BANKWELL FINANCIAL GROUP REPORTS RECORD SECOND QUARTER NET INCOME OF $4.7 MILLION OR $0.60 PER SHARE AND DECLARES THIRD QUARTER DIVIDEND
New Canaan, CT – July 26, 2018 – Bankwell Financial Group, Inc. (NASDAQ: BWFG) reported GAAP net income of $4.7 million or $0.60 per share for the second quarter of 2018, versus $3.8 million or $0.49 per share for the same period in 2017.
The Company's Board of Directors declared a $0.12 per share cash dividend, payable August 27, 2018 to shareholders of record on August 17, 2018.
Notes Bankwell Financial Group President and CEO, Christopher R. Gruseke:
"During the second quarter Bankwell improved its operating metrics on multiple fronts. We saw a return to more rational pricing, and loan origination exceeded $91 million, versus $55 million originated during Q1. Funded loans grew by $73 million in Q2, versus $28 million for Q1. Q2 performance represents annualized loan growth of approximately 10%."
"On the expense side, Q2 results demonstrated that Q1 performance did not represent the start of an unfavorable trend. The quarter's efficiency ratio was 58.2%, versus 62.0% in Q1, bringing the year to date ratio down to 60.1%. Our management team is committed to continue to drive the ratio down."
"June also saw the successful opening of three new branches in Fairfield County, CT. We are excited about our growth prospects in these markets and are confident that these branches will have made a meaningful impact on deposit balances by this time next year."
"In Q1 we disclosed the addition of two loan relationships, totaling $14 million, to non-performing asset ("NPA") balances. Subsequent to the end of the second quarter, the smaller of the two exposures disclosed in Q1, with an unpaid balance of approximately $4 million, was repaid in full. Our second quarter allowance for loan losses ("ALLL") included approximately $0.6 million in specific reserves for this credit."
"During Q2, for the larger of the two relationships, the NPA balance increased from $10 million to $13 million. The increase does not reflect further deterioration of the credit but is a result of the required re-purchase by Bankwell of the guaranteed portion of the loan sold to investors as part of the Small Business Administration's ("SBA") 7(a) Program. Our second quarter results include the addition of approximately $3 million in specific reserves associated with this relationship. We believe this specific reserve adequately provides against the risk of loss associated with this lending relationship based on the information available at this time. Meanwhile, we continue to work with the borrower to explore multiple pathways to repayment of these loans. The $3 million specific reserve was largely offset by a required reduction in the Bank's general loan loss reserve. Bankwell utilizes both its own and peer group historical loss data as part of its ALLL calculation. As higher historical loss periods are being replaced with periods with lower losses, the Bank's general ALLL reserve is recalculated to reflect the improving loss trends. There should be no confusion that, with or without the $3 million specific reserve recorded in Q2 2018, the reduction in the general ALLL reserve was required by the consistent application of our ALLL methodology."
"Bankwell's balance sheet and credit culture remain strong. Further, the Bank's general ALLL reserve provides a 256% coverage of NPAs that are not already covered by a specific reserve."
Additional Second Quarter 2018 Highlights:
| · | Second quarter diluted earnings per share were $0.60, an increase of 22% compared to the second quarter of 2017. |
| · | Return on average assets reached 1.02% for the quarter ended June 30, 2018 compared to 0.88% for the quarter ended June 30, 2017. |
| · | Return on average tangible common equity reached 11.41% in the second quarter of 2018 compared to 10.09% for the quarter ended June 30, 2017. |
| · | The tangible book value per common share at June 30, 2018 was $21.56, an 8% increase over June 30, 2017. |
| · | Second quarter total revenue (net interest income plus non-interest income) was $15.0 million versus $14.6 million in the same period last year, a 3% increase. |
| · | The second quarter efficiency ratio totaled 58.2% compared to 62.0% for the first quarter of 2018. |
| · | The second quarter noninterest expense totaled $8.8 million compared to $9.2 million for the first quarter of 2018, reflecting the absence of Q1'18 non-recurring expenses. |
| · | Tax equivalent net interest margin was 3.14% for the second quarter of 2018. |
| · | Total gross loans approached $1.6 billion for the second quarter of 2018 and grew at an annualized rate of 10% during the second quarter of 2018. |
| · | Total assets approached $1.9 billion and grew at an annualized rate of 9% during the second quarter of 2018. |
| · | Total deposits approached $1.5 billion and grew at an annualized rate of 11% during the second quarter of 2018. |
| · | The allowance for loan losses was $19.0 million and represents 1.19% of total loans. |
| · | Investment securities totaled $114.1 million and represent 6% of total assets. |
Earnings
Net income for the quarter ended June 30, 2018 was $4.7 million, an increase of 25% compared to the quarter ended June 30, 2017. Net income for the six months ended June 30, 2018 was $9.3 million, an increase of 25% compared to the six months ended June 30, 2017. Revenues (net interest income plus non-interest income) for the quarter ended June 30, 2018 were $15.0 million, an increase of 3% compared to the quarter ended June 30, 2017. Revenues for the six months ended June 30, 2018 were $30.1 million, an increase of 4% compared to the six months ended June 30, 2017. Net interest income for the quarter ended June 30, 2018 was $13.9 million, an increase of 2% compared to the quarter ended June 30, 2017. Net interest income for the six months ended June 30, 2018 was $27.6 million, an increase of 4% compared to the six months ended June 30, 2017. The increase in net income was driven by an increase in interest and fees on loans and from a reduction in the corporate tax rate from 35% to 21% resulting from 2017 tax reform, offset by increases in interest expense and noninterest expense. The increase in interest and fees on loans was a result of commercial real estate and commercial business loan growth as compared to June 30, 2017.
