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Press Release

Bankwell Financial Group Reports Record Quarterly Net Income of $5.1 Million or $0.65 Per Share for the First Quarter and Declares Second Quarter Dividend

Company Release - 4/24/2019 4:23 PM ET

NEW CANAAN, Conn.--(BUSINESS WIRE)-- Bankwell Financial Group, Inc. (NASDAQ:BWFG) reported GAAP net income of $5.1 million or $0.65 per share for the first quarter of 2019, versus $4.6 million or $0.59 per share for the same period in 2018.

The Company's Board of Directors declared a $0.13 per share cash dividend, payable May 24, 2019 to shareholders of record on May 14, 2019.

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

"I’m happy to announce a strong start to 2019. With another quarter of loan originations in excess of $90 million, our team has managed to excel without succumbing to a competitive pricing environment."

First Quarter 2019 Highlights:

  • First quarter diluted earnings per share were $0.65, an increase of 10% compared to the first quarter of 2018.
  • First quarter total revenue (net interest income plus noninterest income) was $15.6 million versus $15.0 million in the same period last year, a 4% increase.
  • Loan originations totaled $93.2 million with $61.8 million of loan fundings for the first quarter of 2019.
  • Tax equivalent net interest margin was 3.19% for the first quarter of 2019.
  • Total noninterest income was $1.3 million for the first quarter of 2019, or 8% of total revenue.
  • The efficiency ratio was 57.5% for the first quarter of 2019 compared to 62.0% for the same period in 2018.
  • Return on average assets for the first quarter of 2019 totaled 1.10% compared to 1.03% for the same period in 2018.
  • Return on average stockholders’ equity for the first quarter of 2019 totaled 11.60% compared to 11.35% for the same period in 2018.
  • The tangible common equity ratio and tangible book value per share was 9.18% and $22.38, respectively.
  • Total gross loans were $1.6 billion for the first quarter of 2019.
  • The allowance for loan losses was $15.4 million and represents 0.97% of total loans.
  • Investment securities totaled $119.8 million and represent 6% of total assets.
  • Total deposits exceeded $1.5 billion and grew at an annualized rate of 5% during the first quarter of 2019.

Earnings

Revenues (net interest income plus noninterest income) for the quarter ended March 31, 2019 were $15.6 million, an increase of 4% compared to the quarter ended March 31, 2018. Net interest income for the quarter ended March 31, 2019 was $14.3 million, an increase of 4% compared to the quarter ended March 31, 2018. Net income for the quarter ended March 31, 2019 was $5.1 million, an increase of 10% compared to the quarter ended March 31, 2018. The increase in revenues, net interest income and net income was aided by income recognized from fees as a result of elevated loan pre-payments. Specifically, the Company recognized just under $1.0 million in fees as a result of an early pay-off from one lending relationship.

Basic and diluted earnings per share were each $0.65 for the quarter ended March 31, 2019 compared to $0.59 for the quarter ended March 31, 2018.

The Company’s efficiency ratios for the quarters ended March 31, 2019 and March 31, 2018 were 57.5% and 62.0%, respectively. The decrease in the efficiency ratio was driven by the aforementioned increase in revenues and a decrease in noninterest expense from continued disciplined expense management.

Noninterest Income and Expense

Noninterest income remained flat, totaling $1.3 million for the quarter ended March 31, 2019 and March 31, 2018. Other noninterest income increased $0.5 million primarily resulting from income recognized from an interest rate swap fee recognized in the first quarter of 2019. This increase was offset by a decrease of $0.3 million in gains and fees from sales of loans and a decrease of $0.2 million in gains on the sales of securities as compared to the quarter ended March 31, 2018.

Noninterest expense decreased $0.2 million or 2% for the quarter ended March 31, 2019 compared to the quarter ended March 31, 2018. The decrease was primarily driven by a decrease in salaries and employee benefits and professional services. Salaries and employee benefits totaled $4.8 million for the quarter ended March 31, 2019 compared to $5.0 million for the same period in 2018, a decrease of $0.2 million. The decrease in salaries and employee benefits was primarily driven by a slight reduction in full time equivalent employees and an increase in deferred loan origination costs as a result of higher loan volume as compared to the quarter ended March 31, 2018. Full time equivalent employees totaled 140 at March 31, 2019 compared to 144 at March 31, 2018. Professional services totaled $0.6 million for the quarter ended March 31, 2019 compared to $0.8 million for the same period in 2018, a decrease of $0.2 million. The decrease in professional services was primarily driven by a decline in audit related fees. Noninterest expense was negatively impacted by $0.3 million as a result of increased occupancy and equipment cost related to prior year's branch expansion and overall investment in technology.

