Bankwell Financial Group Reports Record Net Income for the Third Quarter; Declares Fourth Quarter Dividend; and Authorizes an Additional 200 Thousand Shares for Its Share Repurchase Program

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 $6.9 million , or $0.87 per share, for the third quarter of 2021, versus $3.0 million , or $0.38 per share, for the same period in 2020. The Company's Board of Directors declared an $0.18 per share cash dividend, payable November 22, 2021 to shareholders of record on November 12, 2021 . We recommend reading this earnings release in conjunction with the Third Quarter 2021 Investor Presentation, located at http://investor.mybankwell.com/Presentations and included as an exhibit to our October 27, 2021 Current Report on Form 8-K. Notes Bankwell Financial Group President and CEO, Christopher R. Gruseke : “On behalf of all of my colleagues at Bankwell, I am proud to announce our results for the most recent quarter. The Company achieved record levels in most performance categories of our business. Loan originations for the quarter totaled $200 million , with net loan growth of $92 million , excluding Paycheck Protection Program ("PPP") loans. Year to date, gross loan balances excluding PPP loans have grown by $232 million for an annualized growth rate of 19%. The Company’s ROAE and ROAA were 14.09% and 1.22%, respectively, for the quarter. Loan demand remains brisk; our healthy pipeline positions us for a strong finish to the year and lays the foundation for increased profitability in 2022. “Confident in the strength of our balance sheet and the prospect of growing earnings, the Company’s Board of Directors today authorized the repurchase of an additional 200,000 shares of its common stock.” Third Quarter 2021 Highlights: Return on average assets was 1.22% and return on average equity was 14.09% for the quarter ended September 30, 2021 . The net interest margin improved to 3.39% for the quarter ended September 30, 2021 . The efficiency ratio improved to 54.1% for the quarter ended September 30, 2021 . Excluding Paycheck Protection Program ("PPP") loans, total gross loans were $1.8 billion , growing $232.1 million , or 14.6%, compared to December 31, 2020 . On a quarterly basis loans grew $92.3 million , or 5.3% compared to June 30, 2021 . Gains from loan sales totaled $0.9 million and $2.3 million for the quarter and nine months ended September 30, 2021 , respectively, compared to $27 thousand for the quarter and nine months ended September 30, 2020 . Total deposits were $1.9 billion compared to $1.8 billion at December 31, 2020 . Noninterest bearing deposits increased by $68.5 million , or 25.3% compared to December 31, 2020 . The percentage of noninterest bearing deposits to total deposits increased to 18.0% compared to 14.8% at December 31, 2020 . The cost of interest bearing deposits decreased approximately 47 basis points to 0.60% for the quarter ended September 30, 2021 when compared to the quarter ended September 30, 2020 . Investment securities totaled $105.9 million and represent 4.8% of total assets. Tangible book value per share rose to $25.25 compared to $22.43 at December 31, 2020 . Shares issued and outstanding were 7,842,824, reflecting repurchases of 52,277 shares of common stock at a weighted average price of $27.26 during the quarter ended September 30, 2021 . Post Third Quarter 2021 Highlights: Subsequent to September 30, 2021 , the Company issued a 3.25% fixed-to-floating rate subordinated note due 2031 in the principal amount of $35.0 million . The proceeds will be used for repayment of $15.5 million of existing subordinated notes and general corporate purposes. The Company's Board of Directors authorized an additional 200,000 shares for its existing share repurchase program. Earnings and Performance Revenues (net interest income plus noninterest income) for the quarter ended September 30, 2021 were $19.2 million , versus $14.2 million for the quarter ended