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Bankwell Financial Group Reports Record Net Income for the Third Quarter, Fueled by Record Loan Growth

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Bankwell Financial Group, Inc. (NASDAQ:BWFG) reported GAAP net income of $1.5 million for the quarter ended September 30, 2014, resulting primarily from record loan growth of $59 million since June 30, 2014.

Blake S. Drexler, Executive Chairman of Bankwell Financial Group, Inc., stated, “Our record performance reflected a continuation of strong momentum as we continue to execute against our strategic plan, which centers on growing the Company, diversifying revenue streams and investing in new and profitable lines of business.” He added, “We have successfully utilized a portion of the capital raised from our IPO with continued loan growth and the acquisition of Quinnipiac Bank & Trust on October 1st. This latest acquisition underscores our strategy to grow both organically and through acquisitions.”

In a recent report, the U.S. Treasury Department ranked Bankwell Financial Group first in the nation for growth in qualified small business lending in its Small Business Lending Fund at June 30, 2014.

Earnings

Revenues (net interest income plus non-interest income) for the three months ended September 30, 2014 were $8.4 million, an increase of 12% compared to September 30, 2013. Revenues (net interest income plus non-interest income) for the nine months ended September 30, 2014 were $24.1 million, an increase of 12% compared to September 30, 2013. Total net interest income for the three months ended September 30, 2014 was $7.6 million, an increase of 19% compared to the same period in the prior year. The strong improvement in net interest income was fueled by record loans outstanding and a year-to-date net interest margin of 3.78%. The increased loan loss provision to $566 thousand for the quarter ended September 30, 2014 is directly a result of growth in our loan portfolio.

Net income for the third quarter of 2014 was $1.5 million, representing a 13% increase compared to the same period in the prior year. The Company continues to focus on expense control as indicated by our improving efficiency ratios. The Company’s efficiency ratio for the three months ended September 30, 2014 was 64.37% and for the nine months ended September 30, 2014 was 70.71%.

Financial Condition

On the balance sheet, assets totaled $896 million at September 30, 2014, a 31% increase over total assets of $684 million for the same period in the prior year. This increase reflects strong loan growth, proceeds from the IPO and, to a lesser extent, The Wilton Bank acquisition in the fourth quarter of 2013. Total loans were $744 million, a 27% increase compared to September 30, 2013. Deposits increased to $695 million, a 28% increase over September 30, 2013, with core deposits showing a 29% increase to $459 million for the same period.

Asset Quality

Asset quality remained exceptionally strong at September 30, 2014. Non-performing assets as a percentage of total assets was 0.23% at September 30, 2014, up slightly from 0.21% at September 30, 2013. The allowance for loan losses as of September 30, 2014 was $9.6 million, representing 1.28% of total loans.

Capital

Shareholders’ equity was strong at $118.5 million as of September 30, 2014, an increase of $49 million compared to December 31, 2013, primarily a result of the approximately $45 million net raised in the IPO. As of September 30, 2014, the Tangible Common Equity Ratio and Tangible Book Value per share were 11.97% and $16.52, 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 can contact Blake S. Drexler, Executive Chairman or Ernest J. Verrico, CFO of Bankwell Financial Group at (203) 972-3838.

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,

December 31, September 30,
2014 2014 2013 2013
Assets
Cash and due from banks $ 35,566 $ 130,535 $ 82,013 $ 51,029
Held to maturity investment securities, at amortized cost 11,502 13,742 13,816 12,831
Available for sale investment securities, at fair value 67,537 49,114 28,597 29,235
Loans held for sale 325 100
Loans receivable (net of allowance for loan losses of $9,552, $8,985,
$8,382 and $8,277 at September 30, 2014, June 30, 2014, December 31, 2013
and September 30, 2013 respectively) 730,148 671,500 621,830 574,340
Foreclosed real estate 829 829 829
Accrued interest receivable 2,670 2,464 2,360 2,165
Federal Home Loan Bank stock, at cost 4,834 4,834 4,834 4,577
Premises and equipment, net 7,787 8,078 7,060 2,528
Bank-owned life insurance 22,837 10,202 10,031
Other intangible assets 401 427 481
Deferred income taxes, net 5,804 5,479 5,845 5,872
Other assets 5,600 4,258 1,822 946
Total assets $ 895,515 $ 901,787 $ 779,618 $ 683,523
Liabilities & Shareholders’ Equity
Liabilities
Deposits
Noninterest-bearing $ 151,146 $ 146,596 $ 118,618 $ 100,878
Interest-bearing 544,117 583,590 542,927 443,246
Total deposits 695,263 730,186 661,545 544,124
Advances from the Federal Home Loan Bank 77,000 47,000 44,000 65,000
Accrued expenses and other liabilities 4,755 7,431 4,588 6,254
Total liabilities 777,018 784,617 710,133 615,378
Shareholders’ equity
Preferred stock, senior noncumulative perpetual, Series C, no par;
10,980 shares issued and outstanding at September 30, 2014,
June 30, 2014, December 31, 2013, and September 30, 2013 respectively;
liquidation value of $1,000 per share. 10,980 10,980 10,980 10,980
Common stock, no par value; 10,000,000 shares authorized,
6,559,995, 6,593,485, 3,876,393 and 3,746,253 shares issued at
September 30, 2014, June 30, 2014, December 31, 2013 and
September 30, 2013 respectively. 97,180 97,296 52,105 51,971
Retained earnings 9,735 8,271 5,976 4,641
Accumulated other comprehensive income 602 623 424 553
Total shareholders’ equity 118,497 117,170 69,485 68,145
Total liabilities and shareholders’ equity $ 895,515 $ 901,787 $ 779,618 $ 683,523
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,

