NEW CANAAN, Conn.--(BUSINESS WIRE)--
Bankwell Financial Group, Inc. ( BWFG ) reported GAAP net income of $3.3 million or $0.41 per share for the fourth quarter of 2018, versus $2.1 million or $0.27 per share for the same period in 2017 and GAAP net income of $17.4 million or $2.21 per share for the year ended 2018, versus $13.8 million or $1.78 per share for the year ended 2017.
The Company's Board of Directors declared a $0.13 per share cash dividend, payable February 25, 2019 to shareholders of record on February 15, 2019, representing an 8% increase when compared to the last quarter’s dividend.
Notes Bankwell Financial Group President and CEO, Christopher R. Gruseke:
“Bankwell’s fourth quarter earnings per share of $0.41 includes the recognition of a loss on a non-performing lending relationship first disclosed in our Q1’18 earnings release. The resultant impact on earnings per share was ($0.32). When originally disclosed, we identified two non-performing relationships and have continued to provide ongoing updates regarding their status. One of these credits subsequently paid off in full with no loss to the Bank. The remaining credit is comprised of two loans with a total original balance of $14.2 million, which subsequently amortized to $13.1 million. $6.2 million has now been charged off against these two loans and the Bank has an SBA guarantee of $2.7 million against the remaining balance of $6.9 million. This balance comprises approximately 50% of the Bank’s non-performing assets at year-end. A more detailed discussion of the relationship can be found in Bankwell’s Investor Presentation released simultaneously with today’s earnings release. The Bank and the borrower are working together toward an orderly liquidation, or other acceptable resolution, and management expects no material negative impact to earnings related to this borrower going forward. We view this loan to be idiosyncratic in nature and in no way representative of a decline in the overall credit quality of our portfolio. We are proud of our history of outstanding credit quality and conservative underwriting practices. Bankwell’s overall credit trends remain quite positive, with no deteriorating trends of note after accounting for the matter discussed above.”
“The quarter’s results also include a $0.05 per share benefit from the reversal of a FIN48 tax reserve as well as a $0.09 per share benefit from consistent application of the Bank’s allowance for loan loss methodology, which accounts for historical portfolio trends. At year end, the total allowance for loan loss reserve represented 0.96% of total loans, and the general reserve provides 132% coverage of NPA’s not carrying a specific reserve.”
“I congratulate our team on a strong operating quarter. We saw robust loan originations of $94 million and deposits crossed the $1.5 billion threshold. Meanwhile, for the fourth quarter our operating expenses as a percentage of average assets have returned below 1.90%, again demonstrating our commitment to prudent spending. Our team’s combined efforts delivered a 10.19% return on average equity for our investors in 2018. Looking forward, we see a healthy loan pipeline and continued operating efficiency which will provide excellent momentum to begin the year.”
Fourth Quarter and Year Ended 2018 Highlights:
- Total revenue (net interest income plus non-interest income) reached $60.2 million for the year ended 2018 compared to $59.0 million for the year ended 2017.
- Tax equivalent net interest margin was 3.18% for the year ended 2018.
- Total noninterest income was $3.9 million for the year ended 2018, which is 6% of total revenue.
- The efficiency ratio was 58.2% and 59.2% for the fourth quarter and year ended 2018.
- Noninterest expense compared to average assets totaled 1.93% for the year ended 2018.
- Return on average assets for the year ended 2018 totaled 0.94% compared to 0.80% for the same period in 2017.
- Return on average stockholders’ equity for the year ended 2018 totaled 10.19% compared to 8.93% for the same period in 2017.
- The tangible common equity ratio and tangible book value per share was 9.16% and $22.06, respectively.
- Total gross loans exceeded $1.6 billion and total assets approached $1.9 billion.
- The allowance for loan losses was $15.5 million and represents 0.96% of total loans.
- Investment securities totaled $116.6 million and represent 6% of total assets.
- Total deposits exceeded $1.5 billion for the year ended 2018, an increase of $103.8 million or 7% compared to the year ended 2017.
Net income for the quarter ended December 31, 2018 was $3.3 million, an increase of 56% compared to the quarter ended December 31, 2017. Net income for the year ended December 31, 2018 was $17.4 million, an increase of 26% compared to the year ended December 31, 2017. The increase in net income was primarily a result of higher net interest income and income tax expense savings resulting from the tax law change enacted in 2017.
Revenues (net interest income plus noninterest income) for the quarter ended December 31, 2018 were $15.1 million, a decrease of 3% compared to the quarter ended December 31, 2017. The decrease in total revenue was primarily driven by a decline in noninterest income resulting from the absence of refining the model assumptions used in calculating a servicing asset in 2017. Revenues for the year ended December 31, 2018 were $60.2 million, an increase of 2% compared to the year ended December 31, 2017. Net interest income for the quarter ended December 31, 2018 was $14.5 million, an increase of 4% compared to the quarter ended December 31, 2017. Net interest income for the year ended December 31, 2018 was $56.3 million, an increase of 4% compared to the year ended December 31, 2017. The growth in year to date revenues and net interest income were primarily driven by an increase in interest income on growing loan balances.
