Bankwell Financial Group, Inc. Stock

Hello, everyone. Thank you for joining us, and welcome to the Bankwell Financial Group second quarter 2026 earnings call. [Operator Instructions] I will now hand the conference over to Courtney Sacchetti, Executive Vice President and Chief Financial Officer. Courtney, please go ahead.

Thank you. Good morning, everyone. Welcome to Bankwell's Second Quarter 2026 Earnings Conference Call. To access the call over the internet and review the presentation materials that we will reference on the call, please visit our website at investor.mybankwell.com and go to the Events and Presentations tab for supporting materials. Our second quarter earnings release is also available on our website.

Our remarks today may contain forward-looking statements and may refer to non-GAAP financial measures. All participants should refer to our SEC filings, including those found on Forms 8-K, 10-Q and 10-K for a complete discussion of forward-looking statements and any factors that could cause actual results to differ from those statements.

And now I will turn the call over to Chris Gruseke, Bankwell's Chief Executive Officer.

Thanks, Courtney. Welcome, and thank you to everyone for joining Bankwell's quarterly earnings call. This morning, I'm joined by Courtney Sacchetti, our CFO; and Matt McNeill, our President and Chief Banking Officer.

Thank you for your continued interest in Bankwell and for the chance to share our second quarter results with you. Second quarter marked another period of strong execution with meaningful margin expansion, robust core deposit and loan growth and continued progress on our strategic priorities, including the continued success of our SBA division.

For the second quarter, we reported GAAP net income of $12.4 million or $1.52 per share compared to $11.3 million or $1.41 per share for Q1. Loan growth accelerated this quarter with balances growing by $93 million or by 3.2% sequentially. Gross loans stood at $3 billion at quarter end as new originations continue to outpace portfolio runoff. Core deposits increased by $128 million during the quarter. Importantly, this includes $72 million of growth in noninterest bearing and NOW accounts. Growth in noninterest bearing deposits included approximately $44 million in increased annualized checking balances. On a year-to-date basis, annualized checking has grown by approximately $68 million or roughly 17%.

In addition to funding loan growth, our strong performance in growing core deposits has enabled us to reduce wholesale funding by $44 million this quarter. Since its peak at the end of 2022, we've now reduced brokered balances by $520 million or by roughly 51%. This continued progress is a result of strong execution across the entire franchise as we continue to strengthen our funding base and deepen client relationships.

Compared to the same quarter in the prior year, core deposits have grown by $356 million or by 19%. The net interest margin was 358 basis points, an expansion of 30 basis points from the prior quarter, driven by favorable repricing dynamics on both sides of the balance sheet. Courtney will walk through those details in a couple of minutes.

Noninterest income remained a meaningful contributor to our results, totaling $3.3 million for the quarter. This was led by our SBA division, which contributed $2.4 million of gain on sale income. First half of this year, SBA loan sale gains were $4.8 million compared to $1.5 million in the first half of 2025. This business remains an important and growing part of diversifying our revenue stream. Credit quality continues to improve. Total nonperforming loans decreased by $3.2 million to $15.9 million and nonperforming assets as a percentage of total assets declined by 10 basis points to 46 basis points. Reserve coverage of nonperforming loans strengthened to approximately 193%.

As stewards of our shareholders' capital, our primary focus has always been to maximize tangible book value per share while balancing the risks of running our business. We've added $2.41 to tangible book value per share in the first half of 2026 to reach $40.25 per share.

Now turn the call back to Courtney to walk through the financial results in more detail.

Thanks, Chris. Profitability for the quarter was outstanding. Return on average assets was 1.46% and return on average tangible common equity was 15.61%. Pre-provision net revenue rose 31.4% to $17.5 million or 2.07% of average assets, up from $13.3 million last quarter, driven by higher net interest income and improved efficiency. Net interest income totaled $29.5 million, up from $26.9 million in the prior quarter. Net interest margin expanded 30 basis points to 3.58%, driven by favorable repricing.

Deposit costs improved 16 basis points to 2.94%, while our earning asset yields rose 11 basis points to 6.26% as new loan production at an average rate of 7.16% continued to outpace runoff. Noninterest income totaled $3.3 million for the quarter, including $2.4 million of gains on SBA loan sales. Noninterest expense fell to $15.3 million from $16.9 million, primarily on lower salaries and benefits as the first quarter carried seasonal compensation costs. Operating leverage continued to build as evidenced by this quarter's 47.5% efficiency ratio, bringing the year-to-date ratio to 51.4%. Provision for credit losses was $1.2 million, driven by loan growth. The allowance ended the quarter at 1.03% of total loans with nonperforming loan coverage of approximately 193%.

The balance sheet remains strong. Total assets ended the quarter at $3.5 billion and deposits at $3 billion. Shareholders' equity grew to $323.5 million. And as Chris commented, our fully diluted tangible book value per share rose to $40.25. Both the bank and the holding company remain well capitalized with the bank's total capital ratio of 12.7%, Common Equity Tier 1 ratio of 11.66% and a leverage ratio of 10.36%.

Finally, we repriced $0.6 billion of time deposits in the first half of the year at a 36-basis-point improvement, representing an annualized benefit of $2.3 million. Looking ahead, that benefit will diminish as much of our higher cost time deposits have already been repriced and the remaining maturities carry rates closer to current market levels. As that benefit moderates, we are increasingly positioned towards a more rate-neutral balance sheet. Approximately 43% or $1.3 billion of our loans are now floating rate, nearly double the 23% we carried at the end of 2024. This increase in floating rate assets provides a more balanced sensitivity across a range of rate scenarios.

In the immediate term, we're modestly asset sensitive, roughly $1.6 billion of loans in cash reprice right away, while $250 million of Fed funds-indexed deposits move with them. Over the following 12 months, that gap narrows towards neutral as $1.1 billion of time deposits mature and reprice and our core nonmaturity deposits gradually adjust.

That's the financial picture for the quarter. I'll turn it back to Chris for closing remarks.

Thanks, Courtney. Our second quarter results demonstrate the earnings power of the franchise we've been building deliberately over time. In our investor presentation for Q3 of 2024, we laid out plans to invest in our deposit franchise, pay down wholesale funding, increase noninterest income and grow our consolidated Tier 1 capital ratio. We committed to invest in the people and technologies necessary for the company's ongoing success and to do so in a manner which would increase our operating leverage.

