8-K
Bankwell Financial Group, Inc. (BWFG)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 28, 2021
Bankwell Financial Group, Inc.
(Exact name of registrant as specified in its charter)
| Connecticut | 001-36448 | 20-8251355 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
258 Elm Street
New Canaan, Connecticut 06840
(203) 652-0166
(Address of Principal Executive Officers and Telephone Number)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which<br>Registered |
|---|---|---|
| Common Stock, no par value per<br><br>share | BWFG | NASDAQ Global Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
| Emerging growth company | ☐ | |||
|---|---|---|---|---|
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | Item 2.02 | Results of Operations and Financial Condition | |
| --- | --- | |||
| On July 28, 2021, Bankwell Financial Group, Inc., the holding company for Bankwell Bank, issued a press release describing its results of operations for the period ended June 30, 2021.<br> <br>A copy of the press release is included as Exhibit 99.1 to this current report on Form 8-K and is incorporated herein by reference. | ||||
| The information furnished under this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that section. The information shall not be deemed incorporated by reference into any other filing with the Securities and Exchange Commission made by the Company, regardless of any general incorporation language in such filing. | ||||
| Item 7.01 | Regulation FD Disclosure | |||
| On July 28, 2021, Bankwell Financial Group, Inc., the holding company for Bankwell Bank, issued slide presentation material, which includes among other things, a review of financial results and trends through the period ended June 30, 2021. A copy of the material will also be available on the Company’s website, http://investor.mybankwell.com/CorporateProfile.<br> <br>A copy of the Presentation Material is included as Exhibit 99.2 to this current report on Form 8-K and is incorporated herein by reference. | ||||
| The information furnished under this Item 7.01, including Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that section. The information shall not be deemed incorporated by reference into any other filing with the Securities and Exchange Commission made by the Company, regardless of any general incorporation language in such filing. | ||||
| Item 8.01 | Other Events | |||
| On July 28, 2021, Bankwell Financial Group, Inc., parent company of Bankwell Bank, announced its Board of Directors has voted to pay a quarterly dividend in the amount of $0.18 per share on August 26, 2021 to all shareholders of record as of August 16, 2021. | ||||
| Item 9.01 | Financial Statements and Exhibits | |||
| (a) | Not applicable. | |||
| (b) | Not applicable. | |||
| (c) | Not applicable. | |||
| (d) | Exhibits. | |||
| Exhibit Number | Description | |||
| --- | --- | |||
| 99.1 | Press Release Dated July 28, 2021 | |||
| 99.2 | Presentation Materials | |||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | SIGNATURES | ||
| --- | --- | |||
| Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. | ||||
| BANKWELL FINANCIAL GROUP, INC. | ||||
| Registrant | ||||
| July 28, 2021 | By: /s/ Penko K. Ivanov | |||
| Penko K. Ivanov | ||||
| Executive Vice President | ||||
| and Chief Financial Officer |
Document
BANKWELL FINANCIAL GROUP REPORTS RECORD OPERATING RESULTS FOR THE SECOND QUARTER; INCREASES DIVIDEND BY 29%
New Canaan, CT – July 28, 2021 – 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 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 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,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | June 30,<br>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,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | June 30,<br>2020 | June 30,<br>2021 | June 30,<br>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,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | June 30,<br>2020 | June 30,<br>2021 | June 30,<br>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, <br>2021 | March 31,<br>2021 | December 31,<br>2020 | June 30, <br>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,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | June 30, <br>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,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | June 30, <br>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 | March 31,<br>2021 | December 31,<br>2020 | Current QTD <br>% Change | YTD <br>% Change | |||||
|---|---|---|---|---|---|---|---|---|---|
| Residential Real Estate | 100,260 | $ | 109,752 | $ | 113,557 | (8.6) | % | (11.7) | % |
| Commercial Real Estate(1) | 1,183,848 | 1,148,383 | 7.0 | 10.3 | |||||
| Construction | 103,099 | 87,007 | (19.7) | (4.8) | |||||
| Total Real Estate Loans | 1,396,699 | 1,348,947 | 3.8 | 7.5 | |||||
| Commercial Business(2) | 267,698 | 276,601 | 4.5 | 1.2 | |||||
| Consumer | 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. |
All values are in US Dollars.
