Bankwell Financial Group, Inc. ( BWFG Quick Quote BWFG - Free Report) announced that its fourth-quarter 2020 results will include one-time pre-tax charge of $3.9 million related to the expense-reduction initiatives. Besides, the company will restart the previously-authorized share-repurchase plan, under which it will likely buy back additional 307,333 shares or roughly 4% of outstanding shares.
Following these developments, shares of the company have depreciated 3%.
Details Related to Cost-Saving Efforts
The expense-reduction initiatives were announced by the company's board of directors on Dec 24, 2020. The charges comprise three major parts — office and branch consolidation expenses, employee severance costs and a fee related to the early termination of a legacy technology contract.
Of the total charges, about $2 million is related to office and branch consolidation expenses. Bankwell Financial had previously announced the shifting of its consolidated headquarters in New Canaan, CT.Hence, several office locations will be closed and certain charges will be incurred. Further, the company intends to shut its Elm Street branch in New Canaan in mid-2021.
Moreover, severance charges of $0.8 million make a portion of total pre-tax charges. The severance charges are related to a reduction in the company's workforce, including the Voluntary Early Retirement Incentive Plan offered to eligible employees during fourth-quarter 2020.
Given the above-mentioned efforts, Bankwell Financial estimates annual costs savings of $2.3 million in the upcoming period.
The last component of the $3.9 million pre-tax charge consists of a $1.1 million expense related to early termination fees to be paid to a legacy technology vendor. Bankwell Financial is committed in providing a strong digital banking platform to its customers and has, hence, roped in the services of a new technology vendor. The company believes the one-time expense is justified for expanding its deposit base.
The cost-cutting initiatives will help Bankwell Financial improve its profitability in the quarters ahead. Apart from this, reinstatement of the share-repurchase program will make it an attractive choice for investors.
In the past year, shares of Bankwell Financial have depreciated 34.3% compared with the 18.3% decline of the
industry it belongs to.
Currently, Bankwell Financial sports a Zacks Rank #1 (Strong Buy). You can see
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