Halfway through 2026, we're excited to have seen so many of our aspirations realized. Given our first half performance and the momentum we're carrying into the second half of the year, we're pleased to increase our full year guidance across several measures. We now expect loan growth of 5% to 7% and we are raising our full year net interest income outlook to a range of $115 million to $117 million. We affirm our previous full year guidance of $12 million to $13 million for noninterest income.

Given our momentum this year, we are making targeted investments in talent and infrastructure to support continued growth and to compensate appropriately our teams for the strong performance they've delivered. Accordingly, we're raising our full year noninterest expense guide to $65 million to $67 million. With our updated revenue guidance, we expect no negative impact to our efficiency ratio from our increased expense guide. None of the progress we've achieved can happen without the people behind it.

I especially want to recognize our team whose dedication and efforts are what turn our strategy into results, our customers who place their trust in us and the shareholders who share our long-term vision. We're grateful to all of you and remain focused on delivering peer-leading results in the quarters to come.

Now operator, we are ready to open the line for questions.

[Operator Instructions] Your first question comes from the line of Feddie Strickland with Hovde Group.

Just wanted to start off really on the loan growth here. I was just wondering if you could talk a little bit about what's changed to drive the higher loan growth? And is that future growth still predominantly C&I driven like this quarter?

Can I hand that to Matt?

Really, the loan growth is a function of us raising our projections on assumptions on runoff. We had a lot of loans refinance away from us or leave the bank last year impacted our ability to grow the loan book early in the year. We looked at those assumptions and raised them. We've kept them raised through the first half of this year, and that's really been the change. Just originating more loans to fill the expected runoff.

Is any of that -- is that driven by increased activity from existing customers or reaching out to new customers? I guess I'm just trying to get a sense for maybe whether sentiment improved or anything else just as the originations increase.

We're very relationship-driven. We don't bring on large quantities of new customers. We're really focused on deepening relationships with existing customers and rinse and repeat asset classes. So it's really driven by deepening relationships with our existing customers. That's across all the health care, goes into investor CRE and C&I, all the places we originate.

So Feddie, it's more art than science. It's managing the flows. And when you have a feel for what the prepayment should be and then we look forward to the next quarter, we can prime the pump and price and speak accordingly to manage the flows.

All right. Great. That's super helpful. And switching to the other side of the balance sheet, you've made really good progress in reducing the brokered funding over the past couple of quarters. I think we're down to about 17% or so of deposits. How should we think about that brokered number over time over the next year or so? Do you think you could get that sub-10% in the next 12 months? Or is it just kind of too hard to tell at this point?

It's not too hard to tell. I think sub-10% would be -- that would sound aggressive. I think it'll come down naturally over time because we are still trying to build consolidated capital at the Holdco. So while we're on this kind of trajectory and the way it's gone in the last several quarters, it feels just like organically, we're generating more deposits than the amount of loans that we would want to book while still growing capital. So I expect to see it kind of drift down over time as that plays out. We don't have a target in mind.

Understood. And last quick question for me. Just should we expect a slight climb higher in the margin if the yield curve stays where it is, just given you've still got above portfolio yields and new production and maybe it sounds like flattish deposit costs with some of the time deposit tailwind going away?

Feddie, it's Courtney. Yes, I would expect our margin to expand a little bit more into the third quarter. We still have some room left on our time deposits in the third quarter. It's really fourth quarter and beyond where we start to see the runoff kind of matching current market rates. So we do expect margin expansion given no other changes.

Your next question comes from the line of Mark Shutley with KBW.

So I was surprised to see the expense guide move up after expense control was really strong in the quarter. I know you talked about compensation drifting higher. I just wonder if you could talk through any other puts and takes there.

Yes. So without specifics of what comprises it, in the earnings release, I think as well just now, we said that despite increasing the guide, if you have numbers worked up based on our revenue guidance prior and now current that we would not expect that to impact the efficiency ratio in a negative manner. So we're talking about -- we're really talking about scale. And as you have a year that's going well and doing better, we're pretty -- we run a meritocratic incentive plan. And if people do better, we want them to get paid. So that's -- I mean, that's a good part of the increase.

As well, we have been investing in technology and processes and bringing on additional people, but the scale is working for us. So we wouldn't -- I think early in the year, we talked about expenses. I said if we're adding expenses it's because we're making more money and we're going to return the expense.

And Chris, I will just add to that is that our guidance from the last -- the last time we gave guidance, if you did a rough calculation of what that efficiency ratio would be, it was a range of 52.8% to 51.2%. This new guidance keeps that high end. It's exactly 52.8% and lowers the best case scenario to 50%. So it is in line with -- from an efficiency ratio perspective, it actually has improved.

Okay. Great. That's helpful. And then maybe shifting over to credit, NPAs improved again. I was wondering if you could update us on sort of that remaining nonperformer bucket, and then should we expect reserves to be relatively stable from here through the year?

Our outlook on the remaining nonperforming loans is good. We see some paths to reducing that number even further in the coming quarters. I'll let Courtney comment on the reserve.

We've taken the write-downs as appropriate. We don't really carry a lot of specific reserves specifically on our real estate portfolio. So we feel it's marked appropriately based on the information we have.

Your next question comes from the line of Steve Moss with Raymond James.

Maybe just starting with just the SBA business here. You guys didn't change your guide on noninterest income, but it's definitely trending strong. And I realize probably nitpicking a little bit, but just kind of curious on any updated thoughts you have there.

I'm sorry, Steve, you broke up a little bit. Can you repeat that question?

Sorry. On the SBA -- no worries. Seems to be my phone today for some reason. On the SBA business here, gains have been trending fairly strong. I realize you guys didn't change the noninterest income guide. But just kind of curious here in terms of the business activity there and maybe if there's just some upside you want to see another quarter of trends before taking things up there.

We intentionally are keeping our SBA production controlled for -- we're still retaining a portion of non-SBA guaranteed portions of those loans. So for risk management purposes, we're going slow and steady. We don't anticipate raising our origination targets there to try to keep up with the other side of the business. It's really risk management [indiscernible] new division. We've only been after it for about 2.5 years. Although we've been originating SBA for more than 10, this new division is just 2.5 years old.

Okay. Appreciate that color there. And then the other thing here, just in terms of the health care business, just kind of curious, can you just talk about the trends you're seeing, how are businesses faring? I know there were some challenges, call it, 6 to 12 months ago in terms of the ability to refinance the permanent market and get revenues where they wanted to be. Just curious on that aspect of things and also the competitive landscape for lending into that market.