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,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | Current QTD <br>% Change | YTD <br>% 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,<br>2021 | March 31,<br>2021 | June 30,<br>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,<br>2021 | March 31,<br>2021 | June 30,<br>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,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | June 30,<br>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,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | June 30,<br>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,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | June 30,<br>2020 | June 30,<br>2021 | June 30,<br>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,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | June 30,<br>2020 | June 30,<br>2021 | June 30,<br>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<br>Balance | Interest | Yield/<br><br>Rate (5) | Average<br>Balance | Interest | Yield/<br><br>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<br>Balance | Interest | Yield/<br><br>Rate (5) | Average<br>Balance | Interest | Yield/<br><br>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.
15
a2q2021bwfginvestorprese
Bankwell Financial Group 2Q21 Investor Presentation
2 Safe Harbor This presentation may contain certain forward-looking statements about Bankwell Financial Group, Inc. (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,” “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.
3 Table of Contents • 2Q21 Performance • Trends • ALLL & Non-Performing Loans • Loan Portfolio • Capital • Bankwell History & Overview
2Q21 Performance
5 2Q21 Summary • $6.23 million reported net income, or $0.79 earnings per share • Pre-tax, pre-provision net revenue (“PPNR”)1 of $7.97 million; 77% year-over-year increase • Operating Expenses of $10.1 million include $0.8 million of non-recurring items ̶ 2Q21 Efficiency Ratio at 55.7%, year-to-date at 56.8% • Quarterly loan growth of $77 million, or 5%, excluding PPP loan balances ̶ Year-to-date total loan growth of ~$113 million, or 7% • Return on Average Assets and Return on Average Equity were 1.11% and 13.06%, respectively for the quarter, and 1.07% and 12.87% year-to-date • 9 basis point linked quarter deposit cost reduction to 58 basis points • 2Q21 Net Interest Margin (“NIM”) of 3.12%, year-to-date NIM of 2.93% ̶ negatively impacted by ~27 basis points due to excess liquidity (year-to-date) • Repaid $10 million of 5.75% subordinated debt during the quarter • Repurchased 13,529 shares at an average price of $27.44 per share • The Company raised its 3Q21 dividend by 29% from the prior quarter, to $0.18 per share 1 Pre-tax, pre-provision net revenue per share is a non-GAAP metric & excludes provision for loan losses and income tax expense
6 2Q21 Results 1 Ratios presented represent Bank ratios; presented ratios are preliminary, subject to finalization of the FDIC Call Report 2 Bankwell meets Adequate + buffer standard, which exceeds Well Capitalized thresholds Profitability Balance Sheet Capital • $1.7 billion of gross loans • $1.9 billion of deposits • 0.96% ALLL • Dividend of $0.14 per share paid • $24.40 Tangible Book Value • Well Capitalized1,2 Tier 1 Leverage 9.19% Tier1/CET1 / RWA 10.95% Total Capital / RWA 11.84% 2Q21 YTD 2021 • Net Income $6.2 million $11.9 million • PPNR $8.0 million $14.9 million • Return on Average Assets 1.11% 1.07% • Return on Average Equity 13.06% 12.87%
