Market Overview

Bankwell Financial Group Reports Record Year-End Operating Results and Declares a 71% Increase to the First Quarter Dividend

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Bankwell Financial Group, Inc. (NASDAQ:BWFG) reported GAAP net income
of $2.1 million or $0.27 per share for the fourth quarter of 2017,
versus $3.3 million or $0.43 per share for the same period in 2016 and
GAAP net income of $13.8 million or $1.78 per share for the year ended
2017, versus $12.4 million or $1.62 per share for the year ended 2016.

The Company's Board of Directors declared a $0.12 per share cash
dividend, payable March 8, 2018 to shareholders of record on February
26, 2018, representing a 71% increase when compared to the last
quarter's dividend.

The reported GAAP net income for the quarter and the full year was
impacted by several one-time, non-recurring items, the most significant
of which was the tax reform of 2017. The impact of all items are
outlined in the table below and discussed in more detail that follows.
The discussion and analysis otherwise contained in our earnings release
is entirely based on reported GAAP measures and corresponding GAAP net
income unless otherwise noted.

     

For The Quarter Ended
12/31/2017

   

For the Year Ended

12/31/2017

Reconciliation of Core Net Income, Net of Tax $     EPS $     EPS
Net Income (GAAP) $ 2,096 $ 0.27 $ 13,830 $ 1.78
DTA write-off resulting from tax reform 3,270 0.42 3,270 0.42
Charges due to reduction in workforce 166 0.02 166 0.02
Income recognized from servicing assets (578 ) (0.07 ) (663 ) (0.08 )
Impact from loan reserve methodology change   (862 )   (0.11 )   (862 )   (0.11 )
Core Net Income (non-GAAP) $ 4,092   $ 0.53   $ 15,741   $ 2.03  
 

As result of the tax law changes enacted in late 2017, the Company
recognized a write-down of its deferred tax asset in the amount of $3.3
million or $0.42 per share. In addition, in late 2017 the Company
recognized an after tax charge of $0.2 million or $0.02 per share due to
a minimal workforce reduction. These charges were partially offset by a
reduction in the allowance for loan losses stemming from an update to
its methodology and underlying loan loss assumptions, incorporating the
most recent industry and product loss trends. This resulted in a
non-recurring, after tax $0.9 million or $0.11 per share reduction in
the reserve. In addition, the Company recognized an after tax benefit of
$0.6 million and $0.7 million or $0.07 per share and $0.08 per share,
for the quarter ended and year ended 2017, respectively, as a result of
refining the model assumptions used in calculating a servicing asset
relating to loans in which the Company retains the servicing rights and
liabilities. Adjusting net income for these items would result in core
net income (non-GAAP) of $4.1 million or $0.53 for the quarter ended
December 31, 2017 and $15.7 million or $2.03 for the year ended December
31, 2017.

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

"2017 was another record year for Bankwell. In an increasingly volatile
interest rate environment, we continue to improve our operating
efficiencies and we vigilantly adhere to disciplined pricing on both
sides of the balance sheet. The 2017 tax reform represents a unique
opportunity for the bank and its shareholders. It will allow us to
reward our shareholders, invest in the company's growth initiatives and
infrastructure, while giving back to the communities we serve."

Fourth Quarter and Year Ended 2017 Highlights:

  • Total revenue (net interest income plus non-interest income) reached
    $59.0 million for the year ended 2017 compared to $51.8 million for
    the year ended 2016.
  • Tax equivalent net interest margin was 3.30% for the year ended 2017.
  • Total non-interest income was $4.6 million for the year ended 2017,
    which is 8% of total revenue.
  • The efficiency ratio was 55.1% and 54.9% for the fourth quarter and
    year ended 2017, respectively, compared to 55.6% and 56.5% for the
    fourth quarter and year ended 2016, respectively.
  • The tangible common equity ratio and tangible book value per share was
    8.81% and $20.59, respectively.
  • Total gross loans exceeded $1.5 billion and total assets reached $1.8
    billion.
  • The allowance for loan losses was $18.9 million and represents 1.23%
    of total loans.
  • Nonperforming assets represented 0.31% of total assets.
  • Investment securities totaled $113.8 million and represent 6% of total
    assets.
  • Total deposits reached $1.4 billion for the year ended 2017, an
    increase of $109.4 million or 8.5% compared to the year ended 2016.

