Bankwell Financial Group Reports Record Loan Growth for the Fourth Quarter and Full Year 2022; Declares First Quarter Dividend

Rhea-AI Summary

Bankwell Financial Group reported a GAAP net income of $8.0 million or $1.04 per share for Q4 2022, compared to $7.8 million or $0.99 per share in Q4 2021. For the full year 2022, net income was $37.4 million or $4.79 per share, up from $26.6 million or $3.36 per share in 2021. The Board declared a $0.20 cash dividend, payable on February 23, 2023, to shareholders of record on February 13, 2023. Total gross loans reached $2.7 billion, a growth of 41.2%. However, anticipated net interest income for 2023 is expected to decline by 10% compared to 2022.

Positive

• Net income increased to $37.4 million in 2022, a 40% rise year-over-year.
• Q4 2022 earnings per share rose to $1.04 from $0.99 in Q4 2021.
• Total gross loans grew by $780.6 million, or 41.2%, compared to 2021.
• Tangible Book Value per share increased from $25.55 to $30.51 since December 2021.
• The company maintained a net interest margin of 3.70% for Q4 2022.

Negative

• Net interest income is projected to decrease by approximately 10% in 2023.
• Increase in provision for loan losses to $4.3 million in Q4 2022 due to loan growth.

NEW CANAAN, Conn.--(BUSINESS WIRE)-- Bankwell Financial Group, Inc. (NASDAQ: BWFG) reported GAAP net income of $8.0 million, or $1.04 per share for the fourth quarter of 2022, versus $7.8 million, or $0.99 per share, for the same period in 2021. For the year ended 2022, net income totaled $37.4 million, or $4.79 per share, versus $26.6 million, or $3.36 per share, for the same period in 2021.

The Company's Board of Directors declared a $0.20 per share cash dividend, payable February 23, 2023 to shareholders of record on February 13, 2023.

We recommend reading this earnings release in conjunction with the Fourth Quarter 2022 Investor Presentation, located at http://investor.mybankwell.com/Presentations and included as an exhibit to our January 25, 2023 Current Report on Form 8-K.

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

"I commend my colleagues at Bankwell for truly exceptional performance in 2022. Our Company posted record results, generating a 16.7% Return on Average Equity and a 1.44% Return on Average Assets. Loan balances grew by over 40%, and we continue to diversify our lending book and bring new commercial relationships to the Bank.

"This year’s growth has positioned the Company well for the expected continued tightening actions by the Federal Reserve. The average yield of loans originated during 2022 was 6.24% while the average yield on fourth quarter originations was 7.23%.

"The historic actions of the Federal Reserve this year are yet to be played out, but based on a peak Federal Funds rate implied by financial markets, and our planning for no Fed rate cuts in 2023, we re-affirm our expectations for 2023’s net interest income to decline by approximately 10% versus 2022.

"Tangible Book Value growth is imperative for value creation to accrue to our shareholders. We are pleased to acknowledge that the Company’s Tangible Book Value per share has compounded at a rate of almost 18% since December 31, 2020.

We are proud of the work we have accomplished in transforming our Bank’s business model in recent years, and thank our customers and clients who have made this success possible."

Fourth Quarter 2022 Highlights:

• Total gross loans were $2.7 billion, growing $780.6 million, or 41.2%, compared to December 31, 2021.
• Average yield on 2022 funded loans was 6.24% compared to 4.56% for 2021.
• Return on average assets was 1.07% for the quarter ended December 31, 2022 and 1.44% for the year ended December 31, 2022.
• Return on average shareholders' equity was 13.38% for the quarter ended December 31, 2022 and 16.72% for the year ended December 31, 2022.
• The net interest margin was 3.70% for the quarter ended December 31, 2022 and 3.78% for the year ended December 31, 2022.
• The efficiency ratio was 45.6% for the quarter ended December 31, 2022 and 45.4% for the year ended December 31, 2022.
• Investment securities totaled $121.6 million and represent 3.7% of total assets.
• Fully diluted tangible book value per share rose to $30.51 compared to $25.55 at December 31, 2021.

Earnings and Performance
Revenues (net interest income plus noninterest income) for the quarter ended December 31, 2022 were $27.3 million, versus $19.8 million for the quarter ended December 31, 2021. Revenues for the year ended December 31, 2022 were $97.8 million, versus $73.5 million for the year ended December 31, 2021. The increase in revenues was primarily attributable to an increase in interest and fees on loans due to record loan growth and higher overall loan yields¹ for the quarter and year ended December 31, 2022. The increase in revenues was partially offset by the following: an increase in interest expense; a decrease in noninterest income driven by a reduction in loans sales and the absence of rental income in 2022 due to the disposition of the Company's former headquarters building in the fourth quarter of 2021. Revenues in 2021 also included a one-time federal payroll tax credit for COVID-19 of $0.9 million recognized in the quarter ended March 31, 2021 which did not repeat in 2022.

