Bankwell Financial Group Reports Operating Results for the Fourth Quarter, Declares First Quarter Dividend
NEW CANAAN, Conn.--(BUSINESS WIRE)--January 22, 2025--
Bankwell Financial Group, Inc. (NASDAQ: BWFG) reported GAAP net income of $2.5 million, or $0.32 per share for the fourth quarter of 2024, versus $1.9 million, or $0.24 per share, for the third quarter of 2024. The Company's Board of Directors declared a $0.20 per share cash dividend, payable February 21, 2025 to shareholders of record on February 11, 2025.
Pre-tax, pre-provision net revenue (PPNR) of $7.9 million, or $1.02 per share, fell 12% relative to the third quarter of 2024 of $9.0 million, or $1.17 per share.
Discussion of Outlook; Bankwell Financial Group Chief Executive Officer, Christopher R. Gruseke:
"Results for the fourth quarter of 2024 include $3.0 million in charge-offs. The main components of these charge offs are discussed in this earnings release as well as in our Investor Presentation. As of January 22, 2025, however, the Company has executed purchase and sale agreements on two nonperforming assets, totaling $35.4 million. These sales will reduce the reported nonperforming assets as a percentage of total assets of 1.88% reported as of December 31, 2024 by 108 basis points upon final disposition early in the first quarter with no further impact to the Company's financial results. We look forward to further reductions in nonperforming assets in the quarters ahead. We have also made significant progress in reducing CRE exposure. The Company's CRE concentration as a percentage of total risked based capital stood at 375% at year-end 2024 versus 397% at year-end 2023, and 425% at year-end 2022.
Regarding our liability sensitive balance sheet, $1.3 billion of time deposits are due to re-price at lower rates in the next 12 months. These deposits alone will contribute approximately $4.4 million on an annualized basis to net interest income. This repricing assumes no further actions by the Fed. With approximately $500 million in loans maturing in the year ahead, net interest margin could further benefit by an additional 15-20 basis points on an annualized basis.
After investing in robust infrastructure and risk management in 2024, the Company's new SBA lending division has begun to originate loans in the first quarter of 2025. Given stable market conditions, we expect material growth in noninterest income attributable to future gains on sale of the guaranteed portions of the new SBA loans.
Given the above, we are guiding to $93-$95 million in net interest income and $7-$8 million in noninterest income, as well as a $56-$57 million spend in noninterest expense for the full year 2025.
On behalf of the Company's Board of Directors, I'd also like to congratulate Matt McNeill on his promotion to President of Bankwell Financial Group and its wholly owned subsidiary, Bankwell Bank. We salute Matt for a job well done."
Key Points for Fourth Quarter and Bankwell's Outlook
Brokered Deposits Decrease, Liability Sensitive Balance Sheet.
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Brokered deposits declined $78.4 million in the fourth quarter of 2024
and have decreased by $246.8 million since December 31, 2023.
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Reported net interest margin was 2.60%, down 12 basis points from the
third quarter of 2024, primarily due to lower loan fees and elevated cash
balances. Total deposit costs of 3.72% declined 9 basis points from the
third quarter of 2024.
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With $1.3 billion of time deposits maturing in the next 12 months at a
weighted average rate of 4.79%, the Company anticipates an annualized
reduction in funding costs of $4.4 million, given current market pricing.
This translates into approximately $0.44 of incremental EPS, or
approximately 14 basis points of increase to the net interest margin,
assuming no further changes to Fed Funds and stable asset yields.
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The Company anticipates $0.5 billion of loans to reprice or mature over
the same period, which could further benefit net interest margin by an
additional 15 to 20 basis points on an annualized basis.
Credit Trends Stable, Material Improvement Expected in Early 2025.
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The Company disposed of a previously disclosed non-performing C&I loan
(pediatric dental practice), recognizing a $0.7 million charge off and
reducing non-performing loan balances by $1.7 million during the
quarter.
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The Company took possession of the collateral securing a non-performing
construction loan, creating a $8.3 million Other Real Estate Owned
("OREO") asset. The Company recorded a $1.2 million charge off and
incurred $0.7 million in OREO expenses during the quarter. Subsequent to
December 31, 2024, the Company executed an agreement to sell the property
at book value.