Earnings

Net income for the quarter ended December 31, 2017 was $2.1 million, a
decrease of 37% compared to the quarter ended December 31, 2016. Net
income for the year ended December 31, 2017 was $13.8 million, an
increase of 12% compared to the year ended December 31, 2016. The
decline in net income was primarily a result of the aforementioned
non-recurring items, the greatest component of which was the DTA write
down as a result of the 2017 tax reform.

Revenues (net interest income plus non-interest income) for the quarter
ended December 31, 2017 were $15.5 million, an increase of 13% compared
to the quarter ended December 31, 2016. Revenues for the year ended
December 31, 2017 were $59.0 million, an increase of 14% compared to the
year ended December 31, 2016. Net interest income for the quarter ended
December 31, 2017 was $13.9 million, an increase of 5% compared to the
quarter ended December 31, 2016. Net interest income for the year ended
December 31, 2017 was $54.4 million, an increase of 11% compared to the
year ended December 31, 2016. The growth in revenues and net interest
income were driven by continued earning asset growth.

Basic and diluted earnings per share for the quarter ended December 31,
2017 were both $0.27 compared to $0.44 and $0.43 basic and diluted
earnings per share for the quarter ended December 31, 2016. Basic and
diluted earnings per share for the year ended December 31, 2017 was
$1.80 and $1.78, respectively, compared to $1.64 and $1.62 earnings per
share, respectively, for the year ended December 31, 2016.

The Company's efficiency ratios for the quarters ended December 31, 2017
and December 31, 2016 were 55.1% and 55.6%, respectively. The Company's
efficiency ratios for the year ended December 31, 2017 and December 31,
2016 were 54.9% and 56.5%, respectively.

Noninterest Income and Expense

Noninterest income increased $1.1 million to $1.5 million for the three
months ended December 31, 2017 compared to the three months ended
December 31, 2016. Noninterest income increased $2.0 million to $4.6
million for the year ended December 31, 2017 compared to the year ended
December 31, 2016. The increase in noninterest income was primarily
driven by income earned from the Company's additional purchases of Bank
Owned Life Insurance, an increase in the gains and fees from the sales
of loans and rental income earned from the headquarters building
acquired in the fourth quarter of 2016.

Noninterest expense increased $811 thousand or 10% for the three months
ended December 31, 2017 compared to the three months ended December 31,
2016. The increase was primarily driven by an increase in salaries and
employee benefits and other expenses related to growth and strategic
initiatives. The increase in salaries and employee benefits was driven
by an increase in full time equivalent employees. Full time equivalent
employees totaled 139 at December 31, 2017 compared to 126 at December
31, 2016.

Noninterest expense increased $3.0 million or 10% for the year ended
December 31, 2017 compared to the year ended December 31, 2016. The
increase was primarily driven by an increase in salaries and employee
benefits, occupancy and equipment expenses, professional services and
other expenses related to growth and strategic initiatives. The increase
in salaries and employee benefits was driven by an increase in full time
equivalent employees. Average full time equivalent employees totaled 134
at December 31, 2017 compared to 125 at December 31, 2016. The increase
in occupancy and equipment expenses was driven by increases in IT
related expenses, one time charges relating to back office consolidation
activity and maintenance costs for our headquarters building acquired in
the fourth quarter of 2016. The increase in professional services was
driven by increased fees paid for internal and external audit, and
consulting services to support the overall growth of the business.

Financial Condition

Assets totaled $1.8 billion at December 31, 2017, an increase of 10%
compared to assets of $1.6 billion at December 31, 2016. This increase
reflects strong organic loan growth. Total gross loans exceeded $1.5
billion at December 31, 2017, an increase of 13% compared to December
31, 2016, driven by growth in commercial real estate loans of $125.8
million and commercial business loans of $60.4 million. Deposits
increased to $1.4 billion compared to $1.3 billion at December 31, 2016,
an increase of 9% over December 31, 2016.

Asset Quality

Asset quality remained strong at December 31, 2017. Non-performing
assets as a percentage of total assets was 0.31% at December 31, 2017,
up from 0.20% at December 31, 2016. The allowance for loan losses at
December 31, 2017 was $18.9 million, representing 1.23% of total loans.

