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Press Release

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

Company Release - 1/30/2019 5:25 PM ET

NEW CANAAN, Conn.--(BUSINESS WIRE)-- Bankwell Financial Group, Inc. (NASDAQ: 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.

Earnings

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.

Financial Condition

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.

Asset Quality

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.

Capital

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,
  2018     2018   2018   2018 2017
Assets
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
Goodwill 2,589 2,589 2,589 2,589 2,589
Other intangible assets 290 309 334 358 382
Deferred income taxes, net 4,347 4,583 4,683 4,716 4,904
Other assets   10,037     13,164   11,859   10,834   10,448
Total assets $ 1,873,665   $ 1,885,036 $ 1,870,802 $ 1,831,243 $ 1,796,607
 
Liabilities & Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing $ 173,198 $ 162,473 $ 168,295 $ 161,641 $ 172,638
Interest-bearing   1,329,046     1,330,696   1,297,343   1,264,886   1,225,767
Total deposits 1,502,244 1,493,169 1,465,638 1,426,527 1,398,405
 
Advances from the Federal Home Loan Bank 160,000 180,000 199,000 199,000 199,000
Subordinated debentures 25,155 25,142 25,129 25,116 25,103
Accrued expenses and other liabilities   12,070     11,971   11,462   14,653   13,072
Total liabilities   1,699,469     1,710,282   1,701,229   1,665,296   1,635,580
 
 
Shareholders' equity
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
Retained earnings 54,706 52,386 48,470 44,695 41,032
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,
  2018     2018   2018   2018   2017     2018   2017  
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
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  
 
Noninterest income
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
Other   (94 )   157   262   222   210     547   938  
Total noninterest income   601     859   1,107   1,333   1,541     3,900   4,629  
 
Noninterest expense
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
Professional services 583 321 424 775 457 2,103 2,072
Data processing 487 512 509 525 399 2,033 1,866
Marketing 416 395 479 297 321 1,587 1,193
Director fees 295 260 274 215 229 1,044 912
FDIC insurance 159 203 203 214 225 779 1,116
Amortization of intangibles 20 24 24 24 25 92 118
Other   662     481   581   508   735     2,232   2,797  
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  
 
Net income $ 3,261   $ 4,857 $ 4,715 $ 4,600 $ 2,096   $ 17,433 $ 13,830  
 
 
Earnings Per Common Share:
Basic $ 0.42 $ 0.62 $ 0.60 $ 0.59 $ 0.27 $ 2.23 $ 1.80
Diluted 0.41 0.62 0.60 0.59 0.27 2.21 1.78
 
Weighted Average Common Shares Outstanding:
Basic 7,749,616 7,738,343 7,722,892 7,676,813 7,624,931 7,722,175 7,572,409
Diluted 7,781,153 7,763,935 7,761,560 7,722,120 7,702,770 7,775,480 7,670,413
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

December 31,
2018

September 30,
2018

June 30,
2018

March 31,
2018

December 31,
2018

December 31,
2018

December 31,
2017

Performance ratios:
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 %

0.03

 

%

 
*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.
 
As of

December 31,
2018

September 30,
2018

June 30,
2018

March 31,
2018

December 31,
2017

Capital ratios:
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
 
Asset quality:
Nonaccrual loans $ 14,082 $ 21,964 $ 23,325 $ 20,374 $ 5,481
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 % 1.37 % 1.46 % 1.31 % 0.36 %
 
Nonperforming assets as a % of total assets 0.75 % 1.17 % 1.25 % 1.14 % 0.31 %
 
Allowance for loan losses as a % of total loans 0.96 % 1.20 % 1.19 % 1.21 % 1.23 %
 
Allowance for loan losses as a % of nonperforming loans 109.80 % 87.92 % 81.48 % 92.28 % 344.90 %
 
(1) Efficiency ratio is defined as noninterest expense, less other real estate owned expenses and amortization of intangible assets, divided by our operating revenue, which is equal to net interest income plus non-interest income excluding gains and losses on sales of securities and gains and losses on other real estate owned. In our judgment, the adjustments made to operating revenue allow investors and analysts to better assess our operating expenses in relation to our core operating revenue by removing the volatility that is associated with certain one-time items and other discrete items that are unrelated to our core business.
 
(2) Represents Bank ratios. Current period capital ratios are preliminary subject to finalization of the FDIC Call Report.
 
(3) Excludes unvested restricted shares of 77,624, 101,759, 112,099, 114,336, and 75,186 as of December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018, and December 31, 2017, respectively.
 
