Bankwell Financial Group Reports Record First Quarter Net Income of $3.7 Million or $0.48 Per Share, Exceeds 10% Return on Equity and Declares Second Quarter Dividend

NEW CANAAN, Conn.--(BUSINESS WIRE)--Bankwell Financial Group, Inc. (NASDAQ: BWFG) reported GAAP net income of $3.7 million or $0.48 per share for the first quarter of 2017, versus $3.0 million or $0.40 per share for the same period in 2016.

The Company's Board of Directors declared a $0.07 per share cash dividend, payable May 26, 2017 to shareholders of record on May 16, 2017.

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

“Bankwell has begun the year with an outstanding first quarter performance. Our strategy of disciplined growth continues to succeed as we increased loan balances at an annualized rate of 18%. We also achieved an important goal by crossing the 10% ROE threshold. Further, we are honored to have been recognized as the only Connecticut bank to be included in the ‘Top 100 Best Performing Community Banks of 2016’ nationwide by S & P Global.”

“I congratulate my colleagues, whose teamwork and dedication to an outstanding customer experience, made these results possible. With a solid start to the year we look forward to continuing this momentum and to provide another year of strong earnings for our shareholders.”

First Quarter 2017 Highlights:

• First quarter total revenue (net interest income plus non-interest income) reached $14.2 million versus $12.1 million in the same period last year, an 18% increase.
• First quarter diluted earnings per share were $0.48, an increase of 20% compared to the first quarter of 2016.
• Return on average assets reached 0.93% for the quarter ended March 31, 2017 compared to 0.89% for the quarter ended March 31, 2016.
• Return on average tangible common equity reached 10.33% in the first quarter of 2017 compared to 9.23% for the quarter ended March 31, 2016.
• The tangible book value per common share at March 31, 2017 was $19.44, a 9% increase over March 31, 2016.
• Tax equivalent net interest margin was 3.35% for the first quarter of 2017.
• The efficiency ratio was 58.3% for the first quarter of 2017.
• Total gross loans exceeded $1.4 billion and grew at an annualized rate of 18% during the first quarter of 2017.
• Total assets approached $1.7 billion and grew at an annualized rate of 11% during the first quarter of 2017.
• Total deposits exceeded $1.3 billion and grew at an annualized rate of 12% during the first quarter of 2017.
• The allowance for loan losses was $18.5 million and represents 1.30% of total loans.
• Nonperforming assets represented 0.28% of total assets as of March 31, 2017.
• Investment securities totaled $104.2 million and represent 6% of total assets.

Earnings

Net income for the quarter ended March 31, 2017 was $3.7 million, an increase of 24% compared to the quarter ended March 31, 2016. Revenues (net interest income plus non-interest income) for the quarter ended March 31, 2017 were $14.2 million, an increase of 18% compared to the quarter ended March 31, 2016. Net interest income for the quarter ended March 31, 2017 was $12.9 million, an increase of 14% compared to the quarter ended March 31, 2016. Our strong net income, revenues and net interest income growth were fueled by continued earning asset growth.

Basic and diluted earnings per share for the quarter ended March 31, 2017 were $0.49 and $0.48, respectively, compared to $0.40 basic and diluted for the quarter ended March 31, 2016.

The Company’s efficiency ratios for the quarters ended March 31, 2017 and March 31, 2016 were 58.3% and 57.7%, respectively. The slight increase in the efficiency ratio was driven by an increase in non-interest expense.

Noninterest Income and Expense

Noninterest income increased $594 thousand or 88% to $1.3 million for the three months ended March 31, 2017 compared to the three months ended March 31, 2016. The increase in noninterest income was primarily driven by an increase in gains and fees from the sales of loans and a gain on sale of available for sale securities. Gain and fees from the sale of loans totaled $324 thousand for the quarter ended March 31, 2017 compared to $110 thousand for the same period in 2016, an increase of $214 thousand. The gain on sale of available for sale securities totaled $165 thousand for the quarter ended March 31, 2017 compared to no gain for the same period in 2016.

