Bankwell Financial Group Reports Record Operating Results for the Second Quarter; Increases Dividend by 29%

Rhea-AI Summary

Bankwell Financial Group (NASDAQ:BWFG) reported a record GAAP net income of $6.2 million ($0.79 per share) for Q2 2021, up from $1.2 million ($0.16 per share) in Q2 2020. The board declared a $0.18 per share cash dividend, a 29% increase from the previous quarter. Key highlights include a 5% loan growth for the quarter, a 3.12% net interest margin, and improved credit quality. Assets totaled $2.27 billion, with total deposits at $1.9 billion. The company anticipates further margin improvements and plans for strong growth in 2022.

Positive

• Record net income of $6.2 million for Q2 2021, a significant increase from $1.2 million in Q2 2020.
• Quarterly dividend increased by 29% to $0.18 per share, demonstrating confidence in financial outlook.
• 5% growth in loans (excluding PPP) for the quarter and 9% year-to-date.
• Deposits increased to $1.9 billion, a growth of $100 million since December 31, 2020.
• Net interest margin improved to 3.12%, indicating better profitability from lending.

Negative

• None.

Bankwell Financial Group, Inc. (NASDAQ:BWFG) reported record GAAP net income of $6.2 million, or $0.79 per share, for the second quarter of 2021, versus $1.2 million, or $0.16 per share, for the same period in 2020.

The Company's Board of Directors declared a $0.18 per share cash dividend, payable August 26, 2021 to shareholders of record on August 16, 2021, representing a 29% increase when compared to the prior quarter’s dividend.

We recommend reading this earnings release in conjunction with the Second Quarter 2021 Investor Presentation, located at http://investor.mybankwell.com/Presentations and included as an exhibit to our July 28, 2021 Current Report on Form 8-K.

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

"I’d like to congratulate the entire Bankwell team for an outstanding job, not just this quarter, but over the last eighteen months. Not only have we navigated the challenges brought about by the global health crisis, but we are emerging from, what we hope to be, the closing stages of the pandemic as a stronger, more robust bank. Excluding PPP loans, we have grown our loan book 5% for the quarter and 9% year to date. We continue to improve our deposit structure and cost, growing non-interest bearing deposits by 17% on a linked quarter basis, and increasing the quarterly net interest margin to 3.12%. We expect to see further improvement in the NIM as 2021 progresses. Consistent with the Company’s focus on improving its deposit base, we’ve just completed the conversion of our online banking product to offer a more robust and more competitive solution. We expect this added capability to help us further grow our business deposit franchise. Credit quality continues to improve. Any COVID impacted loans carry specific reserves or are well collateralized, and we expect these loans to return to accrual status over the coming quarters.

"Confident in our earnings outlook, Bankwell’s Board has just approved a 29% increase in our quarterly dividend to $0.18 per share. We look forward to a strong finish to 2021 and are planning substantial growth and profitability in 2022."

Second Quarter 2021 Highlights:

• Return on average assets was 1.11% and return on average equity was 13.06% for the quarter ended June 30, 2021.
• The net interest margin improved to 3.12% for the quarter ended June 30, 2021.
• The efficiency ratio improved to 55.7% for the quarter ended June 30, 2021.
• Total gross loans were $1.7 billion, growing $139.8 million, or 8.8%, compared to December 31, 2020, excluding Paycheck Protection Program ("PPP") loans.
• Resumption of SBA loan sales with gains of $0.8 million compared to no sales for the quarter ended June 30, 2020.
• Total deposits were $1.9 billion compared to $1.8 billion at December 31, 2020.
• Noninterest bearing deposits increased by $58.2 million, or 21.6% compared to December 31, 2020.
• The cost of interest bearing deposits decreased approximately 64 basis points to 0.68% when compared to the quarter ended June 30, 2020.
• Investment securities totaled $109.3 million and represent 4.8% of total assets.
• Tangible book value per share rose to $24.40 compared to $22.43 at December 31, 2020.
• Shares issued and outstanding were 7,895,101, reflecting repurchases of 13,529 shares of common stock at a weighted average price of $27.44 during the quarter ended June 30, 2021.
• Repaid $10.0 million of subordinated debt on May 15, 2021.