Financial Condition

Assets totaled $1.90 billion at March 31, 2019, an annualized increase of 5% compared to assets of $1.87 billion at December 31, 2018. Total gross loans were $1.6 billion at March 31, 2019 and December 31, 2018, with loan originations being offset by elevated loan pre-payments during the first quarter of 2019. Deposits increased to $1.52 billion compared to $1.50 billion at December 31, 2018, an annualized increase of 5% over December 31, 2018.

Asset Quality

Nonperforming assets as a percentage of total assets was 0.70% at March 31, 2019, down from 0.75% at December 31, 2018. Net charge-offs to average loans decreased to 0.01% for the quarter ended March 31, 2019 compared to 0.41% for the quarter ended December 31, 2018. The allowance for loan losses at March 31, 2019 was $15.4 million, representing 0.97% of total loans. The Company continues to work on the resolution of its previously disclosed large nonperforming lending relationship and progress to date has been in line with the Company's estimates.

Capital

Shareholders’ equity totaled $176.8 million as of March 31, 2019, an increase of $2.6 million compared to December 31, 2018, primarily a result of net income for the quarter ended March 31, 2019 of $5.1 million, offset by dividends paid of $1.0 million and a $2.1 million impact to accumulated other comprehensive income driven by fair value marks related to hedge positions involving interest rate swaps. As of March 31, 2019, the tangible common equity ratio and tangible book value per share were 9.18% and $22.38, 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 is 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, except share data)
 
March 31,
2019
December 31,
2018
March 31,
2018
Assets
Cash and due from banks $ 88,827 $ 75,411 $ 81,249
Federal funds sold 4,764   2,701   2,121
Cash and cash equivalents 93,591 78,112 83,370
 
Investment Securities
 
Marketable equity securities, at fair value 2,049 2,009
Available for sale investment securities, at fair value 96,423 93,154 99,050
Held to maturity investment securities, at amortized cost 21,364   21,421   21,546
Total investment securities 119,836 116,584 120,596
Loans receivable (net of allowance for loan losses of $15,430, $15,462 and $18,801 at March 31, 2019, December 31, 2018 and March 31, 2018, respectively) 1,578,609 1,586,775 1,534,565
Foreclosed real estate 487
Accrued interest receivable 6,534 6,375 5,331
Federal Home Loan Bank stock, at cost 7,475 8,110 9,310
Premises and equipment, net 29,629 19,771 19,207
Bank-owned life insurance 40,925 40,675 39,880
Goodwill 2,589 2,589 2,589
Other intangible assets 270 290 358
Deferred income taxes, net 4,835 4,347 4,716
Other assets 13,465   10,037   10,834
Total assets $ 1,897,758   $ 1,873,665   $ 1,831,243
 
Liabilities & Shareholders’ Equity
Liabilities
Deposits
Noninterest bearing deposits $ 161,844 $ 173,198 $ 161,641
Interest bearing deposits 1,359,521   1,329,046   1,264,886
Total deposits 1,521,365 1,502,244 1,426,527
Advances from the Federal Home Loan Bank 150,000 160,000 199,000
Subordinated debentures 25,168 25,155 25,116
Accrued expenses and other liabilities 24,384   12,070   14,653
Total liabilities 1,720,917   1,699,469   1,665,296
 
Shareholders’ equity
Common stock, no par value; 10,000,000 shares authorized, 7,873,471, 7,842,271, and 7,831,804 shares issued and outstanding at March 31, 2019, December 31, 2018 and March 31, 2018, respectively 120,750 120,527 119,363
Retained earnings 59,247 54,706 44,695
Accumulated other comprehensive (loss) income (3,156 ) (1,037 ) 1,889
Total shareholders’ equity 176,841   174,196   165,947
 
Total liabilities and shareholders’ equity $ 1,897,758   $ 1,873,665   $ 1,831,243
 
     
BANKWELL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars in thousands, except share data)
 