Noninterest expense increased $1.2 million or 16% for the three months ended March 31, 2017 compared to the three months ended March 31, 2016. The increase was primarily driven by an increase in other expense and an increase in occupancy and equipment expense. Other expenses totaled $836 thousand for the quarter ended March 31, 2017 compared to $513 thousand for the same period in 2016, an increase of $323 thousand. The increase in other expenses was primarily due to the reserve on unfunded commitments. Occupancy and equipment expense totaled $1.7 million for the quarter ended March 31, 2017 compared to $1.4 million for the same period in 2016, an increase of $284 thousand. The increase in occupancy and equipment expense was primarily driven by increases in IT related expenses, one time charges relating to back office consolidation activity and maintenance costs for our recently acquired HQ building.

Financial Condition

Assets approached $1.7 billion at March 31, 2017, an annualized increase of 11% compared to assets of $1.6 billion at December 31, 2016. This increase reflects strong organic loan growth. Total gross loans were $1.4 billion at March 31, 2017, an annualized increase of 18% compared to December 31, 2016, driven by growth in commercial real estate loans of $41.6 million. Deposits increased to $1.3 billion, an annualized increase of 12% over December 31, 2016.

Asset Quality

Asset quality remained exceptionally strong at March 31, 2017. Non-performing assets as a percentage of total assets was 0.28% at March 31, 2017, up slightly from 0.20% at December 31, 2016. The allowance for loan losses at March 31, 2017 was $18.5 million, representing 1.30% of total loans.

Capital

Shareholders’ equity totaled $149.7 million as of March 31, 2017, an increase of $3.8 million compared to December 31, 2016, primarily a result of net income for the quarter ended March 31, 2017 of $3.7 million. As of March 31, 2017, the tangible common equity ratio and tangible book value per share were 8.78% and $19.44, respectively.

About Bankwell Financial Group

Bankwell is a commercial bank that serves the banking and lending needs of residents and businesses throughout Fairfield and New Haven Counties, CT. 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 [phone].

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.

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 table. 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 non-interest expense control. The Company believes that tangible common equity and tangible book value per share is 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, except share data)
	March 31,		December 31,		March 31,
	2017		2016		2016
Assets
Cash and due from banks	$	63,675	$	96,026	$	69,512
Federal funds sold		10,280		329		3,194
Cash and cash equivalents		73,955		96,355		72,706
Held to maturity investment securities, at amortized cost		16,808		16,859		17,010
Available for sale investment securities, at fair value		87,434		87,751		91,528
Loans held for sale		-		254		-
Loans receivable (net of allowance for loan losses of $18,511, $17,982
and $14,810 at March 31, 2017, December 31, 2016
and March 31, 2016, respectively)		1,406,407		1,343,895		1,177,905
Foreclosed real estate		272		272		878
Accrued interest receivable		5,180		4,958		4,370
Federal Home Loan Bank stock, at cost		8,033		7,943		7,158
Premises and equipment, net		17,618		17,835		10,830
Bank-owned life insurance		38,740		33,448		23,929
Goodwill		2,589		2,589		2,589
Other intangible assets		469		501		612
Deferred income taxes, net		8,954		9,085		8,814
Other assets		5,783		7,174		1,881
Total assets	$	1,672,242	$	1,628,919	$	1,420,210
Liabilities & Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing	$	170,572	$	187,593	$	165,968
Interest-bearing		1,156,888		1,101,444		927,766
Total deposits		1,327,460		1,289,037		1,093,734
Advances from the Federal Home Loan Bank		160,000		160,000		160,000
Subordinated debentures		25,064		25,051		25,012
Accrued expenses and other liabilities		10,046		8,936		6,856
Total liabilities		1,522,570		1,483,024		1,285,602
Shareholders' equity
Common stock, no par value; 10,000,000 shares authorized, 7,638,706, 7,620,663
and 7,530,791 shares issued at March 31, 2017, December 31, 2016
and March 31, 2016, respectively		115,823		115,353		113,052
Retained earnings		32,820		29,652		21,578
Accumulated other comprehensive income (loss)		1,029		890		(22	)
Total shareholders' equity		149,672		145,895		134,608
Total liabilities and shareholders' equity	$	1,672,242	$	1,628,919	$	1,420,210