Earnings and Performance

Revenues (net interest income plus noninterest income) for the quarter ended June 30, 2021 were $18.0 million, versus $14.2 million for the quarter ended June 30, 2020. Revenues for the six months ended June 30, 2021 were $34.6 million, versus $28.6 million for the six months ended June 30, 2020. The increase was primarily attributable to lower interest expense on deposits and from the resumption of SBA loan sales. Revenues for the six months ended June 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 June 30, 2021 was $6.2 million, versus $1.2 million for the quarter ended June 30, 2020. Net income for the six months ended June 30, 2021 was $11.9 million, versus $2.6 million for the six months ended June 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 the absence of elevated reserves recognized in 2020 due to the impact of the COVID-19 pandemic and improving economic trends in 2021.

Basic and diluted earnings per share were each $0.79 for the quarter ended June 30, 2021 compared to basic and diluted earnings per share of $0.16 each for the quarter ended June 30, 2020. Basic and diluted earnings per share were $1.51 and $1.50, respectively, for the six months ended June 30, 2021 compared to basic and diluted earnings per share of $0.33 each for the six months ended June 30, 2020.

The net interest margin (fully taxable equivalent basis) for the quarters ended June 30, 2021 and June 30, 2020 was 3.12% and 2.81%, respectively. The net interest margin (fully taxable equivalent basis) for the six months ended June 30, 2021 and June 30, 2020 was 2.93% and 2.89%, 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, partially offset by excess liquidity.

Financial Condition

Assets totaled $2.27 billion at June 30, 2021, compared to assets of $2.25 billion at December 31, 2020. The change in assets remained relatively flat as the increase in loans were offset by a decrease in excess liquidity. Gross loans totaled $1.7 billion at June 30, 2021, an increase of $112.9 million compared to December 31, 2020. Excluding PPP loans, gross loans increased by $139.8 million at June 30, 2021 when compared to December 31, 2020. Deposits totaled $1.9 billion at June 30, 2021, compared to deposits of $1.8 billion at December 31, 2020.

Capital

Shareholders’ equity totaled $190.8 million as of June 30, 2021, an increase of $14.2 million compared to December 31, 2020, primarily a result of (i) net income of $11.9 million for the six months ended June 30, 2021 and (ii) a $5.4 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 $2.2 million and common stock repurchases of $1.8 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, 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, 2021				March 31, 2021				December 31, 2020				June 30, 2020
ASSETS
Cash and due from banks		$	297,851			$	351,194			$	405,340			$	201,380
Federal funds sold		4,036				10,811				4,258				5,886
Cash and cash equivalents		301,887				362,005				409,598				207,266
Investment securities
Marketable equity securities, at fair value		2,192				2,178				2,207				2,195
Available for sale investment securities, at fair value		90,983				83,218				88,605				82,220
Held to maturity investment securities, at amortized cost		16,166				16,225				16,078				16,196
Total investment securities		109,341				101,621				106,890				100,611
Loans receivable (net of allowance for loan losses of $16,672, $20,545, $21,009, and $19,662 at June 30, 2021, March 31, 2021, December 31, 2020, and June 30, 2020, respectively)		1,719,274				1,650,127				1,601,672				1,590,995
Other real estate owned		—				—				—				180
Accrued interest receivable		6,661				7,306				6,579				6,774
Federal Home Loan Bank stock, at cost		3,844				6,446				7,860				7,835
Premises and equipment, net		33,916				33,386				21,762				27,177
Bank-owned life insurance		48,632				42,881				42,651				42,167
Goodwill		2,589				2,589				2,589				2,589
Other intangible assets		58				67				76				178
Deferred income taxes, net		8,208				8,908				11,300				11,352
Other assets		35,415				29,131				42,770				46,511
Total assets		$	2,269,825			$	2,244,467			$	2,253,747			$	2,043,635
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits
Noninterest bearing deposits		$	328,473			$	280,947			$	270,235			$	214,789
Interest bearing deposits		1,610,829				1,578,861				1,557,081				1,405,175
Total deposits		1,939,302				1,859,808				1,827,316				1,619,964
Advances from the Federal Home Loan Bank		75,000				125,000				175,000				175,000
Subordinated debentures		15,366				25,271				25,258				25,233
Accrued expenses and other liabilities		49,362				46,445				49,571				53,078
Total liabilities		2,079,030				2,056,524				2,077,145				1,873,275
Shareholders’ equity
Common stock, no par value		120,451				120,398				121,338				120,381
Retained earnings		80,543				75,418				70,839				69,712
Accumulated other comprehensive loss		(10,199		)		(7,873		)		(15,575		)		(19,733		)
Total shareholders’ equity		190,795				187,943				176,602				170,360
Total liabilities and shareholders’ equity		$	2,269,825			$	2,244,467			$	2,253,747			$	2,043,635

