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.

   -- 
 Brokered deposits declined $78.4 million in the fourth quarter of 2024 
      and have decreased by $246.8 million since December 31, 2023. 
 
 
   -- 
 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. 
 
 
   -- 
 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. 
 
 
   -- 
 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.

   -- 
 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. 
 
 
   -- 
 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. 
 
 
   -- 
 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.

   -- 
 The Company launched an SBA Lending division, which began originating 
      loans in December of 2024. 
 
 
   -- 
 The Company continues to grow Bankwell Direct, our digital deposit 
      channel. Bankwell Direct balances have increased to $136 million as of 
      December 31, 2024. 
 
 
   -- 
 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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