Bankwell Financial Group Reports Record Net Income for the Fourth Quarter and Full Year 2021; Increases Dividend by 11%; Provides Guidance For 2022

NEW CANAAN, Conn., January 26, 2022--(BUSINESS WIRE)--Bankwell Financial Group, Inc. (NASDAQ: BWFG) reported record GAAP net income for the fourth quarter and year ended 2021. For the fourth quarter of 2021 net income totaled $7.8 million, or $0.99 per share, versus $0.3 million, or $0.04 per share, for the same period in 2020. For the year ended 2021 net income totaled $26.6 million, or $3.36 per share, versus $5.9 million, or $0.75 per share, for the same period in 2020.

The Company's Board of Directors declared a $0.20 per share cash dividend, payable February 24, 2022 to shareholders of record on February 14, 2022, representing an 11% increase when compared to the prior quarter’s dividend.

We recommend reading this earnings release in conjunction with the Fourth Quarter 2021 Investor Presentation, located at http://investor.mybankwell.com/Presentations and included as an exhibit to our January 26, 2022 Current Report on Form 8-K.

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

"We are proud to announce record performance for the fourth quarter and full year of 2021. In addition to generating a Return on Average Equity of 14% for the year, the Company made significant strides in all aspects of its business. While originating approximately $800 million in loans, we also continued to diversify our asset base. Core deposits grew by 31.7%, year over year, and non-interest bearing deposits increased by 47.6% over the same period.

"I offer my heartfelt gratitude and sincere congratulations to every member of our team. Their hard work and commitment, during a time of historic disruption, has made these impressive achievements possible.

"We enter the year ahead with confidence and momentum and look forward to another outstanding year. Loan and deposit pipelines remain strong. Inclusive of four expected rate hikes by the Federal Reserve, we expect net interest income to grow by 12-14% in 2022."

Fourth Quarter 2021 Highlights:

• Return on average assets was 1.32% and return on average equity was 15.44% for the quarter ended December 31, 2021.

• The net interest margin improved to 3.43% for the quarter ended December 31, 2021 and 3.17% for the year ended December 31, 2021.

• Total gross loans were $1.9 billion, growing $303.9 million excluding Paycheck Protection Program ("PPP") loans, or 19.1%, compared to December 31, 2020. On a quarterly basis, loans grew $71.7 million, or 3.9% compared to September 30, 2021.

• Gains from loan sales totaled $0.4 million and $2.7 million for the quarter and year ended December 31, 2021, respectively.

• Total deposits were $2.1 billion compared to $1.8 billion at December 31, 2020.

• Noninterest bearing deposits increased by $128.7 million, or 47.6% compared to December 31, 2020.

• The percentage of noninterest bearing deposits to total deposits increased to 18.8% compared to 14.8% at December 31, 2020.

• The cost of interest bearing deposits decreased approximately 35 basis points to 0.54% for the quarter ended December 31, 2021 when compared to the quarter ended December 31, 2020.

• Investment securities totaled $108.4 million and represent 4.4% of total assets.

• Tangible book value per share rose to $26.19 compared to $22.43 at December 31, 2020.

• Shares issued and outstanding were 7,803,166, reflecting repurchases of 59,338 shares of common stock at a weighted average price of $31.29 during the quarter ended December 31, 2021.

• The Company issued a 3.25% fixed-to-floating rate subordinated note due 2031 in the principal amount of $35.0 million. Part of the proceeds were used to repay $15.5 million of previously issued subordinated notes.

Earnings and Performance

Revenues (net interest income plus noninterest income) for the quarter ended December 31, 2021 were $19.8 million, versus $14.9 million for the quarter ended December 31, 2020. Revenues for the year ended December 31, 2021 were $73.5 million, versus $57.7 million for the year ended December 31, 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.

Net income for the quarter ended December 31, 2021 was $7.8 million, versus $0.3 million for the quarter ended December 31, 2020. Net income for the year ended December 31, 2021 was $26.6 million, versus $5.9 million for the year ended December 31, 2020. The increase in net income was primarily impacted by the aforementioned increases in revenues, a decrease in noninterest expense, 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 $1.00 and $0.99, respectively, for the quarter ended December 31, 2021 compared to basic and diluted earnings per share of $0.04 each for the quarter ended December 31, 2020. Basic and diluted earnings per share were $3.38 and $3.36, respectively, for the year ended December 31, 2021 compared to basic and diluted earnings per share of $0.75 each for the year ended December 31, 2020.

The net interest margin (fully taxable equivalent basis) for the quarters ended December 31, 2021 and December 31, 2020 was 3.43% and 2.66%, respectively. The net interest margin (fully taxable equivalent basis) for the years ended December 31, 2021 and December 31, 2020 was 3.17% and 2.77%, respectively. The increase in the net interest margin was due to lower interest expense from a decrease in rates on interest bearing deposits and a greater proportion of noninterest bearing deposits.

Financial Condition

Assets totaled $2.46 billion at December 31, 2021, compared to assets of $2.25 billion at December 31, 2020. The increase in assets was primarily due to loan growth, partially offset by a decrease in excess liquidity. Gross loans totaled $1.9 billion at December 31, 2021, an increase of $269.3 million compared to December 31, 2020. Excluding PPP loans, gross loans increased by $303.9 million at December 31, 2021 when compared to December 31, 2020. Deposits totaled $2.1 billion at December 31, 2021, compared to deposits of $1.8 billion at December 31, 2020.

