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Bankwell Financial Group Reports Operating Results for the Second Quarter, Continued Reserve Build and Maintains Quarterly Dividend

Bankwell Financial Group, Inc. (NASDAQ:BWFG) reported GAAP net income of $1.2 million, or $0.16 per share, for the second quarter of 2020, versus $5.6 million, or $0.71 per share, for the same period in 2019. The decline in net income was largely driven by an increase in the loan loss provision due to increased credit risk relating to economic disruption and uncertainty caused by the Coronavirus (COVID-19) pandemic.

The Company's Board of Directors declared a $0.14 per share cash dividend, payable August 24, 2020 to shareholders of record on August 14, 2020.

We recommend reading this earnings release in conjunction with the Second Quarter 2020 Investor Presentation, located at http://investor.mybankwell.com/Presentations and included as an exhibit to our July 28, 2020 Current Report on Form 8-K, for further details regarding the impact of the COVID-19 pandemic on our operations and financial results.

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

"I am thankful for our employees’ exemplary performance during this pandemic. We have performed our role as an essential service provider with the utmost sense of purpose, and have continued to assist our customers and our communities in a meaningful way. Our performance metrics, after adjusting for various COVID-19 related items, highlight a solid foundation for profitability and growth. On the credit side, our loan deferral population stood at approximately 22% as of June 30th. Although the course of our national crisis will be uncertain, I am happy to note that loans on deferral are expected to drop to below 10% during the third quarter."

Second Quarter 2020 Highlights:

  • Second quarter provision for loan losses totaled $3.0 million, which included an additional reserve build of $4.9 million related to increased risk due to the COVID-19 pandemic. The increase was partially offset by changes in the loan portfolio composition and growth.
  • The allowance for loan losses was $19.7 million and represents 1.22% of total loans as of June 30, 2020, compared to an allowance for loan losses of $13.5 million, representing 0.84% of total loans as of December 31, 2019.
  • Funded 381 Paycheck Protection Program (“PPP”) loans for a total of $60.4 million.
  • Granted COVID-19 related deferrals on loans (excluding SBA loans which are paid for 6 months by the SBA on behalf of borrowers) totaling $339.9 million. Further detail regarding COVID-19 related loan deferrals is included in the Second Quarter 2020 Investor Presentation.
  • Total deposits were $1.6 billion at June 30, 2020 compared to $1.5 billion at December 31, 2019, primarily reflecting a temporary increase in short term time deposits to expand on-balance sheet liquidity.
  • Noninterest bearing deposits increased 12% at June 30, 2020 compared to December 31, 2019.
  • The loan-to-deposit ratio for the Bank was 99.2% at June 30, 2020, reflecting the above-mentioned increase in deposits.
  • Total gross loans were $1.6 billion at June 30, 2020, increasing slightly when compared to December 31, 2019.
  • Investment securities totaled $100.6 million and represent 5% of total assets.
  • Total noninterest income was $0.6 million for the quarter ended June 30, 2020, or 4% of total revenue.
  • The tangible common equity ratio and tangible book value per share, as of June 30, 2020, were 8.21% and $21.70, respectively.

Earnings and Performance

Revenues (net interest income plus noninterest income) for the quarter ended June 30, 2020 were $14.2 million, versus $14.9 million for the quarter ended June 30, 2019. Revenues for the six months ended June 30, 2020 were $28.6 million, versus $30.5 million for the six months ended June 30, 2019. The decrease in revenues was attributable to a decline in income from loan prepayments and the absence of loan sales during the quarter and six month periods ended June 30, 2020 when compared to the same periods in 2019. The decrease in revenues was also driven by lower loan yields as loans are re-priced in the current low interest rate environment. The decrease in revenues was partially offset by a decline in interest expense, driven by lower interest rates on deposits when compared to the same periods in 2019.

Net income for the quarter ended June 30, 2020 was $1.2 million, versus $5.6 million for the quarter ended June 30, 2019. Net income for the six months ended June 30, 2020 was $2.6 million, versus $10.7 million for the six months ended June 30, 2019. The decrease in net income for the quarter and six month periods ended June 30, 2020 when compared to the same periods in 2019 was largely driven by an increase in the provision for loan losses due to COVID-19 related loan loss reserves, an increase in noninterest expense and the aforementioned decline in revenues. The provision for loan losses related to COVID-19 totaled $4.9 million and $7.9 million for the quarter and six months ended June 30, 2020, respectively.

