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Bankwell Financial Group Reports Record Net Income for the Third Quarter; Declares Fourth Quarter Dividend; and Authorizes an Additional 200 Thousand Shares for Its Share Repurchase Program

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NEW CANAAN, Conn., October 27, 2021--(BUSINESS WIRE)--Bankwell Financial Group, Inc. (NASDAQ: BWFG) reported record GAAP net income of $6.9 million, or $0.87 per share, for the third quarter of 2021, versus $3.0 million, or $0.38 per share, for the same period in 2020.

The Company's Board of Directors declared an $0.18 per share cash dividend, payable November 22, 2021 to shareholders of record on November 12, 2021.

We recommend reading this earnings release in conjunction with the Third Quarter 2021 Investor Presentation, located at http://investor.mybankwell.com/Presentations and included as an exhibit to our October 27, 2021 Current Report on Form 8-K.

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

"On behalf of all of my colleagues at Bankwell, I am proud to announce our results for the most recent quarter. The Company achieved record levels in most performance categories of our business. Loan originations for the quarter totaled $200 million, with net loan growth of $92 million, excluding Paycheck Protection Program ("PPP") loans. Year to date, gross loan balances excluding PPP loans have grown by $232 million for an annualized growth rate of 19%. The Company’s ROAE and ROAA were 14.09% and 1.22%, respectively, for the quarter. Loan demand remains brisk; our healthy pipeline positions us for a strong finish to the year and lays the foundation for increased profitability in 2022.

"Confident in the strength of our balance sheet and the prospect of growing earnings, the Company’s Board of Directors today authorized the repurchase of an additional 200,000 shares of its common stock."

Third Quarter 2021 Highlights:

  • Return on average assets was 1.22% and return on average equity was 14.09% for the quarter ended September 30, 2021.

  • The net interest margin improved to 3.39% for the quarter ended September 30, 2021.

  • The efficiency ratio improved to 54.1% for the quarter ended September 30, 2021.

  • Excluding Paycheck Protection Program ("PPP") loans, total gross loans were $1.8 billion, growing $232.1 million, or 14.6%, compared to December 31, 2020. On a quarterly basis loans grew $92.3 million, or 5.3% compared to June 30, 2021.

  • Gains from loan sales totaled $0.9 million and $2.3 million for the quarter and nine months ended September 30, 2021, respectively, compared to $27 thousand for the quarter and nine months ended September 30, 2020.

  • Total deposits were $1.9 billion compared to $1.8 billion at December 31, 2020.

  • Noninterest bearing deposits increased by $68.5 million, or 25.3% compared to December 31, 2020.

  • The percentage of noninterest bearing deposits to total deposits increased to 18.0% compared to 14.8% at December 31, 2020.

  • The cost of interest bearing deposits decreased approximately 47 basis points to 0.60% for the quarter ended September 30, 2021 when compared to the quarter ended September 30, 2020.

  • Investment securities totaled $105.9 million and represent 4.8% of total assets.

  • Tangible book value per share rose to $25.25 compared to $22.43 at December 31, 2020.

  • Shares issued and outstanding were 7,842,824, reflecting repurchases of 52,277 shares of common stock at a weighted average price of $27.26 during the quarter ended September 30, 2021.

Post Third Quarter 2021 Highlights:

  • Subsequent to September 30, 2021, the Company issued a 3.25% fixed-to-floating rate subordinated note due 2031 in the principal amount of $35.0 million. The proceeds will be used for repayment of $15.5 million of existing subordinated notes and general corporate purposes.

  • The Company's Board of Directors authorized an additional 200,000 shares for its existing share repurchase program.

Earnings and Performance

Revenues (net interest income plus noninterest income) for the quarter ended September 30, 2021 were $19.2 million, versus $14.2 million for the quarter ended September 30, 2020. Revenues for the nine months ended September 30, 2021 were $53.8 million, versus $42.8 million for the nine months ended September 30, 2020. The increase was primarily attributable to lower interest expense on deposits, an increase in interest and fees on loans due to loan growth and from the resumption of loan sales. Revenues for the nine months ended September 30, 2021 also benefited from a one-time federal payroll tax credit for COVID-19 of $0.9 million.

