Bankwell Financial Group Reports Record Net Income for the Second Quarter; Gross Loans Surpass $2 Billion; and Declares Third Quarter Dividend

About this update from Bankwell Financial Group, Inc.

NEW CANAAN, Conn. --(BUSINESS WIRE)-- Bankwell Financial Group, Inc. (NASDAQ: BWFG) reported record GAAP net income of $12.0 million , or $1.55 per share, for the second quarter of 2022, versus $6.2 million , or $0.79 per share, for the same period in 2021. During the quarter ended June 30, 2022 the Company experienced several non-recurring items that positively impacted reported earnings. Adjusting for these items, operating earnings per share totaled $1.15 for the second quarter of 2022. Please reference the table below for a reconciliation of reported earnings per share to operating earnings per share. Earnings Per Common Share 2Q'22 QTD Reported EPS $ 1.55 Elevated Loan Prepayments(1) (0.15 ) Release of Specific Reserves(2) (0.16 ) Historical Loss Update to Peer Group (3) (0.09 ) 2Q'22 QTD Operating EPS(4) $ 1.15 (1) 2Q'22 loan prepayments exceeded historical quarterly averages and are not reflective of run rate. (2) Specific reserve reduction as impaired loans exhibited improved performance or paid off. (3) Bankwell is not yet subject to CECL; reduction in general reserves due to annual update to historical loss data in our peer group-based, “incurred loss” model. (4) Non-gaap measure. The Company's Board of Directors declared a $0.20 per share cash dividend, payable August 25, 2022 to shareholders of record on August 15, 2022 . We recommend reading this earnings release in conjunction with the Second Quarter 2022 Investor Presentation, located at http://investor.mybankwell.com/Presentations and included as an exhibit to our July 27, 2022 Current Report on Form 8-K. Notes Bankwell Financial Group President and CEO, Christopher R. Gruseke : "I offer my thanks and congratulations to our entire team for their commitment to excellence. Even after discounting favorable one-time items, our Company has delivered outstanding results, including an operating ROAA of 1.45%, an ROAE of 16.4%, and an efficiency ratio of 46.6%. Several years ago we put forth a strategic plan to diversify and transform our business model. With careful planning and execution, we are now reaping the benefits of investing in that plan. "As we look ahead, despite the backdrop of macroeconomic uncertainty, our third quarter loan pipeline remains at record levels. It is likely that the economy will experience further volatility in the coming quarters. Nevertheless, we are confident that the business we have built will enable us to continue to deliver above-peer group performance." Second Quarter 2022 Highlights (performance metrics are impacted by the above mentioned one-time items - please refer to the table following the below highlights for adjusted performance metrics): Return on average assets was 1.96% and return on average equity was 22.09% for the quarter ended June 30, 2022 . The net interest margin was 4.01% for the quarter ended June 30, 2022 . The efficiency ratio was 43.8% for the quarter ended June 30, 2022 . Total gross loans were $2.1 billion , growing $161.7 million , or 8.5%, compared to December 31, 2021 . Average yield on 2022 funded loans was 4.88%. Gains from loan sales totaled $0.6 million for the quarter ended June 30, 2022 . Total deposits decreased by 4.3% to $2.0 billion compared to $2.1 billion at December 31, 2021 as a result of seasonal fluctuations in several municipal and commercial deposit relationships. Investment securities totaled $113.0 million and represent 4.6% of total assets. Fully diluted tangible book value per share rose to $28.75 compared to $25.55 at December 31, 2021 . Wilton branch closure announced July 8, 2022 (effective October 7, 2022 ). Shares issued and outstanding were 7,752,389 for the quarter ended June 30, 2022 . Quarter Ended June 30, 