7 2Q21 Consolidated Financial Statements Linked Quarter Income Statement 2Q21 1Q21 Var1 Total Interest Income $20.1 $18.8 $1.3 Total Interest Expense $3.5 $4.1 $0.6 Net Interest Income $16.6 $14.7 $1.9 Non-Interest Income2 $1.4 $2.0 $(0.5) Non-Interest Expense $10.1 $9.6 $(0.4) Pre-Tax, Pre-Provision Net Revenue $8.0 $7.0 $1.0 Credit/Provision for Loan Losses $(0.0) $(0.3) $(0.3) Pre-Tax Income $8.0 $7.3 $0.7 Income Tax Expense $1.8 $1.6 $(0.2) Reported Net Income $6.2 $5.7 $0.5 EPS $0.79 $0.71 $0.08 Pre-Tax, Pre-Provision Net Revenue per share3 $1.03 $0.89 $0.14 1 Variances are rounded based on actual whole dollar amounts 2 1Q21 includes the one-time benefit for the federal payroll tax credit for COVID-19-impacted small businesses 3 Pre-tax, pre-provision net revenue per share is a non-GAAP metric & excludes provision for loan losses and income tax expense Dollars in millions, except per share data Balance Sheet 2Q21 1Q21 Var1 Cash & Cash Equivalents $302 $362 $(60) Investment Securities $109 $102 $8 Loans Receivable, net $1,719 $1,650 $69 All Other Assets $139 $131 $9 Total Assets $2,270 $2,244 $25 Total Deposits $1,939 $1,860 $79 Total Borrowings $90 $150 $(60) Other Liabilities $49 $46 $3 Total Liabilities $2,079 $2,057 $23 Equity $191 $188 $3 Total Liabilities & Equity $2,270 $2,244 $25
8 Income Statement 2Q21 YTD 2Q20 YTD Var1 Total Interest Income $38.9 $39.4 $(0.5) Total Interest Expense $7.6 $12.5 $4.9 Net Interest Income $31.2 $26.9 $4.3 Non-Interest Income2 $3.4 $1.7 $1.7 Non-Interest Expense $19.7 $19.4 $(0.3) Pre-Tax, Pre-Provision Net Revenue $14.9 $9.2 $5.7 Credit/Provision for Loan Losses $(0.3) $6.2 $6.5 Pre-Tax Income $15.3 $3.0 $12.2 Income Tax Expense $3.3 $0.4 $(2.9) Reported Net Income $11.9 $2.6 $9.3 EPS $1.50 $0.33 $1.17 Pre-Tax, Pre-Provision Net Revenue per share3 $1.92 $1.19 $0.73 Dollars in millions, except per share data 2Q21 YTD Consolidated Income Statement Prior Year 1 Variances are rounded based on actual whole dollar amounts 2 2021 includes the one-time benefit for the federal payroll tax credit for COVID-19-impacted small businesses 3 Pre-tax, pre-provision net revenue per share is a non-GAAP metric & excludes provision for loan losses and income tax expense
Trends
10 Performance Trends $18.98 $20.59 $22.06 $23.15 $22.43 $24.40 2016 2017 2018 2019 2020 2Q21 Tangible Book Value $1.62 $1.78 $2.21 $2.31 $0.75 $1.50 2016 2017 2018 2019 2020 2Q21 YTD Diluted EPS 0.85% 0.80% 0.94% 0.97% 0.28% 1.07% 2016 2017 2018 2019 2020 2Q21 YTD Return on Average Assets 8.94% 8.93% 10.19% 10.20% 3.35% 12.87% 2016 2017 2018 2019 2020 2Q21 YTD Return on Average Equity
11 Net Interest Margin 3.54% 3.30% 3.18% 3.03% 2.77% 2.93% 2016 2017 2018 2019 2020 2Q21 YTD Net Interest Margin • 2Q21 NIM of 3.12% • Favorable NIM outlook ̶ ~$165 million retail CDs maturing in 2H’21, at 1.59% average rate ̶ Liquidity will normalize by year-end 2021 0.91% 1.08% 1.42% 1.75% 1.20% 0.76% 0.73% 0.93% 1.30% 1.66% 1.07% 0.62% 2016 2017 2018 2019 2020 2Q21 YTD Cost of Funds / Deposits Cost of Funds Cost of Deposits 4.64% 4.51% 4.67% 4.85% 4.48% 4.45% 4.34% 4.23% 4.45% 4.61% 3.85% 3.64% 2016 2017 2018 2019 2020 2Q21 YTD Loan & Earning Asset Yields Loan Yield Earning Asset Yield Yields include origination fee amortization
12 Loan Trends $995 $1,107 $1,168 $1,202 $1,182 $1,215 $371 $436 $436 $402 $444 $524 $1,366 $1,543 $1,605 $1,604 $1,626 $1,738 2016 2017 2018 2019 2020 2Q21 Loan Balances All Other C&I + CRE Owner Occupied Residential 5.42% C&I 16.10% CRE Owner Occupied 13.89% CRE Investor 58.98% Commercial Const. 4.76% Consumer Loans / Other 0.86% 2Q21 Loan Mix 2Q21 Portfolio Yield by Vintage1 Pre 2018 48% 2018 9% 2019 14% 2020 13% 2021 16% 4.21% 4.61% 3.98% 4.01% 4.56% • Strong organic loan growth • Growing C&I and CRE Owner Occupied, both in absolute dollars and percentage of the portfolio 1 Weighted average yield based on active loans as of 6-30-21; excludes PPP loans
