Bankwell Financial Group Reports Record First Quarter Net Income of $3.0 Million, $0.40 Earnings Per Common Share, 9.23% Return on Average Tangible Common Equity and Declares Second Quarter Dividend

Bankwell Financial Group, Inc. (NASDAQ: BWFG) reported GAAP net income of $3.0 million for the first quarter of 2016. In addition, Bankwell Financial Group, Inc. reached record loan levels at $1.2 billion, driven by strong organic growth.

The Company's Board of Directors declared a $0.05 per share cash dividend, payable May 26, 2016 to shareholders of record on May 16, 2016.

First Quarter 2016 Highlights:

  • Total revenue (net interest income plus non-interest income) reached $12.1 million.
  • Diluted earnings per share were $0.40; an increase of 54% compared to the first quarter of 2015.
  • Tax equivalent net interest margin was 3.54%, compared to 3.89% in the first quarter of 2015.
  • Total non-interest income was $0.7 million, which is 6% of total revenue.
  • The efficiency ratio was 57.7%, compared to 66.0% in the first quarter of 2015.
  • The tangible common equity ratio and tangible book value per share were 9.26% and $17.76, respectively.
  • Total gross loans were $1.2 billion.
  • The allowance for loan losses was $14.8 million and represented 1.34% of total loans, excluding acquired loans.
  • Investment securities totaled $108.5 million and represented 8% of total assets.
  • Total deposits ended the quarter at $1.1 billion.

Notes Bankwell Financial Group CEO, Christopher R. Gruseke:

“Bankwell has begun 2016 with its best financial performance to date. Despite the headwinds of increased volatility in the financial markets, we recorded net income of $3.0 million, or $0.40 per share for the quarter. We also grew our loan book, organically, by $49.0 million or 4.3% percent during that period. This organic growth was achieved without compromising on credit quality or pricing.”

“During the first quarter, we observed competitor pricing at yields which could not possibly generate appropriate returns on capital. We practice a more disciplined approach to loan pricing, and our veteran lending team performed well versus the competition, resulting in a net interest margin of 3.54%. This margin was achieved while maintaining superior asset quality as indicated by our non-performing asset ratio of 0.30% of assets.”

“In this low interest rate environment, only the low cost producers will thrive. We continue to look for efficiencies in every aspect of our business, and Bankwell achieved an efficiency ratio of 57.7% for the quarter, compared to 66.0% for the comparable period last year, a figure which puts us ahead of our own strategic plan. While we are quite pleased with this result, the bank plans to continue to invest in infrastructure and people. We expect several personnel additions during the remainder of the year, which will result in a more normalized rate of non-interest expense. Our 2016 plan for the full year remains intact to deliver an improved efficiency ratio over 2015’s result of 62.4%.”

“Finally, the combination of Bankwell’s ability to generate high quality assets, our focus on cost control, and the strength of our team produced a return on average tangible common equity of 9.23%, versus 6.43% for the same period in 2015, demonstrating again this team’s commitment to deliver value to our shareholders.”

Earnings

Net income for the quarter ended March 31, 2016 was $3.0 million, an increase of 60% compared to the quarter ended March 31, 2015. Revenues (net interest income plus non-interest income) for the quarter ended March 31, 2016 were $12.1 million, an increase of 15% compared to the quarter ended March 31, 2015. Net interest income for the quarter ended March 31, 2016 was $11.4 million, an increase of 15% compared to the quarter ended March 31, 2015. Our strong net income, revenues and net interest income was fueled by record earning asset growth.

Basic and diluted earnings per share for the quarter ended March 31, 2016 was $0.40, compared to $0.26 for the quarter ended March 31, 2015.

The Company continues to focus on expense control as indicated by our improving efficiency ratio. The Company’s efficiency ratio for the quarters ended March 31, 2016 and March 31, 2015 were 57.7% and 66.0%, respectively.

Noninterest Income and Expense

Noninterest income increased $73 thousand to $0.7 million for the three months ended March 31, 2016 compared to the three months ended March 31, 2015. The increase in noninterest income was primarily driven by an increase in service charges and fees on checking accounts, increased ATM and debit card fees, and an increase in other income as a result of income recognized on the early pay-off of purchased credit impaired loans.

