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Bankwell Financial Group Reaches Record Asset Levels at $902 Million; Reports Net Income of $1.2 Million; Core Earnings up 23% Year-over-Year

July 31, 2014

NEW CANAAN, Conn.--(BUSINESS WIRE)-- Bankwell Financial Group, Inc. (NASDAQ:BWFG) reported GAAP net income of $1.2 million for the second quarter of 2014. Excluding merger-related expenses and securities gains, net income (defined as core earnings) for the quarter would have been $1.3 million, representing a 23% year-over-year improvement.

Peyton R. Patterson, President and CEO of Bankwell Financial Group stated, “As a newly public company, we are laser focused on delivering strong balance sheet growth and earnings performance for our shareholders.” She added, “The recently completed initial public offering (IPO) raised approximately $45 million in capital, which allows us to fund our organic growth and to make accretive acquisitions in attractive markets. With the pending closing of the Quinnipiac Bank & Trust acquisition, subject to regulatory and shareholder approval, total assets will exceed $1 billion.”

Earnings

Revenues (net interest income plus non-interest income, excluding security gains) for the three months ended June 30, 2014 were $7.8 million, an increase of 10% compared to June 30, 2013. Revenues (net interest income plus non-interest income, excluding security gains) for the six months ended June 30, 2014 were $15.7 million, an increase of 17% compared to June 30, 2013. Total net interest income for the three months ended June 30, 2014 was $7.1 million, an increase of 14% compared to the same period in the prior year. The strong improvement in net interest income was fueled by record loans outstanding and a year-to-date net interest margin of 3.82%.

Net income for the second quarter of 2014 was $1.2 million, representing a 9% increase over the linked quarter. Contributing to the favorable earnings improvement was the 2% reduction in operating expenses, exclusive of merger related costs. The decrease in operating expenses was coupled with a reduction in the loan loss provision by 67% as a result of favorable credit quality and a second quarter recovery of approximately $400,000. Excluding the CRE loan sale that generated $413,000 in fee income in the first quarter, non-interest income on a linked quarter basis increased from $356,000 to $682,000, a result of depositor service charge income and gains on the sale of SBA loans.

Financial Condition

On the balance sheet, assets totaled a record $902 million at June 30, 2014, a 38% increase over total assets of $654 million for the same period in the prior year. This increase reflects strong loan growth, proceeds from the IPO and, to a lesser extent, The Wilton Bank acquisition. Total loans were $684 million, a 19% increase year-over-year. Deposits increased to $730 million, a 41% increase over June 30, 2013, with core deposits showing a 31% increase to $469 million.

Asset Quality

Asset quality remained exceptionally strong at June 30, 2014. Non-performing assets as a percentage of total assets was 0.22% at June 30, 2014, down from 0.24% at June 30, 2013. The allowance for loan losses as of June 30, 2014 was $9.0 million, representing 1.31% of total loans.

Capital

Shareholders’ equity was strong at $117.2 million as of June 30, 2014, an increase of $47.7 million compared to December 31, 2013, primarily a result of the approximately $45 million raised in the IPO. As of June 30, 2014, the Tangible Common Equity Ratio and Tangible Book Value per share were 11.73% and $16.32, respectively.

About Bankwell Financial Group

Bankwell is a commercial bank that serves the banking and lending needs of residents and businesses throughout Fairfield County, CT. For more information about this press release, interested parties can contact Peyton R. Patterson, President and CEO or Ernest J. Verrico, CFO of Bankwell Financial Group at (203) 972-3838.

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.

       
BANKWELL FINANCIAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS (unaudited)
(Dollars in thousands)
 
June 30,December 31,June 30,
201420132013
Assets
Cash and due from banks $ 130,535 $ 82,013 $ 38,610
Held to maturity investment securities, at amortized cost 13,742 13,816 5,251
Available for sale investment securities, at fair value 49,114 28,597 29,441
Loans held for sale 325 100 -

Loans receivable (net of allowance for loan losses of $8,985, $8,382 and $8,224 at June 30, 2014, December 31, 2013 and June 30, 2013 respectively)

