a positive sign. Allowance for credit losses as a percentage of nonperforming loans improved to 122.5%, showing stronger coverage from reserves. Net loan charge-offs, or actual loan losses, remained at zero. Other notable highlights included a share repurchase of 14,626 shares at an average price of $28.86, and a raised tangible book value per share (non-GAAP) to $35.65.
Expense discipline continued, but investment in people was visible. Total noninterest expense rose 2.9% quarter over quarter, primarily due to higher salaries and benefits. Despite the expense increase, the efficiency ratio—a measure of overhead costs relative to revenue—improved to 56.1% (non-GAAP). Regulatory capital levels stayed comfortably above required minimums, with a total capital to risk-weighted assets ratio at 13.28% as of June 30, 2025 and CET1 (common equity tier 1 ratio) was 12.20%.
Deposit and loan totals showed modest declines compared to year end 2024, as balance sheet discipline and reductions in time and brokered deposits continued. However, commercial business and construction lending grew 8.6% and 17.4% year to date, signaling some bright spots in new loan categories. Commercial real estate continued to represent about two-thirds of the loan book, an area the company monitors closely due to potential risks in office and retail sectors.
Looking Ahead: Guidance and Watchpoints
Management raised its outlook for net interest income in fiscal 2025 to $97–98 million from a prior range of $93–95 million. Noninterest income guidance was reaffirmed at $7–8 million for 2025. Noninterest expense guidance was also raised to $58–59 million for 2025, reflecting added investments in people and strategic deposit initiatives. Management signaled continued focus on efficiency and margin expansion, stating that positive momentum should continue if improvements in deposit mix and lower funding costs persist, as discussed in the Q2 2025 earnings release.
The dividend per common share remained flat at $0.20. There was no change in the dividend level compared with recent quarters. For the remainder of fiscal 2025, investors will want to keep an eye on the ability of new deposit teams to bring in core, low-cost deposits, as well as sustained performance in SBA lending and expense management. Management did not provide guidance beyond the current fiscal year.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