For the Quarter Ended
March 31,
2019
    December 31,
2018
    March 31,
2018
Interest and dividend income
Interest and fees on loans $ 20,096 $ 20,030 $ 17,418
Interest and dividends on securities 997 1,009 935
Interest on cash and cash equivalents 383   504   254
Total interest and dividend income 21,476   21,543   18,607
 
Interest expense
Interest expense on deposits 6,100 5,942 3,656
Interest expense on borrowings 1,103   1,134   1,246
Total interest expense 7,203   7,076   4,902
 
Net interest income 14,273 14,467 13,705
Provision for loan losses 195   2,795   13
 
Net interest income after provision for loan losses 14,078   11,672   13,692
 
Noninterest income
Service charges and fees 249 284 256
Bank owned life insurance 249 262 263
Gains and fees from sales of loans 89 149 370
Net gain on sale of available for sale securities 222
Other 721   (94 ) 222
Total noninterest income 1,308   601   1,333
 
Noninterest expense
Salaries and employee benefits 4,836 4,503 5,028
Occupancy and equipment 1,887 1,671 1,617
Professional services 590 583 775
Data processing 512 487 525
Marketing 193 416 297
Director fees 189 295 215
FDIC insurance 123 159 214
Amortization of intangibles 19 20 24
Other 626   662   508
Total noninterest expense 8,975   8,796   9,203
 
Income before income tax expense 6,411 3,477 5,822
Income tax expense 1,331   216   1,222
Net income $ 5,080   $ 3,261   $ 4,600
 
Earnings Per Common Share:
Basic $ 0.65 $ 0.42 $ 0.59
Diluted $ 0.65 $ 0.41 $ 0.59
 
Weighted Average Common Shares Outstanding:
Basic 7,760,460 7,749,616 7,676,813
Diluted 7,776,378 7,781,153 7,722,120
Dividends per common share $ 0.13 $ 0.12 $ 0.12
 
     
BANKWELL FINANCIAL GROUP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
(Dollars in thousands, except share data)
 
For the Quarter Ended

March 31,
2019

    December 31,
2018
    March 31,
2018
Performance ratios:
Return on average assets 1.10 % 0.69 % 1.03 %
Return on average stockholders' equity 11.60 % 7.28 % 11.35 %
Return on average tangible common equity 11.80 % 7.40 % 11.56 %
Net interest margin 3.19 % 3.20 % 3.15 %
Efficiency ratio(1) 57.5 % 58.2 % 62.0 %
 
Net loan charge-offs as a % of average loans 0.01 % 0.41 % 0.01 %
 
 
As of

March 31,
2019

December 31,
2018
March 31,
2018
Capital ratios:
Total Common Equity Tier 1 Capital to Risk-Weighted Assets(2) 12.00 % 11.56 % 11.18 %
Total Capital to Risk-Weighted Assets(2) 12.94 % 12.50 % 12.35 %
Tier I Capital to Risk-Weighted Assets(2) 12.00 % 11.56 % 11.18 %
Tier I Capital to Average Assets(2) 10.53 % 10.14 % 9.90 %
Tangible common equity to tangible assets 9.18 % 9.16 % 8.92 %
 
Tangible book value per common share(3) $ 22.38 $ 22.06 $ 21.12
 
Asset quality:
Nonaccrual loans $ 13,233 $ 14,082 $ 20,374
Other real estate owned     487  
Total nonperforming assets $ 13,233   $ 14,082   $ 20,861  
 
Nonperforming loans as a % of total loans 0.83 % 0.88 % 1.31 %
Nonperforming assets as a % of total assets 0.70 % 0.75 % 1.14 %
Allowance for loan losses as a % of total loans 0.97 % 0.96 % 1.21 %
Allowance for loan losses as a % of nonperforming loans 116.60 % 109.80 % 92.28 %
(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 noninterest 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 99,061, 77,624, and 114,336 as of March 31, 2019, December 31, 2018, and March 31, 2018, respectively.
 
