Bankwell Financial Group(BWFG) - 2021 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents Bankwell Financial Group's unaudited consolidated financial statements for Q1 2021, including balance sheets, income statements, and cash flows Consolidated Balance Sheets Total assets slightly decreased to $2.24 billion, driven by reduced cash and FHLB advances, while net loans and shareholders' equity increased Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $2,244,467 | $2,253,747 | | Cash and cash equivalents | $362,005 | $409,598 | | Loans receivable, net | $1,650,127 | $1,601,672 | | Total investment securities | $101,621 | $106,890 | | Total Liabilities | $2,056,524 | $2,077,145 | | Total deposits | $1,859,808 | $1,827,316 | | Advances from the FHLB | $125,000 | $175,000 | | Total Shareholders' Equity | $187,943 | $176,602 | Consolidated Statements of Income Net income significantly increased to $5.7 million in Q1 2021, driven by higher net interest income and a credit for loan losses Q1 2021 vs. Q1 2020 Income Statement (in thousands, except per share data) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net Interest Income | $14,655 | $13,286 | | (Credit) Provision for Loan Losses | ($296) | $3,185 | | Total Noninterest Income | $1,956 | $1,072 | | Total Noninterest Expense | $9,638 | $9,659 | | Net Income | $5,690 | $1,363 | | Diluted EPS | $0.71 | $0.17 | Consolidated Statements of Comprehensive Income (Loss) Comprehensive income turned positive to $13.4 million in Q1 2021, primarily due to net income and unrealized gains on interest rate swaps - Total other comprehensive income was $7.7 million in Q1 2021, primarily due to $8.5 million in unrealized gains on interest rate swaps (net of tax) This contrasts with a total other comprehensive loss of $11.8 million in Q1 2020, which was driven by $13.5 million in unrealized losses on interest rate swaps[13] Consolidated Statements of Shareholders' Equity Shareholders' equity increased to $187.9 million, primarily from net income and other comprehensive income, partially offset by dividends and repurchases - Key changes in shareholders' equity for Q1 2021 included: +$5.7M Net Income, +$7.7M Other Comprehensive Income, -$1.1M Cash Dividends, and -$1.4M Stock Repurchases[15] Consolidated Statements of Cash Flows Cash and cash equivalents decreased by $47.6 million, driven by investing and financing outflows, partially offset by operating inflows Cash Flow Summary for Three Months Ended March 31 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $16,694 | ($16,842) | | Net cash used in investing activities | ($44,297) | ($13,329) | | Net cash (used in) provided by financing activities | ($19,990) | $162,116 | | Net (decrease) increase in cash and cash equivalents | ($47,593) | $131,945 | Notes to Consolidated Financial Statements This section details accounting policies, financial account specifics, and disclosures on loans, equity, derivatives, and regulatory matters - The Company's primary market is Connecticut, with a significant concentration of commercial real estate loans in Fairfield and New Haven Counties[23][28] - The Company qualifies as a smaller reporting company and has elected to defer the adoption of ASU No. 2016-13 (CECL model) until fiscal years beginning after December 15, 2022[34] - Subsequent to the quarter end, on April 28, 2021, the Board declared a $0.14 per share cash dividend and the company committed to retire $10.0 million of subordinated debt on May 15, 2021[178][179] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial performance, focusing on increased net income, financial condition, liquidity, capital, and interest rate risk management Results of Operations Net income significantly increased to $5.7 million in Q1 2021, driven by higher net interest income, a loan loss credit, and increased noninterest income - Net interest income increased by $1.4 million (10.3%) YoY, mainly due to a decline in interest expense on deposits[190][196] - Noninterest income increased by $0.9 million YoY, driven by $0.5 million in SBA loan sales and a $0.9 million one-time federal payroll tax credit[191][210] - Noninterest expense was stable YoY A $0.6 million decrease in salaries and employee benefits, due to a lower employee count, was offset by increases in occupancy and FDIC insurance expenses[211][212] Financial Condition Total assets were $2.2 billion, with growth in loans and deposits, and improved asset quality indicated by decreased nonperforming assets - Gross loans increased by $47.6 million in Q1 2021, driven by growth in commercial real estate and construction loans[217][219] Asset Quality Metrics | Metric | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Nonperforming assets | $31,366 | $33,416 | | Nonperforming assets to total assets | 1.40% | 1.48% | | Allowance for loan losses to total gross loans | 1.23% | 1.29% | Liquidity and Capital Resources The company maintains strong liquidity and capital, exceeding regulatory requirements with $362.0 million in cash and a Common Equity Tier 1 ratio of 11.02% - Shareholders' equity increased by $11.3 million in Q1 2021, driven by net income and a $7.7 million favorable change in accumulated other comprehensive income from interest rate swaps[247][248] Bank's Capital Ratios (March 31, 2021) | Ratio | Actual | Well-Capitalized Minimum | | :--- | :--- | :--- | | Common Equity Tier 1 Capital Ratio | 11.02% | 6.50% | | Tier 1 Capital Ratio | 11.02% | 8.00% | | Total Capital Ratio | 12.17% | 10.00% | | Tier 1 Leverage Ratio | 8.82% | 5.00% | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, managed through simulation analysis and considering inflation impacts - The company's primary market risk is interest rate risk, which is managed through asset/liability strategies and monitored using simulation analysis[261] Item 4. Controls and Procedures Management concluded disclosure controls were effective, with no material changes to internal controls over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[264] - No material changes were made to internal controls over financial reporting during the quarter ended March 31, 2021[265] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is involved in legal proceedings, but management anticipates no material losses from pending lawsuits - Management believes no material loss is expected from any pending legal proceedings[266] Item 1A. Risk Factors No material changes to previously disclosed risk factors were reported for the period - No material changes to risk factors were reported for the period[268] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 65,626 common shares at $21.66 per share, with 241,707 shares remaining under the repurchase program Issuer Purchases of Equity Securities (Q1 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2021 | 0 | N/A | | Feb 2021 | 65,626 | $21.66 | | Mar 2021 | 0 | N/A | | Total | 65,626 | $21.66 | - The share repurchase program was authorized on December 19, 2018, for up to 400,000 shares[270] Other Information This section confirms no defaults on senior securities, no mine safety disclosures, and lists exhibits filed with the report - The company reported "None" for Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)[271][272][273]