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Bankwell Financial Group Reports Operating Results for the Fourth Quarter and Declares an Increase to the First Quarter Dividend

Bankwell Financial Group, Inc. (NASDAQ: BWFG) reported GAAP net income of $3.5 million or $0.44 per share for the fourth quarter of 2019, versus $3.3 million or $0.41 per share for the same period in 2018 and GAAP net income of $18.2 million or $2.31 per share for the year ended 2019, versus $17.4 million or $2.21 per share for the year ended 2018.

The Company's Board of Directors declared a $0.14 per share cash dividend, payable February 24, 2020 to shareholders of record on February 14, 2020, representing an 8% increase when compared to the prior quarter’s dividend.

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

"We finished the year with excellent momentum, growing loan balances $40 million during the fourth quarter on originations of $92 million. We are particularly pleased at the results of our investment in Bankwell’s Treasury Management ("TM") business. New non-interest bearing deposits from TM grew by 31% during 2019. Importantly, we begin 2020 with our cost of deposits down approximately 20 basis points from the peak in Q2, and expect a further 10-15 basis point reduction this year based on currently prevailing interest rates."

Fourth Quarter and Year Ended 2019 Highlights:

  • Fourth quarter diluted earnings per share were $0.44, an increase of 7% compared to the fourth quarter of 2018.
  • Total gross loans were $1.6 billion at December 31, 2019 and grew at an annualized rate of 10% during the quarter.
  • Return on average assets for the year ended December 31, 2019 totaled 0.97% compared to 0.94% for the same period in 2018.
  • Total deposits were $1.5 billion at December 31, 2019 and grew at an annualized rate of 6% during the quarter.
  • Noninterest bearing deposits totaled $191.5 million for the year ended December 31, 2019, up 7% when compared to the third quarter of 2019.
  • The allowance for loan losses was $13.5 million and represents 0.84% of total loans.
  • Investment securities totaled $100.9 million and represent 5% of total assets.
  • Total noninterest income was $5.2 million for the year ended December 31, 2019, or 9% of total revenue.
  • The tangible common equity ratio and tangible book value per share, as of December 31, 2019, were 9.56% and $23.15, respectively.
  • The efficiency ratio was 60.2% for the year ended December 31, 2019.
  • Tax equivalent net interest margin was 3.03% for the year ended December 31, 2019.

Earnings and Performance

Revenues (net interest income plus noninterest income) for the quarter ended December 31, 2019 were $13.9 million, versus $15.1 million for the quarter ended December 31, 2018. The decrease in revenues was attributable to a decline in fee income from loan prepayment activity during the quarter ended December 31, 2019 when compared to the same period in 2018. The decrease in revenues was partially offset by an increase in gains and fees from the sales of loans.

Revenues for the year ended December 31, 2019 were $59.0 million, versus $60.2 million for the year ended December 31, 2018. The decrease in revenues was primarily due to an increase in the cost of interest bearing deposits when compared to the same period in 2018. The decrease in revenues was partially offset by fees recognized from elevated loan prepayments, an increase in gains and fees from the sales of loans, and an increase in fees associated with loan related interest rate swaps. Loan prepayment fees totaled $2.7 million for the year ended December 31, 2019 compared to $1.3 million for the same period in 2018.

Net income for the quarter ended December 31, 2019 was $3.5 million, versus $3.3 million for the quarter ended December 31, 2018. Net income for the year ended December 31, 2019 was $18.2 million, versus $17.4 million for the year ended December 31, 2018. The increase in net income was largely driven by a decline in loan charge-offs in 2019 when compared to 2018, resulting in a lower loan loss provision.

Basic and diluted earnings per share were each $0.44 for the quarter ended December 31, 2019 compared to basic and diluted earnings per share of $0.42 and $0.41, respectively, for the quarter ended December 31, 2018. Basic and diluted earnings per share were $2.32 and $2.31, respectively, for the year ended December 31, 2019 compared to basic and diluted earnings per share of $2.23 and $2.21, respectively, for the year ended December 31, 2018.

