Bankwell Financial Group Reports Strong Operating Results for the First Quarter; Declares Second Quarter Dividend

Rhea-AI Summary

Bankwell Financial Group (NASDAQ:BWFG) reported a significant increase in GAAP net income for Q1 2021, achieving $5.7 million ($0.71 per share) compared to $1.4 million ($0.17 per share) in Q1 2020. Pre-tax, pre-provision net revenue grew 48% to $7.0 million, aided by a $0.9 million one-time federal payroll tax credit. The Board declared a cash dividend of $0.14 per share, payable on May 24, 2021. Total loans reached $1.7 billion, growing 4%, with total deposits climbing to $1.9 billion. The return on average equity was 12.67%. Tangible book value per share increased to $23.99.

Positive

• GAAP net income increased to $5.7 million, a substantial rise from $1.4 million in Q1 2020.
• Pre-tax, pre-provision net revenue of $7.0 million, a 48% increase compared to last year.
• Total loans grew by 4% to reach $1.7 billion, indicating strong loan origination performance.
• Return on average equity of 12.67%, reflecting robust profitability.
• Declared a dividend of $0.14 per share, showcasing confidence in ongoing financial health.

Negative

• Net interest margin decreased to 2.74% from 2.98%, indicating reduced profitability on loans.
• Total assets decreased from $2.3 billion to $2.2 billion, primarily due to reduced excess liquidity.

Bankwell Financial Group, Inc. (NASDAQ:BWFG) reported GAAP net income of $5.7 million, or $0.71 per share, for the first quarter of 2021, versus $1.4 million, or $0.17 per share, for the same period in 2020. Pre-tax, pre-provision net revenue ("PPNR")¹ grew 48% to $7.0 million compared to the same period in 2020. Results include a $0.9 million one-time federal payroll tax credit for small businesses impacted by COVID-19².

The Company's Board of Directors declared a $0.14 per share cash dividend, payable May 24, 2021 to shareholders of record on May 14, 2021.

We recommend reading this earnings release in conjunction with the First Quarter 2021 Investor Presentation, located at http://investor.mybankwell.com/Presentations and included as an exhibit to our April 28, 2021 Current Report on Form 8-K.

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

"I am pleased to announce Bankwell’s financial results for the first quarter of 2021. Our team made meaningful progress in virtually all aspects of our business. Loans grew by 4% on originations of $158 million and we continue to generate quality C&I business. Core commercial deposits grew by 8.6%, or $63 million as we steadily improve both the mix and the cost of our deposits. We have also successfully implemented many of our previously announced expense reduction initiatives. The cumulative impact of the multiple successes we’ve experienced was to grow pre-tax, pre-provision net revenue by 48% versus the previous year’s first quarter and to deliver a return on average equity of 12.67%. Importantly, we look to further improving profitability as the year proceeds.

"I’d like to thank all of my colleagues who have worked tirelessly to achieve these results amidst such challenging circumstances. On behalf of everyone at Bankwell, I also wish to acknowledge our gratitude for all of our health care workers and scientists who have persevered in an effort to bring our health crisis to an end."

First Quarter 2021 Highlights:

• PPNR of $7.0 million ($6.1 million excluding the one-time payroll tax credit), a 48% increase compared to the same period in 2020.
• Return on average assets was 1.02% and return on average equity was 12.67%.
• Resumption of SBA loan sales with gains of $0.5 million compared to no sales for the quarter ended March 31, 2020.
• Total gross loans were $1.7 billion, growing $63.2 million, or 4%, compared to December 31, 2020, excluding PPP loans.
• Total deposits were $1.9 billion compared to $1.8 billion at December 31, 2020.
• Noninterest bearing deposits increased by $112.5 million to 15% of total deposits compared to 10% at March 31, 2020.
• The cost of deposits decreased approximately 10 basis points to 0.67% when compared to the quarter ended December 31, 2020.
• The Bank's loan-to-deposit ratio was 89.0%, reflecting the above-mentioned increase in deposits.
• Investment securities totaled $101.6 million and represent 5% of total assets.
• Tangible book value per share rose to $23.99 compared to $22.43 at December 31, 2020, benefiting from strong operating performance and favorable marks on interest rate swaps used to hedge interest rate risk.
• Shares issued and outstanding were 7,908,630, reflecting repurchases of 65,626 shares of common stock at a weighted average price of $21.66 during the quarter ended March 31, 2021.
• Subsequent to March 31, 2021, the Company committed to retire $10 million of existing subordinated debt on May 15, 2021.

Earnings and Performance

Revenues (net interest income plus noninterest income) for the quarter ended March 31, 2021 were $16.6 million, versus $14.4 million for the quarter ended March 31, 2020. The increase was primarily attributable to lower interest expense on deposits, partially offset by a decrease in interest and fees on loans. Revenues also benefited from the aforementioned one-time federal payroll tax credit for COVID-19 and from the resumption of SBA loan sales.

Net income for the quarter ended March 31, 2021 was $5.7 million, versus $1.4 million for the quarter ended March 31, 2020. The increase in net income was impacted by the aforementioned increases in revenues.

Basic and diluted earnings per share were $0.72 and $0.71, respectively, for the quarter ended March 31, 2021 compared to basic and diluted earnings per share of $0.17 each for the quarter ended March 31, 2020.

The net interest margin (fully taxable equivalent basis) for the quarters ended March 31, 2021 and March 31, 2020 was 2.74% and 2.98%, respectively. The decrease in net interest margin was primarily due to excess liquidity.

Financial Condition

Assets totaled $2.2 billion at March 31, 2021, compared to assets of $2.3 billion at December 31, 2020. The decrease in assets is primarily due to a decrease in excess liquidity, partially offset by an increase in loans. Gross loans totaled $1.7 billion at March 31, 2021, an increase of $47.6 million compared to December 31, 2020. Excluding PPP loans, gross loans increased by $63.2 million at March 31, 2021 when compared to December 31, 2020. Deposits totaled $1.9 billion at March 31, 2021, compared to deposits of $1.8 billion at December 31, 2020.

Capital

Shareholders’ equity totaled $187.9 million as of March 31, 2021, an increase of $11.3 million compared to December 31, 2020, primarily a result of (i) a $7.7 million favorable impact to accumulated other comprehensive income driven by fair value marks related to hedge positions involving interest rate swaps and (ii) net income for the quarter ended March 31, 2021 of $5.7 million. 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 $1.1 million and common stock repurchases of $1.4 million.

About Bankwell Financial Group

Bankwell is a commercial bank that serves the banking needs of residents and businesses throughout Fairfield and New Haven Count

FAQ

What were Bankwell Financial Group's earnings for Q1 2021?

Bankwell Financial Group reported a net income of $5.7 million, or $0.71 per share, for Q1 2021.

What is the dividend amount declared by Bankwell Financial Group?

The Board declared a cash dividend of $0.14 per share, payable on May 24, 2021.

How did Bankwell Financial Group's loan growth perform in Q1 2021?

Bankwell Financial Group experienced a 4% growth in total loans, amounting to $1.7 billion.

What was the return on equity for Bankwell Financial Group in Q1 2021?

The return on average equity for Q1 2021 was 12.67%.

How much did Bankwell Financial Group's assets change in Q1 2021?

Bankwell Financial Group's assets decreased from $2.3 billion at the end of 2020 to $2.2 billion by March 31, 2021.