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Bankwell Financial Group Reports Record Net Income for the Fourth Quarter and Full Year 2021; Increases Dividend by 11%; Provides Guidance For 2022

·11-min read

NEW CANAAN, Conn., January 26, 2022--(BUSINESS WIRE)--Bankwell Financial Group, Inc. (NASDAQ: BWFG) reported record GAAP net income for the fourth quarter and year ended 2021. For the fourth quarter of 2021 net income totaled $7.8 million, or $0.99 per share, versus $0.3 million, or $0.04 per share, for the same period in 2020. For the year ended 2021 net income totaled $26.6 million, or $3.36 per share, versus $5.9 million, or $0.75 per share, for the same period in 2020.

The Company's Board of Directors declared a $0.20 per share cash dividend, payable February 24, 2022 to shareholders of record on February 14, 2022, representing an 11% increase when compared to the prior quarter’s dividend.

We recommend reading this earnings release in conjunction with the Fourth Quarter 2021 Investor Presentation, located at http://investor.mybankwell.com/Presentations and included as an exhibit to our January 26, 2022 Current Report on Form 8-K.

Notes Bankwell Financial Group President and CEO, Christopher R. Gruseke:

"We are proud to announce record performance for the fourth quarter and full year of 2021. In addition to generating a Return on Average Equity of 14% for the year, the Company made significant strides in all aspects of its business. While originating approximately $800 million in loans, we also continued to diversify our asset base. Core deposits grew by 31.7%, year over year, and non-interest bearing deposits increased by 47.6% over the same period.

"I offer my heartfelt gratitude and sincere congratulations to every member of our team. Their hard work and commitment, during a time of historic disruption, has made these impressive achievements possible.

"We enter the year ahead with confidence and momentum and look forward to another outstanding year. Loan and deposit pipelines remain strong. Inclusive of four expected rate hikes by the Federal Reserve, we expect net interest income to grow by 12-14% in 2022."

Fourth Quarter 2021 Highlights:

  • Return on average assets was 1.32% and return on average equity was 15.44% for the quarter ended December 31, 2021.

  • The net interest margin improved to 3.43% for the quarter ended December 31, 2021 and 3.17% for the year ended December 31, 2021.

  • Total gross loans were $1.9 billion, growing $303.9 million excluding Paycheck Protection Program ("PPP") loans, or 19.1%, compared to December 31, 2020. On a quarterly basis, loans grew $71.7 million, or 3.9% compared to September 30, 2021.

  • Gains from loan sales totaled $0.4 million and $2.7 million for the quarter and year ended December 31, 2021, respectively.

  • Total deposits were $2.1 billion compared to $1.8 billion at December 31, 2020.

  • Noninterest bearing deposits increased by $128.7 million, or 47.6% compared to December 31, 2020.

  • The percentage of noninterest bearing deposits to total deposits increased to 18.8% compared to 14.8% at December 31, 2020.

  • The cost of interest bearing deposits decreased approximately 35 basis points to 0.54% for the quarter ended December 31, 2021 when compared to the quarter ended December 31, 2020.

  • Investment securities totaled $108.4 million and represent 4.4% of total assets.

  • Tangible book value per share rose to $26.19 compared to $22.43 at December 31, 2020.

  • Shares issued and outstanding were 7,803,166, reflecting repurchases of 59,338 shares of common stock at a weighted average price of $31.29 during the quarter ended December 31, 2021.

  • The Company issued a 3.25% fixed-to-floating rate subordinated note due 2031 in the principal amount of $35.0 million. Part of the proceeds were used to repay $15.5 million of previously issued subordinated notes.

Earnings and Performance

Revenues (net interest income plus noninterest income) for the quarter ended December 31, 2021 were $19.8 million, versus $14.9 million for the quarter ended December 31, 2020. Revenues for the year ended December 31, 2021 were $73.5 million, versus $57.7 million for the year ended December 31, 2020. The increase was primarily attributable to lower interest expense on deposits, an increase in interest and fees on loans due to loan growth and from the resumption of loan sales.