2022 Six Months Ended June 30, 2022 Key metrics Reported Operating(1) Variance Reported Operating(1) Variance Net interest margin 4.01 % 3.75 % 0.26 % 3.65 % 3.53 % 0.12 % Efficiency ratio 43.8 % 46.6 % (2.8) % 45.9 % 47.5 % (1.6) % Return on average assets 1.96 % 1.45 % 0.51 % 1.65 % 1.40 % 0.25 % Return on average stockholders' equity 22.09 % 16.39 % 5.70 % 19.16 % 16.22 % 2.94 % (1) Operating metrics are non-gaap measures and have been adjusted for elevated loan prepayments, release of specific reserves, and the historical loss update to the Company's peer group as noted in the above EPS table. Earnings and Performance Revenues (net interest income plus noninterest income) for the quarter ended June 30, 2022 were $25.0 million , versus $18.0 million for the quarter ended June 30, 2021 . Revenues for the six months ended June 30, 2022 were $45.4 million , versus $34.6 million for the six months ended June 30, 2021 . The increase in revenues was primarily attributable to an increase in interest and fees on loans due to loan growth and higher overall loan yields and from lower interest expense on deposits. The increase in loan yields was aided by elevated loan prepayment fees, which totaled $1.8 million for the quarter ended June 30, 2022 , compared to $0.8 million for the quarter ended June 30, 2021 . The increase in revenues was partially offset by a decrease in noninterest income driven by the absence of rental income recognized during the quarter and six months ended June 30, 2021 , as a result of the disposition of the Company's former headquarters building. In addition, the increase in revenues for the six months ended June 30, 2022 was also partially offset by a one-time federal payroll tax credit for COVID-19 of $0.9 million recognized in the quarter ended March 31, 2021 . Net income for the quarter ended June 30, 2022 was $12.0 million , versus $6.2 million for the quarter ended June 30, 2021 . Net income for the six months ended June 30, 2022 was $20.2 million , versus $11.9 million for the six months ended June 30, 2021 . The increase in net income was primarily impacted by the aforementioned increases in revenues and by a decrease in the provision for loan losses primarily driven by the release of specific reserves on impaired loans that showed improved performance or paid off. Basic and diluted earnings per share were $1.56 and $1.55 , respectively, for the quarter ended June 30, 2022 compared to basic and diluted earnings per share of $0.79 each for the quarter ended June 30, 2021 . Basic and diluted earnings per share were $2.61 and $2.58 , respectively, for the six months ended June 30, 2022 compared to basic and diluted earnings per share of $1.51 and $1.50 , respectively, for the six months ended June 30, 2021 . The net interest margin (fully taxable equivalent basis) for the quarters ended June 30, 2022 and June 30, 2021 was 4.01% and 3.12%, respectively. The net interest margin (fully taxable equivalent basis) for the six months ended June 30, 2022 and June 30, 2021 was 3.65% and 2.93%, respectively. The increase in the net interest margin was due to lower interest expense from a decrease in rates on interest bearing deposits, elevated loan prepayment fees, and an increase in overall loan yields. Financial Condition Assets totaled $2.44 billion at June 30, 2022 , compared to assets of $2.46 billion at December 31, 2021 . The decrease in assets was primarily due to a decrease in deposits while excess liquidity funded additional loan growth. Gross loans totaled $2.1 billion at June 30, 2022 , an increase of $161.7 million compared to December 31, 2021 . Deposits totaled $2.0 billion at June 30, 2022 , compared to deposits of $2.1 billion at December 31, 2021 . Capital Shareholders’ equity totaled $225.5 million as of June 30, 2022 , an increase of $23.5 million compared to December 31, 2021 , primarily a result of (i) net income of $20.2 