671,500 621,830 565,488
Foreclosed real estate 829 829 26
Accrued interest receivable 2,464 2,360 2,185
Federal Home Loan Bank stock, at cost 4,834 4,834 4,577
Premises and equipment, net 8,078 7,060 2,334
Bank-owned life insurance 10,202 10,031 -
Other intangible assets 427 481 -
Deferred income taxes, net 5,479 5,845 3,448
Other assets   4,258   1,822   2,892
Total assets $ 901,787 $ 779,618 $ 654,252
 
Liabilities & Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing $ 146,487 $ 118,618 $ 95,244
Interest-bearing   583,700   542,927   424,010
Total deposits 730,187 661,545 519,254
 
Advances from the Federal Home Loan Bank 47,000 44,000 69,000
Accrued expenses and other liabilities   7,431   4,588   5,439
Total liabilities   784,618   710,133   593,693
 
Commitments and contingencies
 
Shareholders' equity

Preferred stock, senior noncumulative perpetual, Series C, no par; 10,980 shares issued and outstanding at June 30, 2014, December 31, 2013, and June 30, 2013 respectively; liquidation value of $1,000 per share.

10,980 10,980 10,980

Common stock, no par value; 10,000,000 shares authorized, 6,593,485, 3,876,393 and 3,387,653 shares issued at June 30, 2014, December 31, 2013 and June 30, 2013 respectively.

97,295 52,105 45,667
Retained earnings 8,271 5,976 3,351
Accumulated other comprehensive income   623   424   561
Total shareholders' equity   117,169   69,485   60,559
 
Total liabilities and shareholders' equity $ 901,787 $ 779,618 $ 654,252
 
                                         
BANKWELL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars in thousands, except per share data)
 

Three Months Ended
June 30,

Six Months Ended
June 30,

Three Months Ended
March 31,

  2014   2013     2014   2013   2014   2013
Interest and dividend income
Interest and fees on loans $ 7,558 $ 6,572 $ 14,986 $ 12,871 $ 7,428 $ 6,299
Interest and dividends on securities 437 318 848 685 411 367
Interest on cash and cash equivalents   49   11     71   21   22   10
Total interest income 8,044 6,901 15,905 13,577 7,861 6,676
 
Interest expense
Interest expense on deposits 730 514 1,352 953 622 439
Interest on borrowings   166   139     259   291   93   152
Total interest expense 896 653 1,611 1,244 715 591
 
Net interest income 7,148 6,248 14,294 12,333 7,146 6,085
 
Provision for loan losses   70   252     282   442   211   190
 
Net interest income after provision for loan losses   7,078   5,996     14,012   11,891   6,935   5,895
 
Noninterest income
Gains and fees from sales of loans 213 757 642 765 428 8
Net gain on sale of available for sale securities - 648 - 648 - -
Service charges and fees 143 101 267 198 124 97
Bank owned life insurance 86 - 171 - 85 -
Gain (loss) on sale of foreclosed real estate, net - (5 ) - 66 - 71
Other   240   23     372   131   132   108
Total noninterest income   682   1,524     1,452   1,808   769   284
 
Noninterest expense
Salaries and employee benefits 3,284 2,752 6,625 5,252 3,341 2,499
Occupancy and equipment 1,030 787 2,096 1,558 1,066 771
Data processing 300 251 639 505 338 255
Professional services 272 421 641 790 369 369
Marketing 218 270 328 398 110 128
Director fees 143 144 282 284 139 139
Merger and acquisition related expenses 122 64 263 64 141 -
FDIC insurance 107 100 225 230 118 130
Amortization of intangibles 27 - 54 - 27 -
Foreclosed real estate - 4 12 4 14 -
Other   394   338     774   644   378   307
Total noninterest expense   5,897   5,131     11,939   9,729   6,041   4,598
 
Income before income tax expense 1,863 2,389 3,525 3,970 1,663 1,581
 
Income tax expense   636   921     1,175   1,490   540   569
 
Net income $ 1,227 $ 1,468 $ 2,350 $ 2,480 $ 1,123 $ 1,012
 
Net income attributable to common shareholders $ 1,173 $ 1,420   $ 2,235 $ 2,388 $ 1,095 $ 984
 
Earnings per common share - basic $ 0.23 $ 0.43 $ 0.51 $ 0.74 $ 0.28 $ 0.31
Earnings per common share - diluted 0.23 0.42 0.51 0.72 0.28 0.30
 