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, 2021				March 31, 2021				December 31, 2020				June 30, 2020				June 30, 2021				June 30, 2020
Interest and dividend income
Interest and fees on loans		$	19,266			$	17,900			$	18,194			$	18,459			$	37,166			$	37,444
Interest and dividends on securities		736				769				835				778				1,505				1,603
Interest on cash and cash equivalents		90				108				117				86				198				372
Total interest and dividend income		20,092				18,777				19,146				19,323				38,869				39,419
Interest expense
Interest expense on deposits		2,744				3,114				3,557				4,810				5,858				10,519
Interest expense on borrowings		769				1,008				1,285				876				1,777				1,977
Total interest expense		3,513				4,122				4,842				5,686				7,635				12,496
Net interest income		16,579				14,655				14,304				13,637				31,234				26,923
(Credit) provision for loan losses		(20		)		(296		)		709				2,999				(316		)		6,184
Net interest income after (credit) provision for loan losses		16,599				14,951				13,595				10,638				31,550				20,739
Noninterest income
Gains and fees from sales of loans		814				513				16				—				1,327				—
Bank owned life insurance		251				231				241				241				482				484
Service charges and fees		217				199				210				171				416				388
Other		158				1,013				154				165				1,170				777
Total noninterest income		1,440				1,956				621				577				3,395				1,649
Noninterest expense
Salaries and employee benefits		3,960				4,769				5,453				5,227				8,729				10,607
Occupancy and equipment		3,250				2,406				4,516				2,235				5,656				4,144
Data processing		833				512				1,658				493				1,345				1,029
Professional services		547				587				591				434				1,134				1,145
Director fees		327				317				331				287				644				582
FDIC insurance		300				403				262				283				703				353
Marketing		140				(9		)		118				199				131				361
Other		695				653				774				564				1,348				1,160
Total noninterest expense		10,052				9,638				13,703				9,722				19,690				19,381
Income before income tax expense		7,987				7,269				513				1,493				15,255				3,007
Income tax expense		1,759				1,579				177				279				3,338				430
Net income		$	6,228			$	5,690			$	336			$	1,214			$	11,917			$	2,577
Earnings Per Common Share:
Basic		$	0.79			$	0.72			$	0.04			$	0.16			$	1.51			$	0.33
Diluted		$	0.79			$	0.71			$	0.04			$	0.16			$	1.50			$	0.33
Weighted Average Common Shares Outstanding:
Basic		7,722,481				7,758,540				7,726,926				7,715,094				7,744,368				7,732,615
Diluted		7,768,026				7,800,777				7,728,206				7,715,295				7,792,600				7,748,104
Dividends per common share		$	0.14			$	0.14			$	0.14			$	0.14			$	0.28			$	0.28

BANKWELL FINANCIAL GROUP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
		For the Quarter Ended												For the Six Months Ended
		June 30, 2021			March 31, 2021			December 31, 2020			June 30, 2020			June 30, 2021			June 30, 2020
Performance ratios:
Return on average assets(1)		1.11	%		1.02	%		0.06	%		0.23	%		1.07	%		0.26	%
Return on average stockholders' equity(1)		13.06	%		12.67	%		0.75	%		2.82	%		12.87	%		2.92	%
Return on average tangible common equity(1)		13.25	%		12.86	%		0.76	%		2.86	%		13.06	%		2.97	%
Net interest margin		3.12	%		2.74	%		2.66	%		2.81	%		2.93	%		2.89	%
Efficiency ratio(2)		55.7	%		58.0	%		91.2	%		68.2	%		56.8	%		67.7	%
Net loan charge-offs as a % of average loans		0.23	%		0.01	%		—	%		—	%		0.24	%		—	%
Dividend payout ratio(3)		17.72	%		19.72	%		350.00	%		87.50	%		18.67	%		84.85	%

(1) 2020 performance ratios were negatively impacted by incremental COVID-19 pandemic related loan loss reserves and $3.9 million in one-time charges related to office consolidation, contract termination and employee severance costs recognized in the fourth quarter of 2020.