 
BANKWELL FINANCIAL GROUP, INC.
LOAN & DEPOSIT PORTFOLIO (unaudited)
(Dollars in thousands)
                     
 
December 31, September 30, December 31, Current QTD YTD
Period End Loan Composition 2018 2018 2017 % Change % Change
Residential Real Estate $ 178,079 $ 182,740 $ 193,524 (2.6%) (8.0%)
Commercial Real Estate 1,094,066 1,057,484 987,242 3.5% 10.8%
Construction 73,191 93,941 101,636 (22.1%) (28.0%)
Total Real Estate Loans 1,345,336 1,334,165 1,282,402 0.8% 4.9%
 
Commercial Business 258,978 273,065 259,995 (5.2%) (0.4%)
 
Consumer 412 389 619 5.9% (33.4%)
Total Loans $ 1,604,726 $ 1,607,619 $ 1,543,016 (0.2%) 4.0%
 
 
 
 
December 31, September 30, December 31, Current QTD YTD
Period End Deposit Composition 2018 2018 2017 % Change % Change
Noninterest-bearing demand $ 173,198 $ 162,473 $ 172,638 6.6% 0.3%
NOW 61,869 56,270 58,942 10.0% 5.0%
Money Market 471,968 484,048 451,804 (2.5%) 4.5%
Savings 180,487 147,940 83,758 22.0% 115.5%
Time 614,722 642,438 631,263 (4.3%) (2.6%)
Total Deposits $ 1,502,244 $ 1,493,169 $ 1,398,405 0.6% 7.4%
 
                     
BANKWELL FINANCIAL GROUP, INC.
NONINTEREST INCOME & EXPENSE - QTD (unaudited)
(Dollars in thousands)
 
For the Quarter Ended
Noninterest income December 31, September 30, December 31 Dec 18 vs. Sep 18 Dec 18 vs. Dec 17
2018 2018 2017 % Change % Change
Service charges and fees $ 284 $ 285 $ 252 (0.4%) 12.7%
Bank owned life insurance 262 267 289 (1.9%) (9.3%)
Gains and fees from sales of loans 149 150 868 (0.7%) (82.8%)
Loss on sale of foreclosed real estate, net - - (78) 100.0% (100.0%)
Other (94) 157 210 (159.9%) (144.8%)
Total noninterest income $ 601 $ 859 $ 1,541 (30.0%) (61.0%)
 
 
 
For the Quarter Ended
Noninterest expense December 31, September 30, December 31 Dec 18 vs. Sep 18 Dec 18 vs. Dec 17
2018 2018 2017 % Change % Change
Salaries and employee benefits $ 4,503 $ 4,903 $ 4,603 (8.2%) (2.2%)
Occupancy and equipment 1,671 1,771 1,585 (5.6%) 5.4%
Professional services 583 321 457 81.6% 27.6%
Data processing 487 512 399 (4.9%) 22.1%
Marketing 416 395 321 5.3% 29.6%
Director fees 295 260 229 13.5% 28.8%
FDIC insurance 159 203 225 (21.7%) (29.3%)
Amortization of intangibles 20 24 25 (16.7%) (20.0%)
Other 662 481 735 37.6% (9.9%)
Total noninterest expense $ 8,796 $ 8,870 $ 8,579 (0.8%) 2.5%
 
             
BANKWELL FINANCIAL GROUP, INC.
NONINTEREST INCOME & EXPENSE - YTD (unaudited)
(Dollars in thousands)
 
For the Year Ended
Noninterest income December 31, December 31, Dec 18 vs. Dec 17
2018 2017 % Change
Service charges and fees $ 1,090 $ 1,007 8.2%
Bank owned life insurance 1,057 1,170 (9.7%)
Gains and fees from sales of loans 984 1,427 (31.0%)
Net gain on sale of available for sale securities 222 165 34.5%
Loss on sale of foreclosed real estate, net - (78) (100.0%)
Other 547 938 (41.7%)
Total noninterest income $ 3,900 $ 4,629 (15.7%)
 
 
 
For the Year Ended
Noninterest expense December 31, December 31, Dec 18 vs. Dec 17
2018 2017 % Change
Salaries and employee benefits $ 18,973 $ 16,284 16.5%
Occupancy and equipment 6,790 6,165 10.1%
Professional services 2,103 2,072 1.5%
Data processing 2,033 1,866 8.9%
Marketing 1,587 1,193 33.0%
Director fees 1,044 912 14.5%
FDIC insurance 779 1,116 (30.2%)
Amortization of intangibles 92 118 (22.0%)
Other 2,232 2,797 (20.2%)
Total noninterest expense $ 35,633 $ 32,523 9.6%
 
                     
BANKWELL FINANCIAL GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (unaudited)
(Dollars in thousands, except share data)
 
 
As of
Computation of Tangible Common Equity to Tangible Assets 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
Total Equity $ 174,196 $ 174,754 $ 169,573 $ 165,947 $ 161,027
Less:
Goodwill 2,589 2,589 2,589 2,589 2,589
Other intangibles 290 309 334 358 382
Tangible Common Equity $ 171,317 $ 171,856 $ 166,650 $ 163,000 $ 158,056
 