Basic and diluted earnings per share were each $0.60 for the quarter ended June 30, 2018 compared to $0.49 for the quarter ended June 30, 2017. Basic and diluted earnings per share were each $1.19 for the six months ended June 30, 2018 compared to $0.98 and $0.97, respectively, for the six months ended June 30, 2017.
The Company's efficiency ratio for the quarters ended June 30, 2018 and June 30, 2017 was 58.2% and 51.2%, respectively. The Company's efficiency ratio for the six months ended June 30, 2018 and June 30, 2017 was 60.1% and 54.7%, respectively. The increase in the efficiency ratio was driven by an increase in noninterest expense as the Company continues to grow its balance sheet and the opening of three new branches during Q2.
Noninterest Income and Expense
Noninterest income increased $109 thousand or 11% to $1.1 million for the three months ended June 30, 2018 compared to the three months ended June 30, 2017. Noninterest income increased $176 thousand or 8% to $2.4 million for the six months ended June 30, 2018 compared to the six months ended June 30, 2017. The increase in noninterest income was primarily driven by an increase in gains and fees from the sales of loans. Gains and fees from the sales of loans totaled $315 thousand for the quarter ended June 30, 2018 compared to $199 thousand for the same period in 2017, an increase of $116 thousand. Gains and fees from the sales of loans totaled $685 thousand for the six months ended June 30, 2018 compared to $523 thousand for the same period in 2017, an increase of $162 thousand.
Noninterest expense increased $1.2 million or 16% for the three months ended June 30, 2018 compared to the three months ended June 30, 2017. The increase was primarily driven by an increase in salaries and employee benefits and an increase in occupancy and equipment expense. Salaries and employee benefits totaled $4.5 million for the quarter ended June 30, 2018 compared to $3.8 million for the same period in 2017, an increase of $0.7 million. The increase in salaries and employee benefits was primarily driven by an increase in full time equivalent employees. 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, opened during the second quarter of 2018. Average full time equivalent employees totaled 145 at June 30, 2018 compared to 129 at June 30, 2017. Occupancy and equipment expense totaled $1.7 million for the quarter ended June 30, 2018 compared to $1.4 million for the same period in 2017, an increase of $292 thousand. 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.
Noninterest expense increased $2.2 million or 14% for the six months ended June 30, 2018 compared to the six months ended June 30, 2017. The increase was primarily driven by an increase in salaries and employee benefits, occupancy and equipment expense and professional services. Salaries and employee benefits totaled $9.6 million for the six months ended June 30, 2018 compared to $7.7 million for the same period in 2017, an increase of $1.8 million. The increase in salaries and employee benefits was primarily driven by an increase in full time equivalent employees, which is in line with year over year business growth and driven by staffing for the three new branch locations and a reduction in deferred loan origination costs as a result of lower year-to-date loan volume. Occupancy and equipment expense totaled $3.3 million for the six months ended June 30, 2018 compared to $3.1 million for the same period in 2017, an increase of $217 thousand. 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. Professional services totaled $1.2 million for the six months ended June 30, 2017 compared to $935 thousand for the same period in 2017, an increase of $264 thousand. The increase in professional services was primarily driven by increases in audit related expenses.
Financial Condition
Assets totaled $1.9 billion at June 30, 2018, an annualized increase of 8% compared to assets of $1.8 billion at December 31, 2017. Total gross loans were $1.6 billion at June 30, 2018, an increase of $51.4 million compared to December 31, 2017, driven by disciplined growth in commercial loans. Deposits increased to $1.5 billion, an annualized increase of 10% over December 31, 2017.
Asset Quality
Non-performing assets as a percentage of total assets was 1.25% at June 30, 2018, up from 0.31% at December 31, 2017. The increase in non-performing assets is primarily driven by two recently impaired commercial loan relationships. Subsequent to the second quarter, the smaller of the two relationships, with an unpaid balance of approximately $4 million, was repaid in full. The allowance for loan losses was $19.0 million, representing 1.19% of total loans and $18.9 million, representing 1.23% of total loans at June 30, 2018 and December 31, 2017, respectively. The Bank's general ALLL provides a 256% coverage of NPAs that are not already covered by a specific reserve as of June 30, 2018.
Capital
Shareholders' equity totaled $169.6 million as of June 30, 2018, an increase of $8.5 million compared to December 31, 2017, primarily a result of net income for the six months ended June 30, 2018 of $9.3 million and equity from stock transactions totaling $1.5 million, offset by dividends paid of $1.9 million. As of June 30, 2018, the tangible common equity ratio and tangible book value per share were 8.92% and $21.56, respectively.