Net income for the quarter ended December 31, 2022 was $8.0 million, versus $7.8 million for the quarter ended December 31, 2021. Net income for the year ended December 31, 2022 was $37.4 million, versus $26.6 million for the year ended December 31, 2021. The increase in net income was a direct result of the aforementioned increases in revenues. In addition, the increase in net income was partially offset by an increase in the provision for loan losses due to loan growth and an increase in noninterest expense for the quarter and year ended December 31, 2022.

Basic and diluted earnings per share were $1.04 and $1.04, respectively, for the quarter ended December 31, 2022 compared to basic and diluted earnings per share of $1.00 and $0.99, respectively, for the quarter ended December 31, 2021. Basic and diluted earnings per share were $4.84 and $4.79, respectively, for the year ended December 31, 2022 compared to basic and diluted earnings per share of $3.38 and $3.36, respectively, for the year ended December 31, 2021.

The net interest margin (fully taxable equivalent basis) for the quarters ended December 31, 2022 and December 31, 2021 was 3.70% and 3.43%, respectively. The net interest margin (fully taxable equivalent basis) for the year ended December 31, 2022 and December 31, 2021 was 3.78% and 3.17%, respectively. The increase in the net interest margin was due to an increase in overall loan yields, aided in part by elevated loan prepayment fees, partially offset by an increase in funding costs.

1 - The increase in overall loan yields were 122 bps and 68 bps, respectively, for the quarter and year ended December 31, 2022.

Provision for Loan Losses

Provision for loan losses was $4.3 million and $5.4 million for the quarter and year ended December 31, 2022, respectively, bringing the total allowance for loan losses to $22.4 million as of December 31, 2022. Provision for loan losses was $0.1 million for the quarter ended December 31, 2021 and a credit for loan losses of $0.1 million for the year ended December 31, 2021. The increase in the Provision for loan losses for both the quarter and year ended December 31, 2022 was attributable to loan growth.

On January 1, 2023, the Company adopted ASC 326 Financial Instruments - Credit Losses ("CECL"). Upon adoption of CECL, the Company will record a one-time cumulative effect, pre-tax adjustment range of $3.4 million to $4.2 million to the Allowance for loan losses and a corresponding net of tax adjustment to beginning retained earnings. This impact will be reflected in the Company's first quarter 2023 financial statements.

Financial Condition

Assets totaled $3.25 billion at December 31, 2022, compared to assets of $2.46 billion at December 31, 2021. The increase in assets was primarily due to loan growth. Gross loans totaled $2.7 billion at December 31, 2022, an increase of $780.6 million or 41.2% compared to December 31, 2021. Deposits totaled $2.8 billion at December 31, 2022, compared to deposits of $2.1 billion at December 31, 2021.

Capital

Shareholders’ equity totaled $238.5 million as of December 31, 2022, an increase of $36.5 million compared to December 31, 2021, primarily a result of (i) net income of $37.4 million for the year ended December 31, 2022 and (ii) an $8.4 million favorable impact to accumulated other comprehensive income driven by fair value marks related to hedge positions involving interest rate swaps of $16.8 million, partially offset by fair value marks on the Company's investment portfolio of $8.4 million. The Company's interest rate swaps are used to hedge interest rate risk. The increase in Shareholders’ equity was partially offset by dividends paid of $6.2 million and common stock repurchases of $5.5 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 Courtney E. Sacchetti, Executive Vice President and Chief Financial Officer of Bankwell Financial Group at (203) 652-0166.

For more information, visit www.mybankwell.com.

This press release may contain certain forward-looking statements about the Company. Forward-looking statements include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” Forward-looking statements, by their nature, are subject to risks and uncertainties. Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures, changes in the interest rate environment, general economic conditions or conditions within the securities markets, and legislative and regulatory changes that could adversely affect the business in which the Company and its subsidiaries are engaged. The COVID-19 pandemic continues to affect Bankwell Financial Group, its customers, counterparties, employees, and third party service providers, and the ultimate extent of the impacts on its business, financial position, results of operations, liquidity, and prospects is unknown.

