Market Overview

Bankwell Financial Group Reports Third Quarter Net Income of $2.3 Million and Declares First Cash Dividend

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NEW CANAAN, Conn.--(BUSINESS WIRE)--

Bankwell Financial Group, Inc. (NASDAQ: BWFG) reported GAAP net income of $2.3 million for the third quarter of 2015. In addition, Bankwell Financial Group, Inc. reached record loan levels at $1.1 billion, driven by strong organic growth.

The Company's Board of Directors declared a $0.05 per share cash dividend, payable December 21, 2015 to shareholders of record on December 11, 2015.

Notes Bankwell Financial Group CEO, Christopher Gruseke:

"The team at Bankwell has delivered another strong performance this quarter, growing our loan book to record levels while continuing to increase operational efficiencies. The declaration of our first cash dividend is a demonstration of Bankwell's financial strength and our commitment to our shareholders. Bankwell's Management and Board of Directors view a regular dividend to be an important component of our overall capital management strategy. Further highlights for the quarter include a successful offering of $25.5 million in subordinated notes, an improved efficiency ratio, and an increase in our return on average tangible common equity to 7.7%, resulting in a tangible book value per common share of $17.25."

Earnings

Net income for the quarter ended September 30, 2015 was $2.3 million, an increase of 51.1% compared to the quarter ended September 30, 2014. Net income for the nine months ended September 30, 2015 was $6.4 million, an increase of 66.9% compared to the nine months ended September 30, 2014. Revenues (net interest income plus non-interest income) for the quarter ended September 30, 2015 were $12.1 million, an increase of 45.2% compared to the quarter ended September 30, 2014. Revenues for the nine months ended September 30, 2015 were $34.2 million, an increase of 41.9% compared to the nine months ended September 30, 2014. Net interest income for the quarter ended September 30, 2015 was $10.9 million, an increase of 43.7% compared to the quarter ended September 30, 2014. Our strong net interest income was fueled by record earning asset growth.

Basic and diluted earnings per share for the quarter ended September 30, 2015 was $0.31, compared to $0.22 for the quarter ended September 30, 2014, an increase of 40.9%.

The Company continues to focus on expense control as indicated by our improving efficiency ratio. The Company's efficiency ratio for the quarters ended September 30, 2015 and September 30, 2014 were 58.4% and 64.4%, respectively. The Company's efficiency ratio for the nine months ended September 30, 2015 and September 30, 2014 were 62.6% and 70.7%, respectively.

Financial Condition

Assets totaled $1.3 billion at September 30, 2015, an annualized increase of 25.9% compared to assets of $1.1 billion at December 31, 2014. This increase reflects strong organic loan growth and capital raised as a result of the issuance of $25.5 million in subordinated notes in the third quarter of 2015. Total gross loans were $1.1 billion at September 30, 2015, an annualized increase of 28.1% compared to December 31, 2014. Deposits increased to $1.0 billion, an annualized increase of 30.4% over December 31, 2014, with core deposits (total deposits less time deposits) showing an annualized increase of 17.8% over December 31, 2014 to $597.3 million.

Asset Quality

Asset quality remained exceptionally strong at September 30, 2015. Non-performing assets as a percentage of total assets was 0.28% at September 30, 2015, down from 0.39% at December 31, 2014. The allowance for loan losses at September 30, 2015 was $13.7 million, representing 1.33% of total loans, excluding acquired loans.

Capital

Shareholders' equity continued to remain strong at $135.8 million as of September 30, 2015, an increase of $6.6 million compared to December 31, 2014, primarily a result of net income for the nine months ended September 30, 2015 of $6.4 million. As of September 30, 2015, the tangible common equity ratio and tangible book value per share were 9.28% and $17.25, 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 Ernest J. Verrico Sr., 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.