13 Deposit Trends 18.5% 16.2% 12.4% 14.1% 15.9% 1 1 Core Deposits include Commercial and Consumer checking, savings and money market accounts 2 Percentages exclude COVID-19-related liquidity of $53 million (brokered deposits) 3 Wholesale Funding ratio defined as brokered deposits and FHLB borrowings to total assets Consumer 38.8% Commercial 61.2% 2Q21 Core Deposit Mix Commercial includes $104 million municipalities deposits 19.2% 17.7% 18.5% 16.2% 12.4% 15.9% 29.0% 30.3% 28.1% 28.6% 20.7% 14.6% 51.7% 52.0% 53.4% 55.3% 66.9% 69.6% $1,289 $1,398 $1,502 $1,492 $1,827 $1,939 2016 2017 2018 2019 2020 2Q21 Deposit Balances Brokered Deposits Retail CDs Core Deposits 2 $213 $231 $471 $525 $512 $156 $178 $255 $263 $309 $369 $409 $725 $788 $821 4Q18 4Q19 4Q20 1Q21 2Q21 Commercial Deposits Recent Trends Interest Bearing Non-Interest Bearing • $100 million FHLB borrowings replaced by lower cost brokered deposits; no impact to Wholesale Funding ratio3 • Noninterest-bearing deposits increased $114 million since 2Q20, equal to 17% of total deposits versus 13% at 2Q20 • ~90% loan to deposit ratio; expected to remain < 100% 24.9% 24.9% 23.4% 20.6% 19.8% 16.8% Wholesale Funding ratio3
14 Non Interest Expense • 2Q Non Interest Expense of $10.1 million include several non-recurring items, including: ̶ Additional $0.4 million related to office consolidation1 ̶ $0.3 million COVID-19 cleaning costs; additional cleaning stopped as of June 30th ̶ $0.1 million net expense related to online banking software conversion • FDIC expenses will moderate as balance sheet normalizes 56.8% 55.7% YTD QTD 2Q Efficiency Ratio 1 Please refer to BWFG’s 4Q’20 Earnings Release for information regarding office consolidation charges 2.03% 1.88% 1.93% 1.90% 2.03% 1.76% 2016 2017 2018 2019 2020 2Q21 YTD Non Interest Expense / Avg Assets
ALLL & Non-Performing Loans
16 Non Performing Loans 0.88% 0.66% 2.06% 1.87% 1.57% 2018 2019 2020 1Q21 2Q21 Non Performing Loans / Gross Loans NPLs $14,082 $10,588 $33,416 $31,366 $27,329 1.25% 0.18% 0.14% 2Q21 Detail 1.57% SBA-guaranteed portion of NPLs Dollars in thousands All other NPLs • No remaining COVID-19 deferral loans at the end of 2Q21 • $3.9 million charged off in June 2Q21 ($3.2 million was specifically reserved) • Permanent loan modifications executed / in progress NPL population adequately collateralized or individually reserved in ALLL COVID-19 related NPLs
17 0.98% 0.80% 0.31% ($3.3) million $1.2 million ($2.3 million) 0.16% 2020 Improving Economic Factors Asset Growth / Mix Specifics 2Q21 General Specific 2021 ALLL Coverage Allowance for Loan Loss (“ALLL”) Walk 1.29% 0.96% • Bankwell not subject to CECL; ALLL calculated in accordance with the incurred loss model • Lower Reserve ratios reflect charge offs for previously reserved loans as well as improving macro-economic conditions • PPP loans guaranteed by the US government carry no reserve $21.0 Million $16.7 Million
Loan Portfolio
19 CT 55%NY 18% NJ 6% All Other 21% Industrial Warehouse 8.76% Mixed Use 5.53% MultiFamily 11.74% Office 25.37%Other 12.88% 1-4 Family Investment 1.48% Retail 31.60% Special Use 2.64% CRE Loan Portfolio 1 • Property Type mix continues to show well diversified exposure • ~ 50% of all CRE loan balances have recourse ̶ Non recourse loans require lower LTV and higher DSCR Total CRE Portfolio = $1,267 million Type Count $MM % LTV3 Retail2 84 $246 61% 65.7% Grocery 12 $91 23% 63.9% Restaurant 29 $26 6% 62.1% Pharmacy 7 $22 6% 65.8% Gas / Auto Services 15 $15 4% 64.7% Total Retail 147 $400 100% 65.0% Retail Segment Detail • No significant exposure to any one retailer • No exposure to bankrupt retailers 1 Includes Owner Occupied CRE, does not include Construction 2 Comprised primarily of neighborhood and convenience centers, typically characterized by: size up to 125,000 sq. ft.; convenience and service oriented 3 LTVs based on original LTV values, at origination Office Segment Detail • ~80% Office loans located in Bankwell’s primary lending area • Out of primary market loans are generally either GSA-leased, credit tenants, owner-occupied or medical office Type Count $MM % LTV3 Office (primarily suburban) 83 $235 71% 65.0% Medical 38 $84 28% 68.9% Condo 7 $2 1% 67.0% Total Office 128 $321 100% 66.0%