About Bankwell Financial Group
Bankwell is a commercial bank that serves the banking and lending 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 table. 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. 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) | | | | | | | | |
| | | | | | | | | |
| | | June 30, | | March 31, | | December 31, | June 30, |
| | | 2018 | | 2018 | | 2017 | | 2017 |
| Assets | | | | | | | | |
| Cash and due from banks | | $ 89,214 | | $ 81,249 | | $ 70,545 | | $ 84,802 |
| Federal funds sold | | 105 | | 2,121 | | 186 | | 1,185 |
| Cash and cash equivalents | | 89,319 | | 83,370 | | 70,731 | | 85,987 |
| | | | | | | | | |
| Available for sale investment securities, at fair value | | 92,608 | | 99,050 | | 92,188 | | 90,951 |
| Held to maturity investment securities, at amortized cost | | 21,505 | | 21,546 | | 21,579 | | 23,615 |
| Loans receivable (net of allowance for loan losses of $19,006, $18,801, | | | | | | |
| $18,904 and $19,536 at June 30, 2018, March 31, 2018, December 31, 2017 | | | | | | |
| and June 30, 2017, respectively) | | 1,572,591 | | 1,534,565 | | 1,520,879 | | 1,463,240 |
| Foreclosed real estate | | - | | 487 | | - | | 222 |
| Accrued interest receivable | | 5,522 | | 5,331 | | 5,910 | | 5,239 |
| Federal Home Loan Bank stock, at cost | | 9,333 | | 9,310 | | 9,183 | | 8,033 |
| Premises and equipment, net | | 20,313 | | 19,207 | | 18,196 | | 17,366 |
| Bank-owned life insurance | | 40,146 | | 39,880 | | 39,618 | | 39,034 |
| Goodwill | | 2,589 | | 2,589 | | 2,589 | | 2,589 |
| Other intangible assets | | 334 | | 358 | | 382 | | 438 |
| Deferred income taxes, net | | 4,683 | | 4,716 | | 4,904 | | 8,957 |
| Other assets | | 11,859 | | 10,834 | | 10,448 | | 10,133 |
| Total assets | | $ 1,870,802 | | $ 1,831,243 | | $ 1,796,607 | | $ 1,755,804 |
| | | | | | | | | |
| Liabilities & Shareholders' Equity | | | | | | | | |
| Liabilities | | | | | | | | |
| Deposits | | | | | | | | |
| Noninterest-bearing deposits | | $ 168,295 | | $ 161,641 | | $ 172,638 | | $ 176,495 |
| Interest-bearing deposits | | 1,297,343 | | 1,264,886 | | 1,225,767 | | 1,237,790 |
| Total deposits | | 1,465,638 | | 1,426,527 | | 1,398,405 | | 1,414,285 |
| | | | | | | | | |
| Advances from the Federal Home Loan Bank | | 199,000 | | 199,000 | | 199,000 | | 150,000 |
| Subordinated debentures | | 25,129 | | 25,116 | | 25,103 | | 25,077 |
| Accrued expenses and other liabilities | | 11,462 | | 14,653 | | 13,072 | | 12,865 |
| Total liabilities | | 1,701,229 | | 1,665,296 | | 1,635,580 | | 1,602,227 |
| | | | | | | | | |
| | | | | | | | | |
| Shareholders' equity | | | | | | | | |
| Common stock, no par value; 10,000,000 shares authorized, 7,841,720, 7,831,804, | | | | | | |
| 7,751,424 and 7,673,850 shares issued and outstanding at June 30, 2018, | | | | | | |
| March 31, 2018, December 31, 2017 and June 30, 2017, respectively | 119,824 | | 119,363 | | 118,301 | | 116,502 |
| Retained earnings | | 48,470 | | 44,695 | | 41,032 | | 36,053 |
| Accumulated other comprehensive income | | 1,279 | | 1,889 | | 1,694 | | 1,022 |
| Total shareholders' equity | | 169,573 | | 165,947 | | 161,027 | | 153,577 |
| | | | | | | | | |
| Total liabilities and shareholders' equity | | $ 1,870,802 | | $ 1,831,243 | | $ 1,796,607 | | $ 1,755,804 |
| | | | | | | | | |
| BANKWELL FINANCIAL GROUP, INC. | | | | | | | | | | | | |
| CONSOLIDATED STATEMENTS OF INCOME (unaudited) | | | | | | | | | | |
| (Dollars in thousands, except per share data) | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | For the Quarter Ended | | For the Six Months Ended |
| | | June 30, | | March 31, | | December 31, | June 30, | | June 30, | | June 30, |
| | | 2018 | | 2018 | | 2017 | | 2017 | | 2018 | | 2017 |
| Interest and dividend income | | | | | | | | | | | | |
| Interest and fees on loans | | $ 18,114 | | $ 17,418 | | $ 17,493 | | $ 16,660 | | $ 35,532 | | $ 32,173 |
| Interest and dividends on securities | | 975 | | 935 | | 947 | | 880 | | 1,910 | | 1,689 |
| Interest on cash and cash equivalents | | 325 | | 254 | | 289 | | 148 | | 579 | | 262 |
| Total interest income | | 19,414 | | 18,607 | | 18,729 | | 17,688 | | 38,021 | | 34,124 |
| | | | | | | | | | | | | |
| Interest expense | | | | | | | | | | | | |
| Interest expense on deposits | | 4,309 | | 3,656 | | 3,602 | | 3,095 | | 7,965 | | 5,676 |