Net income for the quarter ended December 31, 2021 was $7.8 million, versus $0.3 million for the quarter ended December 31, 2020. Net income for the year ended December 31, 2021 was $26.6 million, versus $5.9 million for the year ended December 31, 2020. The increase in net income was primarily impacted by the aforementioned increases in revenues, a decrease in noninterest expense, and a decrease in the provision for loan losses resulting from lower loan loss reserves in 2021 when compared to 2020, which saw a large increase in reserves due to the COVID-19 Pandemic.

Basic and diluted earnings per share were $1.00 and $0.99, respectively, for the quarter ended December 31, 2021 compared to basic and diluted earnings per share of $0.04 each for the quarter ended December 31, 2020. Basic and diluted earnings per share were $3.38 and $3.36, respectively, for the year ended December 31, 2021 compared to basic and diluted earnings per share of $0.75 each for the year ended December 31, 2020.

The net interest margin (fully taxable equivalent basis) for the quarters ended December 31, 2021 and December 31, 2020 was 3.43% and 2.66%, respectively. The net interest margin (fully taxable equivalent basis) for the years ended December 31, 2021 and December 31, 2020 was 3.17% and 2.77%, respectively. The increase in the net interest margin was due to lower interest expense from a decrease in rates on interest bearing deposits and a greater proportion of noninterest bearing deposits.

Financial Condition

Assets totaled $2.46 billion at December 31, 2021, compared to assets of $2.25 billion at December 31, 2020. The increase in assets was primarily due to loan growth, partially offset by a decrease in excess liquidity. Gross loans totaled $1.9 billion at December 31, 2021, an increase of $269.3 million compared to December 31, 2020. Excluding PPP loans, gross loans increased by $303.9 million at December 31, 2021 when compared to December 31, 2020. Deposits totaled $2.1 billion at December 31, 2021, compared to deposits of $1.8 billion at December 31, 2020.

Capital

Shareholders’ equity totaled $202.0 million as of December 31, 2021, an increase of $25.4 million compared to December 31, 2020, primarily a result of (i) net income of $26.6 million for the year ended December 31, 2021 and (ii) a $7.0 million favorable impact to accumulated other comprehensive income driven by fair value marks related to hedge positions involving interest rate swaps. The Company's interest rate swaps are used to hedge interest rate risk. The Company's current interest rate swap positions will cause a decrease to other comprehensive income in a falling interest rate environment and an increase in a rising interest rate environment. The increase in Shareholders’ equity was partially offset by dividends paid of $5.0 million and common stock repurchases of $5.1 million.

About Bankwell Financial Group

Bankwell is a commercial bank that serves the banking needs of residents and businesses throughout Fairfield and New Haven Counties, Connecticut. 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, but are not limited to, increased competitive pressures, changes in the interest rate environment, general economic conditions or conditions within the securities markets, uncertain impacts of, or additional changes in, monetary, fiscal or tax policy to address the impact of COVID-19, prolonged measures to contain the spread of COVID-19 or premature easing of such containment measures, either of which could further exacerbate the effects on the Company’s business and results of operations, 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 noninterest expense control. The Company believes that tangible common equity, tangible book value per share, and return on average tangible common equity are useful to evaluate the relative strength of the Company's performance and capital position. 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)

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021

December 31,
2020

ASSETS

Cash and due from banks

$

291,598

$

169,417

$

297,851

$

351,194

$

405,340

Federal funds sold

53,084

8,097

4,036

10,811

4,258

Cash and cash equivalents

344,682

177,514

301,887

362,005

409,598

Investment securities

Marketable equity securities, at fair value

2,168

2,185

2,192

2,178

2,207

Available for sale investment securities, at fair value

90,198

87,565

90,983

83,218

88,605

Held to maturity investment securities, at amortized cost

16,043

16,107

16,166

16,225

16,078

Total investment securities

108,409

105,857

109,341

101,621

106,890

Loans receivable (net of allowance for loan losses of $16,902, $16,803, $16,672, $20,545, and $21,009 at December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021, and December 31, 2020, respectively)