million for the six months ended June 30, 2022 and (ii) an $8.9 million favorable impact to accumulated other comprehensive income driven by fair value marks related to hedge positions involving interest rate swaps, partially offset by fair value marks on the Company's investment portfolio. The Company's interest rate swaps are used to hedge interest rate risk. The increase in Shareholders’ equity was partially offset by dividends paid of $3.1 million and common stock repurchases of $3.8 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, which could further exacerbate the effects on the Company’s business and results of operations, and legislative and regulatory changes that could adversely affect the business in which the Company and its subsidiaries are engaged. Non-GAAP Financial Measures In addition to evaluating the Company's financial performance in accordance with U.S. generally accepted accounting principles ("GAAP"), management may evaluate certain non-GAAP financial measures, such as the efficiency ratio. A computation and reconciliation of certain non-GAAP financial measures used for these purposes is contained in the accompanying Reconciliation of GAAP to Non-GAAP Measures tables. We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. For example, the Company believes that the efficiency ratio is useful in the assessment of financial performance, including noninterest expense control. The Company believes that tangible common equity, tangible book value per share, and return on average tangible common equity are useful to evaluate the relative strength of the Company's performance and capital position. We utilize these measures for internal planning and forecasting purposes. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED BALANCE SHEETS (unaudited) (Dollars in thousands) June 30 , 2022 March 31 , 2022 December 31 , 2021 June 30 , 2021 ASSETS Cash and due from banks $ 149,522 $ 280,471 $ 291,598 $ 297,851 Federal funds sold 21,505 19,022 53,084 4,036 Cash and cash equivalents 171,027 299,493 344,682 301,887 Investment securities Marketable equity securities, at fair value 2,126 2,090 2,168 2,192 Available for sale investment securities, at fair value 94,907 98,733 90,198 90,983 Held to maturity investment securities, at amortized cost 15,917 15,979 16,043 16,166 Total investment securities 112,950 116,802 108,409 109,341 Loans receivable (net of allowance for loan losses of $15,773 , $17,141 , $16,902 and $16,672 at June 30, 2022 , March 31, 2022 , December 31, 2021 and June 30, 2021 , respectively) 2,036,626 1,964,567 1,875,167 1,719,274 Accrued interest receivable 8,047 7,733 7,512 6,661 Federal Home Loan Bank stock, at cost 5,064 2,870 2,814 3,844 Premises and equipment, net 27,768 25,661 25,588 33,916 Bank-owned life insurance 49,699 49,434 49,174 48,632 Goodwill 2,589 2,589 2,589 2,589 Other intangible assets — — — 58 Deferred income taxes, net 4,768 6,879 7,621 8,208 Other assets 17,014 20,849 32,708 35,415 Total assets $ 2,435,552 $ 2,496,877 $ 2,456,264 $ 2,269,825 LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities Deposits Noninterest bearing deposits $ 372,584 $ 412,985 $ 398,956 $ 328,473 Interest bearing deposits 1,660,941 1,753,219 1,725,042 1,610,829 Total deposits 2,033,525 2,166,204 2,123,998 1,939,302 Advances from the Federal Home Loan Bank 105,000 50,000 50,000 75,000 Subordinated debentures 34,500 34,471 34,441 15,366 Accrued expenses and other liabilities 37,060 35,982 45,838 49,362 Total liabilities 2,210,085 2,286,657 2,254,277 2,079,030 Shareholders’ equity Common stock, no par value 115,599 114,882 118,148 120,451 Retained earnings 109,523 99,047 92,400 80,543 Accumulated other comprehensive income (loss) 345 (3,709 ) (8,561 ) (10,199 ) Total shareholders’ equity 225,467 210,220 201,987 190,795 Total liabilities and shareholders’ equity $ 2,435,552 $ 2,496,877 $ 2,456,264 $ 2,269,825 