| Interest on borrowings | | 1,197 | | 1,246 | | 1,213 | | 952 | | 2,443 | | 1,859 |
| Total interest expense | | 5,506 | | 4,902 | | 4,815 | | 4,047 | | 10,408 | | 7,535 |
| | | | | | | | | | | | | |
| Net interest income | | 13,908 | | 13,705 | | 13,914 | | 13,641 | | 27,613 | | 26,589 |
| | | | | | | | | | | | | |
| Provision (Credit) for loan losses | | 310 | | 13 | | (495) | | 895 | | 323 | | 1,438 |
| | | | | | | | | | | | | |
| Net interest income after provision (credit) for loan losses | 13,598 | | 13,692 | | 14,409 | | 12,746 | | 27,290 | | 25,151 |
| | | | | | | | | | | | | |
| Noninterest income | | | | | | | | | | | | |
| Gains and fees from sales of loans | | 315 | | 370 | | 868 | | 199 | | 685 | | 523 |
| Bank owned life insurance | | 265 | | 263 | | 289 | | 295 | | 528 | | 586 |
| Service charges and fees | | 265 | | 256 | | 252 | | 261 | | 521 | | 501 |
| Loss on sale of foreclosed real estate, net | | - | | - | | (78) | | - | | - | | - |
| Net gain on sale of available for sale securities | | - | | 222 | | - | | - | | 222 | | 165 |
| Other | | 262 | | 222 | | 210 | | 243 | | 484 | | 489 |
| Total noninterest income | | 1,107 | | 1,333 | | 1,541 | | 998 | | 2,440 | | 2,264 |
| | | | | | | | | | | | | |
| Noninterest expense | | | | | | | | | | | | |
| Salaries and employee benefits | | 4,539 | | 5,028 | | 4,603 | | 3,800 | | 9,567 | | 7,729 |
| Occupancy and equipment | | 1,731 | | 1,617 | | 1,585 | | 1,439 | | 3,348 | | 3,131 |
| Data processing | | 509 | | 525 | | 399 | | 401 | | 1,034 | | 846 |
| Marketing | | 479 | | 297 | | 321 | | 311 | | 776 | | 577 |
| Professional services | | 424 | | 775 | | 457 | | 523 | | 1,199 | | 935 |
| Director fees | | 274 | | 215 | | 229 | | 243 | | 489 | | 476 |
| FDIC insurance | | 203 | | 214 | | 225 | | 243 | | 417 | | 626 |
| Amortization of intangibles | | 24 | | 24 | | 25 | | 31 | | 48 | | 62 |
| Other | | 581 | | 508 | | 735 | | 590 | | 1,089 | | 1,433 |
| Total noninterest expense | | 8,764 | | 9,203 | | 8,579 | | 7,581 | | 17,967 | | 15,815 |
| | | | | | | | | | | | | |
| Income before income tax expense | | 5,941 | | 5,822 | | 7,371 | | 6,163 | | 11,763 | | 11,600 |
| | | | | | | | | | | | | |
| Income tax expense | | 1,226 | | 1,222 | | 5,275 | | 2,394 | | 2,448 | | 4,129 |
| | | | | | | | | | | | | |
| Net income | | $ 4,715 | | $ 4,600 | | $ 2,096 | | $ 3,769 | | $ 9,315 | | $ 7,471 |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Earnings Per Common Share: | | | | | | | | | | | | |
| Basic | | $ 0.60 | | $ 0.59 | | $ 0.27 | | $ 0.49 | | $ 1.19 | | $ 0.98 |
| Diluted | | 0.60 | | 0.59 | | 0.27 | | 0.49 | | 1.19 | | 0.97 |
| | | | | | | | | | | | | |
| Weighted Average Common Shares Outstanding: | | | | | | | | | | | | |
| Basic | | 7,722,892 | | 7,676,813 | | 7,624,931 | | 7,550,734 | | 7,699,977 | | 7,538,069 |
| Diluted | | 7,761,560 | | 7,722,120 | | 7,702,770 | | 7,645,930 | | 7,747,068 | | 7,638,350 |
| Dividends per common share | | $ 0.12 | | $ 0.12 | | $ 0.07 | | $ 0.07 | | $ 0.24 | | $ 0.14 |
| BANKWELL FINANCIAL GROUP, INC. | | | | | | | | | |
| CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited) | | | | | | | |
| (Dollars in thousands, except per share data) | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | For the Quarter Ended | | For the Six Months Ended |
| | | June 30, | | March 31, | December 31, | June 30, | | June 30, | | June 30, | |
| | | 2018 | | 2018 | | 2017 | | 2017 | | 2018 | | 2017 | |
| Performance ratios: | | | | | | | | | | | | | |
| Return on average assets* | | 1.02% | | 1.03% | | 0.46% | | 0.88% | | 1.03% | | 0.90% | |
| Return on average stockholders' equity* | | 11.21% | | 11.35% | | 5.15% | | 9.89% | | 11.28% | | 10.00% | |
| Return on average tangible common equity* | 11.41% | | 11.56% | | 5.25% | | 10.09% | | 11.48% | | 10.21% | |
| Net interest margin | | 3.14% | | 3.15% | | 3.23% | | 3.32% | | 3.15% | | 3.34% | |
| Efficiency ratio (1) | | 58.2% | | 62.0% | | 55.1% | | 51.2% | | 60.1% | | 54.7% | |
| | | | | | | | | | | | | | |
| Net loan charge-offs (recoveries) as a % of average loans | | | 0.01% | | 0.01% | | (0.01%) | | 0.01% | | (0.01%) | |
| | | | | | | | | | | | | | |
*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 4Q'17 Earnings Release for further detail.