(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, 2021				March 31, 2021				December 31, 2020				June 30, 2020
Capital ratios:
Total Common Equity Tier 1 Capital to Risk-Weighted Assets(1)		10.95		%		11.02		%		11.06		%		12.44		%
Total Capital to Risk-Weighted Assets(1)		11.84		%		12.17		%		12.28		%		13.63		%
Tier I Capital to Risk-Weighted Assets(1)		10.95		%		11.02		%		11.06		%		12.44		%
Tier I Capital to Average Assets(1)		9.19		%		8.82		%		8.44		%		9.93		%
Tangible common equity to tangible assets		8.30		%		8.27		%		7.73		%		8.21		%
Tangible book value per common share(2)		$	24.40			$	23.99			$	22.43			$	21.70

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

(2) Excludes unvested restricted shares of 184,548, 186,485, 163,369, and 165,708 as of June 30, 2021, March 31, 2021, December 31, 2020, and June 30, 2020, respectively.

BANKWELL FINANCIAL GROUP, INC.
ASSET QUALITY (unaudited)
(Dollars in thousands)
		For the Quarter Ended
		June 30, 2021				March 31, 2021				December 31, 2020				June 30, 2020
Allowance for loan losses:
Balance at beginning of period		$	20,545			$	21,009			$	20,372			$	16,686
Charge-offs:
Commercial real estate		(3,814		)		(163		)		—				—
Commercial business		(51		)		—				(75		)		—
Consumer		(4		)		(14		)		(11		)		(23		)
Total charge-offs		(3,869		)		(177		)		(86		)		(23		)
Recoveries:
Commercial business		16				—				14				—
Consumer		—				9				—				—
Total recoveries		16				9				14				—
Net loan charge-offs		(3,853		)		(168		)		(72		)		(23		)
(Credit) provision for loan losses		(20		)		(296		)		709				2,999
Balance at end of period		$	16,672			$	20,545			$	21,009			$	19,662

Net loan charge-offs totaled $3.9 million for the quarter ended June 30, 2021 and primarily consisted of previously reserved commercial real estate exposure.

		As of
		June 30, 2021				March 31, 2021				December 31, 2020				June 30, 2020
Asset quality:
Nonaccrual loans
Residential real estate		$	1,160			$	1,289			$	1,492			$	1,622
Commercial real estate		15,392				19,277				21,093				5,172
Commercial business		1,780				1,803				1,834				3,783
Construction		8,997				8,997				8,997				—
Total nonaccrual loans		27,329				31,366				33,416				10,577
Other real estate owned		—				—				—				180
Total nonperforming assets		$	27,329			$	31,366			$	33,416			$	10,757
Nonperforming loans as a % of total loans		1.57		%		1.87		%		2.06		%		0.66		%
Nonperforming assets as a % of total assets		1.20		%		1.40		%		1.48		%		0.53		%
Allowance for loan losses as a % of total loans		0.96		%		1.23		%		1.29		%		1.22		%
Allowance for loan losses as a % of nonperforming loans		61.00		%		65.50		%		62.87		%		185.89		%

Total nonaccrual loans declined $6.1 million to $27.3 million as of June 30, 2021 when compared to December 31, 2020 partially a result of the charge-offs described above. The Bank continues work-out activity on its nonaccrual loan population. Nonperforming assets as a percentage of total assets was 1.20% at June 30, 2021, down from 1.48% at December 31, 2020. The allowance for loan losses at June 30, 2021 was $16.7 million, representing 0.96% of total loans.