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 assets, tangible common equity to tangible assets, tangible common shareholders' equity, fully diluted tangible book value per common share, adjusted non interest expense, operating revenue, efficiency ratio, average tangible common equity, annualized return on average tangible common equity, return on average assets, return on average shareholders' equity, and the dividend payout ratio 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)
	December 31, 2022				September 30, 2022				June 30, 2022			March 31, 2022				December 31, 2021
ASSETS
Cash and due from banks	$	344,925			$	212,175			$	149,522		$	280,471			$	291,598
Federal funds sold		10,754				10,947				21,505			19,022				53,084
Cash and cash equivalents		355,679				223,122				171,027			299,493				344,682
Investment securities
Marketable equity securities, at fair value		1,988				1,973				2,126			2,090				2,168
Available for sale investment securities, at fair value		103,663				95,095				94,907			98,733				90,198
Held to maturity investment securities, at amortized cost		15,983				16,027				15,917			15,979				16,043
Total investment securities		121,634				113,095				112,950			116,802				108,409
Loans receivable (net of allowance for loan losses of $22,431, $18,167, $15,773, $17,141 and $16,902 at December 31, 2022, September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, respectively)		2,646,384				2,263,432				2,036,626			1,964,567				1,875,167
Accrued interest receivable		13,070				9,552				8,047			7,733				7,512
Federal Home Loan Bank stock, at cost		5,216				5,039				5,064			2,870				2,814
Premises and equipment, net		27,199				27,510				27,768			25,661				25,588
Bank-owned life insurance		50,243				49,970				49,699			49,434				49,174
Goodwill		2,589				2,589				2,589			2,589				2,589
Deferred income taxes, net		7,422				5,952				4,768			6,879				7,621
Other assets		23,013				22,734				17,014			20,849				32,708
Total assets	$	3,252,449			$	2,722,995			$	2,435,552		$	2,496,877			$	2,456,264
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits
Noninterest bearing deposits	$	404,559			$	380,365			$	372,584		$	412,985			$	398,956
Interest bearing deposits		2,396,259				1,906,337				1,660,941			1,753,219				1,725,042
Total deposits		2,800,818				2,286,702				2,033,525			2,166,204				2,123,998
Advances from the Federal Home Loan Bank		90,000				90,000				105,000			50,000				50,000
Subordinated debentures		68,959				68,897				34,500			34,471				34,441
Accrued expenses and other liabilities		54,203				45,896				37,060			35,982				45,838
Total liabilities		3,013,980				2,491,495				2,210,085			2,286,657				2,254,277
Shareholders’ equity
Common stock, no par value		115,018				114,548				115,599			114,882				118,148
Retained earnings		123,640				117,152				109,523			99,047				92,400
Accumulated other comprehensive (loss) income		(189	)			(200	)			345			(3,709	)			(8,561	)
Total shareholders’ equity		238,469				231,500				225,467			210,220				201,987
Total liabilities and shareholders’ equity	$	3,252,449			$	2,722,995			$	2,435,552		$	2,496,877			$	2,456,264

BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited) (Dollars in thousands, except share data)
	For the Quarter Ended																				For the Year Ended
	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				December 31, 2022				December 31, 2021
Interest and dividend income
Interest and fees on loans	$	36,545			$	28,128			$	25,141			$	21,428			$	21,081			$	111,242			$	78,042
Interest and dividends on securities		898				811				774				720				722				3,203				2,958
Interest on cash and cash equivalents		2,150				747				449				154				90				3,500				376
Total interest and dividend income		39,593				29,686				26,364				22,302				21,893				117,945				81,376
Interest expense
Interest expense on deposits		11,083				4,092				1,983				2,206				2,198				19,364				10,443
Interest expense on borrowings		1,701				993				558				586				767				3,838				3,047
Total interest expense		12,784				5,085				2,541				2,792				2,965				23,202				13,490
Net interest income		26,809				24,601				23,823				19,510				18,928				94,743				67,886
Provision (credit) for loan losses		4,272				2,381				(1,445	)			229				125				5,437				(57	)
Net interest income after provision (credit) for loan losses		22,537				22,220				25,268				19,281				18,803				89,306				67,943
Noninterest income
Bank owned life insurance		273				271				265				260				270				1,069				1,023
Service charges and fees		343				240				249				240				257				1,072				872
Gains (losses) and fees from sales of loans		12				(15	)			608				631				441				1,236				2,692
Other		(100	)			(94	)			30				(173	)			(143	)			(337	)			1,070
Total noninterest income		528				402				1,152				958				825				3,040				5,657
Noninterest expense
Salaries and employee benefits		5,988				5,876				5,433				4,940				4,806				22,237				18,317
Occupancy and equipment		1,919				2,035				2,193				2,150				2,411				8,297				10,682
Professional services		912				994				1,000				981				628				3,887				2,260
Data processing		663				626				689				654				432				2,632				2,409
Director fees		378				325				339				352				335				1,394				1,303
FDIC insurance		898				255				262				223				231				1,638				1,232
Marketing		112				102				107				45				87				366				404
Other		1,601				818				913				580				749				3,912				3,132
Total noninterest expense		12,471				11,031				10,936				9,925				9,679				44,363				39,739
Income before income tax expense		10,594				11,591				15,484				10,314				9,949				47,983				33,861
Income tax expense		2,573				2,417				3,462				2,102				2,135				10,554				7,275
Net income	$	8,021			$	9,174			$	12,022			$	8,212			$	7,814			$	37,429			$	26,586
Earnings Per Common Share:
Basic	$	1.04			$	1.19			$	1.56			$	1.05			$	1.00			$	4.84			$	3.38
Diluted	$	1.04			$	1.18			$	1.55			$	1.04			$	0.99			$	4.79			$	3.36
Weighted Average Common Shares Outstanding:
Basic		7,507,540				7,553,718				7,556,645				7,637,077				7,660,307				7,563,363				7,706,407
Diluted		7,563,116				7,612,421				7,614,243				7,719,405				7,726,420				7,640,218				7,761,811
Dividends per common share	$	0.20			$	0.20			$	0.20			$	0.20			$	0.18			$	0.80			$	0.64

BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
	For the Quarter Ended															For the Year Ended
	December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			December 31, 2022			December 31, 2021
Performance ratios:
Return on average assets	1.07	%		1.47	%		1.96	%		1.35	%		1.32	%		1.44	%		1.17	%
Return on average shareholders' equity	13.38	%		15.73	%		22.09	%		16.05	%		15.44	%		16.72	%		13.86	%
Return on average tangible common equity	13.52	%		15.91	%		22.36	%		16.25	%		15.65	%		16.91	%		14.05	%
Net interest margin	3.70	%		4.12	%		4.01	%		3.30	%		3.43	%		3.78	%		3.17	%
Efficiency ratio(1)	45.6	%		44.1	%		43.8	%		48.5	%		48.8	%		45.4	%		53.9	%
Net loan charge-offs as a % of average loans	—	%		—	%		—	%		—	%		—	%		—	%		0.23	%
Dividend payout ratio(2)	19.23	%		16.95	%		12.90	%		19.23	%		18.18	%		16.70	%		19.05	%

(1)		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.
(2)		The dividend payout ratio is calculated by dividing dividends per share by earnings per share.

	As of
	December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021
Capital ratios:
Total Common Equity Tier 1 Capital to Risk-Weighted Assets(1)	10.28	%		11.42	%		11.10	%		11.20	%		11.18	%
Total Capital to Risk-Weighted Assets(1)	11.07	%		12.16	%		11.80	%		12.00	%		12.00	%
Tier I Capital to Risk-Weighted Assets(1)	10.28	%		11.42	%		11.10	%		11.20	%		11.18	%
Tier I Capital to Average Assets(1)	9.88	%		11.31	%		10.15	%		9.80	%		9.94	%
Tangible common equity to tangible assets	7.26	%		8.41	%		9.16	%		8.32	%		8.13	%
Fully diluted tangible book value per common share	$ 30.51			$ 29.68			$ 28.75			$ 26.75			$ 25.55

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

BANKWELL FINANCIAL GROUP, INC. ASSET QUALITY (unaudited) (Dollars in thousands)
	For the Quarter Ended
	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Allowance for loan losses:
Balance at beginning of period	$	18,167			$	15,773			$	17,141			$	16,902			$	16,803
Charge-offs:
Commercial business		—				—				—				—				(26	)
Consumer		(11	)			(8	)			—				(4	)			(5	)
Total charge-offs		(11	)			(8	)			—				(4	)			(31	)
Recoveries:
Commercial real estate		—				—				77				—				—
Commercial business		—				21				—				13				2
Consumer		3				—				—				1				3
Total recoveries		3				21				77				14				5
Net loan (charge-offs) recoveries		(8	)			13				77				10				(26	)
Provision (credit) for loan losses		4,272				2,381				(1,445	)			229				125
Balance at end of period	$	22,431			$	18,167			$	15,773			$	17,141			$	16,902

	As of
	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Asset quality:
Nonaccrual loans
Residential real estate	$	2,152			$	2,137			$	2,161			$	2,181			$	2,380
Commercial real estate		2,781				2,894				2,955				3,365				3,482
Commercial business		2,126				2,380				787				817				1,728
Construction		9,382				9,382				9,382				9,382				8,997
Total nonaccrual loans		16,441				16,793				15,285				15,745				16,587
Other real estate owned		—				—				—				—				—
Total nonperforming assets	$	16,441			$	16,793			$	15,285			$	15,745			$	16,587
Nonperforming loans as a % of total loans		0.61	%			0.73	%			0.74	%			0.79	%			0.88	%
Nonperforming assets as a % of total assets		0.51	%			0.62	%			0.63	%			0.63	%			0.68	%
Allowance for loan losses as a % of total loans		0.84	%			0.79	%			0.77	%			0.86	%			0.89	%
Allowance for loan losses as a % of nonperforming loans		136.43	%			108.18	%			103.19	%			108.87	%			101.90	%
Total past due loans to total loans		0.60	%			0.78	%			1.40	%			0.85	%			1.72	%