| | | | As of | | |
| | | | June 30, 2018 | March 31, 2018 | December 31, 2017 | June 30, 2017 | | |
| Capital ratios: | | | | | | | | | | | |
| Total Common Equity Tier 1 Capital to Risk-Weighted Assets (2) | 11.31% | | 11.18% | | 10.99% | | 10.91% | | |
| Total Capital to Risk-Weighted Assets (2) | | | 12.47% | | 12.35% | | 12.19% | | 12.16% | | |
| Tier I Capital to Risk-Weighted Assets (2) | | | 11.31% | | 11.18% | | 10.99% | | 10.91% | | |
| Tier I Capital to Average Assets (2) | | | 10.03% | | 9.90% | | 9.61% | | 9.75% | | |
| Tangible common equity to tangible assets | | 8.92% | | 8.92% | | 8.81% | | 8.59% | | |
| | | | | | | | | | | | |
| Tangible book value per common share (3) | | | $ 21.56 | | $ 21.12 | | $ 20.59 | | $ 19.89 | | |
| | | | | | | | | | | | |
| Asset quality: | | | | | | | | | | | |
| Nonaccrual loans | | | $ 23,325 | | $ 20,374 | | $ 5,481 | | $ 5,303 | | |
| Other real estate owned | | | - | | 487 | | - | | 222 | | |
| Total non-performing assets (4) | | | $ 23,325 | | $ 20,861 | | $ 5,481 | | $ 5,525 | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Nonperforming loans as a % of total loans | | | 1.46% | | 1.31% | | 0.36% | | 0.36% | | |
| | | | | | | | | | | | |
| Nonperforming assets as a % of total assets | 1.25% | | 1.14% | | 0.31% | | 0.31% | | |
| | | | | | | | | | | | |
| Allowance for loan losses as a % of total loans | 1.19% | | 1.21% | | 1.23% | | 1.31% | | |
| | | | | | | | | | | | |
| Allowance for loan losses as a % of nonperforming loans (5) | 81.48% | | 92.28% | | 344.90% | | 368.40% | | |
| | | | | | | | | | | | |
| (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 112,099, 114,336, 75,186 and 103,220 as of June 30, 2018, March 31, 2018, December 31, 2017 and June 30, 2017, respectively. |
| (4) | Total NPAs do not reflect the payoff of a $4 million nonaccrual commercial loan which occurred subsequent to June 30, 2018. |
| (5) | The Bank's General ALLL provides a 256% coverage of NPAs that are not already covered by a specific reserve as of June 30, 2018. |
| BANKWELL FINANCIAL GROUP, INC. | | | | | | | | | | |
| LOAN & DEPOSIT PORTFOLIO (unaudited) | | | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | June 30, | | March 31, | | December 31, | | Current QTD | | YTD |
| Period End Loan Composition | | 2018 | | 2018 | | 2017 | | % Change | | % Change |
| Residential Real Estate | | $ 188,546 | | $ 195,638 | | $ 193,524 | | (3.6%) | | (2.6%) |
| Commercial Real Estate | | 1,042,689 | | 1,005,962 | | 987,242 | | 3.7% | | 5.6% |
| Construction | | 100,147 | | 87,309 | | 101,636 | | 14.7% | | (1.5%) |
| Total Real Estate Loans | | 1,331,382 | | 1,288,909 | | 1,282,402 | | 3.3% | | 3.8% |
| | | | | | | | | | | |
| Commercial Business | | 262,625 | | 267,052 | | 259,995 | | (1.7%) | | 1.0% |
| | | | | | | | | | | |
| Consumer | | 406 | | 446 | | 619 | | (9.0%) | | (34.4%) |
| Total Loans | | $ 1,594,413 | | $ 1,556,407 | | $ 1,543,016 | | 2.4% | | 3.3% |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | June 30, | | March 31, | | December 31, | | Current QTD | | YTD |
| Period End Deposit Composition | | 2018 | | 2018 | | 2017 | | % Change | | % Change |
| Noninterest-bearing demand | | $ 168,295 | | $ 161,641 | | $ 172,638 | | 4.1% | | (2.5%) |
| NOW | | 66,207 | | 58,416 | | 58,942 | | 13.3% | | 12.3% |
| Money Market | | 497,760 | | 479,524 | | 451,804 | | 3.8% | | 10.2% |
| Savings | | 113,496 | | 96,664 | | 83,758 | | 17.4% | | 35.5% |
| Time | | 619,880 | | 630,282 | | 631,263 | | (1.7%) | | (1.8%) |
| Total Deposits | | $ 1,465,638 | | $ 1,426,527 | | $ 1,398,405 | | 2.7% | | 4.8% |
| | | | | | | | | | | |
| BANKWELL FINANCIAL GROUP, INC. | | | | | | | | | |
| NONINTEREST INCOME & EXPENSE - QTD (unaudited) | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | |
| | | | | | | | | | |
| | For the Quarter Ended | | | | |
| Noninterest income | June 30, | | March 31, | | June 30, | | June 18 vs. March 18 | June 18 vs. June 17 |
| | 2018 | | 2018 | | 2017 | | % Change | | % Change |
| Gains and fees from sales of loans | $ 315 | | $ 370 | | $ 199 | | (14.9%) | | 58.3% |