Basic and diluted earnings per share for the quarter ended December 31, 2018 were $0.42 and $0.41, respectively compared to both $0.27 basic and diluted earnings per share for the quarter ended December 31, 2017. Basic and diluted earnings per share for the year ended December 31, 2018 were $2.23 and $2.21, respectively, compared to $1.80 and $1.78 earnings per share, respectively, for the year ended December 31, 2017. Earnings per share for the fourth quarter of 2018 were negatively impacted by $0.32 as a result of an additional loss recognized on one nonperforming lending relationship previously disclosed in the first quarter of 2018, offset by a $0.09 benefit in the loan loss provision resulting from improving historical loss trends and a $0.05 benefit from a positive resolution of an uncertain tax position.
The Company’s efficiency ratios for the quarters ended December 31, 2018 and December 31, 2017 were 58.2% and 55.1%, respectively. The Company’s efficiency ratios for the year ended December 31, 2018 and December 31, 2017 were 59.2% and 54.9%, respectively. The increase in the efficiency ratio was driven by an increase in noninterest expense associated with the opening of three new branches during the second quarter of 2018 as well as a number of non-recurring expenses previously disclosed in the first quarter 2018 earnings release that caused our efficiency ratio to temporarily jump to 62.0%.
Noninterest Income and Expense
Noninterest income decreased $0.9 million to $0.6 million for the three months ended December 31, 2018 compared to the three months ended December 31, 2017. Noninterest income decreased $0.7 million to $3.9 million for the year ended December 31, 2018 compared to the year ended December 31, 2017. The decrease in noninterest income was primarily driven by the absence of refining the model assumptions used in calculating a servicing asset in 2017, a valuation allowance of $0.2 million recognized in the fourth quarter of 2018, partially offset by an increase in the gains realized on the sale of loans in 2018 as compared to 2017.
Noninterest expense increased $0.2 million or 3% for the three months ended December 31, 2018 compared to the three months ended December 31, 2017. The increase was primarily driven by an increase in professional services and marketing expenses. Professional services totaled $0.6 million for the three months ended December 31, 2018 compared to $0.5 million for the same period in 2017, an increase of $0.1 million. The increase in professional services was driven by increased costs related to audit fees. Marketing expenses totaled $0.4 million for the three months ended December 31, 2018 compared to $0.3 million for the same period in 2017, an increase of $0.1 million. The increase in marketing expenses was driven by increases in advertising related costs in support of our deposit gathering activities including but not limited to our three new branch locations, opened during the second quarter of 2018.
Noninterest expense increased $3.1 million or 10% for the year ended December 31, 2018 compared to the year ended December 31, 2017. The increase was primarily driven by an increase in salaries and employee benefits and occupancy and equipment expenses. Salaries and employee benefits totaled $19.0 million for the year ended December 31, 2018 compared to $16.3 million for the same period in 2017, an increase of $2.7 million. The increase in salaries and employee benefits was primarily driven by an increase in full time equivalent employees and a reduction in deferred loan origination costs as a result of lower loan volume. The increase in full time equivalent employees is in line with year over year business growth and driven by staffing for the three new branch locations. Average full time equivalent employees totaled 144 at December 31, 2018 compared to 134 at December 31, 2017. Occupancy and equipment expense totaled $6.8 million for the year ended December 31, 2018 compared to $6.2 million for the same period in 2017, an increase of $0.6 million. The increase in occupancy and equipment expense was primarily driven by expenditures associated with the opening of the new branch locations and improvements of existing infrastructure.
Assets totaled $1.9 billion at December 31, 2018, an increase of 4% compared to assets of $1.8 billion at December 31, 2017. Total gross loans exceeded $1.6 billion at December 31, 2018, an increase of 4% compared to December 31, 2017, driven by growth in commercial real estate loans of $106.8 million, partially offset by the run-off in the residential loan portfolio. Deposits increased to $1.5 billion compared to $1.4 billion at December 31, 2017, an increase of 7% over December 31, 2017.
Non-performing assets as a percentage of total assets was 0.75% at December 31, 2018, down from 1.17% at September 30, 2018 and up from 0.31% at December 31, 2017. The reduction in non-performing assets from the prior quarter was driven by a $6.2 million charge off attributable to one lending relationship. The year over year increase is primarily attributable to the remaining outstanding loan balances associated with the same lending relationship which carries a partial SBA guarantee. Net charge offs to average loans increased to 0.44% for the year ended December 31, 2018 driven by the $6.2 million charge off. The allowance for loan losses at December 31, 2018 was $15.5 million, representing 0.96% of total loans.