We're very particular about the states where we originate for senior housing, particularly, which is where the -- those headwinds are largely behind the industry. The places where we originate, we're seeing a lot of strength in cash flows. We're seeing growth in revenue, expenses being controlled. The expense control is largely due to having enough labor to operate the facilities and not having to go to agency.

So all of those headwinds seem to be behind the operators for now in the states where we're originating our business, and we think this is a very good time to be in the business. Other banks have now come to that conclusion as well. So the lending activity amongst other banks and nonbank lenders [indiscernible] so many people have come back to the market. So it is more competitive. We are fortunate in the fact that our customers come to us for our strong execution. That hasn't changed, and we still have as much access as we want to the market.

Okay. And just in terms of pricing, is it incrementally more competitive or kind of spreads tightened kind of materially? Just kind of curious there.

We don't often compete on price. Like I said, execution is the strong driver of our value creation for our clients. And so we keep our spreads where they are and that hasn't been a problem for us.

We also have a follow-up from Feddie Strickland of Hovde Group.

Just two quick follow-ups. One on expenses, I totally understand compensating folks for good production. But as I think through the back half of '26, I know you haven't given '27 guidance, but if we see the expenses step up in the back half on maybe some incentive comp, should I expect that to carry through into '27? Or is that kind of a onetime thing until we get through to '27? A long-winded way of asking, could we maybe see expenses step down a little bit in the first quarter of '27 after maybe a little bit higher expenses in the back half of the year? Or is this more salary related?

I would think it's more salary related. I would think that our run rate will tick up as long as our production continues on the path that it's on, right? So again, as we perform well, the company will compensate accordingly. So the expectation would be the expense rate would start to -- the run rate would start to tick up.

And that would be correlated with performance?

Yes.

So we'll come back to -- that number will grow to reflect comp incentive performance. But the only way that's going to happen is if the top line is growing and profitability metrics continue to increase. So we don't want to be in the business and won't be in the business of increasing expenses and decreasing our efficiency ratio. Just want to be clear, this is about scale.

Understood. So at the end of the day, it just sounds like I should really pay attention to efficiency really more than anything because if you've got increased revenue, you may have some increased expenses just to make sure you're compensating folks.

Yes.

Right now, we would agree with that, yes.

Okay. And one more for me. Just in terms of overall profitability, 15% ROATCE, 1.46% ROAA, really strong. Is a 1.40-ish, 1.35%, 1.40-ish ROAA a good go-forward number for you guys? I know you haven't given formal guidance on those profitability metrics, but I'm just trying to think through whether this quarter's profitability carries forward or kind of what you expect in terms of those metrics?

Well, I think with a little bit of math, I'm not trying to be cute, Feddie. I think if we lay out the expenses and noninterest income and the revenue guidance that we've given, you can kind of get to the numbers pretty close. And yes, we're not surprised that they increased this quarter, and we see no reason for them to decrease unless the world changes.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bankwell Financial Group, Inc. First Quarter 2026 Earnings Call. [Operator Instructions]

It is now my pleasure to turn the call over to Courtney Sacchetti, Executive Vice President and Chief Financial Officer. You may begin.

Thank you. Good morning, everyone. Welcome to Bankwell's First Quarter 2026 Earnings Conference Call. To access the call over the Internet and review the presentation materials that we will reference on the call, please visit our website at investor.mybankwell.com, and go to the Events and Presentations tab for supporting materials. Our first quarter earnings release is also available on our website.

Our remarks today may contain forward-looking statements and may refer to non-GAAP financial measures. All participants should refer to our SEC filings, including those found on Forms 8-K, 10-Q and 10-K for a complete discussion of forward-looking statements and any factors that could cause actual results to differ from those statements.

And now I will turn the call over to Chris Gruseke, Bankwell's Chief Executive Officer.

Thanks, Courtney. Welcome, and thank you to everyone for joining Bankwell's quarterly earnings call. This morning, I'm joined by Courtney Sacchetti, our Chief Financial Officer; and Matt McNeill, our President and Chief Banking Officer. We appreciate your interest in our performance, and I'm excited by this opportunity to discuss our results with you.

We've delivered a solid start to 2026 with strong earnings, continued balance sheet improvement and continued progress on our strategic priorities. For the first quarter, we reported GAAP net income of $11.3 million or $1.41 per share. These results were supported by solid loan production, strong fee income from our SBA platform, lower funding costs, meaningful core deposit growth and ongoing balance sheet optimization, including reduced reliance on wholesale funding and continued progress on building a more interest rate neutral balance sheet.

Loan growth remained positive during the quarter with $190 million of originations, including $34 million of SBA production, resulting in net loan growth of $27 million. On an annualized basis, this level of growth is consistent with our previously communicated guidance of 4% to 5% for the full year, and our pipeline remains strong. Importantly, this growth is supported by strong core deposit inflows.

Core deposits increased by $113 million sequentially with $39 million coming from low-cost deposits. Included in that $39 million is $24 million of growth in annualized checking balances for an 8% increase on the quarter. In addition to funding our loan growth, we've also reduced broker deposit balances and Federal Home Loan Bank borrowings by a combined $95 million, further improving our funding mix. Since our peak at the end of 2022, we've successfully reduced our broker deposits by $513 million for a 50% decline.

The net interest margin was 328 basis points, reflecting modest pressure from asset repricing as floating rate loans reset lower and an unfavorable day count impact relative to the prior quarter. These factors were partially offset by continued improvement in deposit costs, which declined 5 basis points sequentially to 310 basis points. Noninterest income remained a meaningful contributor to results totaling $3.3 million, which includes $2.4 million of SBA gain on sale income.

Our SBA division continues to be an important part of our diversified revenue strategy and a meaningful source of recurring fee income. Credit quality remains healthy with expectations of further improvement.

While nonperforming assets increased modestly to 56 basis points of total assets, we have visibility into the resolution of several credits over the coming quarters. Overall asset quality metrics remain well within our internal expectations and reserve coverage levels remain appropriate.

Finally, we are excited to have opened our first full-service branch in New York during the quarter located in Bay Ridge, Brooklyn. The branch is home to an experienced private client banking team that joined Bankwell in 2025. And the addition of this location enables the team to deliver Bankwell's full suite of commercial and private client banking services on the ground in New York.

I'll now turn the call back to Courtney to walk through the financial results in more detail.