The Company’s efficiency ratio for the quarters ended December 31, 2019 and December 31, 2018 was 66.1% and 58.2%, respectively. The Company's efficiency ratio for the years ended December 31, 2019 and December 31, 2018 was 60.2% and 59.2%, respectively. The increases in the efficiency ratio were primarily a result of decreased revenues when compared to the quarter and year ended December 31, 2018. Additionally, increased noninterest expense for the quarter ended December 31, 2019 when compared to the same period in 2018 also contributed to an increase in the quarter end efficiency ratio.

The net interest margin (fully taxable equivalent basis) for the quarters ended December 31, 2019 and 2018 was 2.92% and 3.20%, respectively. The net interest margin for the years ended December 31, 2019 and 2018 was 3.03% and 3.18%, respectively. The decrease in the net interest margin for the quarter ended December 31, 2019 compared to the same period in 2018 was due to a decline in fee income from loan prepayment activity. The decrease in the net interest margin for the year ended December 31, 2019 compared to the same period in 2018 was due to higher rates on interest bearing deposits. For the year ended December 31, 2019, the decline in the net interest margin was partially offset by incremental fees from loan prepayments.

Financial Condition

Total assets, gross loans and deposits remained relatively flat for the period ended December 31, 2019 when compared to the same period in 2018, totaling $1.9 billion, $1.6 billion and $1.5 billion, respectively. However, gross loans grew at an annualized rate of 10% during the fourth quarter of 2019 when compared to the third quarter of 2019. In addition, deposits grew at an annualized rate of 6% during the fourth quarter of 2019 when compared to the third quarter of 2019, which includes strong growth in noninterest bearing deposits.

Capital

Shareholders’ equity totaled $182.4 million as of December 31, 2019, an increase of $8.2 million compared to December 31, 2018, primarily a result of net income for the year ended December 31, 2019 of $18.2 million. The increase was partially offset by a $6.5 million unfavorable impact to accumulated other comprehensive income driven by fair value marks related to hedge positions involving interest rate swaps, as well as dividends paid of $4.1 million and common stock repurchases of $1.0 million. The marks on the interest rate swaps are driven by lower long term market interest rates in 2019 when compared to 2018. The Company's interest rate swaps are primarily used to hedge interest rate risk in relation to its funding sources. The Company's current derivative positions will cause a decrease to other comprehensive income in a falling interest rate environment and an increase in a rising interest rate environment. As of December 31, 2019, the tangible common equity ratio and tangible book value per share were 9.56% and $23.15, 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, 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 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 noninterest expense control. The Company believes that tangible common equity and tangible book value per share are useful to evaluate the relative strength of the Company's 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,
2019

 

September 30,
2019

 

June 30,
2019

 

March 31,
2019

 

December 31,
2018

ASSETS

 

 

 

 

 

 

 

 

 

Cash and due from banks

$

78,051

 

 

$

83,109

 

 

$

75,647

 

 

$

88,827

 

 

$

75,411

 

Federal funds sold

 

 

 

 

3,237

 

 

4,764

 

 

2,701

 

Cash and cash equivalents

78,051

 

 

83,109

 

 

78,884

 

 

93,591

 

 

78,112

 

 

 

 

 

 

 

 

 

 

 

Investment securities

 

 

 

 

 

 

 

 

 

Marketable equity securities, at fair value

2,118

 

 

2,120

 

 

2,090

 

 

2,049

 

 

2,009

 

Available for sale investment securities, at fair value

82,439

 

 

86,017

 

 

93,017

 

 

96,423

 

 

93,154

 

Held to maturity investment securities, at amortized cost

16,308

 

 

17,365

 

 

21,318

 

 

21,364

 

 

21,421

 

Total investment securities

100,865

 

 

105,502

 

 

116,425

 

 

119,836

 

 

116,584

 

Loans receivable (net of allowance for loan losses of $13,509, $13,212, $13,890, $15,430, and $15,462 at December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019, and December 31, 2018, respectively)