Noninterest expense increased only 1.5% for the three months ended March 31, 2016 compared to the three months ended March 31, 2015. The increase was primarily driven by an increase in data processing and foreclosed real estate, offset by a decrease in salaries and employee benefits. Salaries and employee benefits decreased $151 thousand to $3.8 million for the three months ended March 31, 2016 compared to the three months ended March 31, 2015 as a result of an increase in open positions.

Financial Condition

Assets totaled $1.4 billion at March 31, 2016, an annualized increase of 27% compared to assets of $1.3 billion at December 31, 2015. This increase reflects strong organic loan growth. Total gross loans were $1.2 billion at March 31, 2016, an annualized increase of 17% compared to December 31, 2015. Commercial real estate loans have experienced the most significant growth, up by $54.0 million.

Deposits increased to $1.1 billion, an annualized increase of 18% over December 31, 2015, with core deposits (total deposits less time deposits) showing an annualized increase of 6% over December 31, 2015 to $619.0 million primarily reflecting increases in money market and NOW accounts.

Asset Quality

Asset quality remained exceptionally strong at March 31, 2016. Non-performing assets as a percentage of total assets was 0.30% at March 31, 2016, down from 0.38% at December 31, 2015. The allowance for loan losses at March 31, 2016 was $14.8 million, representing 1.34% of total loans, excluding acquired loans.

Capital

Shareholders’ equity totaled $134.5 million as of March 31, 2016, an increase of $2.7 million compared to December 31, 2015, primarily a result of net income for the quarter ended March 31, 2016 of $3.0 million. As of March 31, 2016, the tangible common equity ratio and tangible book value per share were 9.26% and $17.76, 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)
March 31,December 31,March 31,
201620152015
Assets
Cash and due from banks $ 69,512 $ 49,562 $ 19,428
Federal funds sold 3,194 39,035 -
Cash and cash equivalents 72,706 88,597 19,428
Held to maturity investment securities, at amortized cost 17,010 10,226 11,398
Available for sale investment securities, at fair value 91,528 40,581 50,736
Loans receivable (net of allowance for loan losses of $14,810,
$14,169 and $11,596 at March 31, 2016, December 31, 2015 and
March 31, 2015, respectively) 1,177,905 1,129,748 964,034
Foreclosed real estate 878 1,248 830
Accrued interest receivable 4,370 4,071 3,342
Federal Home Loan Bank stock, at cost 7,158 6,554 6,794
Premises and equipment, net 10,830 11,163 12,120
Bank-owned life insurance 23,929 23,755 23,211
Goodwill 2,589 2,589 2,589
Other intangible assets 612 652 797
Deferred income taxes, net 8,677 8,337 7,436
Other assets 1,881 2,851 1,748
Total assets $ 1,420,073 $ 1,330,372 $ 1,104,463
Liabilities & Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing $ 165,968 $ 164,553 $ 142,920
Interest-bearing 927,766 882,389 691,783
Total deposits 1,093,734 1,046,942 834,703
Advances from the Federal Home Loan Bank 160,000 120,000 133,000