Thanks, Chris. Starting with the income statement. Net interest income totaled $26.9 million for the first quarter and was largely unchanged compared to the prior quarter. Net interest margin declined modestly to 328 basis points, driven primarily by the repricing of floating rate loans in a lower rate environment and an unfavorable day count impact.

On a day count normalized basis, the sequential NIM variance would have been approximately 5 basis points. These headwinds were partially offset by continued improvement in deposit costs. Total deposit costs declined to 310 basis points, down 5 basis points from the fourth quarter, and the bank exited March with a deposit cost exit rate of approximately 298 basis points.

During the first quarter, we successfully repriced approximately $300 million of time deposits, 44 basis points lower, generating an expected annualized benefit of $1.2 million. In addition, over the next 12 months, approximately $1.1 billion of time deposits are expected to reprice favorably with an average rate reduction of 14 basis points. This repricing is anticipated to deliver an incremental annualized benefit of roughly $1.6 million or about 5 basis points of net interest margin.

With respect to rate-sensitive assets, we've strategically increased the proportion of variable rate loans from just over 20% at the start of 2025 to approximately 42% at quarter end. Additional detail on asset and liability repricing as well as rate sensitivity is provided on Page 8 of the investor presentation.

Profitability remained solid in the quarter with return on average assets of 1.35% and a return on average tangible common equity of 15%. As deposit repricing continues to flow through the balance sheet and interest rate sensitivity moderates, we expect incremental margin improvement over the balance of 2026, affirming our full year net interest income guidance of $111 million to $112 million.

Noninterest income totaled $3.3 million for the quarter, reflecting $2.4 million of gains on SBA loan sales and continued growth in service fee income driven by an expanding commercial client base. Based on our first quarter results, we are raising our full year noninterest income guidance to $12 million to $13 million.

Our pre-provision net revenue for the quarter was $13.3 million or 1.6% of average assets compared to 1.8% in the prior quarter. Our PPNR was impacted by approximately $1 million in annual noninterest expense typically incurred in the first quarter, elevating total noninterest expense to $16.9 million for the quarter. These annual costs are primarily related to employee compensation and certain professional services.

Despite these seasonal expenses, our underlying noninterest expense run rate remains consistent with our prior guidance of $64 million to $65 million. The efficiency ratio for the quarter was 55.8%, which reflects the seasonality of first quarter expenses.

Our provision for credit losses was a release of $1 million for the quarter, driven by the net impact of loan growth and economic factors embedded in our CECL model. The allowance for credit losses ended the quarter at 1.03% of total loans with coverage of nonperforming loans at approximately 155%.

From a capital and liquidity standpoint, the balance sheet remains strong. Total assets ended the quarter at $3.4 billion, deposits totaled $2.9 billion, and both the bank and holding company remain well capitalized. Tangible common equity was 9.17%, and our consolidated common equity Tier 1 ratio was approximately 10.58%. We repurchased 3,317 shares during the quarter at an average price of $45.32 per share.

Now I'll turn the call back to Chris for closing remarks.

Thanks, Courtney. In 2024, we laid out a plan to improve our funding mix, continue to grow our loan book in a disciplined manner, maintain strong credit quality and build diversified sources of revenue. We've also committed to continue to invest in our tech-forward platform while managing expenses. We are truly gratified by the results achieved through the planning and hard work done by our team, and we thank them for their dedication.

We will continue to execute on our strategic goals and look forward to sharing the results of our continuous growth and evolution with all of our stakeholders in the quarters ahead. We thank our long-time customers for their continued support and welcome the many new customers who have helped us to grow our business. We also appreciate the continued support and interest from our shareholders and the investment community.

Now operator, we're ready to open the line for questions.

[Operator Instructions] And from KBW, our first question comes from the line of Mark Shutley.

I appreciate the detail on the CDs and how much of that's coming due. I think you said that's a 5 basis point benefit to the margin. So I was just curious in this current rate environment now that it's seemingly more flat. Are you seeing more competition on the deposit side? I'm just trying to get a sense for how much the overall interest-bearing deposit costs can be worked down.

First of all, the first part of that answer is the numbers that we put in that's expected to roll CDs is based on market on the day that -- as of today's market. So it implies no further cuts or any term deposits as they roll to current, that's what the impact would be. That was the first part of your question.

This is Matt. As far as deposit competition, it's very competitive out there for deposits. We're focused on bringing in low-cost deposits to bring down our funding costs, which is probably the most competitive area. However, we're finding success and have been able to substantially grow core deposits in the quarter.

Right. So obviously, it's competitive. And loan growth -- net loan growth was approximately 2% quarter-over-quarter, but core loan growth was substantially higher. And with the -- so it was something like 7%, Courtney?

Core deposit growth of $113 million.

$113 million, about $30 million of that was annualized or noninterest-bearing or low cost. So almost 30% -- 25%, 30% of what we brought in this quarter. And with the balance that didn't result in growth, we paid down more expensive borrowings. So we're happy with the deposit result despite the competitive environment.

Improved mix in our deposits...

Yes.

Okay. Appreciate it. And then maybe switching gears really quick. So SBA was strong in the quarter, and it looks like originations are tracking higher than -- I think you previously talked about $100 million in originations for the quarter. So I'm just trying to get a sense of where you think if there's any change to that and where SBA fits into the overall fee guidance.

Yes, we are having success with the SBA. We have a really strong team. We could definitely originate more SBA loans. We're choosing to keep the volume kind of level where it's at. We're not increasing our $100 million that we put out as how we are thinking about fee income, although other fees are coming in higher as well. So that is the reason for the increase in the fee guidance.

So if we wanted to do more, we could is the answer. Similarly, as we're 2 years into this, we're going in a measured.

Operator, we are ready for the next question.

Our next question is from the line of [Technical Difficulty].

Sorry, are you there?

Yes, sorry, I didn't hear the name. So my apologies on that.

Yes, no...

Courtney, there is...

You are on, Feddie.

All right. Perfect. No worries. It's all good. I just wanted to start by asking about the Brooklyn office. Just does that sort of serve as the [indiscernible] or some of the deposit gathering teams that are in the city. And I was just curious how much lending do you think you will do out of that office?

I think we'll do a modest amount of lending out of the office, Feddie. It wasn't the primary reason to open the office. It was definitely a deposit play, which has already taken off and been robust, just in the 10 months leading up to the branch opening, the team was very active, and we've had good success there. Lending isn't a part of the strategy there. However, we do think that some loans will come out of it, but we've been lending in and around NYC for the -- since the existence of the bank. So it really shouldn't change a whole lot as far as like the geography where we're lending.