Shareholders’ equity totaled $174.2 million as of December 31, 2018, an increase of $13.2 million compared to December 31, 2017, primarily a result of net income for the year ended December 31, 2018 of $17.4 million, offset by dividends paid of $3.8 million and a $2.7 million impact to accumulated other comprehensive income driven by fair value marks related to hedge positions involving interest rate swaps. As of December 31, 2018, the tangible common equity ratio and tangible book value per share were 9.16% and $22.06, respectively.
About Bankwell Financial Group
Bankwell is a commercial bank that serves the banking needs of residents and businesses throughout Fairfield and New Haven Counties, CT. For more information about this press release, interested parties may contact Christopher R. Gruseke, President and Chief Executive Officer or Penko Ivanov, Executive Vice President and Chief Financial Officer of Bankwell Financial Group at (203) 652-0166.
For more information, visit www.mybankwell.com .
This press release may contain certain forward-looking statements about the Company. Forward-looking statements include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” Forward-looking statements, by their nature, are subject to risks and uncertainties. Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures, changes in the interest rate environment, general economic conditions or conditions within the securities markets, and legislative and regulatory changes that could adversely affect the business in which the Company and its subsidiaries are engaged.
Non-GAAP Financial Measures
In addition to evaluating the Company's financial performance in accordance with U.S. generally accepted accounting principles ("GAAP"), management may evaluate certain non-GAAP financial measures, such as the efficiency ratio. A computation and reconciliation of certain non-GAAP financial measures used for these purposes is contained in the accompanying Reconciliation of GAAP to Non-GAAP Measures tables. We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. For example, the Company believes that the efficiency ratio is useful in the assessment of financial performance, including non-interest expense control. The Company believes that tangible common equity and tangible book value per share is useful to evaluate the relative strength of the Company's capital position. The Company believes that providing a reconciliation from GAAP net income to core net income is useful for comparative analysis to prior periods given the presence of non-recurring items. We utilize these measures for internal planning and forecasting purposes. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure.
|BANKWELL FINANCIAL GROUP, INC.|
|CONSOLIDATED BALANCE SHEETS (unaudited)|
|(Dollars in thousands, except share data)|
|December 31,||September 30,||June 30,||March 31,||December 31,|
|Cash and due from banks||$||75,411||$||84,437||$||89,214||$||81,249||$||70,545|
|Federal funds sold||2,701||2,664||105||2,121||186|
|Cash and cash equivalents||78,112||87,101||89,319||83,370||70,731|
|Available for sale investment securities, at fair value||95,163||94,438||92,608||99,050||92,188|
|Held to maturity investment securities, at amortized cost||21,421||21,464||21,505||21,546||21,579|
|Loans receivable (net of allowance for loan losses of $15,462, $19,311, $19,006,|
|$18,801 and $18,904 at December 31, 2018, September 30, 2018, June 30, 2018,|
|March 31, 2018 and December 31, 2017, respectively)||1,586,775||1,585,465||1,572,591||1,534,565||1,520,879|
|Foreclosed real estate||-||-||-||487||-|
|Accrued interest receivable||6,375||6,055||5,522||5,331||5,910|
|Federal Home Loan Bank stock, at cost||8,110||9,210||9,333||9,310||9,183|
|Premises and equipment, net||19,771||20,245||20,313||19,207||18,196|
|Bank-owned life insurance||40,675||40,413||40,146||39,880||39,618|
|Other intangible assets||290||309||334||358||382|
|Deferred income taxes, net||4,347||4,583||4,683||4,716||4,904|
|Liabilities & Shareholders' Equity|
|Advances from the Federal Home Loan Bank||160,000||180,000||199,000||199,000||199,000|
|Accrued expenses and other liabilities||12,070||11,971||11,462||14,653||13,072|
|Common stock, no par value; 10,000,000 shares authorized,|
|7,842,271, 7,842,996, 7,841,720, 7,831,804 and 7,751,424 shares issued|
|and outstanding at December 31, 2018, September 30, 2018, June 30, 2018,|
