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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:

 

 

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 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%		(0.01%)

			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%

 

 

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%