And Feddie, I think we've said this before, this is Chris. It's -- we don't have a plan to go and try to find branches in particular markets or make sure we have more branches. We hired the people first. This is a very experienced private client group that's been together for years has already had material and significant impact on our organization. And if what they needed is a branch to assist in their platform, then we can build a branch. It wasn't -- we happen to love Brooklyn. I was born there, but we weren't going out of our way to enter that market. We were following our deposit team and their needs.

Got it. That's helpful. And then just switching gears to CRE concentration, given the current trend line, is it possible we could see that dip below 300% by year-end or maybe early next year just based on what's currently in the pipeline and capital build and what have you? Or do you feel like you're kind of in a range where you're pretty comfortable and you're not as worried about crossing that 300% threshold?

I'm sorry, was that the CRE concentration question?

Yes.

We don't have 300 as a target. We're seeing a more diversified loan mix. It's conceivable, but it's not the plan. So you can look at the trend. Over the last year, we've come down 10 -- no, more, 375, 40 basis points. Yes, we are happy where it is. I guess we can live with it, but I suspect over time, we'll get down there. It's -- whether it's year-end or not, I don't know, but it's been a consistent trend for a while, and we're seeing a better flow of C&I deals and we haven't done much office, et cetera. So I think it will naturally kind of get there, but it's not particularly our goal. I wouldn't be surprised if it came down another 10, 20 basis points over the course of the year.

Got it. And then just on the credit side, it looked like the modest increase in nonaccruals there was CRE driven. I apologize if I missed it in the opening remarks. But can you speak a little bit more on maybe what drove the increase there and what you might expect on resolution of those?

Yes. The increase was just a tenant left the building. Sponsors not able to make the payment. There's equity in the deal. We think that we'll be able to work with them to dispose of the real estate and be paid there. As in Chris' comments, you heard that there is some visibility into resolution to several of the credits that are on our NPAs, and we expect those to happen in the next couple of quarters and have some meaningful resolution in a much lower NPA number.

From Raymond James, your next question comes from the line of Steve Moss.

It's Chase on for Steve. On loan pricing, can you tell me where new origination yields are coming on at these days?

For the first quarter, our average rate was 7.5%.

I appreciate that. And just one more for me. I thought you guys nibbled at buybacks this quarter. Can you tell us what would bring you more into that market?

I'm sorry, can you repeat that? I heard buybacks and that cut out.

Yes. I saw you nibbled at buybacks. Could you tell us what would bring you more into that market?

We look at the price quarterly or daily when we're not in blackout. We had a plan in place. I expect the number will grow over the course of the year, but you have to look at our consolidated CET1 ratio. And we are still trying to grow that. At the levels we have gotten to the last couple of days and the amount of stock that we issued, that wouldn't be surprised to see us over the course of the year, nibble some back. But we still need to -- our goal is still to get to 11%, not necessarily by year-end in the CET1 ratio at the hold co...

And with no further questions, this does conclude today's conference call. You may now disconnect.

Thank you for standing by. My name is Tina, and I will be your conference operator today. [Audio Gap]

[Operator Instructions] It is now my pleasure to turn the call all over to Courtney Sacchetti, Executive Vice President and Chief Financial Officer, you may begin.

[Audio Gap] Please visit our website at investor.mybankwell.com, and go to the Events & Presentations tab for supporting materials. Our fourth quarter earnings release is also available on our website.

Our remarks today may contain forward-looking statements and may refer to non-GAAP financial measures. All participants should refer to our SEC filings, including those found on Forms 8-K, 10-Q and 10-K for a complete discussion of forward-looking statements and any factors that could cause [Audio Gap]

[Audio Gap] Thank you to everyone for joining Bankwell's quarterly earnings call. This morning, I'm joined by Courtney Sacchetti, our Chief Financial Officer; and Matt McNeill, our President and Chief Banking Officer. We appreciate your interest in our performance and this opportunity to discuss our results with you.

Our fourth quarter GAAP net income was $9.1 million, or $1.15 per share, which includes a $1.5 million onetime adjustment to the income tax provision associated with various state tax filings and changes in estimated tax positions. This adjustment relates to both current and prior year tax estimates [Audio Gap]

encourage you to review both metrics together. Courtney will walk you through these results in more detail in a moment.

Pre-provision net revenue return on average assets was 180 basis points for the quarter, an increase of [Audio Gap] growth in noninterest income, driven primarily by our [ SBA ] division. [Audio Gap] interest margin has continued to expand this quarter, as we've previously signaled, the pace of that expansion has moderated. This is a result of our intentional increased exposure to floating rate loans. We ended 2025 with floating rate loans comprising 38% of our total loan portfolio, compared to 23% of the end of '24.

On the funding side, we've taken advantage of the lower rate environment to reprice [Audio Gap]

deposits continues to improve. Average low-cost deposit balances increased by $22 million, or 5% over the prior quarter, and by $86 million or 21% versus the fourth quarter of 2024. As we note in our investor presentation, low-cost deposits include noninterest-bearing accounts [Audio Gap] accounts with the deposit rate of 50 basis points or less [Audio Gap].

Net loan growth for the quarter was $122 million. And for the full year, we generated $134 million of net loan growth, or 5% annual loan growth. With the end of the government shutdown and the reopening of the SBA in November, our SBA division was able to fully resume both originations and sales. As a result, gains on sale [Audio Gap]

in the portfolio continue to improve. Nonperforming assets as a percentage of total assets fell to 49 basis points compared to 56 basis points last quarter. This improvement was driven by the sale of a $1.3 million [ OREO ] property and the collection of $400,000 on an [Audio Gap]

Operating leverage created by faster revenue growth relative to expenses.

I'll now turn it over to Courtney for a more detailed review of our financial results.

Thanks, Chris. We closed the year on a strong note, delivering fourth quarter GAAP net income of $9.1 million, and a reported EPS of $1.15. [Audio Gap]

while noninterest income increased to $3.4 million, driven by $2.2 million of [Audio Gap]

For the Full year, we originated more than $900 million of loans, including approximately $68 million of SBA originations. Net interest margin expanded to 340 basis points, up 6 basis points from the prior quarter. The improvement was driven by a 15 basis point reduction in deposit costs, which declined to [Audio Gap]

September, we responded to the Fed's 75 basis points rate cuts by adjusting our deposit pricing. We lowered offered time deposit rates by 50 basis points, repriced approximately $250 million of index deposits at 100% beta [Audio Gap]

This repricing is anticipated to provide an annualized incremental benefit of roughly $4 million, or about 12 basis points of net interest margin [Audio Gap]

Increased quarter over quarter. As shown on Page 13 of our investor presentation, noninterest income now represents 11.4% of total revenue, compared to 4.6% in the fourth quarter of 2024. Asset quality continued to improve during the quarter. We reduced nonperforming assets by $1.9 million, bringing the NPA to assets ratio down to [indiscernible] basis points. We recorded modest net recoveries and a provision for credit losses of approximately $600,000.