Net income for the quarter ended September 30, 2021 was $6.9 million, versus $3.0 million for the quarter ended September 30, 2020. Net income for the nine months ended September 30, 2021 was $18.8 million, versus $5.6 million for the nine months ended September 30, 2020. The increase in net income was primarily impacted by the aforementioned increases in revenues and a decrease in the provision for loan losses resulting from lower loan loss reserves in 2021 when compared to 2020, which saw a large increase in reserves due to the COVID-19 Pandemic.

Basic and diluted earnings per share were $0.88 and $0.87, respectively, for the quarter ended September 30, 2021 compared to basic and diluted earnings per share of $0.38 each for the quarter ended September 30, 2020. Basic and diluted earnings per share were $2.38 and $2.37, respectively, for the nine months ended September 30, 2021 compared to basic and diluted earnings per share of $0.71 each for the nine months ended September 30, 2020.

The net interest margin (fully taxable equivalent basis) for the quarters ended September 30, 2021 and September 30, 2020 was 3.39% and 2.67%, respectively. The net interest margin (fully taxable equivalent basis) for the nine months ended September 30, 2021 and September 30, 2020 was 3.08% and 2.81%, respectively. The increase in the net interest margin was due to a decrease in rates on interest bearing deposits and a greater percentage of noninterest bearing deposits. In addition, the increase in the net interest margin for the quarter ended September 30, 2021 was positively impacted by a reduction in excess liquidity when compared to the quarter ended September 30, 2020.

Financial Condition

Assets totaled $2.23 billion at September 30, 2021, compared to assets of $2.25 billion at December 31, 2020. The change in assets remained relatively flat as the decrease in excess liquidity was offset by an increase in loans. Gross loans totaled $1.8 billion at September 30, 2021, an increase of $198.9 million compared to December 31, 2020. Excluding PPP loans, gross loans increased by $232.1 million at September 30, 2021 when compared to December 31, 2020. Deposits totaled $1.9 billion at September 30, 2021, compared to deposits of $1.8 billion at December 31, 2020.

Capital

Shareholders’ equity totaled $196.2 million as of September 30, 2021, an increase of $19.6 million compared to December 31, 2020, primarily a result of (i) net income of $18.8 million for the nine months ended September 30, 2021 and (ii) a $6.2 million favorable impact to accumulated other comprehensive income driven by fair value marks related to hedge positions involving interest rate swaps. The Company's interest rate swaps are 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. The increase in Shareholders’ equity was partially offset by dividends paid of $3.6 million and common stock repurchases of $3.2 million.

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, tangible book value per share, and return on average tangible common equity are useful to evaluate the relative strength of the Company's performance and 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)

September 30,
2021

June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

ASSETS

Cash and due from banks

$

169,417

$

297,851

$

351,194

$

405,340

$

333,103

Federal funds sold

8,097

4,036

10,811

4,258

6,380

Cash and cash equivalents

177,514

301,887

362,005

409,598

339,483

Investment securities

Marketable equity securities, at fair value

2,185

2,192

2,178

2,207

2,203

Available for sale investment securities, at fair value

87,565

90,983

83,218

88,605

90,563

Held to maturity investment securities, at amortized cost

16,107

16,166

16,225

16,078

16,138

Total investment securities

105,857

109,341

101,621

106,890

108,904

Loans receivable (net of allowance for
loan losses of $16,803, $16,672,
$20,545, $21,009, and $20,372 at
September 30, 2021, June 30, 2021,
March 31, 2021, December 31, 2020,
and September 30, 2020, respectively)