September 30, 2020 . Revenues for the nine months ended September 30, 2021 were $53.8 million , versus $42.8 million for the nine months ended September 30, 2020 . The increase was primarily attributable to lower interest expense on deposits, an increase in interest and fees on loans due to loan growth and from the resumption of loan sales. Revenues for the nine months ended September 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 September 30, 2021 was $6.9 million , versus $3.0 million for the quarter ended September 30, 2020 . Net income for the nine months ended September 30, 2021 was $18.8 million , versus $5.6 million for the nine months ended September 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 lower loan loss reserves in 2021 when compared to 2020, which saw a large increase in reserves due to the COVID-19 Pandemic. Basic and diluted earnings per share were $0.88 and $0.87 , respectively, for the quarter ended September 30, 2021 compared to basic and diluted earnings per share of $0.38 each for the quarter ended September 30, 2020 . Basic and diluted earnings per share were $2.38 and $2.37 , respectively, for the nine months ended September 30, 2021 compared to basic and diluted earnings per share of $0.71 each for the nine months ended September 30, 2020 . The net interest margin (fully taxable equivalent basis) for the quarters ended September 30, 2021 and September 30, 2020 was 3.39% and 2.67%, respectively. The net interest margin (fully taxable equivalent basis) for the nine months ended September 30, 2021 and September 30, 2020 was 3.08% and 2.81%, 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. In addition, the increase in the net interest margin for the quarter ended September 30, 2021 was positively impacted by a reduction in excess liquidity when compared to the quarter ended September 30, 2020 . Financial Condition Assets totaled $2.23 billion at September 30, 2021 , compared to assets of $2.25 billion at December 31, 2020 . The change in assets remained relatively flat as the decrease in excess liquidity was offset by an increase in loans. Gross loans totaled $1.8 billion at September 30, 2021 , an increase of $198.9 million compared to December 31, 2020 . Excluding PPP loans, gross loans increased by $232.1 million at September 30, 2021 when compared to December 31, 2020 . Deposits totaled $1.9 billion at September 30, 2021 , compared to deposits of $1.8 billion at December 31, 2020 . Capital Shareholders’ equity totaled $196.2 million as of September 30, 2021 , an increase of $19.6 million compared to December 31, 2020 , primarily a result of (i) net income of $18.8 million for the nine months ended September 30, 2021 and (ii) a $6.2 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 $3.6 million and common stock repurchases of $3.2 million . About Bankwell Financial Group Bankwell is a commercial bank that serves the banking needs of residents and businesses throughout Fairfield and New Haven Counties, Connecticut . For more information about this press release, interested parties may contact Christopher R. Gruseke , President and Chief Executive Officer or Penko Ivanov , Executive Vice President and Chief Financial Officer of Bankwell Financial Group at (203) 652-0166. For more information, visit www.mybankwell.com . This press release may contain certain forward-looking statements about the Company. Forward-looking statements include statements regarding anticipated future events and can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” Forward-looking statements, by their nature, are subject to risks and uncertainties. Certain factors that could cause actual results to differ materially from expected results include, but are not limited to, increased competitive pressures, changes in the interest rate environment, general economic conditions or conditions within the securities markets, uncertain impacts of, or additional changes in, monetary, fiscal or tax