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 , 2022 March 31 , 2022 December 31 , 2021 June 30 , 2021 June 30 , 2022 June 30 , 2021 Interest and dividend income Interest and fees on loans $ 25,141 $ 21,428 $ 21,081 $ 19,266 $ 46,569 $ 37,166 Interest and dividends on securities 774 720 722 736 1,494 1,505 Interest on cash and cash equivalents 449 154 90 90 603 198 Total interest and dividend income 26,364 22,302 21,893 20,092 48,666 38,869 Interest expense Interest expense on deposits 1,983 2,206 2,198 2,744 4,189 5,858 Interest expense on borrowings 558 586 767 769 1,144 1,777 Total interest expense 2,541 2,792 2,965 3,513 5,333 7,635 Net interest income 23,823 19,510 18,928 16,579 43,333 31,234 (Credit) provision for loan losses (1,445 ) 229 125 (20 ) (1,216 ) (316 ) Net interest income after (credit) provision for loan losses 25,268 19,281 18,803 16,599 44,549 31,550 Noninterest income Gains and fees from sales of loans 608 631 441 814 1,239 1,327 Bank owned life insurance 265 260 270 251 525 482 Service charges and fees 249 240 257 217 489 416 Other 30 (173 ) (143 ) 158 (143 ) 1,170 Total noninterest income 1,152 958 825 1,440 2,110 3,395 Noninterest expense Salaries and employee benefits 5,433 4,940 4,806 3,960 10,373 8,729 Occupancy and equipment 2,193 2,150 2,411 3,250 4,343 5,656 Professional services 1,000 981 628 547 1,981 1,134 Data processing 689 654 432 833 1,343 1,345 Director fees 339 352 335 327 691 644 FDIC insurance 262 223 231 300 485 703 Marketing 107 45 87 140 152 131 Other 913 580 749 695 1,493 1,348 Total noninterest expense 10,936 9,925 9,679 10,052 20,861 19,690 Income before income tax expense 15,484 10,314 9,949 7,987 25,798 15,255 Income tax expense 3,462 2,102 2,135 1,759 5,564 3,338 Net income $ 12,022 $ 8,212 $ 7,814 $ 6,228 $ 20,234 $ 11,917 Earnings Per Common Share: Basic $ 1.56 $ 1.05 $ 1.00 $ 0.79 $ 2.61 $ 1.51 Diluted $ 1.55 $ 1.04 $ 0.99 $ 0.79 $ 2.58 $ 1.50 Weighted Average Common Shares Outstanding: Basic 7,556,645 7,637,077 7,660,307 7,722,481 7,596,639 7,744,368 Diluted 7,614,243 7,719,405 7,726,420 7,768,026 7,683,305 7,792,600 Dividends per common share $ 0.20 $ 0.20 $ 0.18 $ 0.14 $ 0.40 $ 0.28 BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited) For the Quarter Ended For the Six Months June 30 , 2022 March 31 , 2022 December 31 , 2021 June 30 , 2021 June 30 , 2022 June 30 , 2021 Performance ratios: Return on average assets 1.96 % 1.35 % 1.32 % 1.11 % 1.65 % 1.07 % Return on average stockholders' equity 22.09 % 16.05 % 15.44 % 13.06 % 19.16 % 12.87 % Return on average tangible common equity 22.36 % 16.25 % 15.65 % 13.25 % 19.40 % 13.06 % Net interest margin 4.01 % 3.30 % 3.43 % 3.12 % 3.65 % 2.93 % Efficiency ratio(1) 43.8 % 48.5 % 48.8 % 55.7 % 45.9 % 56.8 % Net loan charge-offs as a % of average loans — % — % — % 0.23 % — % 0.24 % Dividend payout ratio(2) 12.90 % 19.23 % 18.18 % 17.72 % 15.50 % 18.67 % 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. The dividend payout ratio is calculated by dividing dividends per share by earnings per share. As of June 30 , 2022 March 31 , 2022 December 31 , 2021 June 30 , 2021 Capital ratios: Total Common Equity Tier 1 Capital to Risk-Weighted Assets(1) 11.10 % 11.20 % 11.18 % 10.95 % Total Capital to Risk-Weighted Assets(1) 11.80 % 12.00 % 12.00 % 11.84 % Tier I Capital to Risk-Weighted Assets(1) 11.10 % 11.20 % 11.18 % 10.95 % Tier I Capital to Average Assets(1) 10.15 % 9.80 % 9.94 % 9.19 % Tangible common equity to tangible assets 9.16 % 8.32 % 8.13 % 8.30 % Fully diluted tangible book value per common share $ 28.75 $ 26.75 $ 25.55 $ 23.83 Represents Bank ratios. Current period capital ratios are preliminary subject to finalization of the FDIC Call Report. BANKWELL FINANCIAL GROUP, INC. ASSET QUALITY (unaudited) (Dollars in thousands) For the Quarter Ended June 30 , 2022 March 31 , 2022 December 31 , 2021 June 30 , 2021 Allowance for loan losses: Balance at beginning