1,805,217

1,719,274

1,650,127

1,601,672

1,600,776

Accrued interest receivable

6,911

6,661

7,306

6,579

7,294

Federal Home Loan Bank stock, at cost

3,632

3,844

6,446

7,860

7,860

Premises and equipment, net

35,118

33,916

33,386

21,762

26,616

Bank-owned life insurance

48,903

48,632

42,881

42,651

42,409

Goodwill

2,589

2,589

2,589

2,589

2,589

Other intangible assets

48

58

67

76

160

Deferred income taxes, net

7,718

8,208

8,908

11,300

11,149

Other assets

33,181

35,415

29,131

42,770

45,782

Total assets

$

2,226,688

$

2,269,825

$

2,244,467

$

2,253,747

$

2,193,022

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities

Deposits

Noninterest bearing deposits

$

338,705

$

328,473

$

280,947

$

270,235

$

234,848

Interest bearing deposits

1,544,118

1,610,829

1,578,861

1,557,081

1,532,680

Total deposits

1,882,823

1,939,302

1,859,808

1,827,316

1,767,528

Advances from the Federal Home Loan Bank

80,000

75,000

125,000

175,000

175,000

Subordinated debentures

15,374

15,366

25,271

25,258

25,245

Accrued expenses and other liabilities

52,314

49,362

46,445

49,571

50,982

Total liabilities

2,030,511

2,079,030

2,056,524

2,077,145

2,018,755

Shareholders’ equity

Common stock, no par value

119,588

120,451

120,398

121,338

120,854

Retained earnings

85,992

80,543

75,418

70,839

71,603

Accumulated other comprehensive loss

(9,403)

(10,199)

(7,873)

(15,575)

(18,190)

Total shareholders’ equity

196,177

190,795

187,943

176,602

174,267

Total liabilities and shareholders’ equity

$

2,226,688

$

2,269,825

$

2,244,467

$

2,253,747

$

2,193,022

BANKWELL FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(Dollars in thousands, except share data)

For the Quarter Ended

For the Nine Months Ended

September 30,
2021

June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

September 30,
2021

September 30,
2020

Interest and dividend income

Interest and fees on loans

$

19,795

$

19,266

$

17,900

$

18,194

$

18,027

$

56,961

$

55,471

Interest and dividends on securities

731

736

769

835

799

2,236

2,402

Interest on cash and cash equivalents

88

90

108

117

96

286

468

Total interest and dividend income

20,614

20,092

18,777

19,146

18,922

59,483

58,341

Interest expense

Interest expense on deposits

2,387

2,744

3,114

3,557

4,104

8,245

14,623

Interest expense on borrowings

503

769

1,008

1,285

1,210

2,280

3,187

Total interest expense

2,890

3,513

4,122

4,842

5,314

10,525

17,810

Net interest income

17,724

16,579

14,655

14,304

13,608

48,958

40,531

Provision (credit) for loan losses

134

(20)

(296)

709

712

(182)

6,896

Net interest income after
provision (credit) for loan losses

17,590

16,599

14,951

13,595

12,896

49,140

33,635

Noninterest income

Gains and fees from sales of loans

924

814

513

16

27

2,251

27

Bank owned life insurance

271

251

231

241

242

753

726

Service charges and fees

199

217

199

210

190

615

578

Gain on sale of other real estate owned, net

19

19

Other

43

158

1,013

154

136

1,213

913

Total noninterest income

1,437

1,440

1,956

621

614

4,832

2,263

Noninterest expense

Salaries and employee benefits

4,782

3,960

4,769

5,453

5,295

13,511

15,902

Occupancy and equipment

2,615

3,250

2,406

4,516

2,266

8,271

6,410

Data processing

632

833

512

1,658

529

1,977

1,558

Professional services

498

547

587

591

374

1,632

1,519

Director fees

324

327

317

331

301

968

883

FDIC insurance

298

300

403

262

176

1,001

529

Marketing

186

140

(9)

118

151

317

512

Other

1,035

695

774

637

2,383

1,797

Total noninterest expense

10,370

10,052

9,638

13,703

9,729

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