Our allowance for credit losses stands at 108 basis points of total loans, while coverage of nonperforming loans increased to [Audio Gap] versus the linked quarter. The holding company banks remain well capitalized with our estimated consolidated common equity Tier 1 ratio now at 10.2%, and bank total capital ratio of 12.9%. Our tangible book value per share also increased [Audio Gap]

$1.5 million of nonrecurring income tax expense this quarter. This reflects $855,000 expense related to a true-up [Audio Gap] reserve for uncertain tax positions, driven by a change in estimate in the company's expanded state-level footprint. These adjustments represent a onetime true-up to certain current and prior period estimates. Our 27.4% effective tax rate for full year 2025 reflects this onetime expense. On a go-forward basis, we would expect our effective tax rate to be approximately 25%.

Finally, in addition to fourth quarter operating net income of $10.7 million, or $1.36 per share, we delivered [Audio Gap] reported 12.31%.

Now I turn the call back to Chris.

Thank you, Courtney. 2025 was a year where our team demonstrated its ability to execute and make meaningful progress across every dimension of our strategy. We entered the year with a clear set of priorities. Strengthen credit, improve the funding mix [Audio Gap] people and technology. I'm pleased to say that we delivered on each of these priorities.

Nonperforming assets ended the year at 49 basis points of total assets. We've continued to improve the profile of our funding base, reducing our dependence on higher-cost sources, and growing our relationship-driven lower-cost deposits. Our focus on building diversified recurring sources of revenue is bearing fruit with the successful growth of our SBA division. And despite a year of heightened prepayments, we ended 2025 with year-over-year loan growth of approximately 5%.

Finally, we continue to invest in the people, technology and capabilities that will carry us forward. We've strengthened our teams both in key client-facing and operational roles, and we're seeing the benefits of those investments. While making these investments, we've also increased scalability. We believe the work done throughout 2025 [Audio Gap]

anticipate net interest income in the range of $111 million to [indiscernible]. We also expect [Audio Gap]

Our people and structure and operational capabilities. Before we open the line for questions, I'd like to thank our entire team for their [Audio Gap] '26 with confidence for an even better year ahead. Operator, we're ready for questions.

[Operator Instructions] [Audio Gap]

[Audio Gap] Just wanted to start on loan growth previously, you're expecting a pickup there in '26. So I think it's a little bit of what I have previously modeled. Can you talk about the extent to which payoffs versus new originations drive the net new growth number?

Yes. Freddie, this is Chris. It was pretty lumpy during the year, and we were paying catch-up [Audio Gap]

[Audio Gap] in the first part of '25 was somewhat unexpected change the way that we were thinking about our [Audio Gap] we're able to catch up in the quarter. Now that we're [Audio Gap] is anticipating that runoff, [Audio Gap]

Yes. I'd just add to that, and not to take away from the question time. I think what we've shown is that [Audio Gap] the number we want to get to, we can get to it. It was a matter [indiscernible] in the pump, and we can generate [Audio Gap] for loans that we can get to a number when we're ready for it. So [Audio Gap]

Okay. Great. And I apologize [indiscernible] in your answer, it was a little choppy on my end, but I just wanted to ask what the makeup in the loan pipeline was today as well?

Are you looking for [Audio Gap]

We've steadily brought down investor accretive capital over the past [indiscernible] several years. We anticipate continuing to be strong C&I [Audio Gap]

[Audio Gap] with KBW.

A couple of quick questions. One, what do you expect the low-cost deposit growth to be this coming year?

I don't think we've got a number on guidance for that. We obviously expect a steady improvement [Audio Gap]. We've got our own teams. We're making headway. So I don't think we're going to guide to a number, but what we have for the -- what it was our number for the year.

[Audio Gap] so we are able to put up a good growth on an average basis year-over-year.

I mean we certainly like to repeat that again.

Right. But it seems [Audio Gap] would outpace the loan growth?

[Audio Gap] pay down brokered.

I'll point out David, that the 5% of low deposit growth is on a average basis for the year. So it's very likely that this is a conservative growth number.

Got it. Okay. [Audio Gap] out in the guide for the total year, any seasonality of that quarter-to-quarter? How should we face that?

I think we'll see [Audio Gap]

Our final question comes from the line of Steve Moss with Raymond James.

Good morning. Maybe just following up on the SBA stuff. On the SBA stuff here in terms of just what are your thoughts, and I apologize if I missed this, for originations in SBA in 2026?

[Audio Gap] I think the way the math works out is to achieve our noninterest income numbers to [Audio Gap] We finished '25 with [indiscernible] and that this was the real -- the first full year of the SBA division functional. So we think [Audio Gap]

Okay. Just wanted to [indiscernible] check that, but I appreciate that. And then in terms of the expense growth outlook here, just kind of curious what you expect will be the drivers on expense growth here in '26?

People and processes? I mean we've definitely added across the bank in client and nonclient facing [Audio Gap]

As we said on the call. [Audio Gap] we want shareholders and you all to have complete transparency is what we're doing. But the guide on revenue, income and profitability, has these numbers baked in. So our approach is not -- well, if you can -- if you build it, they will come. We're making these investments while [indiscernible] putting up -- operating [Audio Gap]

points in the guidance that we have out there probably gets you depending on what you use for [Audio Gap] if you don't invest, stay current you're at a business. So we want to make sure that we're always ready for the future. right.

No. Definitely appreciate that dynamic. And I guess the other thing in terms of just kind of loan pricing here, curious how are new origination coupons holding up these days, if there's been any spread compression? Just any color you can give on that front.

No recent spread compression. We generate a reasonable amount of floating rate loans. So as indices fall, the origination coupon on floating rate loan goes down and we price our fixed rate primarily off of treasury. So as those fall the coupons down, but the credit spread itself.

