David Joseph Konrad

David Joseph Konrad inquired about the expected low-cost deposit growth for the coming year and asked for clarification on any seasonality in the SBA-dominated fee income guidance for the total year.

Answer

CEO Christopher Gruseke stated that while no specific guidance number was provided for low-cost deposit growth, steady improvement is expected, with President and Chief Banking Officer Matthew McNeill adding that it's likely to outpace loan growth. EVP and CFO Courtney Sacchetti highlighted 5% average low-cost deposit growth from the prior quarter and 21% year-over-year from Q4 2024. Matthew McNeill indicated that SBA fee income production should be smooth throughout the year, barring government shutdowns.

David Joseph Konrad asked about Bankwell's expectations for low-cost deposit growth in the upcoming year and any anticipated seasonality for SBA fee income.

Answer

Christopher Gruseke, CEO, Courtney Sacchetti, EVP and CFO, and Matthew McNeill, President and Chief Banking Officer, stated that while specific guidance for low-cost deposit growth wasn't provided, they expect steady improvement, noting a 21% average growth year-over-year in Q4 2024. For SBA fee income, they anticipate smooth production throughout the year, barring any government shutdowns.

David Joseph Konrad inquired about the impressive Net Interest Margin (NIM) expansion in a down-rate quarter, asking about current commercial loan yields being booked, pipeline yields, and the mix of fixed versus floating rate loans. He also asked about the outlook for PACE portfolio growth given strong deposit growth, and if there are any limitations on its expansion as a percentage of the securities book or capital.

Answer

CFO Jason Darby explained that NIM expansion was driven by baseline loan yield growth and benefits from rate cuts and deposit bands. He noted CNI bring-on rates of 5.9%-6% and multifamily at 5.70%, with significant repricing benefits from older real estate loans. He highlighted PACE portfolio yields in the high sixes to 7%. Darby confirmed ample balance sheet room for CPACE growth without concentration restrictions, citing excellent risk-adjusted returns and a developing market. He also mentioned trading down traditional securities to fund loan and CPACE growth. Chief Banking Officer Sam Brown added that three-quarters of the quarter's origination came from commercial PACE, which is a key focus for future income.

David Joseph Konrad inquired about the key drivers behind the impressive net interest margin (NIM) expansion, the current booking yields for commercial loans, the growth outlook and potential concentration limits for the high-yielding PACE portfolio, and the strategic shift towards CPACE.

Answer

Jason Darby (CFO) attributed the NIM expansion to baseline loan yield growth and benefits from recent rate cuts, noting C&I booking rates around 5.9%-6% and multifamily CRE at 5.70%, with significant repricing benefits from older real estate loans. He confirmed ample balance sheet capacity for CPACE growth, emphasizing strong risk-adjusted returns and the strategy to reduce traditional securities holdings to fund CPACE. Sam Brown (Chief Banking Officer) highlighted the focus on increasing CPACE as a percentage of the total PACE portfolio, with Q4 originations showing three-quarters from the commercial side.