Basic and diluted earnings per share were each $0.16 for the quarter ended June 30, 2020 compared to basic and diluted earnings per share of $0.71 each for the quarter ended June 30, 2019. Basic and diluted earnings per share were each $0.33 for the six months ended June 30, 2020 compared to basic and diluted earnings per share of $1.36 and $1.35, respectively, for the six months ended June 30, 2019.

The net interest margin (fully taxable equivalent basis) for the quarters ended June 30, 2020 and June 30, 2019 was 2.81% and 3.07%, respectively. The net interest margin for the six months ended June 30, 2020 and June 30, 2019 was 2.89% and 3.13%, respectively. The decrease in net interest margin for the quarter and six month periods ended June 30, 2020, when compared to the same periods in 2019, was primarily due to excess cash held at low interest rates to maintain a higher level of liquidity during the COVID-19 pandemic. Excluding the impact of additional liquidity and PPP loans, the net interest margin would increase approximately 21 basis points for the six months ended June 30, 2020.

Financial Condition

Assets totaled $2.0 billion at June 30, 2020, compared to assets of $1.9 billion at December 31, 2019. The increase in assets is primarily driven by an increase in cash and cash equivalents in order to maintain a higher level of liquidity during the COVID-19 pandemic. Gross loans totaled $1.6 billion at June 30, 2020, an increase of $10.2 million compared to December 31, 2019. Deposits totaled $1.6 billion at June 30, 2020, compared to deposits of $1.5 billion at December 31, 2019. The increase in deposits was a result of a temporary increase in short term time deposits to expand on-balance sheet liquidity as well as an increase in noninterest bearing deposits as a result of our ongoing treasury management efforts.

Capital

Shareholders’ equity totaled $170.4 million as of June 30, 2020, a decrease of $12.0 million compared to December 31, 2019, primarily a result of a $12.2 million unfavorable impact to accumulated other comprehensive income driven by fair value marks related to hedge positions involving interest rate swaps, as well as dividends paid of $2.2 million and common stock repurchases of $1.0 million. The decrease was partially offset by net income for the six months ended June 30, 2020 of $2.6 million. The marks on the interest rate swaps are driven by lower long term market interest rates in 2020 when compared to 2019. The Company's interest rate swaps are primarily used to hedge interest rate risk. The Company's current interest rate swap positions will cause a decrease to other comprehensive income in a falling interest rate environment and an increase in a rising interest rate environment. As of June 30, 2020, the tangible common equity ratio and tangible book value per share were 8.21% and $21.70, respectively.

About Bankwell Financial Group

Bankwell is a commercial bank that serves the banking needs of residents and businesses throughout Fairfield and New Haven Counties, Connecticut. 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, but are not limited to, increased competitive pressures, changes in the interest rate environment, general economic conditions or conditions within the securities markets, uncertain impacts of, or additional changes in, monetary, fiscal or tax policy to address the impact of COVID-19, prolonged measures to contain the spread of COVID-19 or premature easing of such containment measures, either of which could further exacerbate the effects on the Company’s business and results of operations, 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 noninterest expense control. The Company believes that tangible common equity and tangible book value per share are useful to evaluate the relative strength of the Company's capital position. We utilize these measures for internal planning and forecasting purposes. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure.

BANKWELL FINANCIAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS (unaudited)

(Dollars in thousands)

 
 

June 30,
2020

March 31,
2020

December 31,
2019

June 30,
2019

ASSETS

Cash and due from banks

$

201,380

$

203,569

$

78,051

$

75,647

Federal funds sold

5,886

6,427

3,237

Cash and cash equivalents

207,266

209,996

78,051

78,884

Investment securities

Marketable equity securities, at fair value

2,195

2,289

2,118

2,090

Available for sale investment securities, at fair value

82,220

82,342

82,439

93,017

Held to maturity investment securities, at amortized cost

16,196

16,252

16,308

21,318

Total investment securities

100,611

100,883

100,865

116,425

Loans receivable (net of allowance for loan losses of $19,662, $16,686, $13,509, and $13,890 at June 30, 2020, March 31, 2020, December 31, 2019, and June 30, 2019, respectively)