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During the third quarter of 2024, a $27.1 million multifamily
commercial real estate loan was put on nonperforming status. Subsequent
to December 31, 2024, the Company executed a signed purchase agreement
for the sale of this loan at par value. As of December 31, 2024, this
loan comprised 83 basis points of the 1.88% nonperforming assets as a
percentage of total assets.
Ongoing Investments with Continued Focus on Efficiency.
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The Company launched an SBA Lending division, which began originating
loans in December of 2024.
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The Company continues to grow Bankwell Direct, our digital deposit
channel. Bankwell Direct balances have increased to $136 million as of
December 31, 2024.
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The Company continues to operate efficiently with a non-interest
expense to average asset ratio of 1.63% for the quarter ended December
31, 2024.
Fourth Quarter 2024 Financial Highlights and Key Performance Indicators (KPIs):
December 31, September 30, June 30, March 31, December 31,
2024 2024 2024 2024 2023
-------------- -------------- -------------- -------------- --------------
Return on
average
assets(1)(6) 0.31% 0.24% 0.14% 0.47% 1.03%
Pre-tax,
pre-provision
net revenue
return on
average
assets(1)(6) 0.98% 1.13% 1.22% 1.10% 1.27%
Return on
average
shareholders'
equity(1)(6) 3.68% 2.83% 1.65% 5.59% 12.82%
Net interest
margin(1)(6) 2.60% 2.72% 2.75% 2.71% 2.81%
Efficiency
Ratio(1)(3) 59.2% 58.8% 55.9% 60.3% 55.0%
Noninterest
expense to
average
assets(1)(6) 1.63% 1.62% 1.55% 1.66% 1.56%
Net loan
charge-offs
as a
percentage of
average
loans(1)(6) 0.11% 0.56% 0.01% 0.11% 0.01%
Dividend
payout(1)(4) 62.50% 82.30% 142.86% 41.67% 18.35%
Fully diluted
tangible book
value per
common
share(1)(2) $ 34.03 $ 33.76 $ 33.61 $ 33.57 $ 33.39
Total capital
to
risk-weighted
assets(1)(5) 12.67% 12.83% 12.98% 12.63% 12.32%
Total common
equity tier 1
capital to
risk-weighted
assets(1)(5) 11.61% 11.80% 11.73% 11.60% 11.30%
Tier I Capital
to Average
Assets(1)(5) 10.07% 10.24% 10.17% 10.09% 9.81%
Tangible
common equity
to tangible
assets(1)(2) 8.19% 8.40% 8.42% 8.42% 8.19%
Earnings per
common share
- diluted $ 0.32 $ 0.24 $ 0.14 $ 0.48 $ 1.09
Common shares
issued and
outstanding 7,859,873 7,858,573 7,866,499 7,908,180 7,882,616
(1) Non-GAAP Financial Measure, refer to the "Non-GAAP Financial Measures"
section of this document for additional detail.
(2) Refer to the "Reconciliation of GAAP to Non-GAAP Measures" section of
this document for additional detail.
(3) Efficiency ratio is defined as noninterest expense, less other real
estate owned expenses and amortization of intangible assets, divided by
our operating revenue, which is equal to net interest income plus
noninterest income excluding gains and losses on sales of securities
and gains and losses on other real estate owned. In our judgment, the
adjustments made to operating revenue allow investors and analysts to
better assess our operating expenses in relation to our core operating
revenue by removing the volatility that is associated with certain
one-time items and other discrete items that are unrelated to our core
business.
(4) The dividend payout ratio is calculated by dividing dividends per share
by earnings per share.
(5) Represents Bank ratios. Current period capital ratios are preliminary
subject to finalization of the FDIC Call Report.
(6) Return on average assets is calculated by dividing annualized net
income by average assets. Pre-tax, pre-provision net revenue return on
average is calculated by dividing PPNR (using the "Pre-Tax,
Pre-Provision Net Revenue (PPNR)) section of this document by average
assets. Return on average shareholders' equity is calculated by
dividing annualized net income by average shareholders' equity. Net
interest margin is calculated by dividing average annualized net
interest income by average total earning assets. Noninterest expense to
average assets is calculated by dividing annualized noninterest expense
by average total assets. Net loan charge-offs as a percentage of
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