             
BANKWELL FINANCIAL GROUP, INC.
LOAN & DEPOSIT PORTFOLIO (unaudited)
(Dollars in thousands)
 
Period End Loan Composition

March 31,
2019

December 31,
2018
% Change
Residential Real Estate $ 174,054 $ 178,079 (2.3 )%
Commercial Real Estate(1) 1,097,354 1,094,066 0.3 %
Construction 88,653   73,191   21.1 %
Total Real Estate Loans 1,360,061 1,345,336 1.1 %
 
Commercial Business 236,110 258,978 (8.8 )%
 
Consumer 248   412   (39.8 )%
Total Loans $ 1,596,419   $ 1,604,726   (0.5 )%
 
(1) Includes owner occupied commercial real estate.
 
 
Period End Deposit Composition

March 31,
2019

December 31,
2018
% Change
Noninterest bearing demand $ 161,844 $ 173,198 (6.6 )%
NOW 61,719 61,869 (0.2 )%
Money Market 469,095 471,968 (0.6 )%
Savings 178,960 180,487 (0.8 )%
Time 649,747   614,722   5.7 %
Total Deposits $ 1,521,365   $ 1,502,244   1.3 %
 
             

BANKWELL FINANCIAL GROUP, INC.

NONINTEREST INCOME & EXPENSE - QTD (unaudited)
(Dollars in thousands)
For the Quarter Ended
Noninterest income

March 31,
2019

    December 31,
2018
    March 31,
2018

Mar 19 vs. Dec 18
% Change

Mar 19 vs. Mar 18
% Change

Service charges and fees $ 249 $ 284 $ 256 (12.3 )% (2.7 )%
Bank owned life insurance 249 262 263 (5.0 )% (5.3 )%
Gains and fees from sales of loans 89 149 370 (40.3 )% (75.9 )%
Net gain on sale of available for sale securities 222 % (100.0 )%
Other 721   (94 ) 222   867.0 % 224.8 %
Total noninterest income $ 1,308   $ 601   $ 1,333   117.6 % (1.9 )%
 
 
For the Quarter Ended
Noninterest expense

March 31,
2019

December 31,
2018
March 31,
2018

Mar 19 vs. Dec 18
% Change

Mar 19 vs. Mar 18
% Change

Salaries and employee benefits $ 4,836 $ 4,503 $ 5,028 7.4 % (3.8 )%
Occupancy and equipment 1,887 1,671 1,617 12.9 % 16.7 %
Professional services 590 583 775 1.2 % (23.9 )%
Data processing 512 487 525 5.1 % (2.5 )%
Marketing 193 416 297 (53.6 )% (35.0 )%
Director fees 189 295 215 (35.9 )% (12.1 )%
FDIC insurance 123 159 214 (22.6 )% (42.5 )%
Amortization of intangibles 19 20 24 (5.0 )% (20.8 )%
Other 626   662   508   (5.4 )% 23.2 %
Total noninterest expense $ 8,975   $ 8,796   $ 9,203   2.0 % (2.5 )%
 
     
BANKWELL FINANCIAL GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (unaudited)
(Dollars in thousands)
 
As of
Computation of Tangible Common Equity to Tangible Assets

March 31,
2019

   

December 31,
2018

   

March 31,
2018

Total Equity $ 176,841 $ 174,196 $ 165,947
Less:
Goodwill 2,589 2,589 2,589
Other intangibles 270   290   358  
Tangible Common Equity $ 173,982   $ 171,317   $ 163,000  
 
Total Assets $ 1,897,758 $ 1,873,665 $ 1,831,243
Less:
Goodwill 2,589 2,589 2,589
Other intangibles 270   290   358  
Tangible Assets $ 1,894,899   $ 1,870,786   $ 1,828,296  
 
Tangible Common Equity to Tangible Assets 9.18 % 9.16 % 8.92 %
 
 
As of
Computation of Tangible Book Value per Common Share

March 31,
2019

December 31,
2018

March 31,
2018

Total shareholders' equity $ 176,841 $ 174,196 $ 165,947
Less:
Preferred stock    
Common shareholders' equity 176,841 174,196 165,947
Less:
Goodwill 2,589 2,589 2,589
Other intangibles 270   290   358
Tangible common shareholders' equity 173,982 171,317 163,000
Common shares issued 7,873,471 7,842,271 7,831,804
Less:
Shares of unvested restricted stock 99,061   77,624   114,336
Common shares outstanding 7,774,410 7,764,647 7,717,468
Book value per share $ 22.75 $ 22.43 $ 21.50
Less:
Effects of intangible assets $ 0.37 $ 0.37 $ 0.38
 