         
BANKWELL FINANCIAL GROUP, INC.
RECONCILIATION GAAP - NON GAAP (unaudited)
(Dollars in thousands)
 
 
For the three months ended June 30, 2014
Net Income $     1,227
Merger and Acquisition Related Expenses 122
Income Tax Expense (benefit)       (42 )
Net adjustment       80  
Core Earnings $     1,307  
 
 
 
For the three months ended June 30, 2013
Net Income $ 1,468
Gain on sale of Available for Sale Securities (648 )
Income Tax Expense (benefit)       244  
Net adjustment       (404 )
Core Earnings $     1,064  
 
 

BANKWELL FINANCIAL GROUP, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
(Dollars in thousands, except per share data)
                 
Three Months Ended
June 30,

2014

March 31,

2014

 

June 30,

2013

Performance ratios:
Return on average assets   0.58 %   0.64 %   0.90 %
Return on average stockholders' equity 5.46 % 12.81 % 9.71 %
Net interest margin 3.68 % 3.97 % 3.97 %
Efficiency ratio (1) 73.77 % 74.37 % 71.98 %
 
As of
June 30,

2014

March 31,

2014

June 30,

2013

Capital ratios:
Total Capital to Risk-Weighted Assets (2) 16.48 % 10.74 % 10.81 %
Tier I Capital to Risk-Weighted Assets (2) 15.23 % 9.49 % 9.56 %
Tier I Capital to Average Assets (2) 12.49 % 7.90 % 7.85 %
Tangible common equity to tangible assets 11.73 % 7.35 % 7.58 %
 
Tangible book value per common share $ 16.32 $ 15.79 $ 14.85
 
Asset quality:
Nonaccrual loans $ 1,111 $ 2,101 $ 1,597
Other real estate owned     829       829       26  
Total non-performing assets $   1,940   $   2,930   $   1,623  
 
 
Loans past due 90 days and still accruing $ 1,294 $ 1,747 $ -
 
 
Nonperforming loans as a % of total loans 0.28 % 0.32 % 0.38 %

 

Nonperforming assets as a % of total assets 0.22 % 0.36 % 0.24 %

 

 

Allowance for loan losses as a % of total loans 1.31 % 1.31 % 1.42 %
 
Allowance for loan losses as a % of nonperforming loans 463.14 % 409.48 % 371.65 %
 
Annualized net loan charge-offs as a % of average loans 0.00 % 0.00 % 0.00 %
 
 
(1) Efficiency ratio is defined as non-interest expenses divided by our operating revenue, which is equal to net interest income plus non-interest income excluding gains and losses on sales of securities. 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.
                 
BANKWELL FINANCIAL GROUP, INC.
NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS
(Dollars in thousands)
 
For the Three Months Ended
June 30, 2014June 30, 2013
AverageYield/AverageYield/
BalanceInterestRateBalanceInterestRate
Assets:
Cash and Fed funds sold $ 78,646 $ 49 0.25 % $ 22,693 $ 11 0.19 %
Securities (1) 51,755 529 4.05 % 38,219 392 4.11 %
Loans: (2)
Commercial real estate 335,263 4,086 4.82 % 308,972 3,815 4.89 %
Residential real estate 160,899 1,467 3.61 % 152,353 1,380 3.63 %
Construction (3) 42,377 515 4.80 % 36,924 448 4.80 %
Commercial business 98,113 1,239 4.99 % 62,745 819 5.16 %
Home equity 13,124 122 3.74 % 10,828 102 3.76 %
Consumer 714 15 8.17 % 747 9 5.05 %
Acquired loan portfolio non accrual loans (net of mark)   3,220   116 14.49 %   -   - 0.00 %
Total loans 653,710 7,560 4.57 % 572,569 6,573 4.54 %
Federal Home Loan Bank stock   4,881   18 1.47 %   4,521   4 0.37 %
Total earning assets 788,992 $ 8,156 4.09 % 638,002 $ 6,980 4.33 %
Other assets   57,416   16,976
Total assets $