We have seen people requesting and showing us offers [Audio Gap] lower credit spreads, but we typically are able to keep our due to loan [Audio Gap]

[Audio Gap] This does conclude today's conference call. Thank you for participating. You may now disconnect.

Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Bankwell Financial Group Third Quarter 2025 Earnings Call. [Operator Instructions] I'd now like to turn the call over to Courtney Sacchetti, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you. Good morning, everyone. Welcome to Bankwell's Third Quarter 2025 Earnings Conference Call. To access the call over the Internet and review the presentation materials that we will reference on the call, please visit our website at investor.mybankwell.com and go to the Events and Presentations tab for supporting materials. Our third quarter earnings release is also available on our website.

Our remarks today may contain forward-looking statements and may refer to non-GAAP financial measures. All participants should refer to our SEC filings, including those found on Forms 8-K, 10-Q and 10-K; for a complete discussion of forward-looking statements and any factors that could cause actual results to differ from those statements.

And now I'll turn the call over to Chris Gruseke, Bankwell's Chief Executive Officer.

Thank you, Courtney. Welcome, and thank you to everyone for joining Bankwell's quarterly earnings call. This morning, I'm joined by Courtney Sacchetti, our Chief Financial Officer; and Matt McNeill, our President and Chief Banking Officer. We appreciate your interest in our performance and this opportunity to discuss our results with you.

Bankwell delivered another strong quarter with GAAP net income of $10.1 million or $1.27 per share, up from $9.1 million or $1.15 per share last quarter. Pre-provision net revenue return on assets was 1.7% for the quarter, up 27 basis points from the prior quarter.

Our results reflect the continued expansion of the company's net interest margin as well as growth in noninterest income generated by our SBA division. We've also made further progress in reducing our nonperforming asset balances during the quarter and continue to have a positive outlook on credit for the quarters ahead.

Our NIM continued to expand this quarter as we forecast for the last several quarters. This is the result of the combined impact of repricing approximately $1 billion of time deposits, increased asset yields and the growth of our low-cost deposit balances.

Low-cost deposits include noninterest-bearing deposits as well as NOW accounts at rates of 50 basis points or lower. These accounts average balances collectively grew by $20 million over the prior quarter and $64 million or 16% since the fourth quarter of 2024.

Loan originations remained strong. During the third quarter, we funded $220 million of loans, bringing our year-to-date fundings to just over $500 million. Our SBA division increased its momentum as gains on sale rose to $1.4 million for the quarter. SBA originations totaled $22 million for the quarter, bringing our year-to-date total originations to $44 million.

The government shutdown has potential to temporarily impact our SBA results for the remainder of this year. While there may be potential for short-term impact, the SBA division has been a strong performer, reaching nearly 90% of our full-year origination goal of $50 million within the first 3 quarters of this year. Year-to-date noninterest income, including SBA gains on sale, totaled $6 million.

Credit trends in the portfolio continue to improve. Nonperforming assets as a percentage of total assets fell to 56 basis points compared to 78 basis points last quarter. This improvement was driven by the collection of $5 million on 3 SBA guaranteed loans and the sale of a $1.6 million commercial real estate loan.

Additionally, Special Mention loan balances decreased by $30 million. Finally, our efficiency ratio improved to 51.4% in the quarter, down from 56.1% last quarter as we continue to balance growth with fiscal discipline.

Now I'll ask Courtney to provide a more detailed review of our financial results.

Thank you, Chris. For the third quarter, pre-provision net revenue totaled $13.9 million or $1.77 per share, representing a 21% increase from the second quarter. Net interest income reached $26 million, while noninterest income increased to $2.5 million, driven by $1.4 million in SBA sales gains.

Net interest margin expanded to 3.34%, up 24 basis points over the prior quarter. This growth was driven by a 13 basis point rise in loan yields, with approximately 3 basis points of both margin and yield attributable to onetime interest income from resolved SBA loans.

Deposit costs also improved 10 basis points now at 3.30%. Improvement in both deposit costs and loan yields have contributed materially to our NIM expansion this year, up 74 basis points from the fourth quarter of 2024. Interest-bearing deposit costs are down 37 basis points from the fourth quarter of 2024.

Loan yields widened, with our year-to-date average originations yield approximately 136 basis points higher than the runoff yield, generating a 41 basis point increase on yield for the total portfolio from the fourth quarter of 2024.

These results do not reflect our response to the September rate cut made by the Fed. In response to the rate cut, we reduced our CD rates by 25 basis points and repriced approximately $0.5 billion of non-maturity deposits.

We expect $1.25 billion in time deposits to reprice favorably over the next 12 months by approximately 27 basis points. The annualized incremental benefit of this repricing is approximately $3.4 million. Please refer to Page 10 of our investor presentation for more detail on our time deposit maturity schedule.

Although we expect to realize the benefit of lower cost time deposits over the next 12 months, we also have approximately $800 million in loans tied to prime that repriced at the end of September. We anticipate the short-term impact of these recent rate changes to hold our net interest margin relatively flat in the fourth quarter. However, as term deposits mature, we expect our margin to improve as liability repricing aligns with assets.

For a future 25 basis point rate cut, we would anticipate a modest annualized increase in our net interest margin of approximately 5 basis points. Since the start of the year, we have strategically increased our proportion of variable rate loans from just over 20% to 35%. As we have constructed a more neutral balance sheet, the impact of future interest rate changes on our results is expected to diminish.

Noninterest income of $2.5 million increased 24% versus the linked quarter, largely driven by $1.4 million of SBA gain on sale income, an increase of $0.3 million over the last quarter. As you can see on Page 14 of our investor presentation, noninterest income now represents 8.8% of total revenue compared to 4.6% in the fourth quarter of 2024.

Total revenue grew 10% compared to the prior quarter, while noninterest expense increased just 1%, resulting in positive operating leverage. While our noninterest expense to average assets was 180 basis points, our efficiency ratio improved to 51.4% for the quarter. We're pleased with this progress and expect further improvement in our efficiency ratio as profitability expands.

Turning to credit, third quarter results reflect continued positive trends. We reduced our nonperforming assets by $7 million, bringing our NPA to assets ratio to 56 basis points. We recorded modest recoveries and a small provision of $372,000 in the quarter. Our allowance for credit losses remains at 110 basis points of total loans, while our coverage of nonperforming loans increased to 177%.