Tangible Book Value per Common Share $ 22.38 $ 22.06 $ 21.12
 
     
BANKWELL FINANCIAL GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (unaudited) - Continued
(Dollars in thousands, except share data)
 
For the Quarter Ended
Computation of Efficiency Ratio

March 31,
2019

   

December 31,
2018

   

March 31,
2018

Noninterest expense $ 8,975 $ 8,796 $ 9,203
Less:
Amortization of intangible assets 19   20   24  
Adjusted noninterest expense $ 8,956   $ 8,776   $ 9,179  
Net interest income $ 14,273 $ 14,467 $ 13,705
Noninterest income 1,308 601 1,333
Less:
Net gain on sale of available for sale securities     222  
Adjusted operating revenue $ 15,581   $ 15,068   $ 14,816  
 
Efficiency ratio 57.5 % 58.2 % 62.0 %
 
 
For the Quarter Ended
Computation of Return on Average Tangible Common Equity

March 31,
2019

December 31,
2018

March 31,
2018

 
Net Income Attributable to Common Shareholders $ 5,080   $ 3,261   $ 4,600  
 
Total average shareholders' equity $ 177,532 $ 177,685 $ 164,369
Less:
Average Goodwill 2,589 2,589 2,589
Average Other intangibles 283   302   374  
 
Average tangible common equity $ 174,660   $ 174,794   $ 161,406  
 
Annualized Return on Average Tangible Common Equity 11.80 % 7.40 % 11.56 %
 
     
BANKWELL FINANCIAL GROUP, INC.
NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS
(Dollars in thousands)
 
For the Quarter Ended
March 31, 2019     March 31, 2018

Average
Balance

    Interest    

Yield/
Rate (5)

Average
Balance

    Interest    

Yield/
Rate (5)

Assets:
Cash and Fed funds sold $ 73,128 $ 383 2.12 % $ 69,164 $ 254 1.49 %
Securities(1) 117,575 932 3.17 % 117,084 888 3.04 %
Loans:
Commercial real estate 1,065,636 12,426 4.66 % 976,294 10,868 4.45 %
Residential real estate 176,490 1,703 3.86 % 197,897 1,799 3.64 %
Construction(2) 81,136 1,124 5.54 % 95,384 1,146 4.81 %
Commercial business 276,744 4,838 6.99 % 280,812 3,597 5.12 %
Consumer 323   5   6.42 % 637   8   4.97 %
Total loans 1,600,329 20,096 5.02 % 1,551,024 17,418 4.49 %
Federal Home Loan Bank stock 7,587   137   7.30 % 9,306   118   5.12 %
Total earning assets 1,798,619 $ 21,548   4.79 % 1,746,578 $ 18,678   4.28 %
Other assets 78,903   66,794  
Total assets $ 1,877,522   $ 1,813,372  
 
Liabilities and shareholders' equity:
Interest bearing liabilities:
NOW $ 58,812 $ 47 0.33 % $ 58,329 $ 19 0.13 %
Money market 473,084 1,981 1.70 % 466,653 1,162 1.01 %
Savings 180,367 769 1.73 % 93,947 196 0.85 %
Time 627,510   3,303   2.13 % 625,728   2,279   1.48 %
Total interest bearing deposits 1,339,773 6,100 1.85 % 1,244,657 3,656 1.19 %
Borrowed Money 175,515   1,103   2.51 % 224,108   1,246   2.22 %
Total interest bearing liabilities 1,515,288 $ 7,203   1.93 % 1,468,765 $ 4,902   1.35 %
Noninterest bearing deposits 163,558 166,289
Other liabilities 21,144   13,949  
Total liabilities 1,699,990 1,649,003
Shareholders' equity 177,532   164,369  
Total liabilities and shareholders' equity $ 1,877,522     $ 1,813,372    
Net interest income(3) $ 14,345   $ 13,776  
Interest rate spread 2.86 % 2.93 %
Net interest margin(4) 3.19 % 3.15 %
(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 $72 thousand and $71 thousand, respectively, for the three months ended March 31, 2019 and 2018.
(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
President and Chief Executive Officer
(203) 652-0166

Penko Ivanov
Executive Vice President and Chief Financial Officer
(203) 652-0166

Source: Bankwell Financial Group, Inc.