Capital

Shareholders' equity totaled $161.0 million as of December 31, 2017, an
increase of $15.1 million compared to December 31, 2016, primarily a
result of net income for the year ended December 31, 2017 of $13.8
million. As of December 31, 2017, the tangible common equity ratio and
tangible book value per share were 8.81% and $20.59, 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 tables. We
believe that providing certain non-GAAP financial measures provides
investors with information useful in understanding our financial
performance, our performance trends and financial position. For example,
the Company believes that the efficiency ratio is useful in the
assessment of financial performance, including 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. The Company believes that providing a
reconciliation from GAAP net income to core net income is useful for
comparative analysis to prior periods given the presence of
non-recurring items. 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)
 
    December 31,     September 30,     June 30,     March 31,     December 31,
2017 2017 2017 2017 2016
Assets
Cash and due from banks $ 70,545 $ 85,329 $ 84,802 $ 63,675 $ 96,026
Federal funds sold   186   11,117   1,185   10,280   329
Cash and cash equivalents 70,731 96,446 85,987 73,955 96,355
 
Available for sale investment securities, at fair value 92,188 86,272 90,951 87,434 87,751
Held to maturity investment securities, at amortized cost 21,579 23,573 23,615 16,808 16,859
Loans held for sale - 785 - - 254
Loans receivable (net of allowance for loan losses of $18,904,
$19,564, $19,536,
$18,511 and $17,982 at December 31, 2017, September 30, 2017, June
30, 2017,
March 31, 2017 and December 31, 2016, respectively) 1,520,879 1,500,574 1,463,240 1,406,407 1,343,895
Foreclosed real estate - 222 222 272 272
Accrued interest receivable 5,910 5,344 5,239 5,180 4,958
Federal Home Loan Bank stock, at cost 9,183 9,351 8,033 8,033 7,943
Premises and equipment, net 18,196 17,509 17,366 17,618 17,835
Bank-owned life insurance 39,618 39,329 39,034 38,740 33,448
Goodwill 2,589 2,589 2,589 2,589 2,589
Other intangible assets 382 407 438 469 501
Deferred income taxes, net 4,904 8,834 8,957 8,954 9,085
Other assets   10,448   13,703   10,133   5,783   7,174
Total assets $ 1,796,607 $ 1,804,938 $ 1,755,804 $ 1,672,242 $ 1,628,919
 
Liabilities & Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing $ 172,638 $ 162,790 $ 176,495 $ 170,572 $ 187,593
Interest-bearing   1,225,767   1,247,001   1,237,790   1,156,888   1,101,444
Total deposits 1,398,405 1,409,791 1,414,285 1,327,460 1,289,037
 
Advances from the Federal Home Loan Bank 199,000 195,000 150,000 160,000 160,000
Subordinated debentures 25,103 25,090 25,077 25,064 25,051
Accrued expenses and other liabilities   13,072   16,740   12,865   10,046   8,936
Total liabilities   1,635,580   1,646,621   1,602,227   1,522,570   1,483,024
 
 
Shareholders' equity
Common stock, no par value; 10,000,000 shares authorized,
7,751,424, 7,705,975, 7,673,850, 7,638,706 and 7,620,663 shares
issued
and outstanding at December 31, 2017, September 30, 2017, June 30,
2017,
March 31, 2017 and December 31, 2016, respectively 118,301 117,289 116,502 115,823 115,353
Retained earnings 41,332 39,777 36,053 32,820 29,652
Accumulated other comprehensive income   1,394   1,251   1,022   1,029   890
Total shareholders' equity   161,027   158,317   153,577   149,672   145,895
 
Total liabilities and shareholders' equity $ 1,796,607 $ 1,804,938 $ 1,755,804 $ 1,672,242 $ 1,628,919
 
 
BANKWELL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars in thousands, except per share data)
 
    For the Quarter Ended     For the Year Ended
December 31,     September 30,     June 30,     March 31,     December 31, December 31,     December 31,
2017 2017 2017 2017 2016 2017   2016
Interest and dividend income
Interest and fees on loans $ 17,493 $ 17,175 $ 16,660 $ 15,513 $ 15,910 $ 66,841 $ 58,077
Interest and dividends on securities 947 934 880 809 657 3,570 2,740
Interest on cash and cash equivalents   289     239   148   114   75     790     173  
Total interest income   18,729     18,348   17,688   16,436   16,642     71,201     60,990  
 