A few final thoughts on our financial condition. Our balance sheet remains well capitalized and liquid with total assets of $3.2 billion, up slightly versus the linked quarter. The holding company and bank both saw expanding capital ratios during the third quarter, with our consolidated common equity Tier 1 ratio now at 10.39% versus 10.18% in the prior quarter. Our tangible book value also increased, reaching $36.84.

I'll now turn it over to Matt to provide an update on loan originations.

Good morning. As Chris mentioned, loan fundings in the first 3 quarters remained strong. The bank has funded $500 million in new loans as of 9/30. 2025 year-to-date loan fundings have already outpaced full year 2023 and 2024, respectively. Payoffs have been at record levels and are projected to remain high through the end of the year. Despite our strong origination numbers, net loan growth only increased $49 million in the quarter and $12 million year-to-date.

I would like to point out that some of our payoff activity is being encouraged by the bank, where we would like to exit some less attractive credits. Overall, we believe the recycling of the loan book is a sign of good health, and it provides the bank the opportunity to make new loans at more favorable yields.

Now I will hand it back to Courtney to summarize our guidance for the remainder of the year.

Thanks, Matt. Due to our elevated payoffs, we are revising our low single-digit loan growth guidance to flat for the year. We affirm our noninterest income guidance of $7 million to $8 million for the full year, and the resumption of the SBA program would be additive to that total.

We also affirm our net interest income guidance of $97 million to $98 million, along with our guidance on noninterest expense of $58 million to $59 million. With our fourth quarter earnings in January, we will provide additional guidance on our 2026 outlook.

I'll now turn the call back to Chris for [Technical Difficulty].

Thank you, Courtney. We've continued to make excellent progress and to deliver on our strategic objectives of diversifying our income streams, improving our deposit base and continuously attracting talented banking professionals who value the opportunities afforded by working with the team committed to constant improvement.

Importantly, we've made significant strides on closing out some pandemic-era credits with no further losses. Nonperforming assets now stand at 56 basis points of total assets versus 207 basis points a year ago, and we look forward to further improvement in the quarters ahead. Thanks to everyone on the Bankwell team, whose commitment to excellence has enabled these results.

This concludes our prepared remarks. Operator, will you please begin the question-and-answer session?

[Operator Instructions] Our first question comes from the line of Steve Moss from Raymond James.

Chris, maybe just starting with the good originations this quarter, I think Courtney gave a loan yield number, but I'm sorry, I missed those, I was kind of hopping on the call a little late here. Just kind of curious, where is loan pricing these days? And do we continue to see elevated payoffs maybe carrying over into 2026?

Yes. So Steve, it's Courtney. On Page 10 of our investor presentation, we do give a little bit more detail. We -- year-to-date, our originations are a weighted average rate of [ 7.86 ]. That's on about $0.5 billion of originations, and that's the rate as of 9/30, so impact from any repricing or anything there.

Matt?

Yes. Loan demand is very strong. That's reflected in that pricing. So [Audio Gap] pick and choose kind of where we want to move forward. The lack of material loan growth year-over-year is really related to the timing and the velocity of the payoffs.

This is the strongest year of payoffs that we've experienced. And that's -- it takes a couple of months to get the loan pipeline to respond to be able to backfill those numbers, which we successfully did this quarter. And we anticipate the fourth quarter to have some similarly strong payoffs.

So we think we'll be able to meet -- and Courtney had said earlier that we're going to stay flat, and that's how we're looking at it. But the loan demand is still there. It's just the timing of payoffs and trying to get the pipeline robust enough to respond to that.

Stephen, with regard to next year, it is -- we have demands due to originate higher volume than we have. So it's a matter of lead time. So we'll just plan to be out in front of it. We can control it with pricing.

Yes, I hear you there. And then in terms of an update on your core deposit initiative with the teams you brought over, just kind of curious, how is that developing? And if you have any update on that front?

So the teams, the first teams were hired in April, and we've hired some subsequent teams since then, including in the third quarter. We're bullish on the teams. They're already starting to produce and add deposits to the balance sheet. We don't think that we will have a -- their full production in place until sometime in '26. We did very carefully target teams that had large portfolios of noninterest-bearing deposits. So those are primarily [Audio Gap] accounts, which take longer to [ move ] than a high interest-bearing account where it's just money sitting around that's not being utilized in a business.

So they're well within our time threshold for how they're performing, and we're [Audio Gap] full impact technical [Audio Gap].

Okay. And just kind of -- maybe just last one for me here in terms of just thinking about just the cadence of lower [ cuts ]. I hear you guys on CDs getting repriced 100% beta. Kind of curious on the nonmaturity deposits, how you're thinking about deposit beta with the Fed?

Right. So the most recent rate cut at the end of September, we have just rough numbers, approximately $1 billion of non-maturity interest-bearing deposits. About $250 million, $260 million of that we have indexed to Fed funds. So that will move that part of the relationship that we have.

And then with this recent round, we did another $250 million or so of our exception rate pricing, 100% beta down. So we were able to achieve effectively 50% beta on $1 billion of deposits.

The final question comes from the line of Feddie Strickland from Hovde Group.

This is Feddie's associate [ Anira ] on for him. The first question, we saw some strong SBA contributions in the quarter, and we wanted to know, how much more do you feel you can ramp up that side of the business? And in your opening remarks, you did mention that there may be short-term government shutdown effects. Will that affect the ramp-up or anything to do with that side of the business?

I believe the answer to the second question is it really depends on the duration of the shutdown right now. So Bankwell is a preferred lender. We're able to continue to underwrite SBA credits. We are not able to get in-place guarantees, and we are not [Audio Gap] our guaranteed [Audio Gap] previously originated.

There is a temporary freeze to the SBA income. If the government opens up in a relatively short amount of time, it may not have a large -- or it may not have an impact on the business. We may be able to fluidly flow through it, but it's really going to depend on the duration of the shutdown.

As far as the ramp, we hired Michael Johnston from ReadyCap, which was the fourth largest producer of SBA loans in the country in previous years. And we believe that the SBA division does have operating leverage able to further scale the business beyond $50 million in production, and we'll talk about that in the fourth quarter.

And we'll just need the government to be open to do that.

Correct.

This is Chris. I'll continue a little bit on that answer and say that we did note that in the 3 quarters' worth of activity, we pretty much hit our original goal of almost [ $50 million ]. So we've got almost a full year's worth of original expectations in the results. So the government opens, as Courtney had mentioned, there's [Audio Gap] it will be [Audio Gap] up to when the government [Audio Gap].

There are no further questions. This concludes today's meeting. You may now disconnect.