Total nonaccrual loans decreased $0.1 million to $16.4 million as of December 31, 2022 when compared to December 31, 2021. Nonperforming assets as a percentage of total assets decreased to 0.51% at December 31, 2022, down from 0.68% at December 31, 2021. The allowance for loan losses at December 31, 2022 was $22.4 million, representing 0.84% of total loans.

Past due loans decreased to $16.1 million, or 0.60% of total loans, as of December 31, 2022, compared to $32.6 million, or 1.72% of total loans, as of December 31, 2021.

BANKWELL FINANCIAL GROUP, INC. LOAN & DEPOSIT PORTFOLIO (unaudited) (Dollars in thousands)
Period End Loan Composition	December 31, 2022			September 30, 2022			December 31, 2021			Current QTD % Change			YTD % Change
Residential Real Estate	$	60,588		$	61,664		$	79,987		(1.7	)%		(24.3	)%
Commercial Real Estate(1)		1,921,252			1,647,928			1,356,709		16.6			41.6
Construction		155,198			117,355			98,341		32.2			57.8
Total Real Estate Loans		2,137,038			1,826,947			1,535,037		17.0			39.2
Commercial Business		520,447			443,288			350,975		17.4			48.3
Consumer		17,963			16,558			8,869		8.5			102.5
Total Loans	$	2,675,448		$	2,286,793		$	1,894,881		17.0	%		41.2	%
(1) Includes owner occupied commercial real estate.

Gross loans totaled $2.7 billion at December 31, 2022, an increase of $780.6 million or 41.2% compared to December 31, 2021.

Period End Deposit Composition	December 31, 2022			September 30, 2022			December 31, 2021			Current QTD % Change			YTD % Change
Noninterest bearing demand	$	404,559		$	380,365		$	398,956		6.4	%		1.4	%
NOW		104,057			115,200			119,479		(9.7	)		(12.9	)
Money Market		913,868			836,564			954,674		9.2			(4.3	)
Savings		151,944			183,576			193,631		(17.2	)		(21.5	)
Time		1,226,390			770,997			457,258		59.1			168.2
Total Deposits	$	2,800,818		$	2,286,702		$	2,123,998		22.5	%		31.9	%

Total deposits were $2.8 billion at December 31, 2022, compared to $2.1 billion at December 31, 2021, an increase of $676.8 million, or 31.9%. The increase in deposits is primarily a result of an increase in brokered time deposits to fund the significant loan growth during the second half of 2022, increasing by $727.1 million compared to December 31, 2021.

BANKWELL FINANCIAL GROUP, INC. NONINTEREST INCOME (unaudited) (Dollars in thousands)
	For the Quarter Ended
Noninterest income	December 31, 2022				September 30, 2022				December 31, 2021				Dec 22 vs. Sep 22 % Change			Dec 22 vs. Dec 21 % Change
Bank owned life insurance	$	273			$	271			$	270			0.7	%		1.1	%
Service charges and fees		343				240				257			42.9			33.5
Gains (losses) and fees from sales of loans		12				(15	)			441			180.0			(97.3	)
Other		(100	)			(94	)			(143	)		6.4			30.1
Total noninterest income	$	528			$	402			$	825			31.3	%		(36.0	)%

	For the Year Ended
Noninterest income	December 31, 2022				December 31, 2021			% Change
Gains and fees from sales of loans	$	1,236			$	2,692		(54.1	)%
Bank owned life insurance		1,069				1,023		4.5
Service charges and fees		1,072				872		22.9
Other		(337	)			1,070		(131.5	)
Total noninterest income	$	3,040			$	5,657		(46.3	)%

Noninterest income decreased by $0.3 million to $0.5 million for the quarter ended December 31, 2022 compared to the quarter ended December 31, 2021. Noninterest income decreased by $2.6 million to $3.0 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The decrease in noninterest income was driven by a reduction in loan sales for the quarter and year ended December 31, 2022 compared to the same periods in 2021. Noninterest income also declined for the year ended December 31, 2022 due to a one-time federal payroll tax credit for COVID-19 of $0.9 million recognized in the quarter ended March 31, 2021. The decrease in noninterest income was also due to the absence of $0.7 million of rental income in 2022 due to the disposition of the Company's former headquarters building in the fourth quarter of 2021.