Interest expense
Interest expense on deposits 3,602 3,416 3,095 2,581 2,438 12,694 8,300
Interest on borrowings   1,213     1,071   952   907   916     4,143     3,598  
Total interest expense   4,815     4,487   4,047   3,488   3,354     16,837     11,898  
 
Net interest income 13,914 13,861 13,641 12,948 13,288 54,364 49,092
 
(Credit) Provision for loan losses   (495 )   398   895   543   748     1,341     3,914  
 
Net interest income after provision for loan losses   14,409     13,463   12,746   12,405   12,540     53,023     45,178  
 
Noninterest income
Gains and fees from sales of loans 868 36 199 324 79 1,427 466
Bank owned life insurance 289 295 295 291 171 1,170 693
Service charges and fees 252 254 261 240 242 1,007 963
(Loss) Gain on sale of foreclosed real estate, net (78 ) - - - - (78 ) 128
Net gain (loss) on sale of available for sale securities - - - 165 (207 ) 165 (115 )
Other   210     239   243   246   116     938     541  
Total noninterest income   1,541     824   998   1,266   401     4,629     2,676  
 
Noninterest expense
Salaries and employee benefits 4,603 3,952 3,800 3,929 4,331 16,284 15,655
Occupancy and equipment 1,585 1,449 1,439 1,692 1,576 6,165 5,811
Professional services 457 680 523 412 397 2,072 1,654
Data processing 399 621 401 445 402 1,866 1,603
Marketing 321 295 311 266 304 1,193 948
Director fees 229 207 243 233 223 912 859
FDIC insurance 225 265 243 383 146 1,116 660
Amortization of intangibles 25 31 31 31 32 118 151
Foreclosed real estate - 3 60 7 8 70 157
Other   735     626   530   836   349     2,727     2,046  
Total noninterest expense   8,579     8,129   7,581   8,234   7,768     32,523     29,544  
 
Income before income tax expense 7,371 6,158 6,163 5,437 5,173 25,129 18,310
 
Income tax expense   5,275     1,895   2,394   1,735   1,850     11,299     5,960  
 
Net income $ 2,096   $ 4,263 $ 3,769 $ 3,702 $ 3,323   $ 13,830   $ 12,350  
 
 
Earnings Per Common Share:
Basic $ 0.27 $ 0.55 $ 0.49 $ 0.49 $ 0.44 $ 1.80 $ 1.64
Diluted 0.27 0.55 0.49 0.48 0.43 1.78 1.62
 
Weighted Average Common Shares Outstanding:
Basic 7,624,931 7,587,471 7,550,734 7,525,268 7,418,820 7,572,409 7,396,019
Diluted 7,702,770 7,670,258 7,645,930 7,632,123 7,560,319 7,670,413 7,491,052
Dividends per common share $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.07 $ 0.28 $ 0.22
 
 
BANKWELL FINANCIAL GROUP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
(Dollars in thousands, except per share data)
 
          For the Quarter Ended       For the Year Ended
December 31,     September 30,     June 30,     March 31,     December 31, December 31,     December 31,
2017 2017 2017 2017 2016 2017 2016
Performance ratios:
Return on average assets * 0.46% 0.96% 0.88% 0.93% 0.84% 0.80% 0.85%
Return on average stockholders' equity * 5.15% 10.78% 9.89% 10.12% 9.23% 8.93% 8.94%
Return on average tangible common equity * 5.25% 10.99% 10.09% 10.33% 9.44% 9.10% 9.15%
Net interest margin 3.23% 3.30% 3.32% 3.35% 3.55% 3.30% 3.54%
Efficiency ratio (1) 55.1% 55.1% 51.2% 58.3% 55.6% 54.9% 56.5%
 
Net loan charge-offs (recoveries) as a % of average loans 0.01% 0.02% (0.01%) 0.00% 0.00% 0.03% 0.01%
* All metrics measuring return are significantly impacted by the
non-recurring items previously described in the "Earnings" section.
Excluding the non-recurring items, the company's return on average
assets, return on average stockholders' equity and return on average
tangible common equity would have been approximately 0.90%, 10.05%
and 10.24% for the quarter ended December 31, 2017 and 0.91%, 10.16%
and 10.36% for the full year ended December 31, 2017, respectively.
 