BANKWELL FINANCIAL GROUP, INC.
LOAN & DEPOSIT PORTFOLIO (unaudited)
(Dollars in thousands)
Period End Loan Composition	June 30, 2021				March 31, 2021				December 31, 2020				Current QTD % Change			YTD % Change
Residential Real Estate	$	100,260			$	109,752			$	113,557			(8.6	)%		(11.7	)%
Commercial Real Estate(1)	1,266,731				1,183,848				1,148,383				7.0			10.3
Construction	82,805				103,099				87,007				(19.7	)		(4.8	)
Total Real Estate Loans	1,449,796				1,396,699				1,348,947				3.8			7.5
Commercial Business(2)	279,814				267,698				276,601				4.5			1.2
Consumer	8,883				8,818				79				0.7			N/M(3)
Total Loans	$	1,738,493			$	1,673,215			$	1,625,627			3.9	%		6.9	%

(1) Includes owner occupied commercial real estate.

(2) Includes $7.9 million, $19.2 million, and $34.8 million of PPP loans at June 30, 2021, March 31, 2021 and December 31, 2020, respectively.

(3) Metric not meaningful.

Gross loans totaled $1.7 billion at June 30, 2021, an increase of $112.9 million compared to December 31, 2020. Excluding PPP loans, gross loans increased by $139.8 million, or 8.8%, at June 30, 2021 when compared to December 31, 2020.

Period End Deposit Composition		June 30, 2021				March 31, 2021				December 31, 2020				Current QTD % Change			YTD % Change
Noninterest bearing demand		$	328,473			$	280,947			$	270,235			16.9	%		21.6	%
NOW		136,558				118,489				101,737				15.2			34.2
Money Market		814,083				751,852				669,364				8.3			21.6
Savings		173,943				164,559				158,750				5.7			9.6
Time		486,245				543,961				627,230				(10.6	)		(22.5	)
Total Deposits		$	1,939,302			$	1,859,808			$	1,827,316			4.3	%		6.1	%

Total deposits were $1.9 billion at June 30, 2021, compared to $1.8 billion at December 31, 2020, an increase of $112.0 million, or 6.1%.

BANKWELL FINANCIAL GROUP, INC.
NONINTEREST INCOME (unaudited)
(Dollars in thousands)
		For the Quarter Ended
Noninterest income		June 30, 2021				March 31, 2021				June 30, 2020				June 21 vs. March 21 % Change			June 21 vs. June 20 % Change
Gains and fees from sales of loans		$	814			$	513			$	—			58.7	%		N/A
Bank owned life insurance		251				231				241				8.7			4.1
Service charges and fees		217				199				171				9.0			26.9
Other		158				1,013				165				(84.4	)		(4.2	)
Total noninterest income		$	1,440			$	1,956			$	577			(26.4	)%		149.6	%

		For the Six Months Ended
Noninterest income		June 30, 2021				June 30, 2020				% Change
Gains and fees from sales of loans		$	1,327			$	—			N/A
Bank owned life insurance		482				484				(0.4	)
Service charges and fees		416				388				7.2
Other		1,170				777				50.6
Total noninterest income		$	3,395			$	1,649			105.9	%

Noninterest income increased by $0.9 million to $1.4 million for the quarter ended June 30, 2021 compared to the quarter ended June 30, 2020. Noninterest income increased by $1.7 million to $3.4 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

The increase in noninterest income was driven by resumed SBA loan sales, totaling $0.8 million and $1.3 million for the quarter and six months ended June 30, 2021, respectively. In addition, the increase in noninterest income for the six months ended June 30, 2021 was impacted by a one-time federal payroll tax credit for COVID-19 of $0.9 million.

BANKWELL FINANCIAL GROUP, INC.
NONINTEREST EXPENSE (unaudited)
(Dollars in thousands)
		For the Quarter Ended
Noninterest expense		June 30, 2021				March 31, 2021					June 30, 2020				June 21 vs. March 21 % Change			June 21 vs. June 20 % Change
Salaries and employee benefits		$	3,960			$	4,769				$	5,227			(17.0	)%		(24.2	)%
Occupancy and equipment		3,250				2,406					2,235				35.1			45.4
Data processing		833				512					493				62.7			69.0
Professional services		547				587					434				(6.8	)		26.0
Director fees		327				317					287				3.2			13.9
FDIC insurance		300				403					283				(25.6	)		6.0
Marketing		140				(9		)			199				N/M(1)			(29.6	)
Other		695				653					564				6.4			23.2
Total noninterest expense		$	10,052			$	9,638				$	9,722			4.3	%		3.4	%
(1) Metric not meaningful.