BANKWELL FINANCIAL GROUP, INC. NONINTEREST EXPENSE (unaudited) (Dollars in thousands)
	For the Quarter Ended
Noninterest expense	December 31, 2022			September 30, 2022			December 31, 2021			Dec 22 vs. Sep 22 % Change			Dec 22 vs. Dec 21 % Change
Salaries and employee benefits	$	5,988		$	5,876		$	4,806		1.9	%		24.6	%
Occupancy and equipment		1,919			2,035			2,411		(5.7	)		(20.4	)
Professional services		912			994			628		(8.2	)		45.2
Data processing		663			626			432		5.9			53.5
Director fees		378			325			335		16.3			12.8
FDIC insurance		898			255			231		252.2			288.7
Marketing		112			102			87		9.8			28.7
Other		1,601			818			749		95.7			113.8
Total noninterest expense	$	12,471		$	11,031		$	9,679		13.1	%		28.8	%

	For the Year Ended
Noninterest expense	December 31, 2022			December 31, 2021			% Change
Salaries and employee benefits	$	22,237		$	18,317		21.4	%
Occupancy and equipment		8,297			10,682		(22.3	)
Professional services		3,887			2,260		72.0
Data processing		2,632			2,409		9.3
Director fees		1,394			1,303		7.0
FDIC insurance		1,638			1,232		33.0
Marketing		366			404		(9.4	)
Other		3,912			3,132		24.9
Total noninterest expense	$	44,363		$	39,739		11.6	%

Noninterest expense increased by $2.8 million to $12.5 million for the quarter ended December 31, 2022 compared to the quarter ended December 31, 2021. Noninterest expense increased by $4.6 million to $44.4 million for the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase in noninterest expense was primarily driven by an increase in salaries and employee benefits expense, professional services expense, FDIC insurance, and customer fraud reimbursement and deposit account fraud within Other. These increases were partially offset by a decrease in occupancy and equipment expense.

Salaries and employee benefits expense totaled $6.0 million for the quarter ended December 31, 2022, an increase of $1.2 million when compared to the same period in 2021. Salaries and employee benefits expense totaled $22.2 million for the year ended December 31, 2022, an increase of $3.9 million when compared to the same period in 2021. The increase in salaries and employee benefits expense was driven by an increase in full time equivalent employees, as well as an increase in variable compensation as a result of the Bank's overall growth and improved performance. Full time equivalent employees totaled 136 at December 31, 2022 compared to 126 for the same period in 2021. The increase in salaries and employee benefits expense was partially offset by an increase in deferred loan costs due to higher loan originations.

Professional services expense totaled $0.9 million for the quarter ended December 31, 2022, an increase of $0.3 million when compared to the same period in 2021. Professional services expense totaled $3.9 million for the year ended December 31, 2022, an increase of $1.6 million when compared to the same period in 2021. The increase in professional services expense was primarily driven by consulting fees associated with various projects, including our core system conversion.

FDIC insurance expense totaled $0.9 million for the quarter ended December 31, 2022, an increase of $0.7 million when compared to the same period in 2021. FDIC insurance expense totaled $1.6 million for the year ended December 31, 2022, an increase of $0.4 million when compared to the same period in 2021. The higher FDIC insurance expense is attributed to the overall balance sheet growth and increased use of brokered deposits.

Other expense totaled $1.6 million for the quarter ended December 31, 2022, an increase of $0.9 million when compared to the same period in 2021. Other expense totaled $3.9 million for the year ended December 31, 2022, an increase of $0.8 million. The increase was mainly attributable to four events of customer reimbursed fraud and deposit account fraud recognized in the quarter ended December 31 2022, the largest of which was a $189 thousand customer reimbursement.

Occupancy and equipment expense totaled $1.9 million for the quarter ended December 31, 2022, a decrease of $0.5 million when compared to the same period in 2021. Occupancy and equipment expense totaled $8.3 million for the year ended December 31, 2022, a decrease of $2.4 million when compared to the same period in 2021. The decrease in occupancy and equipment expense was primarily driven by the curtailment of additional cleaning costs associated with precautions taken to prevent the spread of COVID-19 during the year ended December 31, 2021. In addition, the decrease in occupancy and equipment expense was impacted by a reduction in lease expense as a result of the branch closure in New Canaan, which occurred during the third quarter of 2021.

