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

dnrt8765

NEW CANAAN, Conn.–(BUSINESS WIRE)–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.

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