	For the Six Months Ended
Noninterest expense	June 30, 2021				June 30, 2020				% Change
Salaries and employee benefits	$	8,729			$	10,607			(17.7	)%
Occupancy and equipment	5,656				4,144				36.5
Data processing	1,345				1,029				30.7
Professional services	1,134				1,145				(1.0	)
FDIC insurance	703				353				99.2
Director fees	644				582				10.7
Marketing	131				361				(63.7	)
Other	1,348				1,160				16.2
Total noninterest expense	$	19,690			$	19,381			1.6	%

Noninterest expense increased by $0.3 million to $10.1 million for the quarter ended June 30, 2021 compared to the quarter ended June 30, 2020. The increase in noninterest expense was primarily driven by an increase in occupancy and equipment expense and data processing expense, partially offset by a decrease in salaries and employee benefits expense.

Noninterest expense increased by $0.3 million to $19.7 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The increase in noninterest expense was primarily driven by an increase in occupancy and equipment expense, FDIC insurance expense, and data processing expense, partially offset by a decrease in salaries and employee benefits expense.

For the quarter ended June 30, 2021 noninterest expense included $0.8 million of non-recurring items relating to office consolidation expenses ($0.4 million), COVID-19 cleaning protocols ($0.3 million) and the implementation of new online banking software ($0.1 million). See below for more information on what specific areas of non-interest expense were impacted by these non-recurring items.

Occupancy and equipment expense totaled $3.3 million for the quarter ended June 30, 2021, an increase of $1.0 million when compared to the same period in 2020. Occupancy and equipment expense totaled $5.7 million for the six months ended June 30, 2021, an increase of $1.5 million when compared to the same period in 2020. The increase in occupancy and equipment expense was primarily due to additional one-time charges of $0.4 million associated with office consolidation activity (previously disclosed in the fourth quarter of 2020) and an increase in lease expense resulting from the commencement of the lease on the Company's new headquarters building. In addition, the increase in occupancy and equipment expense for the six months ended June 30, 2021 was due to additional cleaning costs associated with precautions taken to prevent the spread of COVID-19. The additional cleaning protocols have been curtailed as of June 30, 2021.

Data processing expense totaled $0.8 million for the quarter ended June 30, 2021, an increase of $0.3 million when compared to the same period in 2020. Data processing expense totaled $1.3 million for the six months ended June 30, 2021, an increase of $0.3 million when compared to the same period in 2020. The increase in data processing expense was primarily due to $0.4 million in costs associated with the conversion to a new online banking system implemented in the second quarter of 2021.

FDIC insurance expense totaled $0.7 million for the six months ended June 30, 2021, an increase of $0.4 million when compared to the same period in 2020. The increase in FDIC insurance expense was due to the absence of available FDIC insurance credits recognized in the first quarter of 2020 and elevated expense due to liquidity driven balance sheet growth in 2021.

Salaries and employee benefits expense totaled $4.0 million for the quarter ended June 30, 2021, a decrease of $1.3 million when compared to the same period in 2020. Salaries and employee benefits expense totaled $8.7 million for the six months ended June 30, 2021, a decrease of $1.9 million when compared to the same period in 2020. The decrease in salaries and employee benefits expense was primarily driven by a decrease in full time equivalent employees as a direct result of the Voluntary Early Retirement Incentive Plan offered to eligible employees and other employee actions taken during the fourth quarter of 2020. Full time equivalent employees totaled 125 at June 30, 2021 compared to 152 for the same period in 2020. Average full time equivalent employees totaled 124 for the six months ended June 30, 2021 compared to 154 for the same period in 2020. Salaries and employee benefits expense was also favorably impacted as higher loan originations enabled the bank to defer a greater amount of expenses. Finally, salaries and employee benefits expense also benefited by a one-time deferral of $0.3 million in costs associated with a new online banking system implemented in the second quarter of 2021, partially offsetting the increase in data processing expenses relating to the same project described above.