20 C&I Loan Portfolio Loans by Industry Type Total C&I Portfolio = $280 million Finance 26% Insurance (Primarily Brokers) 30% Wholesale 7% Professional, Sci & Tech Services 6% Arts, Entertainment & Recreation 6% Health Care & Social Assistance 5% Retail Trade 5% Information 3% All Other 12% • Minimal exposure to the following industries (each industry < $5 million) : ̶ Accommodation & Food Services ̶ Transportation / Airlines • No exposure to the Energy or Hotel industries • Limited leverage loan exposure of $38 million as of 6/30/21, 2% of total loans • Majority of the Lines of Credit are uncommitted lines
Capital
22 Tangible Book Value Tangible Book Value (TBV) Per Share Walk • $0.69 increase in OCI primarily from mark-to-market on long-dated interest rate swaps • Repurchased 79,155 shares at an average price of $22.68 per share as of June 30th, 2021 • 52,277 additional shares repurchased in July (through the 27th) at an average price of $27.26 $22.43 $24.40 $1.50 $0.28 $0.69 $0.02 $0.04 2020 Net Income Dividends AOCI Share Buyback Misc 2Q21 1 Misc includes items such as, but not limited to, changes related to stock grants and share count 1
23 Capital Position 8.27% 8.82% 11.02% 12.17% 8.30% 9.19% 10.95% 11.84% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 12.00% 13.00% 14.00% 15.00% TC E Ti er 1 Le ve ra ge Ti er 1 / CE T1 To ta l C ap ita l 2Q21 1Q21 ‘Adequate’ + Buffer Min Bankwell’s capital position remains strong 2 Tier 1CET1 • $10 million subordinated debt repaid in 2Q21 • As of July 23rd, the share repurchase program has ~176 thousand authorized shares remaining for repurchase • 2Q21 reduction in Total Capital reflects charge offs taken • CRE concentration of 491%1 1 Current period Bank capital ratios are preliminary, subject to finalization of the FDIC Call Report 2 TCE calculation is a consolidated BWFG ratio Key Bank Capital Ratios1
Bankwell History & Overview
25 + Second most affluent MSA in the Nation in per capita personal income (PCPI)2 + 4 of the top 25 wealthiest towns in the U.S.3 • Connecticut-based $2 billion bank, with focus on CRE and C&I lending • 10 existing branches in Fairfield & New Haven Counties • BWFG has $136 million deposits per branch; one of the highest in Fairfield & New Haven Counties1 • Our core market of Fairfield County (the Bridgeport-Stamford-Norwalk MSA) is the premier Connecticut location, highlighted by: Company Overview NASDAQ: BWFG 1 Source: S&P Global Market Intelligence’s Branch Competitors & Pricing Report as of 6/30/20, excluding global money center banks (tickers BAC, WFC, JPM, TD & C) + Headquarters of 9 Fortune 500 companies4 + Home to the two largest hedge funds in the U.S.5 2 Source: Bureau of Economic Analysis’ Metropolitan Area Table, contained within the Personal Income by County & Metropolitan Area, 2019 news release 11/17/20 3 Source: Bloomberg: 2020 Richest Places 4 Source: Fortune.com: 2021 Fortune 500 5 Source: Business Insider: The 10 Biggest Hedge Funds in the U.S., 5/18/18 Bankwell Profile Existing Branches (10) Fairfield County
26 Financial Snapshot Dollars in thousands, except per share data 2016 2017 2018 2019 2020 2Q21 YTD Total assets $1,628,919 $1,796,607 $1,873,665 $1,882,182 $2,253,747 $2,269,825 Net loans $1,343,895 $1,520,879 $1,586,775 $1,588,840 $1,601,672 $1,719,274 Loan-to-deposit ratio 105.6% 110.1% 106.4% 107.1% 87.9% 89.3% Efficiency ratio2 56.5% 54.9% 59.2% 60.2% 73.9% 56.8% Non-interest expense / avg. assets 2.03% 1.88% 1.93% 1.90% 2.03% 1.76% Net interest margin 3.54% 3.30% 3.18% 3.03% 2.77% 2.93% Total capital to risk weighted assets 12.85% 12.19% 12.50% 13.35% 12.28% 11.84% Tangible common equity ratio2 8.78% 8.81% 9.16% 9.56% 7.73% 8.30% Return on