policy to address the impact of COVID-19, prolonged measures to contain the spread of COVID-19 or premature easing of such containment measures, either of which could further exacerbate the effects on the Company’s business and results of operations, and legislative and regulatory changes that could adversely affect the business in which the Company and its subsidiaries are engaged. Non-GAAP Financial Measures In addition to evaluating the Company's financial performance in accordance with U.S. generally accepted accounting principles ("GAAP"), management may evaluate certain non-GAAP financial measures, such as the efficiency ratio. A computation and reconciliation of certain non-GAAP financial measures used for these purposes is contained in the accompanying Reconciliation of GAAP to Non-GAAP Measures tables. We believe that providing certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends and financial position. For example, the Company believes that the efficiency ratio is useful in the assessment of financial performance, including noninterest expense control. The Company believes that tangible common equity, tangible book value per share, and return on average tangible common equity are useful to evaluate the relative strength of the Company's performance and capital position. We utilize these measures for internal planning and forecasting purposes. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED BALANCE SHEETS (unaudited) (Dollars in thousands) September 30 , 2021 June 30 , 2021 March 31 , 2021 December 31 , 2020 September 30 , 2020 ASSETS Cash and due from banks $ 169,417 $ 297,851 $ 351,194 $ 405,340 $ 333,103 Federal funds sold 8,097 4,036 10,811 4,258 6,380 Cash and cash equivalents 177,514 301,887 362,005 409,598 339,483 Investment securities Marketable equity securities, at fair value 2,185 2,192 2,178 2,207 2,203 Available for sale investment securities, at fair value 87,565 90,983 83,218 88,605 90,563 Held to maturity investment securities, at amortized cost 16,107 16,166 16,225 16,078 16,138 Total investment securities 105,857 109,341 101,621 106,890 108,904 Loans receivable (net of allowance for loan losses of $16,803 , $16,672 , $20,545 , $21,009 , and $20,372 at September 30, 2021 , June 30, 2021 , March 31, 2021 , December 31, 2020 , and September 30, 2020 , respectively) 1,805,217 1,719,274 1,650,127 1,601,672 1,600,776 Accrued interest receivable 6,911 6,661 7,306 6,579 7,294 Federal Home Loan Bank stock, at cost 3,632 3,844 6,446 7,860 7,860 Premises and equipment, net 35,118 33,916 33,386 21,762 26,616 Bank-owned life insurance 48,903 48,632 42,881 42,651 42,409 Goodwill 2,589 2,589 2,589 2,589 2,589 Other intangible assets 48 58 67 76 160 Deferred income taxes, net 7,718 8,208 8,908 11,300 11,149 Other assets 33,181 35,415 29,131 42,770 45,782 Total assets $ 2,226,688 $ 2,269,825 $ 2,244,467 $ 2,253,747 $ 2,193,022 LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities Deposits Noninterest bearing deposits $ 338,705 $ 328,473 $ 280,947 $ 270,235 $ 234,848 Interest bearing deposits 1,544,118 1,610,829 1,578,861 1,557,081 1,532,680 Total deposits 1,882,823 1,939,302 1,859,808 1,827,316 1,767,528 Advances from the Federal Home Loan Bank 80,000 75,000 125,000 175,000 175,000 Subordinated debentures 15,374 15,366 25,271 25,258 25,245 Accrued expenses and other liabilities 52,314 49,362 46,445 49,571 50,982 Total liabilities 2,030,511 2,079,030 2,056,524 2,077,145 2,018,755 Shareholders’ equity Common stock, no par value 119,588 120,451 120,398 121,338 120,854 Retained earnings 85,992 80,543 75,418 70,839 71,603 Accumulated other comprehensive loss (9,403) (10,199) (7,873) (15,575) (18,190) Total shareholders’ equity 196,177 190,795 187,943 176,602 174,267 Total liabilities and shareholders’ equity $ 2,226,688 $ 2,269,825 $ 2,244,467 $ 2,253,747 $ 2,193,022 BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited) (Dollars in thousands, except share data) For the Quarter Ended