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, 2021				March 31, 2021				December 31, 2020				June 30, 2020
Total Equity	$	190,795			$	187,943			$	176,602			$	170,360
Less:
Goodwill	2,589				2,589				2,589				2,589
Other intangibles	58				67				76				178
Tangible Common Equity	$	188,148			$	185,287			$	173,937			$	167,593
Total Assets	$	2,269,825			$	2,244,467			$	2,253,747			$	2,043,635
Less:
Goodwill	2,589				2,589				2,589				2,589
Other intangibles	58				67				76				178
Tangible Assets	$	2,267,178			$	2,241,811			$	2,251,082			$	2,040,868
Tangible Common Equity to Tangible Assets	8.30		%		8.27		%		7.73		%		8.21		%

		As of
Computation of Tangible Book Value per Common Share		June 30, 2021				March 31, 2021				December 31, 2020				June 30, 2020
Total shareholders' equity		$	190,795			$	187,943			$	176,602			$	170,360
Less:
Preferred stock		—				—				—				—
Common shareholders' equity		$	190,795			$	187,943			$	176,602			$	170,360
Less:
Goodwill		2,589				2,589				2,589				2,589
Other intangibles		58				67				76				178
Tangible common shareholders' equity		$	188,148			$	185,287			$	173,937			$	167,593
Common shares		7,895,101				7,908,630				7,919,278				7,887,503
Less:
Shares of unvested restricted stock		184,548				186,485				163,369				165,708
Common shares less unvested restricted stock		7,710,553				7,722,145				7,755,909				7,721,795
Book value per share		$	24.74			$	24.34			$	22.77			$	22.06
Less:
Effects of intangible assets		$	0.34			$	0.34			$	0.34			$	0.36
Tangible Book Value per Common Share		$	24.40			$	23.99			$	22.43			$	21.70

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, 2021				March 31, 2021				December 31, 2020				June 30, 2020				June 30, 2021				June 30, 2020
Noninterest expense		$	10,052			$	9,638			$	13,703			$	9,722			$	19,690			$	19,381
Less:
Amortization of intangible assets		9				9				84				18				19				36
Other real estate owned expenses		—				—				—				6				—				6
Adjusted noninterest expense		$	10,043			$	9,629			$	13,619			$	9,698			$	19,671			$	19,339
Net interest income		$	16,579			$	14,655			$	14,304			$	13,637			$	31,234			$	26,923
Noninterest income		1,440				1,956				621				577				3,395				1,649
Less:
Net gain on sale of available for sale securities		—				—				—				—				—				—
Gain (loss) on sale of other real estate owned, net		—				—				—				—				—				—
Operating revenue		$	18,019			$	16,611			$	14,925			$	14,214			$	34,629			$	28,572
Efficiency ratio		55.7		%		58.0		%		91.2		%		68.2		%		56.8		%		67.7		%

		For the Quarter Ended																For the Six Months Ended
Computation of Return on Average Tangible Common Equity		June 30, 2021				March 31, 2021				December 31, 2020				June 30, 2020				June 30, 2021				June 30, 2020
Net Income Attributable to Common Shareholders		$	6,228			$	5,690			$	336			$	1,214			$	11,917			$	2,577
Total average shareholders' equity		$	191,224			$	182,058			$	178,439			$	173,289			$	186,664			$	177,204
Less:
Average Goodwill		2,589				2,589				2,589				2,589				2,589				2,589
Average Other intangibles		64				73				153				190				68				199
Average tangible common equity		$	188,571			$	179,396			$	175,697			$	170,510			$	184,007			$	174,416
Annualized Return on Average Tangible Common Equity		13.25		%		12.86		%		0.76		%		2.86		%		13.06		%		2.97		%