of period $ 17,141 $ 16,902 $ 16,803 $ 20,545 Charge-offs: Commercial real estate — — — (3,814 ) Commercial business — — (26 ) (51 ) Consumer — (4 ) (5 ) (4 ) Total charge-offs — (4 ) (31 ) (3,869 ) Recoveries: Commercial real estate 77 — — — Commercial business — 13 2 16 Consumer — 1 3 — Total recoveries 77 14 5 16 Net loan recoveries (charge-offs) 77 10 (26 ) (3,853 ) (Credit) provision for loan losses (1,445 ) 229 125 (20 ) Balance at end of period $ 15,773 $ 17,141 $ 16,902 $ 16,672 As of June 30 , 2022 March 31 , 2022 December 31 , 2021 June 30 , 2021 Asset quality: Nonaccrual loans Residential real estate $ 2,161 $ 2,181 $ 2,380 $ 1,160 Commercial real estate 2,955 3,365 3,482 15,392 Commercial business 787 817 1,728 1,780 Construction 9,382 9,382 8,997 8,997 Total nonaccrual loans 15,285 15,745 16,587 27,329 Other real estate owned — — — — Total nonperforming assets $ 15,285 $ 15,745 $ 16,587 $ 27,329 Nonperforming loans as a % of total loans 0.74 % 0.79 % 0.88 % 1.57 % Nonperforming assets as a % of total assets 0.63 % 0.63 % 0.68 % 1.20 % Allowance for loan losses as a % of total loans 0.77 % 0.86 % 0.89 % 0.96 % Allowance for loan losses as a % of nonperforming loans 103.19 % 108.87 % 101.90 % 61.00 % Total past due loans to total loans 1.40 % 0.85 % 1.72 % 1.65 % Total nonaccrual loans declined $1.3 million to $15.3 million as of June 30, 2022 when compared to December 31, 2021 . Nonperforming assets as a percentage of total assets was 0.63% at June 30, 2022 , down from 0.68% at December 31, 2021 . The allowance for loan losses at June 30, 2022 was $15.8 million , representing 0.77% of total loans. Past due loans decreased to $28.8 million , or 1.40% of total loans, as of June 30, 2022 , compared to $32.6 million , or 1.72% of total loans, as of December 31, 2021 . As of June 30, 2022 , past due loans include one $10.5 million commercial real estate loan, representing 0.51% of total loans, that had reached maturity and is in active negotiations to be refinanced. BANKWELL FINANCIAL GROUP, INC. LOAN & DEPOSIT PORTFOLIO (unaudited) (Dollars in thousands) Period End Loan Composition June 30 , 2022 March 31 , 2022 December 31 , 2021 Current QTD % Change YTD % Change Residential Real Estate $ 64,253 $ 68,617 $ 79,987 (6.4 ) % (19.7 ) % Commercial Real Estate (1) 1,499,364 1,425,758 1,356,709 5.2 10.5 Construction 111,422 115,514 98,341 (3.5 ) 13.3 Total Real Estate Loans 1,675,039 1,609,889 1,535,037 4.0 9.1 Commercial Business 372,361 370,166 350,975 0.6 6.1 Consumer 9,196 5,275 8,869 74.3 3.7 Total Loans $ 2,056,596 $ 1,985,330 $ 1,894,881 3.6 % 8.5 % (1) Includes owner occupied commercial real estate. Gross loans totaled $2.1 billion at June 30, 2022 , an increase of $161.7 million compared to December 31, 2021 . Period End Deposit Composition June 30 , 2022 March 31 , 2022 December 31 , 2021 Current QTD % Change YTD % Change Noninterest bearing demand $ 372,584 $ 412,985 $ 398,956 (9.8 ) % (6.6 ) % NOW 155,026 112,567 119,479 37.7 29.8 Money Market 833,730 996,458 954,674 (16.3 ) (12.7 ) Savings 196,075 197,961 193,631 (1.0 ) 1.3 Time 476,110 446,233 457,258 6.7 4.1 Total Deposits $ 2,033,525 $ 2,166,204 $ 2,123,998 (6.1 ) % (4.3 ) % Total deposits were $2.0 billion at June 30, 2022 , compared to $2.1 billion at December 31, 2021 , a decrease of $90.5 million , or 4.3%. The decrease in deposits is primarily a result of seasonal fluctuations in several municipal and commercial deposit relationships. BANKWELL FINANCIAL GROUP, INC. NONINTEREST INCOME (unaudited) (Dollars in thousands) For the Quarter Ended Noninterest income June 30 , 2022 March 31 , 2022 June 30 , 2021 June 22 vs. March 22 % Change June 22 vs. June 21 % Change Gains and fees from sales of loans $ 608 $ 631 $ 814 (3.6 ) % (25.3 ) % Bank owned life insurance 265 260 251 1.9 5.6 Service charges and fees 249 240 217 3.8 14.7 Other 30 (173 ) 158 (117.3 ) (81.0 ) Total noninterest