| Bank owned life insurance | 265 | | 263 | | 295 | | 0.8% | | (10.2%) |
| Service charges and fees | 265 | | 256 | | 261 | | 3.5% | | 1.5% |
| Net gain on sale of available for sale securities | - | | 222 | | - | | (100.0%) | | 0.0% |
| Other | 262 | | 222 | | 243 | | 18.0% | | 7.8% |
| Total noninterest income | $ 1,107 | | $ 1,333 | | $ 998 | | (17.0%) | | 10.9% |
| | | | | | | | | | |
| | | | | | | | | | |
| | For the Quarter Ended | | | | |
| Noninterest expense | June 30, | | March 31, | | June 30, | | June 18 vs. March 18 | June 18 vs. June 17 |
| | 2018 | | 2018 | | 2017 | | % Change | | % Change |
| Salaries and employee benefits | $ 4,539 | | $ 5,028 | | $ �� 3,800 | | (9.7%) | | 19.4% |
| Occupancy and equipment | 1,731 | | 1,617 | | 1,439 | | 7.1% | | 20.3% |
| Data processing | 509 | | 525 | | 401 | | (3.0%) | | 26.9% |
| Marketing | 479 | | 297 | | 311 | | 61.3% | | 54.0% |
| Professional services | 424 | | 775 | | 523 | | (45.3%) | | (18.9%) |
| Director fees | 274 | | 215 | | 243 | | 27.4% | | 12.8% |
| FDIC insurance | 203 | | 214 | | 243 | | (5.1%) | | (16.5%) |
| Amortization of intangibles | 24 | | 24 | | 31 | | 0.0% | | (22.6%) |
| Other | 581 | | 508 | | 590 | | 14.4% | | (1.5%) |
| Total noninterest expense | $ 8,764 | | $ 9,203 | | $ 7,581 | | (4.8%) | | 15.6% |
| | | | | | | | | | |
| BANKWELL FINANCIAL GROUP, INC. | | | | | |
| NONINTEREST INCOME & EXPENSE - YTD (unaudited) | | | | | |
| (Dollars in thousands) | | | | | |
| | | | | | |
| | For the Six Months Ended | | |
| Noninterest income | June 30, | | June 30, | | June 18 vs. June 17 |
| | 2018 | | 2017 | | % Change |
| Gains and fees from sales of loans | $ 685 | | $ 523 | | 31.0% |
| Bank owned life insurance | 528 | | 586 | | (9.9%) |
| Service charges and fees | 521 | | 501 | | 4.0% |
| Net gain on sale of available for sale securities | 222 | | 165 | | 34.5% |
| Other | 484 | | 489 | | (1.0%) |
| Total noninterest income | $ 2,440 | | $ 2,264 | | 7.8% |
| | | | | | |
| | | | | | |
| | | | | | |
| | For the Six Months Ended | | |
| Noninterest expense | June 30, | | June 30, | | June 18 vs. June 17 |
| | 2018 | | 2017 | | % Change |
| Salaries and employee benefits | $ 9,567 | | $ 7,729 | | 23.8% |
| Occupancy and equipment | 3,348 | | 3,131 | | 6.9% |
| Professional services | 1,199 | | 935 | | 28.2% |
| Data processing | 1,034 | | 846 | | 22.2% |
| Marketing | 776 | | 577 | | 34.5% |
| Director fees | 489 | | 476 | | 2.7% |
| FDIC insurance | 417 | | 626 | | (33.4%) |
| Amortization of intangibles | 48 | | 62 | | (22.6%) |
| Other | 1,089 | | 1,433 | | (24.0%) |
| Total noninterest expense | $ 17,967 | | $ 15,815 | | 13.6% |
| | | | | | |
| 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 | 6/30/2018 | | 3/31/2018 | | 12/31/2017 | | 6/30/2017 |
| Total Equity | $ 169,573 | | $ 165,947 | | $ 161,027 | | $ 153,577 |
| Less: | | | | | | | |
| Goodwill | 2,589 | | 2,589 | | 2,589 | | 2,589 |
| Other intangibles | 334 | | 358 | | 382 | | 438 |
| Tangible Common Equity | $ 166,650 | | $ 163,000 | | $ 158,056 | | $ 150,550 |
| | | | | | | | |
| Total Assets | $ 1,870,802 | | $ 1,831,243 | | $ 1,796,607 | | $ 1,755,804 |
| Less: | | | | | | | |
| Goodwill | 2,589 | | 2,589 | | 2,589 | | 2,589 |
| Other intangibles | 334 | | 358 | | 382 | | 438 |
| Tangible Assets | $ 1,867,879 | | $ 1,828,296 | | $ 1,793,636 | | $ 1,752,777 |
| | | | | | | | |
| Tangible Common Equity to Tangible Assets | 8.92% | | 8.92% | | 8.81% | | 8.59% |
| | | | | | | | |
| | | | | | | | |
| | As of |
| Computation of Tangible Book Value per Common Share | 6/30/2018 | | 3/31/2018 | | 12/31/2017 | | 06/30/2017 |
| Total shareholders' equity | $ 169,573 | | $ 165,947 | | $ 161,027 | | $ 153,577 |
| Less: | | | | | | | |
| Preferred stock | - | | - | | - | | - |
| Common shareholders' equity | $ 169,573 | | $ 165,947 | | $ 161,027 | | $ 153,577 |
| Less: | | | | | | | |
| Goodwill | 2,589 | | 2,589 | | 2,589 | | 2,589 |
| Other intangibles | 334 | | 358 | | 382 | | 438 |
| Tangible common shareholders' equity | $ 166,650 | | $ 163,000 | | $ 158,056 | | $ 150,550 |
| Common shares issued | 7,841,720 | | 7,831,804 | | 7,751,424 | | 7,673,850 |