BANKWELL FINANCIAL GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars in thousands, except per share data)
	For the Quarter Ended
	March 31,		December 31,			March 31,
	2017		2016			2016
Interest and dividend income
Interest and fees on loans	$	15,513	$	15,910		$	13,283
Interest and dividends on securities		809		657			684
Interest on cash and cash equivalents		114		75			37
Total interest income		16,436		16,642			14,004
Interest expense
Interest expense on deposits		2,581		2,438			1,740
Interest on borrowings		907		916			866
Total interest expense		3,488		3,354			2,606
Net interest income		12,948		13,288			11,398
Provision for loan losses		543		748			646
Net interest income after provision for loan losses		12,405		12,540			10,752
Noninterest income
Gains and fees from sales of loans		324		79			110
Bank owned life insurance		291		171			174
Service charges and fees		240		242			245
Net gain (loss) on sale of available for sale securities		165		(207	)		-
Other		246		116			143
Total noninterest income		1,266		401			672
Noninterest expense
Salaries and employee benefits		3,929		4,419			3,811
Occupancy and equipment		1,692		1,576			1,408
Data processing		445		402			407
Professional services		412		397			366
FDIC insurance		383		146			169
Marketing		266		304			139
Director fees		233		135			155
Amortization of intangibles		31		32			40
Foreclosed real estate		7		8			72
Other		836		349			513
Total noninterest expense		8,234		7,768			7,080
Income before income tax expense		5,437		5,173			4,344
Income tax expense		1,735		1,850			1,353
Net income	$	3,702	$	3,323		$	2,991
Net income attributable to common shareholders	$	3,702	$	3,323		$	2,991
Earnings Per Common Share:
Basic	$	0.49	$	0.44		$	0.40
Diluted		0.48		0.43			0.40
Weighted Average Common Shares Outstanding:
Basic		7,525,268		7,418,820			7,380,217
Diluted		7,632,123		7,560,319			7,431,747
Dividends per common share	$	0.07	$	0.07		$	0.05

BANKWELL FINANCIAL GROUP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
(Dollars in thousands, except per share data)
	For the Quarter Ended
	March 31,			December 31,			March 31,
	2017			2016			2016
Performance ratios:
Return on average assets		0.93	%		0.84	%		0.89	%
Return on average stockholders' equity		10.12	%		9.23	%		9.01	%
Return on average tangible common equity		10.33	%		9.44	%		9.23	%
Net interest margin		3.35	%		3.55	%		3.54	%
Efficiency ratio (1)		58.3	%		55.6	%		57.7	%
Net loan charge-offs as a % of average loans		0.00	%		0.00	%		0.00	%
	As of
	March 31, 2017			December 31, 2016			March 31, 2016
Capital ratios:
Total Common Equity Tier 1 Capital to Risk-Weighted Assets (2)		11.16	%		11.59	%		12.24	%
Total Capital to Risk-Weighted Assets (2)		12.41	%		12.85	%		13.48	%
Tier I Capital to Risk-Weighted Assets (2)		11.16	%		11.59	%		12.24	%
Tier I Capital to Average Assets (2)		10.06	%		10.10	%		10.85	%
Tangible common equity to tangible assets		8.78	%		8.78	%		9.27	%
Tangible book value per common share (3)	$	19.44		$	18.98		$	17.78
Asset quality:
Nonaccrual loans	$	4,434		$	2,937		$	3,398
Other real estate owned		272			272			878
Total non-performing assets	$	4,706		$	3,209		$	4,276
Loans past due 90 days and still accruing	$	-		$	-		$	89
Nonperforming loans as a % of total loans		0.31	%		0.22	%		0.28	%
Nonperforming assets as a % of total assets		0.28	%		0.20	%		0.30	%
Allowance for loan losses as a % of total loans		1.30	%		1.32	%		1.24	%
Allowance for loan losses as a % of nonperforming loans		417.48	%		612.26	%		435.84	%

(1) Efficiency ratio is defined as noninterest expense, less merger and acquisition related expenses, other real estate owned expenses and amortization of intangible assets, divided by our operating revenue, which is equal to net interest income plus non-interest 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) Represents Bank ratios. Current period capital ratios are preliminary subject to finalization of the FDIC Call Report.

(3) Excludes unvested restricted stock awards of 98,176, 96,594 and 138,423 as of March 31, 2017, December 31, 2016 and March 31, 2016, respectively.