income $ 1,152 $ 958 $ 1,440 20.3 % (20.0 ) % For the Six Months Ended Noninterest income June 30, 2022 June 30, 2021 % Change Gains and fees from sales of loans $ 1,239 $ 1,327 (6.6 ) % Bank owned life insurance 525 482 8.9 Service charges and fees 489 416 17.5 Other (143 ) 1,170 (112.2 ) Total noninterest income $ 2,110 $ 3,395 (37.8 ) % Noninterest income decreased by $0.3 million to $1.2 million for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 . Noninterest income decreased by $1.3 million to $2.1 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 . The decrease in noninterest income was driven by a reduction in loan sales for the quarter and six months ended June 30, 2022 when compared to the same periods in the prior year. Loan sales decreased $0.2 million and $0.1 million for the quarter and six months ended June 30, 2022 , respectively. In addition, noninterest income declined due to the absence of rental income recognized during the quarter and six months ended June 30, 2021 , as a result of the disposition of the Company's former headquarters building. Noninterest income also declined for the six months ended June 30, 2022 due to a one-time federal payroll tax credit for COVID-19 of $0.9 million recognized in the quarter ended March 31, 2021 . BANKWELL FINANCIAL GROUP, INC. NONINTEREST EXPENSE (unaudited) (Dollars in thousands) For the Quarter Ended Noninterest expense June 30 , 2022 March 31 , 2022 June 30 , 2021 June 22 vs. March 22 % Change June 22 vs. June 21 % Change Salaries and employee benefits $ 5,433 $ 4,940 $ 3,960 10.0 % 37.2 % Occupancy and equipment 2,193 2,150 3,250 2.0 (32.5 ) Professional services 1,000 981 547 1.9 82.8 Data processing 689 654 833 5.4 (17.3 ) Director fees 339 352 327 (3.7 ) 3.7 FDIC insurance 262 223 300 17.5 (12.7 ) Marketing 107 45 140 137.8 (23.6 ) Other 913 580 695 57.4 31.4 Total noninterest expense $ 10,936 $ 9,925 $ 10,052 10.2 % 8.8 % For the Six Months Ended Noninterest expense June 30, 2022 June 30, 2021 % Change Salaries and employee benefits $ 10,373 $ 8,729 18.8 % Occupancy and equipment 4,343 5,656 (23.2 ) Professional services 1,981 1,134 74.7 Data processing 1,343 1,345 (0.1 ) Director fees 691 644 7.3 FDIC insurance 485 703 (31.0 ) Marketing 152 131 16.0 Other 1,493 1,348 10.8 Total noninterest expense $ 20,861 $ 19,690 5.9 % Noninterest expense increased by $0.9 million to $10.9 million for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 . Noninterest expense increased by $1.2 million to $20.9 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 . The increase in noninterest expense was primarily driven by an increase in salaries and employee benefits expense and professional services expense, partially offset by a decrease in occupancy and equipment expense. Salaries and employee benefits expense totaled $5.4 million for the quarter ended June 30, 2022 , an increase of $1.5 million when compared to the same period in 2021. Salaries and employee benefits expense totaled $10.4 million for the six months ended June 30, 2022 , an increase of $1.6 million when compared to the same period in 2021. The increase in salaries and employee benefits expense was primarily driven by an increase in full time equivalent employees. Full time equivalent employees totaled 132 at June 30, 2022 compared to 125 for the same period in 2021. Average full time equivalent employees totaled 128 for the six months ended June 30, 2022 compared to 124 for the same period in 2021. The increase in salaries and employee benefits expense was also impacted by an increase in variable compensation accruals as a result of the Bank's overall improved performance. The increase in salaries and employee benefits expense was partially offset by higher loan originations, which enabled the bank to defer a greater amount of expenses. Professional services expense totaled $1.0 million for the quarter ended June 30, 2022 , an