1,588,840

 

 

1,548,988

 

 

1,551,620

 

 

1,578,609

 

 

1,586,775

 

Other real estate owned

 

 

 

 

1,217

 

 

 

 

 

Accrued interest receivable

5,959

 

 

5,916

 

 

6,165

 

 

6,534

 

 

6,375

 

Federal Home Loan Bank stock, at cost

7,475

 

 

7,475

 

 

7,475

 

 

7,475

 

 

8,110

 

Premises and equipment, net

28,522

 

 

28,892

 

 

29,060

 

 

29,629

 

 

19,771

 

Bank-owned life insurance

41,683

 

 

41,433

 

 

41,178

 

 

40,925

 

 

40,675

 

Goodwill

2,589

 

 

2,589

 

 

2,589

 

 

2,589

 

 

2,589

 

Other intangible assets

214

 

 

232

 

 

251

 

 

270

 

 

290

 

Deferred income taxes, net

5,788

 

 

6,591

 

 

5,596

 

 

4,835

 

 

4,347

 

Other assets

22,196

 

 

27,815

 

 

19,205

 

 

13,465

 

 

10,037

 

Total assets

$

1,882,182

 

 

$

1,858,542

 

 

$

1,859,665

 

 

$

1,897,758

 

 

$

1,873,665

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

 

Noninterest bearing deposits

$

191,518

 

 

$

178,733

 

 

$

161,704

 

 

$

161,844

 

 

$

173,198

 

Interest bearing deposits

1,300,385

 

 

1,291,551

 

 

1,316,027

 

 

1,359,521

 

 

1,329,046

 

Total deposits

1,491,903

 

 

1,470,284

 

 

1,477,731

 

 

1,521,365

 

 

1,502,244

 

 

 

 

 

 

 

 

 

 

 

Advances from the Federal Home Loan Bank

150,000

 

 

150,000

 

 

150,000

 

 

150,000

 

 

160,000

 

Subordinated debentures

25,207

 

 

25,194

 

 

25,181

 

 

25,168

 

 

25,155

 

Accrued expenses and other liabilities

32,675

 

 

37,052

 

 

29,813

 

 

24,384

 

 

12,070

 

Total liabilities

1,699,785

 

 

1,682,530

 

 

1,682,725

 

 

1,720,917

 

 

1,699,469

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

 

 

Common stock, no par value

120,589

 

 

120,343

 

 

120,064

 

 

120,750

 

 

120,527

 

Retained earnings

69,324

 

 

66,870

 

 

63,801

 

 

59,247

 

 

54,706

 

Accumulated other comprehensive loss

(7,516

)

 

(11,201

)

 

(6,925

)

 

(3,156

)

 

(1,037

)

Total shareholders’ equity

182,397

 

 

176,012

 

 

176,940

 

 

176,841

 

 

174,196

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

$

1,882,182

$

1,858,542

$

1,859,665

$

1,897,758

$

1,873,665

...

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,
2019

 

September 30,
2019

 

June 30,
2019

 

March 31,
2019

 

December 31,
2018

 

December 31,
2019

 

December 31,
2018

Interest and dividend income

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

$

18,648

 

 

$

19,055

 

 

$

19,540

 

 

$

20,096

 

 

$

20,030

 

 

$

77,339

 

 

$

74,715

 

Interest and dividends on securities

858

 

 

903

 

 

992

 

 

997

 

 

1,009

 

 

3,750

 

 

3,921

 

Interest on cash and cash equivalents

427

 

 

535

 

 

514

 

 

383

 

 

504

 

 

1,859

 

 

1,428

 

Total interest and dividend income

19,933

 

 

20,493

 

 

21,046

 

 

21,476

 

 

21,543

 

 

82,948

 

 

80,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense on deposits

5,948

 

 

6,331

 

 

6,319

 

 

6,100

 

 

5,942

 

 

24,698

 

 

18,951

 

Interest expense on borrowings

1,103

 