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	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021
Total Equity	$	238,469			$	231,500			$	225,467			$	210,220			$	201,987
Less:
Goodwill		2,589				2,589				2,589				2,589				2,589
Other intangibles		—				—				—				—				—
Tangible Common Equity	$	235,880			$	228,911			$	222,878			$	207,631			$	199,398
Total Assets	$	3,252,449			$	2,722,995			$	2,435,552			$	2,496,877			$	2,456,264
Less:
Goodwill		2,589				2,589				2,589				2,589				2,589
Other intangibles		—				—				—				—				—
Tangible Assets	$	3,249,860			$	2,720,406			$	2,432,963			$	2,494,288			$	2,453,675
Tangible Common Equity to Tangible Assets		7.26	%			8.41	%			9.16	%			8.32	%			8.13	%

	As of
Computation of Fully Diluted Tangible Book Value per Common Share	December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021
Total shareholders' equity	$	238,469		$	231,500		$	225,467		$	210,220		$	201,987
Less:
Preferred stock		—			—			—			—			—
Common shareholders' equity	$	238,469		$	231,500		$	225,467		$	210,220		$	201,987
Less:
Goodwill		2,589			2,589			2,589			2,589			2,589
Other intangibles		—			—			—			—			—
Tangible common shareholders' equity	$	235,880		$	228,911		$	222,878		$	207,631		$	199,398
Common shares issued and outstanding		7,730,699			7,711,843			7,752,389			7,761,338			7,803,166
Fully Diluted Tangible Book Value per Common Share	$	30.51		$	29.68		$	28.75		$	26.75		$	25.55

BANKWELL FINANCIAL GROUP, INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES (unaudited) - Continued (Dollars in thousands)
	For the Quarter Ended																				For the Year Ended
Computation of Efficiency Ratio	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				December 31, 2022				December 31, 2021
Noninterest expense	$	12,471			$	11,031			$	10,936			$	9,925			$	9,679			$	44,363			$	39,739
Less:
Amortization of intangible assets		—				—				—				—				48				—				76
Other real estate owned expenses		—				—				—				—				—				—				—
Adjusted noninterest expense	$	12,471			$	11,031			$	10,936			$	9,925			$	9,631			$	44,363			$	39,663
Net interest income	$	26,809			$	24,601			$	23,823			$	19,510			$	18,928			$	94,743			$	67,886
Noninterest income		528				402				1,152				958				825				3,040				5,657
Less:
Net gain on sale of available for sale securities		—				—				—				—				—				—				—
Gain on sale of other real estate owned, net		—				—				—				—				—				—				—
Operating revenue	$	27,337			$	25,003			$	24,975			$	20,468			$	19,753			$	97,783			$	73,543
Efficiency ratio		45.6	%			44.1	%			43.8	%			48.5	%			48.8	%			45.4	%			53.9	%

	For the Quarter Ended																				For the Year Ended
Computation of Return on Average Tangible Common Equity	December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				December 31, 2022				December 31, 2021
Net Income Attributable to Common Shareholders	$	8,021			$	9,174			$	12,022			$	8,212			$	7,814			$	37,429			$	26,586
Total average shareholders' equity	$	237,922			$	231,378			$	218,250			$	207,541			$	200,752			$	223,874			$	191,808
Less:
Average Goodwill		2,589				2,589				2,589				2,589				2,589				2,589				2,589
Average Other intangibles		—				—				—				—				45				—				59
Average tangible common equity	$	235,333			$	228,789			$	215,661			$	204,952			$	198,118			$	221,285			$	189,160
Annualized Return on Average Tangible Common Equity		13.52	%			15.91	%			22.36	%			16.25	%			15.65	%			16.91	%			14.05	%

BANKWELL FINANCIAL GROUP, INC. NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS - QTD (unaudited) (Dollars in thousands)
	For the Quarter Ended
	December 31, 2022									December 31, 2021
	Average Balance			Interest			Yield/ Rate (4)			Average Balance			Interest			Yield/ Rate (4)
Assets:
Cash and Fed funds sold	$	231,767		$	2,150		3.68	%		$	233,196		$	90		0.15	%
Securities(1)		123,274			887		2.88				104,797			756		2.89
Loans:
Commercial real estate		1,828,306			24,998		5.35				1,337,147			15,104		4.42
Residential real estate		61,057			599		3.92				83,763			694		3.31
Construction		138,552			2,185		6.17				95,611			972		3.98
Commercial business		499,030			8,549		6.70				347,394			4,222		4.75
Consumer		16,875			214		5.05				8,904			89		3.97
Total loans		2,543,820			36,545		5.62				1,872,819			21,081		4.40
Federal Home Loan Bank stock		5,371			64		4.72				2,814			16		2.28
Total earning assets		2,904,232		$	39,646		5.34	%			2,213,626		$	21,943		3.88	%
Other assets		76,703									130,512
Total assets	$	2,980,935								$	2,344,138
Liabilities and shareholders' equity:
Interest bearing liabilities:
NOW	$	107,118		$	45		0.17	%		$	114,158		$	51		0.18	%
Money market		837,486			4,158		1.97				874,352			1,097		0.50
Savings		170,903			581		1.35				190,118			100		0.21
Time		1,002,012			6,299		2.49				438,627			950		0.86
Total interest bearing deposits		2,117,519			11,083		2.08				1,617,255			2,198		0.54
Borrowed Money		170,202			1,701		3.91				89,726			767		3.35
Total interest bearing liabilities		2,287,721		$	12,784		2.22	%			1,706,981		$	2,965		0.69	%
Noninterest bearing deposits		407,923									383,557
Other liabilities		47,369									52,848
Total liabilities		2,743,013									2,143,386
Shareholders' equity		237,922									200,752
Total liabilities and shareholders' equity	$	2,980,935								$	2,344,138
Net interest income(2)				$	26,862								$	18,978
Interest rate spread							3.12	%								3.19	%
Net interest margin(3)							3.70	%								3.43	%