increase of $0.5 million when compared to the same period in 2021. Professional services expense totaled $2.0 million for the six months ended June 30, 2022 , an increase of $0.8 million when compared to the same period in 2021. The increase in professional services expense was primarily driven by consulting fees associated with various projects, including our core system conversion. Occupancy and equipment expense totaled $2.2 million for the quarter ended June 30, 2022 , a decrease of $1.1 million when compared to the same period in 2021. Occupancy and equipment expense totaled $4.3 million for the six months ended June 30, 2022 , a decrease of $1.3 million when compared to the same period in 2021. The decrease in occupancy and equipment expense was primarily driven by the curtailment of additional cleaning costs associated with precautions taken to prevent the spread of COVID-19 during the six months ended June 30, 2021 . 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 , 2022 March 31 , 2022 December 31 , 2021 June 30 , 2021 Total Equity $ 225,467 $ 210,220 $ 201,987 $ 190,795 Less: Goodwill 2,589 2,589 2,589 2,589 Other intangibles — — — 58 Tangible Common Equity $ 222,878 $ 207,631 $ 199,398 $ 188,148 Total Assets $ 2,435,552 $ 2,496,877 $ 2,456,264 $ 2,269,825 Less: Goodwill 2,589 2,589 2,589 2,589 Other intangibles — — — 58 Tangible Assets $ 2,432,963 $ 2,494,288 $ 2,453,675 $ 2,267,178 Tangible Common Equity to Tangible Assets 9.16 % 8.32 % 8.13 % 8.30 % As of Computation of Fully Diluted Tangible Book Value per Common Share June 30 , 2022 March 31 , 2022 December 31 , 2021 June 30 , 2021 Total shareholders' equity $ 225,467 $ 210,220 $ 201,987 $ 190,795 Less: Preferred stock — — — — Common shareholders' equity $ 225,467 $ 210,220 $ 201,987 $ 190,795 Less: Goodwill 2,589 2,589 2,589 2,589 Other intangibles — — — 58 Tangible common shareholders' equity $ 222,878 $ 207,631 $ 199,398 $ 188,148 Common shares issued and outstanding 7,752,389 7,761,338 7,803,166 7,895,101 Fully Diluted Tangible Book Value per Common Share $ 28.75 $ 26.75 $ 25.55 $ 23.83 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 , 2022 March 31 , 2022 December 31 , 2021 June 30 , 2021 June 30 , 2022 June 30 , 2021 Noninterest expense $ 10,936 $ 9,925 $ 9,679 $ 10,052 $ 20,861 $ 19,690 Less: Amortization of intangible assets — — 48 9 — 19 Other real estate owned expenses — — — — — — Adjusted noninterest expense $ 10,936 $ 9,925 $ 9,631 $ 10,043 $ 20,861 $ 19,671 Net interest income $ 23,823 $ 19,510 $ 18,928 $ 16,579 $ 43,333 $ 31,234 Noninterest income 1,152 958 825 1,440 2,110 3,395 Less: Net gain on sale of available for sale securities — — — — — — Gain on sale of other real estate owned, net — — — — — — Operating revenue $ 24,975 $ 20,468 $ 19,753 $ 18,019 $ 45,443 $ 34,629 Efficiency ratio 43.8 % 48.5 % 48.8 % 55.7 % 45.9 % 56.8 % For the Quarter Ended For the Six Months Ended Computation of Return on Average Tangible Common Equity June 30 , 2022 March 31 , 2022 December 31 , 2021 June 30 , 2021 June 30 , 2022 June 30 , 2021 Net Income Attributable to Common Shareholders $ 12,022 $ 8,212 $ 7,814 $ 6,228 $ 20,234 $ 11,917 Total average shareholders' equity $ 218,250 $ 207,541 $ 200,752 $ 191,224 $ 212,932 $ 186,664 Less: Average Goodwill 2,589 2,589 2,589 2,589 2,589 2,589 Average Other intangibles — — 45 64 — 68 Average tangible common equity $ 215,661 $ 204,952 $ 198,118 $ 188,571 $ 210,343 $ 184,007 Annualized Return on Average Tangible Common Equity 22.36 % 16.25 % 15.65 % 13.25 % 19.40 % 13.06 % 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, 2022 June 30, 2021 Average Balance Interest Yield/ Rate (4) Average Balance Interest Yield/ Rate (4) Assets: Cash and Fed funds sold $ 247,013 $ 449 0.73 % $ 336,073 $ 90 0.11 % Securities(1) 118,534 809 2.73 103,297 761 2.95 Loans: Commercial real estate 1,443,239 17,278 4.74 1,163,134 13,678 4.65 Residential real