 
        As of
December 31,

2017

    September 30,

2017

    June 30,

2017

    March 31,

2017

    December 31,

2016

Capital ratios:
Total Common Equity Tier 1 Capital to Risk-Weighted Assets (2) 10.99 % 10.95 % 10.91 % 11.16 % 11.59 %
Total Capital to Risk-Weighted Assets (2) 12.19 % 12.19 % 12.16 % 12.41 % 12.85 %
Tier I Capital to Risk-Weighted Assets (2) 10.99 % 10.95 % 10.91 % 11.16 % 11.59 %
Tier I Capital to Average Assets (2) 9.61 % 9.78 % 9.75 % 10.06 % 10.10 %
Tangible common equity to tangible assets 8.81 % 8.62 % 8.59 % 8.78 % 8.78 %
 
Tangible book value per common share (3) $ 20.59 $ 20.41 $ 19.89 $ 19.44 $ 18.98
 
Asset quality:
Nonaccrual loans $ 5,481 $ 4,241 $ 5,303 $ 4,434 $ 2,937
Other real estate owned   -     222     222     272     272  
Total non-performing assets $ 5,481   $ 4,463   $ 5,525   $ 4,706   $ 3,209  
 
 
Nonperforming loans as a % of total loans 0.36 % 0.28 % 0.36 % 0.31 % 0.22 %

 

 

Nonperforming assets as a % of total assets 0.31 % 0.25 % 0.31 % 0.28 % 0.20 %
 
Allowance for loan losses as a % of total loans 1.23 % 1.28 % 1.31 % 1.30 % 1.32 %
 
Allowance for loan losses as a % of nonperforming loans 344.90 % 461.31 % 368.40 % 417.48 % 612.26 %
(1) Efficiency ratio is defined as noninterest expense, less merger
and acquisition related expenses, 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.
 
(3) Excludes unvested restricted shares of 75,186, 96,488, 103,220,
98,176, and 96,594 as of December 31, 2017, September 30, 2017, June
30, 2017, March 31, 2017, and December 31, 2016, respectively.
 
 
BANKWELL FINANCIAL GROUP, INC.
LOAN & DEPOSIT PORTFOLIO (unaudited)
(Dollars in thousands)
 
    December 31,     September 30,     December 31,     Current QTD     YTD
Period End Loan Composition 2017 2017 2016 % Change % Change
Residential Real Estate $ 193,609 $ 192,848 $ 195,729 0.4 % (1.1 %)
Commercial Real Estate 971,151 942,898 845,322 3.0 % 14.9 %
Construction   101,636   114,571   107,441 (11.3 %) (5.4 %)
Total Real Estate Loans 1,266,396 1,250,317 1,148,492 1.3 % 10.3 %
 
Commercial Business 276,285 272,505 215,914 1.4 % 28.0 %
 
Consumer   335   724   1,533 (53.7 %) (78.1 %)
Total Loans $ 1,543,016 $ 1,523,546 $ 1,365,939 1.3 % 13.0 %
 
 
December 31, September 30, December 31, Current QTD YTD
Period End Deposit Composition 2017 2017 2016 % Change % Change
Noninterest-bearing demand $ 172,638 $ 162,790 $ 187,593 6.0 % (8.0 %)
NOW 58,942 58,894 53,950 0.1 % 9.3 %
Money Market 451,804 453,577 349,131 (0.4 %) 29.4 %
Savings 83,758 87,469 96,502 (4.2 %) (13.2 %)
Time   631,263   647,061   601,861 (2.4 %) 4.9 %
Total Deposits $ 1,398,405 $ 1,409,791 $ 1,289,037 (0.8 %) 8.5 %
 
 
BANKWELL FINANCIAL GROUP, INC.
NONINTEREST INCOME & EXPENSE - QTD (unaudited)
(Dollars in thousands)
 
    For the Quarter Ended        
Noninterest income December 31,     September 30,     December 31 Dec 17 vs. Sep 17 Dec 17 vs. Dec 16
2017 2017 2016 % Change % Change
Gains and fees from sales of loans $ 868 $ 36 79 2311.1 % 998.7 %
Bank owned life insurance 289 295 $ 171 (2.0 %) 69.0 %
Service charges and fees 252 254 242 (0.8 %) 4.1 %
Loss on sale of foreclosed real estate, net (78 ) - - 100.0 % 100.0 %
Net loss on sale of available for sale securities - - (207 ) 0.0 % (100.0 %)
Other   210     239   116   (12.1 %) 81.0 %
Total noninterest income $ 1,541   $ 824 $ 401   87.0 % 284.3 %
 