Subordinated debentures 25,012 25,000 -
Accrued expenses and other liabilities 6,856 6,661 5,352
Total liabilities 1,285,602 1,198,603 973,055
Shareholders' equity
Preferred stock, senior noncumulative perpetual, Series C, no par;
10,980 shares issued and outstanding at March 31, 2015
liquidation value of $1,000 per share. - - 10,980
Common stock, no par value; 10,000,000 shares authorized,
7,530,791, 7,516,291 and 7,243,252 shares issued at
March 31, 2016, December 31, 2015 and March 31, 2015, respectively 113,052 112,579 107,765
Retained earnings 21,578 18,963 12,280
Accumulated other comprehensive (loss) income (159 ) 227 383
Total shareholders' equity 134,471 131,769 131,408
Total liabilities and shareholders' equity $ 1,420,073 $ 1,330,372 $ 1,104,463
BANKWELL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars in thousands, except per share data)
For the Quarter Ended
March 31,December 31,March 31,
201620152015
Interest and dividend income
Interest and fees on loans $ 13,283 $ 13,383 $ 10,757
Interest and dividends on securities 684 489 504
Interest on cash and cash equivalents 37 36 12
Total interest income 14,004 13,908 11,273
Interest expense
Interest expense on deposits 1,740 1,776 1,038
Interest on borrowings 866 896 341
Total interest expense 2,606 2,672 1,379
Net interest income 11,398 11,236 9,894
Provision for loan losses 646 354 733
Net interest income after provision for loan losses 10,752 10,882 9,161
Noninterest income
Service charges and fees 245 258 208
Bank owned life insurance 174 178 183
Gains and fees from sales of loans 110 228 89
Gain on sale of foreclosed real estate, net - - 18
Other 143 176 101
Total noninterest income 672 840 599
Noninterest expense
Salaries and employee benefits 3,811 4,248 3,962
Occupancy and equipment 1,408 1,312 1,349
Data processing 407 366 336
Professional services 366 414 325
FDIC insurance 169 185 158
Director fees 155 198 148
Marketing 139 278 148
Foreclosed real estate 72 95 5
Amortization of intangibles 40 43 51
Merger and acquisition related expenses - 2 -
Other 513 540 490
Total noninterest expense 7,080 7,681 6,972
Income before income tax expense 4,344 4,041 2,788
Income tax expense 1,353 1,423 915
Net income $ 2,991 $ 2,618 $ 1,873
Net income attributable to common shareholders $ 2,991 $ 2,575 $ 1,846
Earnings Per Common Share:
Basic $ 0.40 $ 0.35 $ 0.26
Diluted 0.40 0.35 0.26
Weighted Average Common Shares Outstanding:
Basic 7,380,217 7,169,570 7,028,499
Diluted 7,431,747 7,234,431 7,056,141
Dividends per common share $ 0.05 $ 0.05 $ -
BANKWELL FINANCIAL GROUP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
(Dollars in thousands, except per share data)
For the Quarter Ended
March 31,December 31,March 31,
201620152015
Performance ratios:
Return on average assets 0.89 % 0.78 % 0.70 %
Return on average stockholders' equity 9.01 % 7.68 % 5.81 %
Return on average tangible common equity 9.23 % 7.74 % 6.43 %
Net interest margin 3.54 % 3.63 % 3.89 %
Efficiency ratio (1) 57.7 % 62.4 % 66.0 %
Net loan charge-offs as a % of average loans 0.00 % 0.01 % 0.00 %
As of
March 31,