                                 
BANKWELL FINANCIAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS (unaudited)
(Dollars in thousands, except share data)
   
September 30, June 30, March 31, December 31, September 30,

   2015   

   2015   

   2015   

   2014   

   2014   

Assets
Cash and due from banks $ 86,830 $ 75,550 $ 19,428 $ 48,559 $ 35,566
Held to maturity investment securities, at amortized cost 11,282 11,341 11,398 11,454 11,502
Available for sale investment securities, at fair value 45,023 46,883 50,736 65,009 67,537
Loans held for sale 252 - - 586 -
Loans receivable (net of allowance for loan losses of $13,720, $12,230,
$11,596, $10,860, $9,552 at September 30, 2015, June 30, 2015,
March 31, 2015, December 31, 2014 and September 30, 2014, respectively) 1,108,439 1,021,693 964,034 915,981 730,148
Foreclosed real estate 1,328 830 830 950 829
Accrued interest receivable 3,831 3,575 3,342 3,323 2,670
Federal Home Loan Bank stock, at cost 6,918 6,918 6,794 6,109 4,834
Premises and equipment, net 11,505 11,868 12,120 11,910 7,787
Bank-owned life insurance 23,578 23,395 23,211 23,028 22,837
Goodwill 2,589 2,589 2,589 2,589 -
Other intangible assets 694 745 797 848 401
Deferred income taxes, net 8,604 7,869 7,436 7,156 5,804
Other assets   2,472     1,418   1,748   2,029   5,600
Total assets $ 1,313,345   $ 1,214,674 $ 1,104,463 $ 1,099,531 $ 895,515
 
Liabilities & Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing $ 148,732 $ 162,546 $ 142,920 $ 166,030 $ 151,146
Interest-bearing   876,957     789,035   691,783   669,409   544,117

Total deposits

1,025,689 951,581 834,703 835,439 695,263
 
Advances from the Federal Home Loan Bank 120,000 124,000 133,000 129,000 77,000
Subordinated debentures 25,037 - - - -
Accrued expenses and other liabilities   6,831     5,424   5,352   5,882   4,755
Total liabilities   1,177,557     1,081,005   973,055   970,321   777,018
 
Commitments and Contingencies - - - - -
 
Shareholders' equity
Preferred stock, senior noncumulative perpetual, Series C, no par;
10,980 shares issued and outstanding at September 30, 2015, June 30, 2015,
March 31, 2015, December 31, 2014 and September 30, 2014, respectively;
liquidation value of $1,000 per share. 10,980 10,980 10,980 10,980 10,980
Common stock, no par value; 10,000,000 shares authorized,
7,252,429, 7,240,704, 7,243,252, 7,185,482 and 6,559,995 shares issued at
September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014
and September 30, 2014, respectively. 108,319 108,038 107,765 107,265 97,180
Retained earnings 16,764 14,538 12,280 10,434 9,735
Accumulated other comprehensive income   (275 )   113   383   531   602
Total shareholders' equity   135,788     133,669   131,408   129,210   118,497
 
Total liabilities and shareholders' equity $ 1,313,345   $ 1,214,674 $ 1,104,463 $ 1,099,531 $ 895,515
 
                         
BANKWELL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars in thousands, except per share data)
 

Three Months Ended
September 30,

Nine Months Ended
September 30,

   2015   

   2014   

   2015   

   2014   

Interest and dividend income
Interest and fees on loans $ 12,662 $ 8,054 $ 35,315 $ 23,040
Interest and dividends on securities 491 569 1,469 1,417
Interest on cash and cash equivalents   33   45   62   116
Total interest income   13,186   8,668   36,846   24,573
 
Interest expense
Interest expense on deposits 1,637 905 3,905 2,257
Interest on borrowings   632   168   1,389   427
Total interest expense   2,269   1,073   5,294   2,684
 
Net interest income 10,917 7,595 31,552 21,889
 
Provision for loan losses   1,489   566   2,876   847
 
Net interest income after provision for loan losses   9,428   7,029   28,676   21,042
 
Noninterest income
Gains and fees from sales of loans 447 366 885 1,008
Service charges and fees 234 153 675 420
Bank owned life insurance 182 135 549 305
Other   348   103   535   475
Total noninterest income   1,211   757   2,644   2,208
 
Noninterest expense
Salaries and employee benefits 3,798 2,786 11,817 9,412
Occupancy and equipment 1,370 1,066 4,029 3,162
Data processing 416 314 1,157 949
Professional services 339 394 1,033 1,035
Marketing 288 135 707 463
FDIC insurance 166 120 487 345
Director fees 136 177 424 460
Foreclosed real estate 81 9 73 21
Amortization of intangibles 51 27 153 80
Merger and acquisition related expenses - 145 - 408
Other   513   357   1,610   1,134
Total noninterest expense   7,158   5,530   21,490   17,469
 