 
For the Quarter Ended
Noninterest expense December 31, September 30, December 31 Dec 17 vs. Sep 17 Dec 17 vs. Dec 16
2017 2017 2016 % Change % Change
Salaries and employee benefits $ 4,603 $ 3,952 $ 4,331 16.5 % 6.3 %
Occupancy and equipment 1,585 1,449 1,576 9.4 % 0.6 %
Professional services 457 680 397 (32.8 %) 15.1 %
Data processing 399 621 402 (35.7 %) (0.7 %)
Marketing 321 295 304 8.8 % 5.6 %
Director fees 229 207 223 10.6 % 2.7 %
FDIC insurance 225 265 146 (15.1 %) 54.1 %
Amortization of intangibles 25 31 32 (19.4 %) (21.9 %)
Foreclosed real estate - 3 8 (100.0 %) (100.0 %)
Other   735     626   349   17.4 % 110.6 %
Total noninterest expense $ 8,579   $ 8,129 $ 7,768   5.5 % 10.4 %
 
   
BANKWELL FINANCIAL GROUP, INC.        
NONINTEREST INCOME & EXPENSE - YTD (unaudited)
(Dollars in thousands)
 
For the Year Ended
Noninterest income December 31, December 31, Dec 17 vs. Dec 16
2017 2016 % Change
Gains and fees from sales of loans $ 1,427 $ 466 206.2 %
Bank owned life insurance 1,170 693 68.8 %
Service charges and fees 1,007 963 4.6 %
Net gain (loss) on sale of available for sale securities 165 (115 ) (243.5 %)
(Loss) Gain on sale of foreclosed real estate, net (78 ) 128 (160.9 %)
Other   938     541   73.4 %
Total noninterest income $ 4,629   $ 2,676   73.0 %
 
 
 
For the Year Ended
Noninterest expense December 31, December 31, Dec 17 vs. Dec 16
2017 2016 % Change
Salaries and employee benefits $ 16,284 $ 15,655 4.0 %
Occupancy and equipment 6,165 5,811 6.1 %
Professional services 2,072 1,654 25.3 %
Data processing 1,866 1,603 16.4 %
Marketing 1,193 948 25.8 %
FDIC insurance 1,116 660 69.1 %
Director fees 912 859 6.2 %
Amortization of intangibles 118 151 (21.9 %)
Foreclosed real estate 70 157 (55.4 %)
Other   2,727     2,046   33.3 %
Total noninterest expense $ 32,523   $ 29,544   10.1 %
 
 
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 12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016
Total Equity $ 161,027 $ 158,317 $ 153,577 $ 149,672 $ 145,895
Less:
Goodwill 2,589 2,589 2,589 2,589 2,589
Other intangibles   382     407     438     469     501  
Tangible Common Equity $ 158,056   $ 155,321   $ 150,550   $ 146,614   $ 142,805  
 
Total Assets $ 1,796,607 $ 1,804,938 $ 1,755,804 $ 1,672,242 $ 1,628,919
Less:
Goodwill 2,589 2,589 2,589 2,589 2,589
Other intangibles   382     407     438     469     501  
Tangible Assets $ 1,793,636   $ 1,801,942   $ 1,752,777   $ 1,669,184   $ 1,625,829  
 
Tangible Common Equity to Tangible Assets 8.81 % 8.62 % 8.59 % 8.78 % 8.78 %
 
 
As of
Computation of Tangible Book Value per Common Share 12/31/2017 9/30/2017 6/30/2017 3/31/2017 12/31/2016
Total shareholders' equity $ 161,027 $ 158,317 $ 153,577 $ 149,672 $ 145,895
Less:
Preferred stock   -     -     -     -     -  
Common shareholders' equity 161,027 158,317 153,577 149,672 145,895
Less:
Goodwill 2,589 2,589 2,589 2,589 2,589
Other intangibles   382     407     438     469     501  
Tangible common shareholders' equity 158,056 155,321 150,550 146,614 142,805
Common shares issued 7,751,424 7,705,975 7,673,850 7,638,706 7,620,663
Less:
Shares of unvested restricted stock   75,186     96,488     103,220     98,176     96,594  
Common shares outstanding 7,676,238 7,609,487 7,570,630 7,540,530 7,524,069
Book value per share $ 20.98 $ 20.81 $ 20.29 $ 19.85 $ 19.39
Less:
Effects of intangible assets $ 0.39 $ 0.39 $ 0.40 $ 0.41 $ 0.41
 