 

1,151

 

 

1,132

 

 

1,103

 

 

1,134

 

 

4,489

 

 

4,787

 

Total interest expense

7,051

 

 

7,482

 

 

7,451

 

 

7,203

 

 

7,076

 

 

29,187

 

 

23,738

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

12,882

 

 

13,011

 

 

13,595

 

 

14,273

 

 

14,467

 

 

53,761

 

 

56,326

 

Provision (Credit) for loan losses

310

 

 

773

 

 

(841

)

 

195

 

 

2,795

 

 

437

 

 

3,440

 

Net interest income after provision (credit) for loan losses

12,572

 

 

12,238

 

 

14,436

 

 

14,078

 

 

11,672

 

 

53,324

 

 

52,886

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains and fees from sales of loans

382

 

 

703

 

 

617

 

 

89

 

 

149

 

 

1,791

 

 

984

 

Bank owned life insurance

250

 

 

255

 

 

254

 

 

249

 

 

262

 

 

1,008

 

 

1,057

 

Service charges and fees

247

 

 

264

 

 

263

 

 

249

 

 

284

 

 

1,023

 

 

1,090

 

Net gain on sale of available for sale securities

 

 

 

 

76

 

 

 

 

 

 

76

 

 

222

 

Loss on sale of other real estate owned, net

 

 

(102

)

 

 

 

 

 

 

 

(102

)

 

 

Other

169

 

 

432

 

 

126

 

 

721

 

 

(94

)

 

1,448

 

 

547

 

Total noninterest income

1,048

 

 

1,552

 

 

1,336

 

 

1,308

 

 

601

 

 

5,244

 

 

3,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

5,162

 

 

4,881

 

 

4,555

 

 

4,836

 

 

4,503

 

 

19,434

 

 

18,973

 

Occupancy and equipment

1,928

 

 

1,946

 

 

1,833

 

 

1,887

 

 

1,671

 

 

7,594

 

 

6,790

 

Data processing

499

 

 

505

 

 

551

 

 

512

 

 

487

 

 

2,067

 

 

2,033

 

Professional services

402

 

 

346

 

 

519

 

 

590

 

 

583

 

 

1,857

 

 

2,103

 

Director fees

224

 

 

235

 

 

215

 

 

189

 

 

295

 

 

863

 

 

1,044

 

Marketing

220

 

 

210

 

 

348

 

 

193

 

 

416

 

 

971

 

 

1,587

 

Amortization of intangibles

18

 

 

19

 

 

19

 

 

19

 

 

20

 

 

75

 

 

92

 

FDIC insurance

 

 

(125

)

 

76

 

 

123

 

 

159

 

 

74

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    Richard Branson's space-tourism company Virgin Galactic Holdings Inc. jumped as much as 24% on Wednesday, marking its eigthth straight gain, to close at another all-time high. Meanwhile, Plug Power Inc. rose 18% to extend a five-year high as retail investors talked up their positions on message boards like r/wallstreetbets on Reddit. Fellow renewable energy equipment-maker FuelCell Energy Inc. rose 18%.

  • Buy the Dip on Roku Stock
    Business
    Schaeffer's Investment Research

    Buy the Dip on Roku Stock

    Specifically, ROKU has come within one standard deviation of its 200-day moving average following an extended period above the trendline, defined for this study as having traded north of the moving average 60% of the time in the past two months and in eight of the last 10 trading days. The equity has seen three similar pullbacks within the past three years, which has resulted in an average 21-day gain of 12.1%. From its current perch at $130.04, a move higher of similar magnitude would put ROKU at its highest point of 2020.