1,590,995

1,602,146

1,588,840

1,551,620

Other real estate owned

180

1,217

Accrued interest receivable

6,774

5,867

5,959

6,165

Federal Home Loan Bank stock, at cost

7,835

6,507

7,475

7,475

Premises and equipment, net

27,177

27,835

28,522

29,060

Bank-owned life insurance

42,167

41,926

41,683

41,178

Goodwill

2,589

2,589

2,589

2,589

Other intangible assets

178

196

214

251

Deferred income taxes, net

11,352

10,009

5,788

5,596

Other assets

46,511

45,671

22,196

19,205

Total assets

$

2,043,635

$

2,053,625

$

1,882,182

$

1,859,665

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities

Deposits

Noninterest bearing deposits

$

214,789

$

168,448

$

191,518

$

161,704

Interest bearing deposits

1,405,175

1,512,684

1,300,385

1,316,027

Total deposits

1,619,964

1,681,132

1,491,903

1,477,731

Advances from the Federal Home Loan Bank

175,000

125,000

150,000

150,000

Subordinated debentures

25,233

25,220

25,207

25,181

Accrued expenses and other liabilities

53,078

52,059

32,675

29,813

Total liabilities

1,873,275

1,883,411

1,699,785

1,682,725

Shareholders’ equity

Common stock, no par value

120,381

119,953

120,589

120,064

Retained earnings

69,712

69,595

69,324

63,801

Accumulated other comprehensive loss

(19,733)

(19,334)

(7,516)

(6,925)

Total shareholders’ equity

170,360

170,214

182,397

176,940

Total liabilities and shareholders’ equity

$

2,043,635

$

2,053,625

$

1,882,182

$

1,859,665

BANKWELL FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(Dollars in thousands, except share data)

 
 

For the Quarter Ended

For the Six Months Ended

June 30,
2020

March 31,
2020

December 31,
2019

June 30,
2019

June 30,
2020

June 30,
2019

Interest and dividend income

Interest and fees on loans

$

18,459

$

18,985

$

18,648

$

19,540

$

37,444

$

39,636

Interest and dividends on securities

778

825

858

992

1,603

1,989

Interest on cash and cash equivalents

86

286

427

514

372

897

Total interest and dividend income

19,323

20,096

19,933

21,046

39,419

42,522

Interest expense

Interest expense on deposits

4,810

5,709

5,948

6,319

10,519

12,419

Interest expense on borrowings

876

1,101

1,103

1,132

1,977

2,235

Total interest expense

5,686

6,810

7,051

7,451

12,496

14,654

Net interest income

13,637

13,286

12,882

13,595

26,923

27,868

Provision (credit) for loan losses

2,999

3,185

310

(841)

6,184

(646)

Net interest income after provision (credit) for loan losses

10,638

10,101

12,572

14,436

20,739

28,514

Noninterest income

Bank owned life insurance

241

243

250

254

484

503

Service charges and fees

171

217

247

263

388

512

Gains and fees from sales of loans

382

617

706

Net gain on sale of available for sale securities

76

76

Other

165

612

169

126

777

847

Total noninterest income

577

1,072

1,048

1,336

1,649

2,644

Noninterest expense

Salaries and employee benefits

5,227

5,380

5,162

4,555

10,607

9,391

Occupancy and equipment

2,235

1,909

1,928

1,833

4,144

3,720

Data processing

493

536

499

551

1,029

1,063

Professional services

434

711

402

519

1,145

1,109

Director fees

287

295

224

215

582

404

FDIC insurance

283

70

76

353

199

Marketing

199

162

220

348

361

541

Amortization of intangibles

18

18

18

19

36

38

Other

546

578

771

639

1,124

1,265

Total noninterest expense

9,722

9,659

9,224

8,755

19,381

17,730

Income before income tax expense

1,493

1,514

4,396

7,017

3,007

13,428

Income tax expense

279

151

924

1,441

430

2,772

Net income

$

1,214

$

1,363

$

3,472

$

5,576

$

2,577

$

10,656

Earnings Per Common Share:

Basic

$

0.16

$

0.17

$

0.44

$

0.71

$

0.33

$

1.36

Diluted

$

0.16

$

0.17

$

0.44

$

0.71

$

0.33

$

1.35

Weighted Average Common Shares Outstanding:

Basic

7,715,094

7,750,135

7,745,227

7,773,466

7,732,615

7,766,999

Diluted

7,715,295

7,778,762

7,773,780

7,790,760

7,748,104

7,791,975

Dividends per common share

$

0.14

$

0.14

$

0.13

$

0.13

$

0.28

$

0.26

BANKWELL FINANCIAL GROUP, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)

 
 

For the Quarter Ended

For the Six Months Ended

June 30,
2020

March 31,
2020

December 31,
2019

June 30,
2019

June 30,
2020

June 30,
2019

Performance ratios:

Return on average assets(1)

0.23

%

0.29

%

0.73

%

1.20

%

0.26

%

1.15

%

Return on average stockholders' equity(1)

2.82

%

3.03

%

7.68

%

12.48

%

2.92

%

12.05

%

Return on average tangible common equity(1)

2.86

%

3.07

%

7.80

%

12.68

%

2.97

%

12.24

%

Net interest margin

2.81

%

2.98

%

2.92

%

3.07

%

2.89

%

3.13

%

Efficiency ratio(2)

68.2

%

67.1

%

66.1

%

58.6

%

67.7

%

58.0

%

Net loan charge-offs as a % of average loans

%

%

%

0.04

%

%

0.06

%

Dividend payout ratio(3)

87.50

%

82.35

%

29.55

%

18.31

%

84.85

%

19.26

%

(1) June 30, 2020 and March 31, 2020 performance ratios are negatively impacted by incremental COVID-19 related loan loss reserves totaling approximately $4.9 million and $3.0 million, respectively. Please refer to the Second and First Quarter 2020 Investor Presentations for more detailed information on the impact of the incremental loan COVID-19 related loss reserve on the Company’s performance ratios.

(2) Efficiency ratio is defined as noninterest expense, less other real estate owned expenses and amortization of intangible assets, divided by our operating revenue, which is equal to net interest income plus noninterest 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.

(3) The dividend payout ratio is calculated by dividing dividends per share by earnings per share.

As of

June 30, 2020

March 31, 2020

December 31, 2019

June 30, 2019

Capital ratios:

Total Common Equity Tier 1 Capital to Risk-Weighted Assets(1)

12.44

%

12.14

%

12.53

%

12.40

%

Total Capital to Risk-Weighted Assets(1)

13.63

%

13.13

%

13.35

%

13.26

%

Tier I Capital to Risk-Weighted Assets(1)

12.44

%

12.14

%

12.53

%

12.40

%

Tier I Capital to Average Assets(1)

9.93

%

10.84

%

10.99

%

10.75

%

Tangible common equity to tangible assets

8.21

%

8.16

%

9.56

%

9.38

%

Tangible book value per common share(2)

$

21.70

$

21.69

$

23.15

$

22.47

(1) Represents Bank ratios. Current period capital ratios are preliminary subject to finalization of the FDIC Call Report.

(2) Excludes unvested restricted shares of 165,708, 154,012, 110,975, and 94,598 as of June 30, 2020, March 31, 2020, December 31, 2019, and June 30, 2019, respectively.

BANKWELL FINANCIAL GROUP, INC.

ASSET QUALITY (unaudited)

(Dollars in thousands)

 
 

For the Quarter Ended

June 30,
2020

March 31,
2020

December 31,
2019

June 30,
2019

Allowance for loan losses:

Balance at beginning of period

$

16,686

$

13,509

$

13,212

$

15,430

Charge-offs:

Residential real estate

(565)

Commercial business

(8)

(13)

(130)

Consumer

(23)

(2)

(5)

(13)

Total charge-offs

(23)

(10)

(18)

(708)

Recoveries:

Commercial business

1

1

6

Consumer

1

4

3

Total recoveries

2

5

9

Net loan charge-offs

(23)

(8)

(13)

(699)

Provision for loan losses

2,999

3,185

310

(841)

Balance at end of period

$

19,662

$

16,686

$

13,509

$

13,890

 

As of

June 30,
2020

March 31,
2020

December 31,
2019

June 30,
2019

Asset quality:

Nonaccrual loans

Residential real estate

$

1,622

$

1,532

$

1,560

$

1,716

Commercial real estate

5,172

5,339

5,222

4,535

Commercial business

3,783

3,783

3,806

5,437

Total nonaccrual loans

10,577

10,654

10,588

11,688

Other real estate owned

180

1,217

Total nonperforming assets

$

10,757

$

10,654

$

10,588

$

12,905

Nonperforming loans as a % of total loans

0.66

%

0.66

%

0.66

%

0.75

%

Nonperforming assets as a % of total assets

0.53

%

0.52

%

0.56

%

0.69

%

Allowance for loan losses as a % of total loans

1.22

%

1.03

%

0.84

%

0.89

%

Allowance for loan losses as a % of nonperforming loans

185.89

%

156.62

%

127.59

%

118.84

%

Total nonaccrual loans were $10.6 million as of June 30, 2020, of which $4.6 million are guaranteed by the Small Business Administration (SBA). Nonperforming assets as a percentage of total assets was 0.53% at June 30, 2020, down from 0.56% at December 31, 2019. The allowance for loan losses at June 30, 2020 was $19.7 million, representing 1.22% of total loans. The $6.2 million increase in the allowance for loan losses at June 30, 2020 when compared to December 31, 2019 was primarily due to incremental loan loss reserves for increased credit risk relating to economic disruption and uncertainty caused by the COVID-19 pandemic.

BANKWELL FINANCIAL GROUP, INC.

LOAN & DEPOSIT PORTFOLIO (unaudited)

(Dollars in thousands)

 
 

Period End Loan Composition

June 30,
2020

March 31,
2020

December 31,
2019

Current QTD
% Change

YTD %
Change

Residential Real Estate

$

128,683

$

139,353

$

147,109

(7.7)

%

(12.5)

%

Commercial Real Estate(1)

1,110,562

1,131,206

1,128,614

(1.8)

(1.6)

Construction

94,523

107,594

98,583

(12.1)

(4.1)

Total Real Estate Loans

1,333,768

1,378,153

1,374,306

(3.2)

(2.9)

Commercial Business

280,811

242,705

230,028

15.7

22.1

Consumer

87

113

150

(23.0)

(42.0)

Total Loans

$

1,614,666

$

1,620,971

$

1,604,484

(0.4)

%

0.6

%

(1) Includes owner occupied commercial real estate.

 

Period End Deposit Composition

June 30,
2020

March 31,
2020

December 31,
2019

Current QTD
% Change

YTD %
Change

Noninterest bearing demand

$

214,789

$

168,448

$

191,518

27.5

%

12.2

%

NOW

87,239

69,562

70,020

25.4

24.6

Money Market

482,462

455,634

419,495

5.9

15.0

Savings

162,891

164,673

183,729

(1.1)

(11.3)

Time

672,583

822,815

627,141

(18.3)

7.2

Total Deposits

$

1,619,964

$

1,681,132

$

1,491,903

(3.6)

%

8.6

%

Total deposits were $1.6 billion at June 30, 2020 compared to $1.5 billion at December 31, 2019, an increase of $0.1 billion, or 8.6%. The increase in total deposits was primarily a result of a temporary increase in short term time deposits to expand on-balance sheet liquidity as well as an increase in noninterest bearing deposits as a result of our ongoing treasury management efforts.

BANKWELL FINANCIAL GROUP, INC.

NONINTEREST INCOME (unaudited)

(Dollars in thousands)

 
 

For the Quarter Ended

Noninterest income

June 30,
2020

March 31,
2020

June 30,
2019

June 20 vs. March
20 % Change

June 20 vs. June
19 % Change

Bank owned life insurance

$

241

$

243

$

254

(0.8)

%

(5.1)

%

Service charges and fees

171

217

263

(21.2)

(35.0)

Gains and fees from sales of loans

617

N/A

(100.0)

Net gain on sale of available for sale securities

76

N/A

(100.0)

Other

165

612

126

(73.0)

31.0

Total noninterest income

$

577

$

1,072

$

1,336

(46.2)

%

(56.8)

%

For the Six Months Ended

Noninterest income

June 30, 2020

June 30, 2019

% Change

Bank owned life insurance

$

484

$

503

(3.8)