Tangible Book Value per Common Share $ 20.59 $ 20.41 $ 19.89 $ 19.44 $ 18.98
 
 
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 Year Ended
Computation of Efficiency Ratio 12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016 12/31/2017     12/31/2016
Noninterest expense $ 8,579 $ 8,129 $ 7,581 $ 8,234 $ 7,768 $ 32,523 $ 29,544
Less:
Amortization of intangible assets 25 31 31 31 32 118 151
Foreclosed real estate expenses   -     3     60     7     8     70     157  
Adjusted noninterest expense $ 8,554   $ 8,095   $ 7,490   $ 8,196   $ 7,728   $ 32,335   $ 29,236  
Net interest income $ 13,914 $ 13,861 $ 13,641 $ 12,948 $ 13,288 $ 54,364 $ 49,092
Noninterest income 1,541 824 998 1,266 401 4,629 2,676
Less:
Gains (losses) on sales of securities - - - 165 (207 ) 165 (115 )
(Loss) Gains on sale of foreclosed real estate   (78 )   -     -     -     -     (78 )   128  
Adjusted operating revenue $ 15,533   $ 14,685   $ 14,639   $ 14,049   $ 13,896   $ 58,906   $ 51,755  
 
Efficiency ratio 55.1 % 55.1 % 51.2 % 58.3 % 55.6 % 54.9 % 56.5 %
 
 
For the Quarter Ended For the Year Ended
Computation of Return on Average Tangible Common Equity   12/31/2017     9/30/2017     6/30/2017     3/31/2017     12/31/2016     12/31/2017     12/31/2016  
Net Income Attributable to Common Shareholders $ 2,096   $ 4,263   $ 3,769   $ 3,702   $ 3,323   $ 13,830   $ 12,350  
Total average shareholders' equity $ 161,477 $ 156,852 $ 152,898 $ 148,349 $ 143,152 $ 154,929 138,131
Less:
Goodwill 2,589 2,589 2,589 2,589 2,589 2,589 2,589
Other intangibles   382     407     438     469     501     382     501  
Average tangible common equity $ 158,506   $ 153,856   $ 149,871   $ 145,291   $ 140,062   $ 151,958     135,041  
 
Annualized Return on Average Tangible Common Equity 5.25 % 10.99 % 10.09 % 10.33 % 9.44 % 9.10 % 9.15 %
 
 
BANKWELL FINANCIAL GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (unaudited) - Continued
(Dollars in thousands, except share data)
 

For The Quarter Ended
12/31/2017

   

For the Year Ended

12/31/2017

Reconciliation of Core Net Income, Net of Tax $     EPS $     EPS
Net Income (GAAP) $ 2,096 $ 0.27 $ 13,830 $ 1.78
DTA write-off resulting from tax reform 3,270 0.42 3,270 0.42
Charges due to reduction in workforce 166 0.02 166 0.02
Income recognized from servicing assets (578 ) (0.07 ) (663 ) (0.08 )
Impact from loan reserve methodology change   (862 )   (0.11 )   (862 )   (0.11 )
Core Net Income (non-GAAP) $ 4,092   $ 0.53   $ 15,741   $ 2.03  
 
 
BANKWELL FINANCIAL GROUP, INC.
NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS
(Dollars in thousands)
 
    For the Quarter Ended
December 31, 2017     December 31, 2016
Average         Yield/ Average         Yield/
Balance Interest Rate (5) Balance Interest Rate (5)
Assets:
Cash and Fed funds sold $ 103,129 $ 289 1.11 % $ 70,313 $ 75 0.42 %
Securities (1) 115,194 1,008 3.50 % 93,375 725 3.11 %
Loans:
Commercial real estate 946,213 11,034 4.56 % 826,095 10,125 4.80 %
Residential real estate 180,078 1,592 3.54 % 180,294 1,603 3.56 %
Construction (2) 109,594 1,333 4.76 % 112,456 1,304 4.54 %
Commercial business 266,235 3,353 4.93 % 206,587 2,709 5.13 %
Home equity 13,892 171 4.86 % 14,193 154 4.31 %
Consumer   970   10 3.76 %   1,121   15 5.33 %
Total loans 1,516,982 17,493 4.51 % 1,340,746 15,910 4.64 %
Federal Home Loan Bank stock   9,340   93 3.99 %   7,943   70 3.52 %
Total earning assets 1,744,645   18,883 4.23 % 1,512,377   16,780 4.34 %
Other assets   66,505   57,850
Total assets $ 1,811,150 $ 1,570,227
 