2016

December 31,

2015

March 31,

2015

Capital ratios:
Total Common Equity Tier 1 Capital to Risk-Weighted Assets (2) 12.24 % 12.18 % 12.08 %
Total Capital to Risk-Weighted Assets (2) 13.48 % 13.39 % 13.26 %
Tier I Capital to Risk-Weighted Assets (2) 12.24 % 12.18 % 12.08 %
Tier I Capital to Average Assets (2) 10.85 % 10.84 % 10.99 %
Tangible common equity to tangible assets 9.26 % 9.68 % 10.63 %
Tangible book value per common share (3) $ 17.76 $ 17.43 $ 16.62
Asset quality:
Nonaccrual loans $ 3,398 $ 3,791 $ 2,451
Other real estate owned 878 1,248 830
Total non-performing assets $ 4,276 $ 5,039 $ 3,281
Loans past due 90 days and still accruing $ 89 $ 1,105 $ 1,671
Nonperforming loans as a % of total loans 0.28 % 0.33 % 0.25 %
Nonperforming assets as a % of total assets 0.30 % 0.38 % 0.30 %
Allowance for loan losses as a % of total loans 1.24 % 1.23 % 1.18 %
Allowance for loan losses as a % of nonperforming loans 435.84 % 373.76 % 473.11 %
(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 preferred stock and unvested restricted stock awards of 138,423, 143,323 and 200,962 as of March 31, 2016, December 31, 2015 and March 31, 2015, respectively.
BANKWELL FINANCIAL GROUP, INC.
LOAN & DEPOSIT PORTFOLIO (unaudited)
(Dollars in thousands)
March 31,December 31,March 31,Mar 16 vs. Dec 15Mar 16 vs. Mar 15
Period End Loan Composition201620152015% Change% Change
Residential Real Estate $ 184,134 $ 177,184 $ 172,629 3.9 % 6.7 %
Commercial Real Estate 751,571 697,542 566,119 7.7 % 32.8 %
Construction 82,528 82,273 68,724 0.3 % 20.1 %
Home equity 15,789 15,926 18,412 -0.9 % -14.2 %
Total Real Estate Loans1,034,022972,925825,8846.3%25.2%
Commercial Business 160,903 172,853 150,326 -6.9 % 7.0 %
Consumer 1,552 1,735 2,437 -10.5 % -36.3 %
Total Loans$1,196,477$1,147,513$978,6474.3%22.3%
March 31,December 31,March 31,Mar 16 vs. Dec 15Mar 16 vs. Mar 15
Period End Deposit Composition201620152015% Change% Change
Noninterest-bearing demand $ 165,968 $ 164,553 $ 142,920 0.9 % 16.1 %
NOW 62,639 51,008 60,990 22.8 % 2.7 %
Money Market 316,440 296,838 242,917 6.6 % 30.3 %
Savings 73,987 97,846 86,502 -24.4 % -14.5 %
Time 474,700 436,697 301,374 8.7 % 57.5 %
Total Deposits$1,093,734$1,046,942$834,7034.5%31.0%
BANKWELL FINANCIAL GROUP, INC.
NONINTEREST INCOME & EXPENSE (unaudited)
(Dollars in thousands)
For the Quarter Ended
Noninterest incomeMarch 31,December 31,March 31,Mar 16 vs. Dec 15Mar 16 vs. Mar 15
201620152015% Change% Change
Service charges and fees $ 245 $ 258 $ 208 -5.0 % 17.8 %
Bank owned life insurance 174 178 183 -2.2 % -4.9 %
Gains and fees from sales of loans 110 228 89 -51.8 % 23.6 %
Gain on sale of foreclosed real estate, net - - 18 0.0 % -100.0 %
Other 143 176 101 -18.8 % 41.6 %
Total noninterest income$672$840$599-20.0%12.2%
For the Quarter Ended
Noninterest expenseMarch 31,December 31,March 31,Mar 16 vs. Dec 15Mar 16 vs. Mar 15
201620152015% Change% Change
Salaries and employee benefits $ 3,811 $ 4,248 $ 3,962 -10.3 % -3.8 %
Occupancy and equipment 1,408 1,312 1,349 7.3 % 4.4 %
Data processing 407 366 336 11.2 % 21.1 %
Professional services 366 414 325 -11.6 % 12.6 %
FDIC insurance 169 185 158 -8.6 % 7.0 %
Director fees 155 198 148 -21.7 % 4.7 %
Marketing 139 278 148 -50.0 % -6.1 %
Foreclosed real estate 72 95 5 -24.2 % 1340.0 %
Amortization of intangibles 40 43 51 -7.0 % -21.6 %
Merger and acquisition related expenses - 2 - -100.0 % 0.0 %
Other 513 540 490 -5.0 % 4.7 %
Total noninterest expense$7,080$7,681$6,972-7.8%1.5%
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 Assets03/31/201612/31/201503/31/2015
Total Equity $ 134,471 $ 131,769 $ 131,408
Less:
Preferred stock - - 10,980
Goodwill 2,589 2,589 2,589
Other intangibles 612 652 797
Tangible Common Equity$131,270$128,528$117,042
Total Assets $ 1,420,073 $ 1,330,372 $ 1,104,463
Less:
Goodwill 2,589 2,589 2,589
Other intangibles 612 652 797
Tangible Assets$1,416,872$1,327,131$1,101,077
Tangible Common Equity to Tangible Assets9.26%9.68%10.63%