BANKWELL FINANCIAL GROUP, INC.
LOAN & DEPOSIT PORTFOLIO (unaudited)
(Dollars in thousands)
	March 31,		December 31,		March 31,		QTD		YTD
Period End Loan Composition	2017		2016		2016		% Change		% Change
Residential Real Estate	$	181,034	$	181,310	$	184,134	-0.2	%	-1.7	%
Commercial Real Estate		886,933		845,322		751,571	4.9	%	18.0	%
Construction		107,766		107,441		82,528	0.3	%	30.6	%
Home equity		14,108		14,419		15,789	-2.2	%	-10.6	%
Total Real Estate Loans		1,189,841		1,148,492		1,034,022	3.6	%	15.1	%
Commercial Business		237,827		215,914		160,903	10.1	%	47.8	%
Consumer		1,063		1,533		1,552	-30.7	%	-31.5	%
Total Loans	$	1,428,731	$	1,365,939	$	1,196,477	4.6	%	19.4	%
	March 31,		December 31,		March 31,		QTD		YTD
Period End Deposit Composition	2017		2016		2016		% Change		% Change
Noninterest-bearing demand	$	170,572	$	187,593	$	165,968	-9.1	%	2.8	%
NOW		57,077		53,851		62,639	6.0	%	-8.9	%
Money Market		367,241		349,131		316,440	5.2	%	16.1	%
Savings		117,395		96,601		73,987	21.5	%	58.7	%
Time		615,175		601,861		474,700	2.2	%	29.6	%
Total Deposits	$	1,327,460	$	1,289,037	$	1,093,734	3.0	%	21.4	%

BANKWELL FINANCIAL GROUP, INC.
NONINTEREST INCOME & EXPENSE - QTD (unaudited)
(Dollars in thousands)
	For the Quarter Ended
Noninterest income	March 31,		December 31,			March 31,		Mar 17 vs. Dec 16		Mar 17 vs. Mar 16
	2017		2016			2016		% Change		% Change
Gains and fees from sales of loans	$	324	$	79		$	110	310.1	%	194.5	%
Bank owned life insurance		291		171			174	70.2	%	67.2	%
Service charges and fees		240		242			245	-0.8	%	-2.0	%
Net gain (loss) on sale of available for sale securities		165		(207	)		-	-179.7	%	100.0	%
Other		246		116			143	112.1	%	72.0	%
Total noninterest income	$	1,266	$	401		$	672	215.7	%	88.4	%
	For the Quarter Ended
Noninterest expense	March 31,		December 31,			March 31,		Mar 17 vs. Dec 16		Mar 17 vs. Mar 16
	2017		2016			2016		% Change		% Change
Salaries and employee benefits	$	3,929	$	4,419		$	3,811	-11.1	%	3.1	%
Occupancy and equipment		1,692		1,576			1,408	7.4	%	20.2	%
Data processing		445		402			407	10.7	%	9.3	%
Professional services		412		397			366	3.8	%	12.6	%
FDIC insurance		383		146			169	162.3	%	126.6	%
Marketing		266		304			139	-12.5	%	91.4	%
Director fees		233		135			155	72.6	%	50.3	%
Amortization of intangibles		31		32			40	-3.1	%	-22.5	%
Foreclosed real estate		7		8			72	-12.5	%	-90.3	%
Other		836		349			513	139.5	%	63.0	%
Total noninterest expense	$	8,234	$	7,768		$	7,080	6.0	%	16.3	%