1,875,167

1,805,217

1,719,274

1,650,127

1,601,672

Accrued interest receivable

7,512

6,911

6,661

7,306

6,579

Federal Home Loan Bank stock, at cost

2,814

3,632

3,844

6,446

7,860

Premises and equipment, net

25,588

35,118

33,916

33,386

21,762

Bank-owned life insurance

49,174

48,903

48,632

42,881

42,651

Goodwill

2,589

2,589

2,589

2,589

2,589

Other intangible assets

48

58

67

76

Deferred income taxes, net

7,621

7,718

8,208

8,908

11,300

Other assets

32,708

33,181

35,415

29,131

42,770

Total assets

$

2,456,264

$

2,226,688

$

2,269,825

$

2,244,467

$

2,253,747

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities

Deposits

Noninterest bearing deposits

$

398,956

$

338,705

$

328,473

$

280,947

$

270,235

Interest bearing deposits

1,725,042

1,544,118

1,610,829

1,578,861

1,557,081

Total deposits

2,123,998

1,882,823

1,939,302

1,859,808

1,827,316

Advances from the Federal Home Loan Bank

50,000

80,000

75,000

125,000

175,000

Subordinated debentures

34,441

15,374

15,366

25,271

25,258

Accrued expenses and other liabilities

45,838

52,314

49,362

46,445

49,571

Total liabilities

2,254,277

2,030,511

2,079,030

2,056,524

2,077,145

Shareholders’ equity

Common stock, no par value

118,148

119,588

120,451

120,398

121,338

Retained earnings

92,400

85,992

80,543

75,418

70,839

Accumulated other comprehensive loss

(8,561

)

(9,403

)

(10,199

)

(7,873

)

(15,575

)

Total shareholders’ equity

201,987

196,177

190,795

187,943

176,602

Total liabilities and shareholders’ equity

$

2,456,264

$

2,226,688

$

2,269,825

$

2,244,467

$

2,253,747

BANKWELL FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(Dollars in thousands, except share data)

For the Quarter Ended

For the Year Ended

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021

December 31,
2020

December 31,
2021

December 31,
2020

Interest and dividend income

Interest and fees on loans

$

21,081

$

19,795

$

19,266

$

17,900

$

18,194

$

78,042

$

73,665

Interest and dividends on securities

722

731

736

769

835

2,958

3,237

Interest on cash and cash equivalents

90

88

90

108

117

376

585

Total interest and dividend income

21,893

20,614

20,092

18,777

19,146

81,376

77,487

Interest expense

Interest expense on deposits

2,198

2,387

2,744

3,114

3,557

10,443

18,180

Interest expense on borrowings

767

503

769

1,008

1,285

3,047

4,472

Total interest expense

2,965

2,890

3,513

4,122

4,842

13,490

22,652

Net interest income

18,928

17,724

16,579

14,655

14,304

67,886

54,835

Provision (credit) for loan losses

125

134

(20

)

(296

)

709

(57

)

7,605

Net interest income after provision (credit) for loan losses

18,803

17,590

16,599

14,951

13,595

67,943

47,230

Noninterest income

Gains and fees from sales of loans

441

924

814

513

16

2,692

43

Bank owned life insurance

270

271

251

231

241

1,023

967

Service charges and fees

257

199

217

199

210

872

788

Gain on sale of other real estate owned, net

19

Other

(143

)

43

158

1,013

154

1,070

1,067

Total noninterest income

825

1,437

1,440

1,956

621

5,657

2,884

Noninterest expense

Salaries and employee benefits

4,806

4,782

3,960

4,769

5,453

18,317

21,355

Occupancy and equipment

2,411

2,615

3,250

2,406

4,516

10,682

10,926

Professional services

628

498

547

587

591

2,260

2,110

Data processing

432

632

833

512

1,658

2,409

3,216

Director fees

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