| Less: | | | | | | | |
| Shares of unvested restricted stock | 112,099 | | 114,336 | | 75,186 | | 103,220 |
| Common shares outstanding | 7,729,621 | | 7,717,468 | | 7,676,238 | | 7,570,630 |
| Book value per share | $ 21.94 | | $ 21.50 | | $ 20.98 | | $ 20.29 |
| Less: | | | | | | | |
| Effects of intangible assets | $ 0.38 | | $ 0.38 | | $ 0.39 | | $ 0.40 |
| | | | | | | | |
| Tangible Book Value per Common Share | $ 21.56 | | $ 21.12 | | $ 20.59 | | $ 19.89 |
| 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 Six Months Ended |
| Computation of Efficiency Ratio | 6/30/2018 | | 3/31/2018 | | 12/31/2017 | | 06/30/2017 | | 06/30/2018 | 06/30/2017 |
| Noninterest expense | $ 8,764 | | $ 9,203 | | $ 8,579 | | $ 7,581 | | $ 17,967 | | $ 15,815 |
| Less: | | | | | | | | | | | |
| Amortization of intangible assets | 24 | | 24 | | 25 | | 31 | | 48 | | 62 |
| Foreclosed real estate expenses | - | | - | | - | | 60 | | - | | 67 |
| Adjusted noninterest expense | $ 8,740 | | $ 9,179 | | $ 8,554 | | $ 7,490 | | $ 17,919 | | $ 15,686 |
| Net interest income | $ 13,908 | | $ 13,705 | | $ 13,914 | | $ 13,641 | | $ 27,613 | | $ 26,589 |
| Noninterest income | 1,107 | | 1,333 | | 1,541 | | 998 | | 2,440 | | 2,264 |
| Less: | | | | | | | | | | | |
| Gain on sales of securities | - | | 222 | | - | | - | | 222 | | 165 |
| Loss on sale of foreclosed real estate | - | | - | | (78) | | - | | - | | - |
| Adjusted operating revenue | $ 15,015 | | $ 14,816 | | $ 15,533 | | $ 14,639 | | $ 29,831 | | $ 28,688 |
| | | | | | | | | | | | |
| Efficiency ratio | 58.2% | | 62.0% | | 55.1% | | 51.2% | | 60.1% | | 54.7% |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | For the Quarter Ended | | For the Six Months Ended |
| Computation of Return on Average Tangible Common Equity | 6/30/2018 | | 3/31/2018 | | 12/31/2017 | | 06/30/2017 | | 06/30/2018 | 06/30/2017 |
| Net Income Attributable to Common Shareholders | $ 4,715 | | $ 4,600 | | $ 2,096 | | $ 3,769 | | $ 9,315 | | $ 7,471 |
| Total average shareholders' equity | $ 168,684 | | $ 164,369 | | $ 161,477 | | $ 152,898 | | $ 166,540 | | $ 150,629 |
| Less: | | | | | | | | | | | |
| Goodwill | 2,589 | | 2,589 | | 2,589 | | 2,589 | | 2,589 | | 2,589 |
| Other intangibles | 334 | | 358 | | 382 | | 438 | | 334 | | 438 |
| Average tangible common equity | $ 165,761 | | $ 161,422 | | $ 158,506 | | $ 149,871 | | $ 163,617 | | $ 147,602 |
| | | | | | | | | | | | |
| Annualized Return on Average Tangible Common Equity | 11.41% | | 11.56% | | 5.25% | | 10.09% | | 11.48% | | 10.21% |
| BANKWELL FINANCIAL GROUP, INC. | | | | | | | | | | | | |
| NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS | | | | | | | | | | | | |
| (Dollars in thousands) | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | For the Quarter Ended |
| | | June 30, 2018 | | June 30, 2017 |
| | | Average | | | | Yield/ | | Average | | | | Yield/ |
| | | Balance | | Interest | | Rate (5) | | Balance | | Interest | | Rate (5) |
| Assets: | | | | | | | | | | | | |
| Cash and Fed funds sold | | $ 81,879 | | $ 325 | | 1.59% | | $ 86,543 | | $ 148 | | 0.69% |
| Securities (1) | | 119,893 | | 921 | | 3.07% | | 105,850 | | 947 | | 3.58% |
| Loans: | | | | | | | | | | | | |
| Commercial real estate | | 996,269 | | 11,400 | | 4.53% | | 899,344 | | 10,230 | | 4.50% |
| Residential real estate | | 193,336 | | 1,786 | | 3.69% | | 196,392 | | 1,816 | | 3.70% |
| Construction (2) | | 92,945 | | 1,180 | | 5.02% | | 109,681 | | 1,299 | | 4.69% |
| Commercial business | | 283,865 | | 3,740 | | 5.21% | | 251,981 | | 3,304 | | 5.19% |
| Consumer | | 536 | | 8 | | 5.97% | | 1,320 | | 11 | | 3.21% |
| Total loans | | 1,566,951 | | 18,114 | | 4.57% | | 1,458,718 | | 16,660 | | 4.52% |
| Federal Home Loan Bank stock | | 9,330 | | 125 | | 5.37% | | 8,033 | | 81 | | 4.02% |
| Total earning assets | | 1,778,053 | | 19,485 | | 4.34% | | 1,659,144 | | 17,836 | | 4.25% |
| Other assets | | 68,334 | | | | | | 61,588 | | | | |
| Total assets | | $ 1,846,387 | | | | | | $ 1,720,732 | | | | |
| | | | | | | | | | | | | |
| Liabilities and shareholders' equity: | | | | | | | | | | | | |