|March 31, 2018 and December 31, 2017, respectively||120,527||120,188||119,824||119,363||118,301|
|Accumulated other comprehensive (loss) income||(1,037||)||2,180||1,279||1,889||1,694|
|Total shareholders' equity||174,196||174,754||169,573||165,947||161,027|
|Total liabilities and shareholders' equity||$||1,873,665||$||1,885,036||$||1,870,802||$||1,831,243||$||1,796,607|
|BANKWELL FINANCIAL GROUP, INC.|
|CONSOLIDATED STATEMENTS OF INCOME (unaudited)|
|(Dollars in thousands, except per share data)|
|For the Quarter Ended||For the Year Ended|
|December 31,||September 30,||June 30,||March 31,||December 31,||December 31,||December 31,|
|Interest and dividend income|
|Interest and fees on loans||$||20,030||$||19,153||$||18,114||$||17,418||$||17,493||$||74,715||$||66,841|
|Interest and dividends on securities||1,009||1,002||975||935||947||3,921||3,570|
|Interest on cash and cash equivalents||504||345||325||254||289||1,428||790|
|Total interest income||21,543||20,500||19,414||18,607||18,729||80,064||71,201|
|Interest expense on deposits||5,942||5,044||4,309||3,656||3,602||18,951||12,694|
|Interest expense on borrowings||1,134||1,210||1,197||1,246||1,213||4,787||4,143|
|Total interest expense||7,076||6,254||5,506||4,902||4,815||23,738||16,837|
|Net interest income||14,467||14,246||13,908||13,705||13,914||56,326||54,364|
|Provision (Credit) for loan losses||2,795||322||310||13||(495||)||3,440||1,341|
|Net interest income after provision for loan losses||11,672||13,924||13,598||13,692||14,409||52,886||53,023|
|Service charges and fees||284||285||265||256||252||1,090||1,007|
|Bank owned life insurance||262||267||265||263||289||1,057||1,170|
|Gains and fees from sales of loans||149||150||315||370||868||984||1,427|
|Loss on sale of foreclosed real estate, net||-||-||-||-||(78||)||-||(78||)|
|Net gain on sale of available for sale securities||-||-||-||222||-||222||165|
|Total noninterest income||601||859||1,107||1,333||1,541||3,900||4,629|
|Salaries and employee benefits||4,503||4,903||4,539||5,028||4,603||18,973||16,284|
|Occupancy and equipment||1,671||1,771||1,731||1,617||1,585||6,790||6,165|
|Amortization of intangibles||20||24||24||24||25||92||118|
|Total noninterest expense||8,796||8,870||8,764||9,203||8,579||35,633||32,523|
|Income before income tax expense||3,477||5,913||5,941||5,822||7,371||21,153||25,129|
|Income tax expense||216||1,056||1,226||1,222||5,275||3,720||11,299|
|Earnings Per Common Share:|
|Weighted Average Common Shares Outstanding:|
|Dividends per common share||$||0.12||$||0.12||$||0.12||$||0.12||$||0.07||$||0.48||$||0.28|
|BANKWELL FINANCIAL GROUP, INC.|
|CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)|
|(Dollars in thousands, except per share data)|
|For the Quarter Ended||For the Year Ended|
|Return on average assets *||0.69||%||1.04||%||1.02||%||1.03||%||0.46||%||0.94||%||0.80||%|
|Return on average stockholders' equity *||7.28||%||11.13||%||11.21||%||11.35||%||5.15||%||10.19||%||8.93||%|
|Return on average tangible common equity *||7.40||%||11.32||%||11.41||%||11.56||%||5.25||%||10.37||%||9.10||%|
|Net interest margin||3.20||%||3.21||%||3.14||%||3.15||%||3.23||%||3.18||%||3.30||%|
|Efficiency ratio (1)||58.2||%||58.6||%||58.2||%||62.0||%||55.1||%||59.2||%||54.9||%|
|Net loan charge-offs as a % of average loans||0.41||%||0.00||%||0.01||%||0.01||%||0.01||%||0.44||%||
|*All metrics, as of December 31, 2017, measuring return were impacted primarily as a result of the Tax Cut and Jobs Act passed in December 2017 along with several other smaller items. Please refer to the Q4'17 Earnings Release for further detail.|
|Total Common Equity Tier 1 Capital to Risk-Weighted Assets (2)||11.56||%||11.43||%||11.31||%||11.18||%||10.99||%|
|Total Capital to Risk-Weighted Assets (2)||12.50||%||12.61||%||12.47||%||12.35||%||12.19||%|
|Tier I Capital to Risk-Weighted Assets (2)||11.56||%||11.43||%||11.31||%||11.18||%||10.99||%|
|Tier I Capital to Average Assets (2)||10.14||%||10.14||%||10.03||%||9.90||%||9.61||%|
|Tangible common equity to tangible assets||9.16||%||9.13||%||8.92||%||8.92||%||8.81||%|
|Tangible book value per common share (3)||$||22.06||$||22.20||$||21.56||$||21.12||$||20.59|
|Other real estate owned||-||-||-||487||-|
|Total non-performing assets||$||14,082||$||21,964||$||23,325||$||20,861||$||5,481|
|Nonperforming loans as a % of total loans||0.88||%||null|