Income before income tax expense 3,481 2,256 9,830 5,781
 
Income tax expense   1,228   765   3,418   1,940
 
Net income $ 2,253 $ 1,491 $ 6,412 $ 3,841
 
 
Net income attributable to common shareholders $ 2,226 $ 1,464 $ 6,330 $ 3,759
 
Earnings Per Common Share:
Basic $ 0.31 $ 0.22 $ 0.88 $ 0.72
Diluted 0.31 0.22 0.87 0.72
 
Weighted Average Common Shares Outstanding:
Basic 7,044,586 6,483,210 7,038,517 5,099,325
Diluted 7,059,117 6,501,984 7,057,450 5,124,261
 
               
BANKWELL FINANCIAL GROUP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
(Dollars in thousands, except per share data)
               
 
 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

   2015   

   

   2014   

   

2015

 

2014

Performance ratios:
Return on average assets 0.69 % 0.67 % 0.74 % 0.62 %
Return on average shareholders' equity 6.92 % 5.02 % 6.45 % 5.84 %
Return on average tangible common equity 7.69 % 5.45 % 7.13 % 6.56 %
Net interest margin 3.67 % 3.69 % 3.83 % 3.78 %
Efficiency ratio (1) 58.4 % 64.4 % 62.6 % 70.7 %
 
Net loan recoveries (charge-offs) as a % of average loans 0.00 % 0.00 % 0.00 % 0.05 %
 
As of

September 30,
2015

June 30,
2015

 

March 31,
2015

 

December 31,
2014

 

September 30,
2014

Capital ratios:
Total Common Equity Tier 1 Capital to Risk-Weighted Assets (2) 10.75 % 11.44 % 12.08 % N/A N/A
Total Capital to Risk-Weighted Assets (2) 11.94 % 12.59 % 13.26 % 13.55 % 15.27 %
Tier I Capital to Risk-Weighted Assets (2) 10.75 % 11.44 % 12.08 % 12.47 % 14.02 %
Tier I Capital to Average Assets (2) 9.84 % 10.71 % 10.99 % 11.12 % 11.93 %
Tangible common equity to tangible assets 9.28 % 9.85 % 10.63 % 10.47 % 11.97 %
 
Tangible book value per common share (3) $ 17.25 $ 16.95 $ 16.62 $ 16.35 $ 16.52
 
Asset quality:
Nonaccrual loans $ 2,367 $ 2,205 $ 2,451 $ 3,362 $ 1,246
Other real estate owned   1,328     830     830     950     829  
Total non-performing assets $ 3,695   $ 3,035   $ 3,281   $ 4,312   $ 2,075  
 
Loans past due 90 days and still accruing $ 1,082 $ 1,479 $ 1,671 $ 1,872 $ 1,309
 
Nonperforming loans as a % of total loans 0.21 % 0.21 % 0.25 % 0.36 % 0.17 %
 
Nonperforming assets as a % of total assets 0.28 % 0.25 % 0.30 % 0.39 % 0.23 %
 
Allowance for loan losses as a % of total loans 1.22 % 1.18 % 1.18 % 1.17 % 1.29 %
 
Allowance for loan losses as a % of nonperforming loans 579.64 % 554.65 % 473.11 % 323.02 % 766.61 %
 
(1) Efficiency ratio is defined as non-interest expenses, less merger and acquisition related expenses and other real estate owned 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 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.
 
(3) Excludes preferred stock and unvested restricted stock awards of 206,732, 198,414, 200,962, 165,862 and 76,278 as of September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014 and September 30, 2014, respectively.
 
 
BANKWELL FINANCIAL GROUP, INC.
NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS
(Dollars in thousands)
                                     
For the Three Months Ended  
September 30, 2015   September 30, 2014  
Average Yield/ Average Yield/
Balance Interest

     Rate     

  Balance Interest

     Rate     

 
Assets:
Cash and Fed funds sold $     62,597 $     33 0.21 % $     64,752 $     45 0.28 %
Securities (1) 57,234 549 3.84 % 71,536 666 3.73 %
Loans:
Commercial real estate 645,488 7,873 4.77 % 365,042 4,473 4.79 %
Residential real estate 175,908 1,569 3.57 % 166,123 1,499 3.61 %
Construction (2) 79,722 912 4.48 % 47,261 570 4.72 %
Commercial business 157,867 2,075 5.14 % 101,184 1,296 5.01 %
Home equity 16,422 155 3.75 % 12,786 121 3.75 %
Consumer 2,184 27 4.87 % 698 15 8.75 %
Acquired loans (net of mark)       2,558       51 7.91 %       1,327       81 24.15 %
Total loans 1,080,149 12,662 4.59 % 694,421 8,055 4.54 %
Federal Home Loan Bank stock       6,918       47 2.71 %       4,834       18 1.49 %
Total earning assets 1,206,898 $     13,291 4.31 % 835,543 $     8,784 4.11 %
Other assets       89,978       47,383
Total assets $     1,296,876 $     882,926
 