As of
Computation of Tangible Book Value per Common Share03/31/201612/31/201503/31/2015
Total shareholders' equity $ 134,471 $ 131,769 $ 131,408
Less:
Preferred stock - - 10,980
Common shareholders' equity134,471131,769120,428
Less:
Goodwill 2,589 2,589 2,589
Other intangibles 612 652 797
Tangible common shareholders' equity131,270128,528117,042
Common shares issued 7,530,791 7,516,291 7,243,252
Less:
Shares of unvested restricted stock 138,423 143,323 200,962
Common shares outstanding7,392,3687,372,9687,042,290
Book value per share $ 18.19 $ 17.87 $ 17.10
Less:
Effects of intangible assets $ 0.43 $ 0.44 $ 0.48
Tangible Book Value per Common Share$17.76$17.43$16.62
BANKWELL FINANCIAL GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (unaudited) - Continued
(Dollars in thousands, except share data)
For the Quarter Ended
Computation of Efficiency Ratio03/31/201612/31/201503/31/2015
Noninterest expense $ 7,080 $ 7,681 $ 6,972
Less:
Amortization of intangible assets 40 43 51
Foreclosed real estate expenses 72 95 5
Merger and acquisition expense - 2 -
Adjusted noninterest expense$6,968$7,541$6,916
Net interest income $ 11,398 $ 11,236 $ 9,894
Noninterest income 672 840 599
Less:
Gains (losses) on sales of securities - - -
Gains on sale of foreclosed real estate - - 18
Adjusted operating revenue$12,070$12,076$10,475
Efficiency ratio57.7%62.4%66.0%
For the Quarter Ended
Computation of Return on Average Tangible Common Equity03/31/201612/31/201503/31/2015
Net Income Attributable to Common Shareholders $ 2,991 $ 2,575 $ 1,846
Total average shareholders' equity 133,474 135,311 130,812
Less:
Preferred stock - - 10,980
Goodwill 2,589 2,589 2,589
Other intangibles 612 652 797
Average tangible common equity 130,273 132,070 116,446
Annualized Return on Average Tangible Common Equity9.23%7.74%6.43%
BANKWELL FINANCIAL GROUP, INC.
NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS
(Dollars in thousands)
For the Quarter Ended
March 31, 2016March 31, 2015
AverageYield/AverageYield/
BalanceInterestRateBalanceInterestRate
Assets:
Cash and Fed funds sold $ 32,764 $ 37 0.45 % $ 18,868 $ 12 0.25 %
Securities (1) 101,987 763 2.99 % 66,508 592 3.56 %
Loans:
Commercial real estate 712,628 8,325 4.62 % 524,215 6,270 4.78 %
Residential real estate 177,353 1,596 3.60 % 173,304 1,579 3.65 %
Construction (2) 86,482 969 4.43 % 67,885 794 4.68 %
Commercial business 165,987 2,190 5.22 % 146,056 1,856 5.08 %
Home equity 15,603 157 4.03 % 18,067 170 3.82 %
Consumer 1,738 21 4.87 % 2,806 34 4.85 %
Acquired loans (net of mark) 1,431 25 7.15 % 3,106 54 7.06 %
Total loans 1,161,222 13,283 4.53 % 935,439 10,757 4.60 %
Federal Home Loan Bank stock 6,560 56 3.44 % 6,440 26 1.59 %
Total earning assets 1,302,533 $ 14,139 4.29 % 1,027,255 $ 11,387 4.43 %
Other assets 54,733 52,634
Total assets $ 1,357,266 $ 1,079,889
Liabilities and shareholders' equity:
Interest-bearing liabilities:
NOW $ 56,617 38 0.27 % $ 52,568 15 0.11 %
Money market 306,105 398 0.52 % 229,984 281 0.50 %
Savings 82,061 86 0.42 % 79,958 86 0.44 %
Time 454,312 1,218 1.08 % 306,072 656 0.87 %
Total interest-bearing deposits 899,095 1,740 0.78 % 668,582 1,038 0.63 %
Borrowed Money 145,444 866 2.39 % 120,217 341 1.15 %
Total interest-bearing liabilities 1,044,539 $ 2,606 1.00 % 788,799 $ 1,379 0.71 %
Noninterest-bearing deposits 172,574 153,674
Other liabilities 6,679 6,604
Total liabilities 1,223,792 949,077
Shareholders' equity 133,474 130,812
Total liabilities and shareholders' equity $ 1,357,266 $ 1,079,889
Net interest income (3) $ 11,533 $ 10,008
Interest rate spread 3.29 % 3.72 %
Net interest margin (4) 3.54 % 3.89 %
(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 $135 thousand and $114 thousand, respectively for the three months ended March 31, 2016, and 2015.
(4) Net interest income as a percentage of earning assets.

Contacts:

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

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