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	3/31/2017			12/31/2016			03/31/2016
Total Equity	$	149,672		$	145,895		$	134,608
Less:
Goodwill		2,589			2,589			2,589
Other intangibles		469			501			612
Tangible Common Equity	$	146,614		$	142,805		$	131,407
Total Assets	$	1,672,242		$	1,628,919		$	1,420,210
Less:
Goodwill		2,589			2,589			2,589
Other intangibles		469			501			612
Tangible Assets	$	1,669,184		$	1,625,829		$	1,417,009
Tangible Common Equity to Tangible Assets		8.78	%		8.78	%		9.27	%
	As of
Computation of Tangible Book Value per Common Share	3/31/2017			12/31/2016			03/31/2016
Total shareholders' equity	$	149,672		$	145,895		$	134,608
Less:
Preferred stock		-			-			-
Common shareholders' equity		149,672			145,895			134,608
Less:
Goodwill		2,589			2,589			2,589
Other intangibles		469			501			612
Tangible common shareholders' equity		146,614			142,805			131,407
Common shares issued		7,638,706			7,620,663			7,530,791
Less:
Shares of unvested restricted stock		98,176			96,594			138,423
Common shares outstanding		7,540,530			7,524,069			7,392,368
Book value per share	$	19.85		$	19.39		$	18.21
Less:
Effects of intangible assets	$	0.41		$	0.41		$	0.43
Tangible Book Value per Common Share	$	19.44		$	18.98		$	17.78
BANKWELL FINANCIAL GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (unaudited) - Continued
(Dollars in thousands, except share data)
	For the Quarter Ended
Computation of Efficiency Ratio	3/31/2017			12/31/2016			03/31/2016
Noninterest expense	$	8,234		$	7,768		$	7,080
Less:
Amortization of intangible assets		31			32			40
Foreclosed real estate expenses		7			8			72
Adjusted noninterest expense	$	8,196		$	7,728		$	6,968
Net interest income	$	12,948		$	13,288		$	11,398
Noninterest income		1,266			401			672
Less:
Gains (losses) on sales of securities		165			(207	)		-
Adjusted operating revenue	$	14,049		$	13,896		$	12,070
Efficiency ratio		58.3	%		55.6	%		57.7	%
	For the Quarter Ended
Computation of Return on Average Tangible Common Equity	3/31/2017			12/31/2016			03/31/2016
Net Income Attributable to Common Shareholders	$	3,702		$	3,323		$	2,991
Total average shareholders' equity		148,349			143,152			133,474
Less:
Goodwill		2,589			2,589			2,589
Other intangibles		469			501			612
Average tangible common equity		145,291			140,062			130,273
Annualized Return on Average Tangible Common Equity		10.33	%		9.44	%		9.23	%

BANKWELL FINANCIAL GROUP, INC.
NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS
(Dollars in thousands)
	For the Quarter Ended
	March 31, 2017						March 31, 2016
	Average				Yield/		Average				Yield/
	Balance		Interest		Rate		Balance		Interest		Rate
Assets:
Cash and Fed funds sold	$	68,416	$	114	0.68	%	$	32,764	$	37	0.45	%
Securities (1)		101,857		861	3.38	%		101,987		763	2.99	%
Loans:
Commercial real estate		854,733		9,684	4.53	%		714,059		8,350	4.63	%
Residential real estate		179,783		1,590	3.54	%		177,353		1,596	3.60	%
Construction (2)		105,320		1,249	4.74	%		86,482		969	4.43	%
Commercial business		228,422		2,826	4.95	%		165,987		2,190	5.22	%
Home equity		13,717		150	4.43	%		15,603		157	4.03	%
Consumer		1,690		14	3.47	%		1,738		21	4.87	%
Total loans		1,383,665		15,513	4.48	%		1,161,222		13,283	4.53	%
Federal Home Loan Bank stock		8,020		79	3.98	%		6,560		56	3.46	%
Total earning assets		1,561,958	$	16,567	4.24	%		1,302,533	$	14,139	4.29	%
Other assets		59,681						54,733
Total assets	$	1,621,639					$	1,357,266
Liabilities and shareholders' equity:
Interest-bearing liabilities:
NOW	$	54,593		27	0.20	%	$	56,617		38	0.27	%
Money market		343,992		566	0.67	%		306,105		398	0.52	%
Savings		111,012		185	0.68	%		82,061		86	0.42	%
Time		595,452		1,803	1.23	%		454,312		1,218	1.08	%
Total interest-bearing deposits		1,105,049		2,581	0.95	%		899,095		1,740	0.78	%
Borrowed Money		182,053		907	1.99	%		145,444		866	2.35	%
Total interest-bearing liabilities		1,287,102	$	3,488	1.10	%		1,044,539	$	2,606	1.00	%
Noninterest-bearing deposits		174,795						172,574
Other liabilities		11,393						6,679
Total liabilities		1,473,290						1,223,792
Shareholders' equity		148,349						133,474
Total liabilities and shareholders' equity	$	1,621,639					$	1,357,266
Net interest income (3)			$	13,079					$	11,533
Interest rate spread					3.14	%					3.29	%
Net interest margin (4)					3.35	%					3.54	%

(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 $131 thousand and $135 thousand, respectively for the three months ended March 31, 2017 and 2016.

(4) Net interest income as a percentage of earning assets.