average equity 8.94% 8.93% 10.19% 10.20% 3.35% 12.87% Tangible book value per share2 $18.98 $20.59 $22.06 $23.15 $22.43 $24.40 Net interest income $49,092 $54,364 $56,326 $53,761 $54,835 $31,234 Pre-tax, pre-provision net revenue2 $22,224 $26,470 $24,593 $23,379 $14,907 $14,939 Net income $12,350 $13,830 $17,433 $18,216 $5,904 $11,917 EPS (fully diluted) $1.62 $1.78 $2.21 $2.31 $0.75 $1.50 1 1 Values are based on reported earnings / performance, which were impacted primarily as a result of the Tax Cut and Jobs Act passed in December 2017 along with several other smaller items. Please refer to BWFG’s 4Q’17 Earnings Release for further detail 2 A non-GAAP metric
27 Experienced Leadership Team Name Years Experience Selected Professional Biography Christopher Gruseke President & CEO (since 2015) 30+ Mr. Gruseke was a founding investor and director of Bankwell Financial Group’s predecessors, BNC Financial Group, Inc., and The Bank of New Canaan. He brings more than 25 years of capital markets, operations, sales and finance experience to his role at the Company. Most recently, he was a member of the Executive Committee at CRT Capital, a Stamford, Connecticut-based broker/dealer. He also served as Co-Chief Operating Officer and a member of the Board of Greenwich Capital Markets. Mr. Gruseke earned a B.A. from Williams College and an M.S. from the Stern School of Business at New York University. Christine A. Chivily EVP & Chief Risk & Credit Officer (since 2013) 40+ Ms. Chivily has over 40 years of experience in banking and real estate finance. She previously served in a risk management role for the CRE and C&I loan portfolios at People's United Bank. Her prior experience also includes five years as Director of Freddie Mac’s New England region for multifamily properties and 11 years as Senior Credit Officer at RBS Greenwich Capital. She also has over 10 years of combined experience in lending, loan administration and workouts at other various banking institutions. Ms. Chivily received her B.A. from Mt. Holyoke College. Penko Ivanov EVP & CFO (since 2016) 25+ Mr. Ivanov has more than 29 years of experience in accounting and finance. His more recent roles include CFO for the U.S. Operations of Doral Bank, where he created a scalable finance organization to support the rapid growth of several business units from infancy to $3 billion in assets, and as CFO of Darien Rowayton Bank. He began his career with Ernst & Young and held various accounting/finance positions at PepsiCo, GE Capital and Bridgewater Associates. His experience includes building, improving and overseeing all finance areas, including Controllership, SOX, Treasury, FP&A, as well as internal and external reporting functions. Mr. Ivanov holds M.B.A. and bachelor degrees in accounting and finance from the University of South Florida and is a certified public accountant. He is also Six Sigma Black Belt certified. Matthew McNeill EVP & Chief Banking Officer (since 2020) 20+ Mr. McNeill has more than 20 years of experience in Commercial Banking. He most recently served as Head of Commercial Lending at Metropolitan Commercial Bank. He previously served as Senior Commercial Relationship Manager at HSBC, a Business Banker at Santander and a Managing Partner at American Real Estate Lending. Laura J. Waitz EVP & Chief Operating Officer (since 2017) 35+ Ms. Waitz has over 35 years of experience for various businesses and previously was Senior Managing Director, Global Head of Human Resources at The Blackstone Group. She also served as Managing Director and Global Head of Compensation at Citi Alternative Investments and as Head of Compensation (Americas) for Deutsche Bank. Prior to that she served as Global Compensation Manager for private equity and investment banks. Ms. Waitz received her B.S. from Penn State University.
Thank You & Questions