Liabilities and shareholders' equity:
Interest-bearing liabilities:
NOW $ 56,567 28 0.20 % $ 57,271 23 0.15 %
Money market 457,351 1,098 0.95 % 331,623 504 0.60 %
Savings 86,932 172 0.78 % 77,428 101 0.52 %
Time   647,325   2,304 1.41 %   589,871   1,810 1.22 %
Total interest-bearing deposits 1,248,175 3,602 1.14 % 1,056,193 2,438 0.92 %
Borrowed Money   218,718   1,213 2.17 %   182,947   916 1.99 %
Total interest-bearing liabilities 1,466,893 $ 4,815 1.30 % 1,239,140 $ 3,354 1.08 %
Noninterest-bearing deposits 170,642 178,106
Other liabilities   12,138   9,829
Total liabilities 1,649,673 1,427,075
Shareholders' equity   161,477   143,152
Total liabilities and shareholders' equity $ 1,811,150 $ 1,570,227
Net interest income (3) $ 14,068 $ 13,426
Interest rate spread 2.93 % 3.26 %
Net interest margin (4) 3.23 % 3.55 %
(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 $154 thousand and $138 thousand, respectively for the
three months ended December 31, 2017 and 2016.
(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 Year Ended
December 31, 2017     December 31, 2016
Average         Yield/ Average         Yield/
Balance Interest Rate (5) Balance Interest Rate (5)
Assets:
Cash and Fed funds sold $ 85,308 $ 790 0.93 % $ 41,838 $ 173 0.41 %
Securities (1) 108,775 3,830 3.52 % 99,905 3,046 3.05 %
Loans:
Commercial real estate 907,223 41,638 4.53 % 772,890 36,572 4.65 %
Residential real estate 180,287 6,323 3.51 % 179,096 6,410 3.58 %
Construction (2) 107,752 5,195 4.75 % 100,611 4,602 4.50 %
Commercial business 253,868 12,981 5.04 % 185,523 9,791 5.19 %
Home equity 14,057 660 4.70 % 14,951 621 4.16 %
Consumer   1,227   44 3.62 %   1,560   81 5.17 %
Total loans 1,464,414 66,841 4.50 % 1,254,631 58,077 4.55 %
Federal Home Loan Bank stock   8,486   337 3.97 %   7,366   255 3.46 %
Total earning assets 1,666,983   71,798 4.25 % 1,403,740   61,551 4.31 %
Other assets   60,904   54,580
Total assets $ 1,727,887 $ 1,458,320
 
Liabilities and shareholders' equity:
Interest-bearing liabilities:
NOW $ 57,712 93 0.16 % $ 56,123 109 0.19 %
Money market 404,848 3,427 0.85 % 317,210 1,836 0.58 %
Savings 102,915 763 0.74 % 72,800 315 0.43 %
Time   633,260   8,411 1.33 %   524,237   6,040 1.15 %
Total interest-bearing deposits 1,198,735 12,694 1.06 % 970,370 8,300 0.86 %
Borrowed Money   194,875   4,143 2.10 %   164,450   3,598 2.19 %
Total interest-bearing liabilities 1,393,610 $ 16,837 1.21 % 1,134,820 $ 11,898 1.05 %
Noninterest-bearing deposits 169,250 172,098
Other liabilities   10,098   13,271
Total liabilities 1,572,958 1,320,189
Shareholders' equity   154,929   138,131
Total liabilities and shareholders' equity $ 1,727,887 $ 1,458,320
Net interest income (3) $ 54,961 $ 49,653
Interest rate spread 3.04 % 3.26 %
Net interest margin (4) 3.30 % 3.54 %
(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 $597 thousand and $561 thousand, respectively for the
year ended December 31, 2017 and 2016.
(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.

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