| Interest-bearing liabilities: | | | | | | | | | | | | |
| NOW | | $ 63,870 | | $ 21 | | 0.13% | | $ 61,002 | | $ 20 | | 0.13% |
| Money market | | 496,548 | | 1,518 | | 1.23% | | 383,919 | | 771 | | 0.81% |
| Savings | | 100,893 | | 267 | | 1.06% | | 113,736 | | 217 | | 0.76% |
| Time | | 619,262 | | 2,503 | | 1.62% | | 644,222 | | 2,087 | | 1.30% |
| Total interest-bearing deposits | | 1,280,573 | | 4,309 | | 1.35% | | 1,202,879 | | 3,095 | | 1.03% |
| Borrowed money | | 224,120 | | 1,197 | | 2.11% | | 184,958 | | 952 | | 2.04% |
| Total interest-bearing liabilities | | 1,504,693 | | $ 5,506 | | 1.47% | | 1,387,837 | | $ 4,047 | | 1.17% |
| Noninterest-bearing deposits | | 160,275 | | | | | | 167,111 | | | | |
| Other liabilities | | 12,735 | | | | | | 12,886 | | | | |
| Total liabilities | | 1,677,703 | | | | | | 1,567,834 | | | | |
| Shareholders' equity | | 168,684 | | | | | | 152,898 | | | | |
| Total liabilities and shareholders' equity | | $ 1,846,387 | | | | | | $ 1,720,732 | | | | |
| Net interest income (3) | | | | $ 13,979 | | | | | | $ 13,789 | | |
| Interest rate spread | | | | | | 2.87% | | | | | | 3.08% |
| Net interest margin (4) | | | | | | 3.14% | | | | | | 3.32% |
| (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 $71 thousand and $148 thousand, respectively for the three months ended June 30, 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 Six Months Ended |
| | | June 30, 2018 | | June 30, 2017 |
| | | Average | | | | Yield/ | | Average | | | | Yield/ |
| | | Balance | | Interest | | Rate (5) | | Balance | | Interest | | Rate (5) |
| Assets: | | | | | | | | | | | | |
| Cash and Fed funds sold | | $ 75,634 | | $ 579 | | 1.54% | | $ 77,440 | | $ 262 | | 0.68% |
| Securities (1) | | 118,502 | | 1,809 | | 3.05% | | 103,852 | | 1,808 | | 3.48% |
| Loans: | | | | | | | | | | | | |
| Commercial real estate | | 986,204 | | 22,269 | | 4.49% | | 877,078 | | 19,914 | | 4.52% |
| Residential real estate | | 195,628 | | 3,585 | | 3.67% | | 194,861 | | 3,556 | | 3.65% |
| Construction (2) | | 94,161 | | 2,326 | | 4.91% | | 107,515 | | 2,548 | | 4.71% |
| Commercial business | | 282,324 | | 7,336 | | 5.17% | | 240,477 | | 6,130 | | 5.07% |
| Consumer | | 586 | | 16 | | 5.43% | | 1,484 | | 25 | | 3.40% |
| Total loans | | 1,558,903 | | 35,532 | | 4.53% | | 1,421,415 | | 32,173 | | 4.50% |
| Federal Home Loan Bank stock | | 9,318 | | 243 | | 5.21% | | 8,027 | | 159 | | 3.97% |
| Total earning assets | | 1,762,357 | | 38,163 | | 4.31% | | 1,610,734 | | 34,402 | | 4.25% |
| Other assets | | 67,571 | | | | | | 60,633 | | | | |
| Total assets | | $ 1,829,928 | | | | | | $ 1,671,367 | | | | |
| | | | | | | | | | | | | |
| Liabilities and shareholders' equity: | | | | | | | | | | | | |
| Interest-bearing liabilities: | | | | | | | | | | | | |
| NOW | | $ 61,117 | | $ 39 | | 0.13% | | $ 57,816 | | $ 46 | | 0.16% |
| Money market | | 481,723 | | 2,680 | | 1.12% | | 364,048 | | 1,337 | | 0.74% |
| Savings | | 97,429 | | 463 | | 0.96% | | 112,372 | | 402 | | 0.72% |
| Time | | 622,508 | | 4,783 | | 1.55% | | 619,950 | | 3,891 | | 1.27% |
| Total interest-bearing deposits | | 1,262,777 | | 7,965 | | 1.27% | | 1,154,186 | | 5,676 | | 0.99% |
| Borrowed money | | 224,114 | | 2,443 | | 2.17% | | 183,514 | | 1,859 | | 2.01% |
| Total interest-bearing liabilities | | 1,486,891 | | $ 10,408 | | 1.41% | | 1,337,700 | | $ 7,535 | | 1.14% |
| Noninterest-bearing deposits | | 163,256 | | | | | | 170,886 | | | | |
| Other liabilities | | 13,241 | | | | | | 12,152 | | | | |
| Total liabilities | | 1,663,388 | | | | | | 1,520,738 | | | | |
| Shareholders' equity | | 166,540 | | | | | | 150,629 | | | | |
| Total liabilities and shareholders' equity | | $ 1,829,928 | | | | | | $ 1,671,367 | | | | |
| Net interest income (3) | | | | $ 27,755 | | | | | | $ 26,867 | | |
| Interest rate spread | | | | | | 2.90% | | | | | | 3.11% |
| Net interest margin (4) | | | | | | 3.15% | | | | | | 3.34% |
| (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 $142 thousand and $278 thousand, respectively for the six months ended June 30, 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. |
14