Capital

Shareholders’ equity totaled $202.0 million as of December 31, 2021, an increase of $25.4 million compared to December 31, 2020, primarily a result of (i) net income of $26.6 million for the year ended December 31, 2021 and (ii) a $7.0 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 $5.0 million and common stock repurchases of $5.1 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)
	December 31, 2021				September 30, 2021				June 30, 2021				March 31, 2021				December 31, 2020
ASSETS
Cash and due from banks	$	291,598			$	169,417			$	297,851			$	351,194			$	405,340
Federal funds sold		53,084				8,097				4,036				10,811				4,258
Cash and cash equivalents		344,682				177,514				301,887				362,005				409,598
Investment securities
Marketable equity securities, at fair value		2,168				2,185				2,192				2,178				2,207
Available for sale investment securities, at fair value		90,198				87,565				90,983				83,218				88,605
Held to maturity investment securities, at amortized cost		16,043				16,107				16,166				16,225				16,078
Total investment securities		108,409				105,857				109,341				101,621				106,890
Loans receivable (net of allowance for loan losses of $16,902, $16,803, $16,672, $20,545, and $21,009 at December 31, 2021, September 30, 2021, June 30, 2021, March 31, 2021, and December 31, 2020, respectively)		1,875,167				1,805,217				1,719,274				1,650,127				1,601,672
Accrued interest receivable		7,512				6,911				6,661				7,306				6,579
Federal Home Loan Bank stock, at cost		2,814				3,632				3,844				6,446				7,860
Premises and equipment, net		25,588				35,118				33,916				33,386				21,762
Bank-owned life insurance		49,174				48,903				48,632				42,881				42,651
Goodwill		2,589				2,589				2,589				2,589				2,589
Other intangible assets		—				48				58				67				76
Deferred income taxes, net		7,621				7,718				8,208				8,908				11,300
Other assets		32,708				33,181				35,415				29,131				42,770
Total assets	$	2,456,264			$	2,226,688			$	2,269,825			$	2,244,467			$	2,253,747
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits
Noninterest bearing deposits	$	398,956			$	338,705			$	328,473			$	280,947			$	270,235
Interest bearing deposits		1,725,042				1,544,118				1,610,829				1,578,861				1,557,081
Total deposits		2,123,998				1,882,823				1,939,302				1,859,808				1,827,316
Advances from the Federal Home Loan Bank		50,000				80,000				75,000				125,000				175,000
Subordinated debentures		34,441				15,374				15,366				25,271				25,258
Accrued expenses and other liabilities		45,838				52,314				49,362				46,445				49,571
Total liabilities		2,254,277				2,030,511				2,079,030				2,056,524				2,077,145
Shareholders’ equity
Common stock, no par value		118,148				119,588				120,451				120,398				121,338
Retained earnings		92,400				85,992				80,543				75,418				70,839
Accumulated other comprehensive loss		(8,561	)			(9,403	)			(10,199	)			(7,873	)			(15,575	)
Total shareholders’ equity		201,987				196,177				190,795				187,943				176,602
Total liabilities and shareholders’ equity	$	2,456,264			$	2,226,688			$	2,269,825			$	2,244,467			$	2,253,747

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, 2021				September 30, 2021			June 30, 2021				March 31, 2021				December 31, 2020			December 31, 2021				December 31, 2020
Interest and dividend income
Interest and fees on loans	$	21,081			$	19,795		$	19,266			$	17,900			$	18,194		$	78,042			$	73,665
Interest and dividends on securities		722				731			736				769				835			2,958				3,237
Interest on cash and cash equivalents		90				88			90				108				117			376				585
Total interest and dividend income		21,893				20,614			20,092				18,777				19,146			81,376				77,487
Interest expense
Interest expense on deposits		2,198				2,387			2,744				3,114				3,557			10,443				18,180
Interest expense on borrowings		767				503			769				1,008				1,285			3,047				4,472
Total interest expense		2,965				2,890			3,513				4,122				4,842			13,490				22,652
Net interest income		18,928				17,724			16,579				14,655				14,304			67,886				54,835
Provision (credit) for loan losses		125				134			(20	)			(296	)			709			(57	)			7,605
Net interest income after provision (credit) for loan losses		18,803				17,590			16,599				14,951				13,595			67,943				47,230
Noninterest income
Gains and fees from sales of loans		441				924			814				513				16			2,692				43
Bank owned life insurance		270				271			251				231				241			1,023				967
Service charges and fees		257				199			217				199				210			872				788
Gain on sale of other real estate owned, net		—				—			—				—				—			—				19
Other		(143	)			43			158				1,013				154			1,070				1,067
Total noninterest income		825				1,437			1,440				1,956				621			5,657				2,884
Noninterest expense
Salaries and employee benefits		4,806				4,782			3,960				4,769				5,453			18,317				21,355
Occupancy and equipment		2,411				2,615			3,250				2,406				4,516			10,682				10,926
Professional services		628				498			547				587			591			2,260				2,110
Data processing		432				632			833				512				1,658			2,409				3,216
Director fees