(1)		Average balances and yields for securities are based on amortized cost.
(2)		The adjustment for securities and loans taxable equivalency amounted to $52 thousand and $50 thousand for the quarters ended December 31, 2022 and 2021, respectively.
(3)		Annualized net interest income as a percentage of earning assets.
(4)		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 Year Ended
	December 31, 2022									December 31, 2021
	Average Balance			Interest			Yield/ Rate (4)			Average Balance			Interest			Yield/ Rate (4)
Assets:
Cash and Fed funds sold	$	238,233		$	3,500		1.47	%		$	294,471		$	376		0.13	%
Securities(1)		118,591			3,280		2.77				103,592			3,071		2.96
Loans:
Commercial real estate		1,532,971			76,103		4.90				1,225,770			55,995		4.51
Residential real estate		66,028			2,408		3.65				99,101			3,363		3.39
Construction		115,902			6,666		5.67				97,163			3,780		3.84
Commercial business		427,178			25,561		5.90				313,422			14,589		4.59
Consumer		10,121			504		4.98				7,929			315		3.97
Total loans		2,152,200			111,242		5.10				1,743,385			78,042		4.42
Federal Home Loan Bank stock		4,132			124		3.00				4,156			88		2.12
Total earning assets		2,513,156		$	118,146		4.64	%			2,145,604		$	81,577		3.75	%
Other assets		86,485									120,955
Total assets	$	2,599,641								$	2,266,559
Liabilities and shareholders' equity:
Interest bearing liabilities:
NOW	$	118,837		$	203		0.17	%		$	111,515		$	198		0.18	%
Money market		891,095			8,830		0.99				804,679			4,042		0.50
Savings		188,186			1,259		0.67				175,629			413		0.23
Time		617,480			9,072		1.47				508,651			5,790		1.14
Total interest bearing deposits		1,815,598			19,364		1.07				1,600,474			10,443		0.65
Borrowed Money		118,960			3,838		3.18				103,919			3,047		2.89
Total interest bearing liabilities		1,934,558		$	23,202		1.20	%			1,704,393		$	13,490		0.79	%
Noninterest bearing deposits		401,005									323,648
Other liabilities		40,204									46,710
Total liabilities		2,375,767									2,074,751
Shareholders' equity		223,874									191,808
Total liabilities and shareholders' equity	$	2,599,641								$	2,266,559
Net interest income(2)				$	94,944								$	68,087
Interest rate spread							3.44	%								2.96	%
Net interest margin(3)							3.78	%								3.17	%

(1)		Average balances and yields for securities are based on amortized cost.
(2)		The adjustment for securities and loans taxable equivalency amounted to $200 thousand and $201 thousand for the year ended December 31, 2022 and 2021, respectively.
(3)		Yields are calculated using the contractual day count convention for each respective product type.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230125005787/en/

Christopher R. Gruseke, President and Chief Executive Officer

or

Courtney E. Sacchetti, Executive Vice President and Chief Financial Officer

Bankwell Financial Group

(203) 652-0166

Source: Bankwell Financial Group, Inc

FAQ

What was Bankwell Financial Group's net income for Q4 2022?

Bankwell Financial Group reported a net income of $8.0 million for Q4 2022.

What is the dividend amount declared by Bankwell Financial Group?

The declared cash dividend is $0.20 per share.

When will the dividend be paid?

The dividend will be paid on February 23, 2023.

What growth did Bankwell Financial Group experience in total loans?

Total gross loans grew by 41.2%, reaching $2.7 billion.

What is the expected decline in net interest income for 2023?

Net interest income is expected to decline by approximately 10% in 2023 compared to 2022.