%

Service charges and fees

388

512

(24.2)

Gains and fees from sales of loans

706

(100.0)

Net gain on sale of available for sale securities

76

(100.0)

Other

777

847

(8.3)

Total noninterest income

$

1,649

$

2,644

(37.6)

%

Noninterest income decreased by $0.8 million, or 57%, to $0.6 million for the quarter ended June 30, 2020 compared to the quarter ended June 30, 2019. Noninterest income decreased by $1.0 million, or 38%, to $1.6 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

The decrease in noninterest income was primarily a result of the absence of gains and fees from the sales of loans for the quarter and six months ended June 30, 2020 compared to the same periods in 2019. In addition, the decrease in noninterest income was also driven by certain waived service charges and fees on depository accounts as a courtesy to customers during the COVID-19 pandemic.

BANKWELL FINANCIAL GROUP, INC.

NONINTEREST EXPENSE (unaudited)

(Dollars in thousands)

 
 

For the Quarter Ended

Noninterest expense

June 30,
2020

March 31,
2020

June 30,
2019

June 20 vs. March
20 % Change

June 20 vs. June
19 % Change

Salaries and employee benefits

$

5,227

$

5,380

$

4,555

(2.8)

%

14.8

%

Occupancy and equipment

2,235

1,909

1,833

17.1

21.9

Data processing

493

536

551

(8.0)

(10.5)

Professional services

434

711

519

(39.0)

(16.4)

Director fees

287

295

215

(2.7)

33.5

FDIC insurance

283

70

76

304.3

272.4

Marketing

199

162

348

22.8

(42.8)

Amortization of intangibles

18

18

19

(5.3)

Other

546

578

639

(5.5)

(14.6)

Total noninterest expense

$

9,722

$

9,659

$

8,755

0.7

%

11.0

%

For the Six Months Ended

Noninterest expense

June 30, 2020

June 30, 2019

% Change

Salaries and employee benefits

$

10,607

$

9,391

12.9

%

Occupancy and equipment

4,144

3,720

11.4

Professional services

1,145

1,109

3.2

Data processing

1,029

1,063

(3.2)

Director fees

582

404

44.1

Marketing

361

541

(33.3)

FDIC insurance

353

199

77.4

Amortization of intangibles

36

38

(5.3)

Other

1,124

1,265

(11.1)

Total noninterest expense

$

19,381

$

17,730

9.3

%

Noninterest expense increased by $1.0 million, or 11%, to $9.7 million for the quarter ended June 30, 2020 compared to the quarter ended June 30, 2019. Noninterest expense increased by $1.7 million, or 9.3%, to $19.4 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019. The increase in noninterest expense was primarily driven by an increase in salaries and employee benefits and occupancy and equipment expense.

Salaries and employee benefits totaled $5.2 million for the quarter ended June 30, 2020, an increase of $0.7 million when compared to the same period in 2019. Salaries and employee benefits totaled $10.6 million for the six months ended June 30, 2020, an increase of $1.2 million when compared to the same period in 2019. The increase in salaries and employee benefits was primarily driven by an increase in full time equivalent employees. Full time equivalent employees totaled 152 at June 30, 2020 compared to 144 for the same period in 2019. Average full time equivalent employees totaled 154 for the six months ended June 30, 2020 compared to 141 for the same period in 2019.

Occupancy and equipment expense totaled $2.2 million for the quarter ended June 30, 2020, an increase of $0.4 million when compared to the same period in 2019. Occupancy and equipment expense totaled $4.1 million for the six months ended June 30, 2020, an increase of $0.4 million when compared to the same period in 2019. The increase in occupancy and equipment expense was primarily due to additional cleaning costs associated with precautions taken to prevent the spread of COVID-19.