Liabilities and shareholders' equity:
Interest-bearing liabilities:
NOW $ 56,104 15 0.11 % $ 52,298 15 0.11 %
Money market 293,150 408 0.55 % 175,111 218 0.49 %
Savings 103,555 214 0.82 % 79,505 65 0.33 %
Time       401,968       1,005 0.99 %       257,616       607 0.93 %

Total interest-bearing deposits

854,777 1,642 0.76 % 564,530 905 0.64 %
Borrowed Money       118,391       583 1.95 %       47,333       168 1.41 %
Total interest bearing liabilities 973,168 $     2,225 0.91 % 611,863 $     1,073 0.70 %
Noninterest-bearing deposits 161,354 138,272
Other liabilities       33,257       14,918
Total liabilities 1,167,779 765,053
Shareholders' equity       129,097       117,873
Total liabilities and shareholders' equity $     1,296,876 $     882,926
Net interest income (3) $     11,066 $     7,711
Interest rate spread 3.40 % 3.41 %
Net interest margin (4) 3.67 % 3.69 %
 
(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 $149 thousand and $116 thousand, respectively for the three months ended September 30, 2015, and 2014.
(4) 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 Nine Months Ended
September 30, 2015 September 30, 2014
Average Yield/ Average Yield/
Balance Interest

     Rate     

Balance Interest

     Rate     

Assets:
Cash and Fed funds sold $     37,037 $     61 0.22 % $     58,699 $     116 0.26 %
Securities (1) 61,233 1,699 3.70 % 53,723 1,697 4.21 %
Loans:
Commercial real estate 583,024 21,476 4.86 % 341,480 12,523 4.84 %
Residential real estate 174,389 4,727 3.61 % 161,049 4,362 3.61 %
Construction (2) 71,900 2,509 4.60 % 46,317 1,615 4.60 %
Commercial business 151,017 5,866 5.12 % 99,113 3,705 4.93 %
Home equity 17,551 494 3.77 % 13,373 370 3.70 %
Consumer 2,487 90 4.85 % 640 42 8.88 %
Acquired loans (net of mark)       2,877       155 7.22 %       2,753       425 20.64 %
Total loans 1,003,245 35,317 4.64 % 664,725 23,042 4.57 %
Federal Home Loan Bank stock       6,741       110 2.17 %       4,834       54 1.48 %
Total earning assets 1,108,256 $     37,187 4.42 % 781,981 $     24,909 4.20 %
Other assets       57,388       39,993
Total assets $     1,165,644 $     821,974
 
Liabilities and shareholders' equity:
Interest-bearing liabilities:
NOW $ 57,017 48 0.11 % $ 52,544 43 0.11 %
Money market 253,662 1,007 0.53 % 173,104 564 0.44 %
Savings 95,242 492 0.69 % 93,328 216 0.31 %
Time       341,658       2,358 0.92 %       224,765       1,434 0.85 %
Total interest-bearing deposits 747,579 3,905 0.70 % 543,741 2,257 0.55 %
Borrowed Money       124,129       1,389 1.50 %       48,370       427 1.18 %
Total interest bearing liabilities 871,708 $     5,294 0.81 % 592,111 $     2,684 0.61 %
Noninterest-bearing deposits 154,825 129,074
Other liabilities       6,137       12,808
Total liabilities 1,032,670 733,993
Shareholders' equity       132,974       87,981
Total liabilities and shareholders' equity $     1,165,644 $     821,974
Net interest income (3) $     31,893 $     22,225
Interest rate spread 3.61 % 3.59 %
Net interest margin (4) 3.83 % 3.78 %
 
(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 $341 thousand and $336 thousand, respectively for the nine months ended September 30, 2015, and 2014.
(4) Net interest income as a percentage of earning assets.

Bankwell Financial Group
Christopher R. Gruseke, 203-652-0166
President & Chief Executive Officer
or
Ernest J. Verrico Sr., 203-652-0166
Executive Vice President & Chief Financial Officer

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