2014 2013 2014 2013
Interest and dividend income
Interest and fees on loans $ 8,054 $ 6,748 $ 23,040 $ 19,619
Interest and dividends on securities 569 355 1,417 1,040
Interest on cash and cash equivalents 45 18 116 39
Total interest income 8,668 7,121 24,573 20,698
Interest expense
Interest expense on deposits 905 600 2,257 1,553
Interest on borrowings 168 127 427 417
Total interest expense 1,073 727 2,684 1,970
Net interest income 7,595 6,394 21,889 18,728
Provision for loan losses 566 47 847 489
Net interest income after provision for loan losses 7,029 6,347 21,042 18,239
Noninterest income
Gains and fees from sales of loans 366 972 1,008 1,737
Service charges and fees 153 100 420 297
Bank owned life insurance 135 305
Net gain on sale of available for sale securities 648
Gain (loss) on sale of foreclosed real estate, net (16 ) 49
Other 103 27 475 141
Total noninterest income 757 1,083 2,208 2,872
Noninterest expense
Salaries and employee benefits 2,786 2,894 9,412 8,146
Occupancy and equipment 1,066 836 3,162 2,410
Professional services 394 422 1,035 1,212
Data processing 314 280 949 787
Director fees 177 142 460 426
Merger and acquisition related expenses 145 408 64
Marketing 135 378 463 776
FDIC insurance 120 36 345 267
Amortization of intangibles 27 80
Foreclosed real estate 9 1 21 4
Other 357 342 1,134 950
Total noninterest expense 5,530 5,331 17,469 15,042
Income before income tax expense 2,256 2,099 5,781 6,069
Income tax expense 765 780 1,940 2,270
Net income $ 1,491 $ 1,319 $ 3,841 $ 3,799
Net income attributable to common shareholders $ 1,441 $ 1,271 $ 3,677 $ 3,660
Earnings per common share – basic $ 0.22 $ 0.38 $ 0.72 $ 1.12
Earnings per common share – diluted 0.22 0.37 0.72 1.10
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,

2014

2013 2014

2013

Performance ratios:
Return on average assets 0.67 % 0.75 % 0.62 % 0.78 %
Return on average stockholders’ equity 5.02 % 8.23 % 5.84 % 8.30 %
Net interest margin 3.69 % 4.00 % 3.78 % 4.04 %
Efficiency ratio (1) 64.37 % 71.13 % 70.71 % 71.64 %
As of
September 30,