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

June 30,
2020

March 31,
2020

December 31,
2019

June 30,
2019

Total Equity

$

170,360

$

170,214

$

182,397

$

176,940

Less:

Goodwill

2,589

2,589

2,589

2,589

Other intangibles

178

196

214

251

Tangible Common Equity

$

167,593

$

167,429

$

179,594

$

174,100

Total Assets

$

2,043,635

$

2,053,625

$

1,882,182

$

1,859,665

Less:

Goodwill

2,589

2,589

2,589

2,589

Other intangibles

178

196

214

251

Tangible Assets

$

2,040,868

$

2,050,840

$

1,879,379

$

1,856,825

Tangible Common Equity to Tangible Assets

8.21

%

8.16

%

9.56

%

9.38

%

 

As of

Computation of Tangible Book Value per Common Share

June 30,
2020

March 31,
2020

December 31,
2019

June 30,
2019

Total shareholders' equity

$

170,360

$

170,214

$

182,397

$

176,940

Less:

Preferred stock

Common shareholders' equity

$

170,360

$

170,214

$

182,397

$

176,940

Less:

Goodwill

2,589

2,589

2,589

2,589

Other intangibles

178

196

214

251

Tangible common shareholders' equity

$

167,593

$

167,429

$

179,594

$

174,100

Common shares

7,887,503

7,871,419

7,868,803

7,841,103

Less:

Shares of unvested restricted stock

165,708

154,012

110,975

94,598

Common shares less unvested restricted stock

7,721,795

7,717,407

7,757,828

7,746,505

Book value per share

$

22.06

$

22.06

$

23.51

$

22.84

Less:

Effects of intangible assets

$

0.36

$

0.36

$

0.36

$

0.37

Tangible Book Value per Common Share

$

21.70

$

21.69

$

23.15

$

22.47

BANKWELL FINANCIAL GROUP, INC.

RECONCILIATION OF GAAP TO NON-GAAP MEASURES (unaudited) - Continued

(Dollars in thousands)

For the Quarter Ended

For the Six Months Ended

Computation of Efficiency Ratio

June 30,
2020

March 31,
2020

December 31,
2019

June 30,
2019

June 30,
2020

June 30,
2019

Noninterest expense

$

9,722

$

9,659

$

9,224

$

8,755

$

19,381

$

17,730

Less:

Amortization of intangible assets

18

18

18

19

36

38

Other real estate owned expenses

6

24

6

24

Adjusted noninterest expense

$

9,698

$

9,641

$

9,206

$

8,712

$

19,339

$

17,668

Net interest income

$

13,637

$

13,286

$

12,882

$

13,595

$

26,923

$

27,868

Noninterest income

577

1,072

1,048

1,336

1,649

2,644

Less:

Net gain on sale of available for sale securities

76

76

Operating revenue

$

14,214

$

14,358

$

13,930

$

14,855

$

28,572

$

30,436

Efficiency ratio

68.2

%

67.1

%

66.1

%

58.6

%

67.7

%

58.0

%

 

For the Quarter Ended

For the Six Months Ended

Computation of Return on Average Tangible Common Equity

June 30,
2020

March 31,
2020

December 31,
2019

June 30,
2019

June 30,
2020

June 30,
2019

Net Income Attributable to Common Shareholders

$

1,214

$

1,363

$

3,472

$

5,576

$

2,577

$

10,656

Total average shareholders' equity

$

173,289

$

181,127

$

179,312

$

179,217

$

177,204

$

178,387

Less:

Average Goodwill

2,589

2,589

2,589

2,589

2,589

2,589

Average Other intangibles

190

208

226

264

199

273

Average tangible common equity

$

170,510

$

178,330

$

176,497

$

176,364

$

174,416

$

175,525

Annualized Return on Average Tangible Common Equity

2.86

%

3.07

%

7.80

%

12.68

%

2.97

%

12.24

%

BANKWELL FINANCIAL GROUP, INC.

NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS - QTD (unaudited)

(Dollars in thousands)

 

For the Quarter Ended

June 30, 2020

June 30, 2019

Average
Balance

Interest

Yield/
Rate (5)

Average
Balance

Interest

Yield/

Rate (5)

Assets:

Cash and Fed funds sold

$

234,979

$

86

0.15

%

$

92,493

$

514

2.23

%

Securities(1)

95,421

738

3.09

119,999

945

3.15

Loans:

Commercial real estate

1,088,390

12,808

4.66

1,052,936

13,201

4.96

Residential real estate

134,295

1,251

3.73

170,180

1,630

3.83

Construction(2)