  • The hedge-fund investor who has beaten Warren Buffett by 200x likely made a killing on Tesla
    Business
    MarketWatch

    The hedge-fund investor who has beaten Warren Buffett by 200x likely made a killing on Tesla

    Renaissance Technologies, added more than 3 million shares of Tesla to its holdings in the fourth quarter of last year, as the electric-vehicle maker's shares catapulted higher, according to public filings. The hedge fund founded by James Simons, considered the premiere quantitative-driven investor, owned 3.9 million shares of Tesla at the end of Dec. 31, with the company's stake in Renaissance's portfolio jumping from 0.1% in the prior quarterly period to 1.3%, according to file-tracking site Whalewisdom. The purchases would have come as Tesla's shares (TSLA) were zooming higher, punishing a number of investors with short positions who had bet that the Elon Musk-run Silicon Valley darling would see its price collapse soon.

  • IBD Live: Nvidia Hits New High And Clears This Key Level; Is It A Buy Or Too Extended?
    Business
    Investor's Business Daily

    IBD Live: Nvidia Hits New High And Clears This Key Level; Is It A Buy Or Too Extended?

    The IBD Live Team discussed stocks to buy and watch during Wednesday's IBD Live episode. Among recent breakout stocks, the Team analyzed Nvidia as it surged to a new all-time high and cleared a key psychological level. Today's full IBD Live show is now available for subscribers.

  • SolarEdge Earnings, Revenue Beat Estimates In Hot Solar Market
    Business
    Investor's Business Daily

    SolarEdge Earnings, Revenue Beat Estimates In Hot Solar Market

    SolarEdge Technologies reported fourth-quarter results Wednesday that beat Wall Street estimates and reached record revenue. The SolarEdge earnings report came after the market close. The Israel-based solar energy firm reported adjusted earnings of $1.65 per share on revenue of $418.2 million.

  • Business
    Fox Business

    How many Americans live paycheck to paycheck?

    For individuals and families in the early stages of saving, building that emergency fund should always be a top priority, and using a high-yield savings account is often the best way to do that,” Jerry J. O'Flanagan, executive vice president, First National Bank of Omaha, said in a statement. And when it comes to longer-term saving, 37 percent of people said they had no plans to stash cash away for retirement. Despite the aforementioned data, more Americans were optimistic about their financial prospects for the coming year.

  • The Top 5 Buys of Steve Mandel's Lone Pine Capital
    Business
    GuruFocus.com

    The Top 5 Buys of Steve Mandel's Lone Pine Capital

    The stock traded for an average price of $104.36 per share during the quarter. The San Jose, California-based company, which operates an online payments system, has a $143.42 billion market cap; its shares were trading around $123.05 on Wednesday with a price-earnings ratio of 59.26, a price-book ratio of 8.52 and a price-sales ratio of 8.2. The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.

  • Groupon needs a sale — its own
    Business
    MarketWatch

    Groupon needs a sale — its own

    The chief executive of Groupon Inc. says the online-deals company has to go through a “profound change,” but he doesn't seem to understand how big of a change is needed. Groupon announced Tuesday afternoon that it would stop selling goods and return to focusing on “experiences,” along with proposing a reverse stock split to shareholders, as it showed off disappointing fourth-quarter financial results. “This performance shortfall, coupled with the significant headwinds we continue to face, call for profound change,” said Groupon Chief Executive Rich Williams in a shareholder letter Tuesday.

  • In this wild stock market, some investors favor Tesla and Virgin Galactic over Apple and Amazon
    Business
    MarketWatch

    In this wild stock market, some investors favor Tesla and Virgin Galactic over Apple and Amazon

    Investors are beginning to show late-cycle stock market behavior. Investors' new mantra: Apple (AAPL) and Amazon (AMZN) are for boomers — we buy Tesla (TSLA) and Virgin Galactic (SPCE) Apple and Amazon are pedestrian stocks of yesterday; they do nothing interesting. Vacationing in space on a Virgin Galactic flight is around the corner.

  • Business
    Oilprice.com

    Why Cramer Is Wrong About Oil Stocks

    Three weeks ago, Mad Money host Jim Cramer raised eyebrows after claiming that the oil industry was in the “death knell phase” and that “fossil fuel stocks are now like tobacco stocks”. In the past, Cramer has received plenty of blowback about his stance on fossil fuels, and this time it was not any different.