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, 2021											June 30, 2020
		Average Balance				Interest				Yield/ Rate (5)			Average Balance				Interest				Yield/ Rate (5)
Assets:
Cash and Fed funds sold		$	336,073			$	90			0.11	%		$	234,979			$	86			0.15	%
Securities(1)		103,297				761				2.95			95,421				738				3.09
Loans:
Commercial real estate		1,163,134				13,678				4.65			1,088,390				12,808				4.66
Residential real estate		105,975				958				3.62			134,295				1,251				3.73
Construction(2)		110,780				1,036				3.70			100,282				1,101				4.34
Commercial business		296,613				3,506				4.68			288,605				3,297				4.52
Consumer		8,851				88				3.98			111				2				8.71
Total loans		1,685,353				19,266				4.52			1,611,683				18,459				4.53
Federal Home Loan Bank stock		4,219				25				2.34			7,472				92				4.93
Total earning assets		2,128,942				$	20,142			3.74	%		1,949,555				$	19,375			3.93	%
Other assets		117,334											129,247
Total assets		$	2,246,276										$	2,078,802
Liabilities and shareholders' equity:
Interest bearing liabilities:
NOW		$	118,806			$	54			0.18	%		$	74,050			$	31			0.17	%
Money market		782,079				941				0.48			464,230				862				0.75
Savings		168,870				92				0.22			162,283				295				0.73
Time		538,915				1,657				1.23			765,103				3,622				1.90
Total interest bearing deposits		1,608,670				2,744				0.68			1,465,666				4,810				1.32
Borrowed Money		101,586				769				3.00			188,557				876				1.84
Total interest bearing liabilities		1,710,256				$	3,513			0.82	%		1,654,223				$	5,686			1.38	%
Noninterest bearing deposits		298,467											198,253
Other liabilities		46,329											53,037
Total liabilities		2,055,052											1,905,513
Shareholders' equity		191,224											173,289
Total liabilities and shareholders' equity		$	2,246,276										$	2,078,802
Net interest income(3)						$	16,629										$	13,689
Interest rate spread										2.92	%										2.55	%
Net interest margin(4)										3.12	%										2.81	%

(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 $50 thousand and $52 thousand for the quarters ended June 30, 2021 and 2020, 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, 2021											June 30, 2020
		Average Balance				Interest				Yield/ Rate (5)			Average Balance				Interest				Yield/ Rate (5)
Assets:
Cash and Fed funds sold		$	368,779			$	198			0.11	%		$	154,321			$	372			0.48	%
Securities(1)		102,252				1,549				3.03			96,932				1,513				3.12
Loans:
Commercial real estate		1,146,258				26,354				4.57			1,098,550				25,839				4.65
Residential real estate		109,003				1,996				3.66			139,059				2,607				3.75
Construction(2)		102,459				1,916				3.72			100,338				2,316				4.57
Commercial business		295,682				6,763				4.55			273,767				6,676				4.82
Consumer		6,956				137				3.96			133				6				8.51
Total loans		1,660,358				37,166				4.45			1,611,847				37,444				4.60
Federal Home Loan Bank stock		5,356				56				2.11			7,401				195				5.30
Total earning assets		2,136,745				$	38,969			3.64	%		1,870,501				$	39,524			4.18	%
Other assets		115,718											122,060
Total assets		$	2,252,463										$	1,992,561
Liabilities and shareholders' equity:
Interest bearing liabilities:
NOW		$	109,990			$	97			0.18	%		$	70,990			$	59			0.17	%
Money market		759,435				1,891				0.50			451,388				2,354				1.05
Savings		164,630				217				0.27			173,875				967				1.12
Time		574,876				3,653				1.28			702,853				7,139				2.04
Total interest bearing deposits		1,608,931				5,858				0.73			1,399,106				10,519				1.51
Borrowed Money		126,886				1,777				2.79			180,575				1,977				2.17
Total interest bearing liabilities		1,735,817				$	7,635			0.89	%		1,579,681				$	12,496			1.59	%
Noninterest bearing deposits		284,226											188,722
Other liabilities		45,756											46,954
Total liabilities		2,065,799											1,815,357
Shareholders' equity		186,664											177,204
Total liabilities and shareholders' equity		$	2,252,463										$	1,992,561
Net interest income(3)						$	31,334										$	27,028
Interest rate spread										2.75	%										2.59	%
Net interest margin(4)										2.93	%										2.89	%

(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 $100 thousand and $105 thousand for the six months ended June 30, 2021 and 2020, 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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FAQ

What is Bankwell Financial Group's net income for Q2 2021?

Bankwell Financial Group reported a net income of $6.2 million for Q2 2021.

What is the dividend amount declared by Bankwell Financial Group?

The board declared a cash dividend of $0.18 per share.

When is the dividend payable for Bankwell Financial Group?

The dividend is payable on August 26, 2021, to shareholders of record on August 16, 2021.

How much did Bankwell Financial Group's loans grow in Q2 2021?

Loans grew by 5% for the quarter and 9% year-to-date, excluding PPP loans.

What is the net interest margin for Bankwell Financial Group?

The net interest margin improved to 3.12% for Q2 2021.