846,408

$ 654,978
 
Liabilities and shareholders' equity:
Deposits:
Noninterest-bearing $ 127,051 $ - 0.00 % $ 85,744 - 0.00 %
NOW 52,605 15 0.11 % 36,614 12 0.13 %
Money market 173,202 167 0.39 % 105,334 110 0.42 %
Savings 92,501 68 0.30 % 120,356 139 0.46 %
Time   233,044   481 0.83 %   148,957   253 0.68 %
Total deposits 678,403 731 0.53 % 497,005 514 0.50 %
Federal Home Loan Bank advances   48,089   166 1.39 %   86,107   138 0.64 %
Total funding liabilities 726,492 $ 897 0.60 % 583,112 $ 652 0.53 %
Other liabilities 29,799 11,209
Shareholders' equity   90,117   60,657
Total liabilities and shareholders' equity $ 846,408 $ 654,978
Net interest income (4) $ 7,259 $ 6,328
 
Interest rate spread 3.49 % 3.80 %
 
Net interest margin (5) 3.68 % 3.97 %
 
 
(1) Average balances and yields for securities are based on amortized cost.
(2) Average balances and yields for loans exclude nonperforming loans.
(3) Includes commercial and residential real estate construction.
(4) The adjustment for securities and loans taxable equivalency amounted to $111 thousand, $80 thousand, respectively for the three months ended June 30, 2014, and 2013.
(5) Net interest income as a percentage of earning assets.
 
                 
BANKWELL FINANCIAL GROUP, INC.
NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS
(Dollars in thousands)
 
For the Six Months Ended
June 30, 2014June 30, 2013
AverageYield/AverageYield/
BalanceInterestRateBalanceInterestRate
Assets:
Cash and Fed funds sold $ 55,672 $ 71 0.26 % $ 19,493 $ 21 0.22 %
Securities (1) 49,751 1,031 4.14 % 40,996 843 4.15 %
Loans: (2)
Commercial real estate 329,700 8,051 4.86 % 294,175 7,415 5.01 %
Residential real estate 158,508 2,863 3.61 % 149,511 2,785 3.76 %
Construction (3) 45,854 1,045 4.53 % 35,201 857 4.84 %
Commercial business 98,087 2,408 4.88 % 62,190 1,609 5.15 %
Home equity 13,666 249 3.68 % 10,681 198 3.73 %
Consumer 610 27 8.80 % 406 11 3.73 %
Acquired loan portfolio non accrual loans (net of mark)   3,466   344 20.03 %   -   - 5.55 %
Total loans 649,891 14,987 4.59 % 552,164 12,875 4.64 %
Federal Home Loan Bank stock   4,834   36 1.49 %   4,517   8 0.37 %
Total earning assets 760,148 $ 16,125 4.22 % 617,170 $ 13,747 4.43 %
Other assets   47,324   11,164
Total assets $ 807,472 $ 628,334
 
Liabilities and shareholders' equity:
Deposits:
Noninterest-bearing $ 124,475 $ - 0.00 % $ 82,113 - 0.00 %
NOW 52,668 28 0.11 % 35,081 24 0.14 %
Money market 172,859 346 0.40 % 99,974 200 0.40 %
Savings 100,240 151 0.30 % 126,444 294 0.47 %
Time   208,151   827 0.80 %   135,473   435 0.65 %
Total deposits 658,393 1,352 0.51 % 479,085 953 0.40 %
Federal Home Loan Bank advances   48,901   259 1.07 %   83,077   291 0.71 %
Total funding liabilities 707,294 $ 1,611 0.56 % 562,162 $ 1,244 0.45 %
Other liabilities 20,265 6,195
Shareholders' equity   79,913   59,977
Total liabilities and shareholders' equity $ 807,472 $ 628,334
Net interest income (4) $ 14,514 $ 12,503
Interest rate spread 3.66 % 3.98 %
 
Net interest margin (5) 3.82 % 4.03 %
 
 
(1) Average balances and yields for securities are based on amortized cost.
(2) Average balances and yields for loans exclude nonperforming loans.
(3) Includes commercial and residential real estate construction.
(4) The adjustment for securities and loans taxable equivalency amounted to $220 thousand, $170 thousand, respectively for the six months ended June 30, 2014, and 2013.
(5) Net interest income as a percentage of earning assets.
 

Bankwell Financial Group
Peyton R. Patterson, 203-972-3838
President and CEO
or
Ernest J. Verrico, 203-972-3838
CFO

Source: Bankwell Financial Group, Inc.

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