Total Assets $ 1,873,665 $ 1,885,036 $ 1,870,802 $ 1,831,243 $ 1,796,607
Less:
Goodwill 2,589 2,589 2,589 2,589 2,589
Other intangibles 290 309 334 358 382
Tangible Assets $ 1,870,786 $ 1,882,138 $ 1,867,879 $ 1,828,296 $ 1,793,636
 
Tangible Common Equity to Tangible Assets 9.16% 9.13% 8.92% 8.92% 8.81%
 
 
As of
Computation of Tangible Book Value per Common Share 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
Total shareholders' equity $ 174,196 $ 174,754 $ 169,573 $ 165,947 $ 161,027
Less:
Preferred stock - - - - -
Common shareholders' equity 174,196 174,754 169,573 165,947 161,027
Less:
Goodwill 2,589 2,589 2,589 2,589 2,589
Other intangibles 290 309 334 358 382
Tangible common shareholders' equity 171,317 171,856 166,650 163,000 158,056
Common shares issued 7,842,271 7,842,996 7,841,720 7,831,804 7,751,424
Less:
Shares of unvested restricted stock 77,624 101,759 112,099 114,336 75,186
Common shares outstanding 7,764,647 7,741,237 7,729,621 7,717,468 7,676,238
Book value per share $ 22.43 $ 22.57 $ 21.94 $ 21.50 $ 20.98
Less:
Effects of intangible assets $ 0.37 $ 0.37 $ 0.38 $ 0.38 $ 0.39
 
Tangible Book Value per Common Share $ 22.06 $ 22.20 $ 21.56 $ 21.12 $ 20.59
 
                             
BANKWELL FINANCIAL GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (unaudited) - Continued
(Dollars in thousands, except share data)
 
 
For the Quarter Ended For the Year Ended
Computation of Efficiency Ratio 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 12/31/2018   12/31/2017
Noninterest expense $ 8,796 $ 8,870 $ 8,764 $ 9,203 $ 8,579 $ 35,633 $ 32,523
Less:
Amortization of intangible assets 20 24 24 24 25 92 118
Foreclosed real estate expenses - - - - - - 70
Adjusted noninterest expense $ 8,776 $ 8,846 $ 8,740 $ 9,179 $ 8,554 $ 35,541 $ 32,335
Net interest income $ 14,467 $ 14,246 $ 13,908 $ 13,705 $ 13,914 $ 56,326 $ 54,364
Noninterest income 601 859 1,107 1,333 1,541 3,900 4,629
Less:
Gains on sales of securities - - - 222 - 222 165
Loss on sale of foreclosed real estate - - - - (78) - (78)
Adjusted operating revenue $ 15,068 $ 15,105 $ 15,015 $ 14,816 $ 15,533 $ 60,004 $ 58,906
 
Efficiency ratio 58.2% 58.6% 58.2% 62.0% 55.1% 59.2% 54.9%
 
 
For the Quarter Ended For the Year Ended
Computation of Return on Average Tangible Common Equity 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 12/31/2018   12/31/2017
Net Income Attributable to Common Shareholders $ 3,261 $ 4,857 $ 4,715 $ 4,600 $ 2,096 $ 17,433 $ 13,830
Total average shareholders' equity $ 177,685 $ 173,199 $ 168,684 $ 164,369 $ 161,477 $ 171,024 $ 154,929
Less:
Average Goodwill 2,589 2,589 2,589 2,589 2,589 2,589 2,589
Average Other intangibles 302 325 350 374 398 338 444
Average tangible common equity $ 174,794 $ 170,285 $ 165,745 $ 161,406 $ 158,490 $ 168,097 151,896
 
Annualized Return on Average Tangible Common Equity 7.40% 11.32% 11.41% 11.56% 5.25% 10.37% 9.10%
 
                         
BANKWELL FINANCIAL GROUP, INC.
NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS
(Dollars in thousands)
 
For the Quarter Ended
December 31, 2018 December 31, 2017
Average Yield/ Average Yield/
Balance Interest Rate (5) Balance Interest Rate (5)
Assets:
Cash and Fed funds sold $ 90,131 $ 504 2.23% $ 103,129 $ 289 1.11%
Securities (1) 117,947 940 3.19% 115,194 1,008 3.50%
Loans:
Commercial real estate 1,053,257 13,253 4.92% 946,213 11,034 4.56%
Residential real estate 179,886 1,707 3.80% 193,970 1,763 3.63%
Construction (2) 82,323 1,115 5.30% 109,594 1,333 4.76%
Commercial business 285,676 3,949 5.41% 266,235 3,353 4.93%
Consumer 363 6 6.33% 970 10 3.76%
Total loans 1,601,505 20,030 4.89% 1,516,982 17,493 4.51%
Federal Home Loan Bank stock 8,782 138 6.27% 9,340 93 3.99%
Total earning assets 1,818,365 $ 21,612 4.65% 1,744,645 $ 18,883 4.23%
Other assets 67,803 66,505
Total assets $ 1,886,168 $ 1,811,150
 