estate 66,460 553 3.33 105,975 958 3.62 Construction 106,285 1,938 7.21 110,780 1,036 3.70 Commercial business 393,318 5,327 5.36 296,613 3,506 4.68 Consumer 5,298 45 3.43 8,851 88 3.98 Total loans 2,014,600 25,141 4.94 1,685,353 19,266 4.52 Federal Home Loan Bank stock 3,263 15 1.79 4,219 25 2.34 Total earning assets 2,383,410 $ 26,414 4.38 % 2,128,942 $ 20,142 3.74 % Other assets 79,380 117,334 Total assets $ 2,462,790 $ 2,246,276 Liabilities and shareholders' equity: Interest bearing liabilities: NOW $ 136,414 $ 59 0.17 % $ 118,806 $ 54 0.18 % Money market 931,101 1,146 0.49 782,079 941 0.48 Savings 198,304 103 0.21 168,870 92 0.22 Time 451,508 675 0.60 538,915 1,657 1.23 Total interest bearing deposits 1,717,327 1,983 0.46 1,608,670 2,744 0.68 Borrowed Money 85,092 558 2.59 101,586 769 3.00 Total interest bearing liabilities 1,802,419 $ 2,541 0.57 % 1,710,256 $ 3,513 0.82 % Noninterest bearing deposits 407,890 298,467 Other liabilities 34,231 46,329 Total liabilities 2,244,540 2,055,052 Shareholders' equity 218,250 191,224 Total liabilities and shareholders' equity $ 2,462,790 $ 2,246,276 Net interest income(2) $ 23,873 $ 16,629 Interest rate spread 3.81 % 2.92 % Net interest margin(3) 4.01 % 3.12 % Average balances and yields for securities are based on amortized cost. The adjustment for securities and loans taxable equivalency amounted to $50 thousand and $50 thousand for the quarters ended June 30, 2022 and 2021, respectively. Annualized net interest income as a percentage of earning assets. 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, 2022 June 30, 2021 Average Balance Interest Yield/ Rate (4) Average Balance Interest Yield/ Rate (4) Assets: Cash and Fed funds sold $ 296,239 $ 603 0.41 % $ 368,779 $ 198 0.11 % Securities(1) 115,452 1,563 2.71 % 102,252 1,549 3.03 % Loans: Commercial real estate 1,393,836 32,273 4.61 % 1,146,258 26,354 4.57 % Residential real estate 70,125 1,224 3.49 % 109,003 1,996 3.66 % Construction 104,176 2,971 5.67 % 102,459 1,916 3.72 % Commercial business 388,249 9,954 5.10 % 295,682 6,763 4.55 % Consumer 5,666 147 5.25 % 6,956 137 3.96 % Total loans 1,962,052 46,569 4.72 % 1,660,358 37,166 4.45 % Federal Home Loan Bank stock 3,051 29 1.94 % 5,356 56 2.11 % Total earning assets 2,376,794 $ 48,764 4.08 % 2,136,745 $ 38,969 3.64 % Other assets 89,866 115,718 Total assets $ 2,466,660 $ 2,252,463 Liabilities and shareholders' equity: Interest bearing liabilities: NOW $ 124,361 $ 106 0.17 % $ 109,990 $ 97 0.18 % Money market 950,131 2,326 0.49 % 759,435 1,891 0.50 % Savings 196,400 204 0.21 % 164,630 217 0.27 % Time 452,676 1,553 0.69 % 574,876 3,653 1.28 % Total interest bearing deposits 1,723,568 4,189 0.49 % 1,608,931 5,858 0.73 % Borrowed Money 84,770 1,144 2.68 % 126,886 1,777 2.79 % Total interest bearing liabilities 1,808,338 $ 5,333 0.59 % 1,735,817 $ 7,635 0.89 % Noninterest bearing deposits 406,707 284,226 Other liabilities 38,683 45,756 Total liabilities 2,253,728 2,065,799 Shareholders' equity 212,932 186,664 Total liabilities and shareholders' equity $ 2,466,660 $ 2,252,463 Net interest income(2) $ 43,431 $ 31,334 Interest rate spread 3.49 % 2.75 % Net interest margin(3) 3.65 % 2.93 % Average balances and yields for securities are based on amortized cost. The adjustment for securities and loans taxable equivalency amounted to $98 thousand and $100 thousand for the six months ended June 30, 2022 and 2021, respectively. Annualized net interest income as a percentage of earning assets. Yields are calculated using the contractual day count convention for each respective product type. View source version on businesswire.com : https://www.businesswire.com/news/home/20220727006003/en/ Christopher R. Gruseke President and Chief Executive Officer Penko Ivanov Executive Vice President and Chief Financial Officer (203) 652-0166 Source: Bankwell Financial Group, Inc.

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