100,282

1,101

4.34

85,933

1,147

5.28

Commercial business

288,605

3,297

4.52

252,814

3,558

5.57

Consumer

111

2

8.71

270

4

6.54

Total loans

1,611,683

18,459

4.53

1,562,133

19,540

4.95

Federal Home Loan Bank stock

7,472

92

4.93

7,474

116

6.23

Total earning assets

1,949,555

$

19,375

3.93

%

1,782,099

$

21,115

4.69

%

Other assets

129,247

85,117

Total assets

$

2,078,802

$

1,867,216

Liabilities and shareholders' equity:

Interest bearing liabilities:

NOW

$

74,050

$

31

0.17

%

$

64,316

$

28

0.17

%

Money market

464,230

862

0.75

444,848

1,847

1.67

Savings

162,283

295

0.73

174,626

743

1.71

Time

765,103

3,622

1.90

644,723

3,701

2.30

Total interest bearing deposits

1,465,666

4,810

1.32

1,328,513

6,319

1.91

Borrowed Money

188,557

876

1.84

175,172

1,132

2.56

Total interest bearing liabilities

1,654,223

$

5,686

1.38

%

1,503,685

$

7,451

1.99

%

Noninterest bearing deposits

198,253

159,021

Other liabilities

53,037

25,293

Total liabilities

1,905,513

1,687,999

Shareholders' equity

173,289

179,217

Total liabilities and shareholders' equity

$

2,078,802

$

1,867,216

Net interest income(3)

$

13,689

$

13,664

Interest rate spread

2.55

%

2.70

%

Net interest margin(4)

2.81

%

3.07

%

(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 $52 thousand and $69 thousand for the quarters ended June 30, 2020 and 2019, respectively.
(4) Annualized 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 - YTD (unaudited)

(Dollars in thousands)

 

For the Six Months Ended

June 30, 2020

June 30, 2019

Average
Balance

Interest

Yield/ Rate
(5)

Average
Balance

Interest

Yield/ Rate
(5)

Assets:

Cash and Fed funds sold

$

154,321

$

372

0.48

%

$

82,854

$

897

2.18

%

Securities(1)

96,932

1,513

3.12

118,792

1,877

3.16

Loans:

Commercial real estate

1,098,550

25,839

4.65

1,059,247

25,586

4.80

Residential real estate

139,059

2,607

3.75

173,353

3,333

3.85

Construction(2)

100,338

2,316

4.57

83,549

2,271

5.41

Commercial business

273,767

6,676

4.82

264,648

8,436

6.34

Consumer

133

6

8.51

296

10

6.48

Total loans

1,611,847

37,444

4.60

1,581,093

39,636

4.99

Federal Home Loan Bank stock

7,401

195

5.30

7,531

253

6.72

Total earning assets

1,870,501

$

39,524

4.18

%

1,790,270

$

42,663

4.74

%

Other assets

122,060

82,023

Total assets

$

1,992,561

$

1,872,293

Liabilities and shareholders' equity:

Interest bearing liabilities:

NOW

$

70,990

$

59

0.17

%

$

61,579

$

75

0.25

%

Money market

451,388

2,354

1.05

458,884

3,829

1.68

Savings

173,875

967

1.12

177,482

1,512

1.72

Time

702,853

7,139

2.04

636,156

7,003

2.22

Total interest bearing deposits

1,399,106

10,519

1.51

1,334,101

12,419

1.88

Borrowed Money

180,575

1,977

2.17

175,343

2,235

2.54

Total interest bearing liabilities

1,579,681

$

12,496

1.59

%

1,509,444

$

14,654

1.96

%

Noninterest bearing deposits

188,722

161,239

Other liabilities

46,954

23,223

Total liabilities

1,815,357

1,693,906

Shareholders' equity

177,204

178,387

Total liabilities and shareholders' equity

$

1,992,561

$

1,872,293

Net interest income(3)

$

27,028

$

28,009

Interest rate spread

2.59

%

2.78

%

Net interest margin(4)

2.89

%

3.13

%

(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 $105 thousand and $141 thousand for the six months ended June 30, 2020 and 2019, respectively.
(4) Annualized net interest income as a percentage of earning assets.
(5) Yields are calculated using the contractual day count convention for each respective product type.

Contacts:

Bankwell Financial Group
Christopher R. Gruseke
President and Chief Executive Officer
or
Penko Ivanov
Executive Vice President and Chief Financial Officer
(203) 652-0166

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