Liabilities and shareholders' equity:
Interest-bearing liabilities:
NOW $ 59,781 $ 65 0.43% $ 56,567 $ 28 0.20%
Money market 484,932 2,009 1.64% 457,351 1,098 0.95%
Savings 164,534 684 1.65% 86,932 172 0.78%
Time 625,874 3,184 2.02% 647,325 2,304 1.41%
Total interest-bearing deposits 1,335,121 5,942 1.77% 1,248,175 3,602 1.14%
Borrowed Money 189,698 1,134 2.34% 218,718 1,213 2.17%
Total interest-bearing liabilities 1,524,819 $ 7,076 1.84% 1,466,893 $ 4,815 1.30%
Noninterest-bearing deposits 172,390 170,642
Other liabilities 11,274 12,138
Total liabilities 1,708,483 1,649,673
Shareholders' equity 177,685 161,477
Total liabilities and shareholders' equity $ 1,886,168 $ 1,811,150
Net interest income (3) $ 14,536 $ 14,068
Interest rate spread 2.81% 2.93%
Net interest margin (4) 3.20% 3.23%
 
(1) Average balances and yields for securities are based on amortized cost.
(2) Includes commercial and residential real estate construction.
(3) The adjustment for securities and loans taxable equivalency amounted to $69 thousand and $154 thousand, respectively for the three months ended December 31, 2018 and 2017.
(4) Net interest income as a percentage of earning assets.
(5) Yields are calculated using the contractual day count convention for each respective product type.
 
                         
BANKWELL FINANCIAL GROUP, INC.
NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS
(Dollars in thousands)
 
For the Year Ended
December 31, 2018 December 31, 2017
Average Yield/ Average Yield/
Balance Interest Rate (5) Balance Interest Rate (5)
Assets:
Cash and Fed funds sold $ 77,923 $ 1,428 1.84% $ 85,308 $ 790 0.93%
Securities (1) 118,311 3,686 3.12% 108,775 3,830 3.52%
Loans:
Commercial real estate 1,014,255 47,967 4.66% 907,223 41,638 4.53%
Residential real estate 189,121 7,016 3.71% 194,344 6,983 3.51%
Construction (2) 90,773 4,667 5.07% 107,752 5,195 4.75%
Commercial business 282,425 15,037 5.25% 253,868 12,981 5.04%
Consumer 481 28 5.88% 1,227 44 3.62%
Total loans 1,577,055 74,715 4.67% 1,464,414 66,841 4.50%
Federal Home Loan Bank stock 9,177 517 5.63% 8,486 337 3.97%
Total earning assets 1,782,466 $ 80,346 4.45% 1,666,983 $ 71,798 4.25%
Other assets 68,002 60,904
Total assets $ 1,850,468 $ 1,727,887
 
Liabilities and shareholders' equity:
Interest-bearing liabilities:
NOW $ 60,410 $ 157 0.26% $ 57,712 $ 93 0.16%
Money market 482,886 6,431 1.33% 404,848 3,427 0.85%
Savings 124,214 1,649 1.33% 102,915 763 0.74%
Time 619,448 10,714 1.73% 633,260 8,411 1.33%
Total interest-bearing deposits 1,286,958 18,951 1.47% 1,198,735 12,694 1.06%
Borrowed Money 213,546 4,787 2.21% 194,875 4,143 2.10%
Total interest-bearing liabilities 1,500,504 $ 23,738 1.58% 1,393,610 $ 16,837 1.21%
Noninterest-bearing deposits 166,566 169,250
Other liabilities 12,374 10,098
Total liabilities 1,679,444 1,572,958
Shareholders' equity 171,024 154,929
Total liabilities and shareholders' equity $ 1,850,468 $ 1,727,887
Net interest income (3) $ 56,608 $ 54,961
Interest rate spread 2.87% 3.04%
Net interest margin (4) 3.18% 3.30%
 
(1) Average balances and yields for securities are based on amortized cost.
(2) Includes commercial and residential real estate construction.
(3) The adjustment for securities and loans taxable equivalency amounted to $282 thousand and $597 thousand, respectively for the year ended December 31, 2018 and 2017.
(4) Net interest income as a percentage of earning assets.
(5) Yields are calculated using the contractual day count convention for each respective product type.
 

Bankwell Financial Group
Christopher R. Gruseke, 203-652-0166
President and Chief Executive Officer
or
Penko Ivanov, 203-652-0166
Executive Vice President and Chief Financial Officer
www.mybankwell.com

Source: Bankwell Financial Group, Inc.