2014

September 30,

2013

Capital ratios:
Total Capital to Risk-Weighted Assets (2) 15.27 % 10.79 %
Tier I Capital to Risk-Weighted Assets (2) 14.02 % 9.54 %
Tier I Capital to Average Assets (2) 11.93 % 7.84 %
Tangible common equity to tangible assets 11.97 % 8.36 %
Tangible book value per common share (3) $ 16.52 $ 15.46
Asset quality:
Nonaccrual loans $ 1,246 $ 1,423
Other real estate owned 829
Total non-performing assets $ 2,075 $ 1,423
Loans past due 90 days and still accruing $ 1,309 $
Nonperforming loans as a % of total loans 0.17 % 0.24 %
Nonperforming assets as a % of total assets 0.23 % 0.21 %
Allowance for loan losses as a % of total loans 1.28 % 1.42 %
Allowance for loan losses as a % of nonperforming loans 766.51 % 581.47 %
Annualized net loan charge-offs as a % of average loans 0.00 % 0.00 %
(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 76,278 and 48,956 as of September 30, 2014 and September 30, 2013, 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, 2014 September 30, 2013
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
Assets:
Cash and Fed funds sold $ 64,752 $ 45 0.28 % $ 31,569 $ 18 0.22 %
Securities (1) 71,536 666 3.73 % 39,993 451 4.51 %
Loans: (2)
Commercial real estate 365,042 4,473 4.79 % 298,085 3,789 4.97 %
Residential real estate 166,123 1,499 3.61 % 156,580 1,429 3.65 %
Construction (3) 47,261 570 4.72 % 38,018 461 4.74 %
Commercial business 101,184 1,296 5.01 % 70,843 968 5.35 %
Home equity 12,786 121 3.75 % 10,511 100 3.80 %
Consumer 698 15 8.75 % 39 2 17.98 %
Acquired loan portfolio non accrual loans (net of mark) 1,327 81 24.15 % 0.00 %
Total loans 694,421 8,055 4.54 % 574,076 6,749 4.60 %
Federal Home Loan Bank stock 4,834 18 1.49 % 4,587 4 0.37 %
Total earning assets 835,543 $ 8,784 4.11 % 650,225 $ 7,222 4.35 %
Other assets 47,383 49,160
Total assets $ 882,926 $ 699,385
Liabilities and shareholders’ equity:
Interest-bearing liabilities:
NOW $ 52,298 15 0.11 % $ 31,933 9 0.12 %
Money market 175,111 218 0.49 % 118,705 138 0.46 %
Savings 79,505 65 0.33 % 110,510 128 0.46 %
Time 257,616 607 0.93 % 170,246 325 0.76 %
Total interest-bearing deposits 564,530 905 0.64 % 431,394 600 0.55 %
Borrowed Money 47,333 168 1.41 % 63,903 127 0.79 %
Total interest bearing liabilities 611,863 $ 1,073 0.70 % 495,297 $ 727 0.58 %
Noninterest-bearing deposits 138,272 97,574
Other liabilities 14,918 42,915
Total liabilities 765,053 635,786
Shareholders’ equity 117,873 63,599
Total liabilities and shareholders’ equity $ 882,926 $ 699,385
Net interest income (4) $ 7,711 $ 6,495
Interest rate spread 3.41 % 3.77 %
Net interest margin (5) 3.69 % 4.00 %
(1) Average balances and yields for securities are based on amortized cost.
(2) Average balances and yields for loans exclude nonperforming loans.
(3) Includes commercial and residential real estate construction.
(4) The adjustment for securities and loans taxable equivalency amounted to $116 thousand and $101 thousand, respectively for the three months ended September 30, 2014, and 2013.
(5) 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, 2014 September 30, 2013
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
Assets:
Cash and Fed funds sold $ 58,699 $ 116 0.26 % $ 23,547 $ 39 0.22 %
Securities (1) 53,723 1,697 4.21 % 40,654 1,294 4.25 %
Loans: (2)
Commercial real estate 341,480 12,523 4.84 % 295,752 11,206 5.00 %
Residential real estate 161,049 4,362 3.61 % 150,957 4,214 3.72 %
Construction (3) 46,317 1,615 4.60 % 36,149 1,317 4.80 %
Commercial business 99,113 3,705 4.93 % 64,576 2,576 5.26 %
Home equity 13,373 370 3.70 % 10,624 298 3.75 %
Consumer 640 42 8.88 % 282 13 6.14 %
Acquired loan portfolio non accrual loans (net of mark) 2,753 425 20.64 % 0.00 %
Total loans 664,725 23,042 4.57 % 558,340 19,624 4.63 %
Federal Home Loan Bank stock 4,834 54 1.48 % 4,516 13 0.37 %
Total earning assets 781,981 $ 24,909 4.20 % 627,057 $ 20,970 4.41 %
Other assets 39,993 20,134
Total assets $ 821,974 $ 647,191
Liabilities and shareholders’ equity:
Interest-bearing liabilities:
NOW $ 52,544 43 0.11 % 34,030 $ 33 0.13 %
Money market 173,104 564 0.44 % 106,279 338 0.43 %
Savings 93,328 216 0.31 % 121,088 421 0.47 %
Time 224,765 1,434 0.85 % 147,138 761 0.69 %
Total interest-bearing deposits 543,741 2,257 0.55 % 408,535 1,553 0.51 %
Borrowed Money 48,370 427 1.18 % 76,612 418 0.73 %
Total interest bearing liabilities 592,111 $ 2,684 0.61 % 485,147 $ 1,971 0.54 %
Noninterest-bearing deposits 129,074 87,312
Other liabilities 12,808 13,546
Total liabilities 733,993 586,005
Shareholders’ equity 87,981 61,186
Total liabilities and shareholders’ equity $ 821,974 $ 647,191
Net interest income (4) $ 22,225 $ 18,999
Interest rate spread 3.59 % 3.87 %
Net interest margin (5) 3.78 % 4.04 %
(1) Average balances and yields for securities are based on amortized cost.
(2) Average balances and yields for loans exclude nonperforming loans.
(3) Includes commercial and residential real estate construction.
(4) The adjustment for securities and loans taxable equivalency amounted to $336 thousand and $271 thousand, respectively for the nine months ended September 30, 2014, and 2013.
(5) Net interest income as a percentage of earning assets.

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