For the Nine Months Ended September 30 , 2021 June 30 , 2021 March 31 , 2021 December 31 , 2020 September 30 , 2020 September 30 , 2021 September 30 , 2020 Interest and dividend income Interest and fees on loans $ 19,795 $ 19,266 $ 17,900 $ 18,194 $ 18,027 $ 56,961 $ 55,471 Interest and dividends on securities 731 736 769 835 799 2,236 2,402 Interest on cash and cash equivalents 88 90 108 117 96 286 468 Total interest and dividend income 20,614 20,092 18,777 19,146 18,922 59,483 58,341 Interest expense Interest expense on deposits 2,387 2,744 3,114 3,557 4,104 8,245 14,623 Interest expense on borrowings 503 769 1,008 1,285 1,210 2,280 3,187 Total interest expense 2,890 3,513 4,122 4,842 5,314 10,525 17,810 Net interest income 17,724 16,579 14,655 14,304 13,608 48,958 40,531 Provision (credit) for loan losses 134 (20) (296) 709 712 (182) 6,896 Net interest income after provision (credit) for loan losses 17,590 16,599 14,951 13,595 12,896 49,140 33,635 Noninterest income Gains and fees from sales of loans 924 814 513 16 27 2,251 27 Bank owned life insurance 271 251 231 241 242 753 726 Service charges and fees 199 217 199 210 190 615 578 Gain on sale of other real estate owned, net — — — — 19 — 19 Other 43 158 1,013 154 136 1,213 913 Total noninterest income 1,437 1,440 1,956 621 614 4,832 2,263 Noninterest expense Salaries and employee benefits 4,782 3,960 4,769 5,453 5,295 13,511 15,902 Occupancy and equipment 2,615 3,250 2,406 4,516 2,266 8,271 6,410 Data processing 632 833 512 1,658 529 1,977 1,558 Professional services 498 547 587 591 374 1,632 1,519 Director fees 324 327 317 331 301 968 883 FDIC insurance 298 300 403 262 176 1,001 529 Marketing 186 140 (9) 118 151 317 512 Other 1,035 695 653 774 637 2,383 1,797 Total noninterest expense 10,370 10,052 9,638 13,703 9,729 30,060 29,110 Income before income tax expense 8,657 7,987 7,269 513 3,781 23,912 6,788 Income tax expense 1,802 1,759 1,579 177 790 5,140 1,220 Net income $ 6,855 $ 6,228 $ 5,690 $ 336 $ 2,991 $ 18,772 $ 5,568 Earnings Per Common Share: Basic $ 0.88 $ 0.79 $ 0.72 $ 0.04 $ 0.38 $ 2.38 $ 0.71 Diluted $ 0.87 $ 0.79 $ 0.71 $ 0.04 $ 0.38 $ 2.37 $ 0.71 Weighted Average Common Shares Outstanding: Basic 7,677,822 7,722,481 7,758,540 7,726,926 7,721,247 7,721,943 7,728,798 Diluted 7,738,758 7,768,026 7,800,777 7,728,206 7,721,459 7,779,632 7,749,199 Dividends per common share $ 0.18 $ 0.14 $ 0.14 $ 0.14 $ 0.14 $ 0.46 $ 0.42 BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited) For the Quarter Ended For the Nine Months Ended September 30 , 2021 June 30 , 2021 March 31 , 2021 December 31 , 2020 September 30 , 2020 September 30 , 2021 September 30 , 2020 Performance ratios: Return on average assets(1) 1.22 % 1.11 % 1.02 % 0.06 % 0.55 % 1.12 % 0.36 % Return on average stockholders' equity(1) 14.09 % 13.06 % 12.67 % 0.75 % 6.87 % 13.29 % 4.23 % Return on average tangible common equity(1) 14.29 % 13.25 % 12.86 % 0.76 % 6.98 % 13.48 % 4.30 % Net interest margin 3.39 % 3.12 % 2.74 % 2.66 % 2.67 % 3.08 % 2.81 % Efficiency ratio(2) 54.1 % 55.7 % 58.0 % 91.2 % 68.4 % 55.8 % 67.9 % Net loan charge-offs as a % of average loans — % 0.23 % 0.01 % — % — % 0.24 % — % Dividend payout ratio(3) 20.69 % 17.72 % 19.72 % 350.00 % 36.84 % 19.41 % 59.15 % (1) 2020 performance ratios were negatively impacted by 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 September 30 , 2021 June 30 , 2021 March 31 , 2021 December 31 , 2020 September 30 , 2020 Capital ratios: Total Common Equity Tier 1 Capital to Risk-Weighted Assets(1) 10.59 % 10.95 % 11.02 % 11.06 % 12.36 % Total Capital to Risk-Weighted Assets(1) 11.44 % 11.84 % 12.17 % 12.28 % 13.57 % Tier I Capital to Risk-Weighted Assets(1) 10.59 % 10.95 % 11.02 % 11.06 % 12.36 % Tier I Capital to Average Assets(1) 9.61 % 9.19 % 8.82 % 8.44 % 9.58 % Tangible common equity to tangible assets 8.70 % 8.30 % 8.27 % 7.73 % 7.83 % Tangible book value per common share(2) $ 25.25 $ 24.40 $ 23.99 $ 22.43 $ 22.20 (1) Represents Bank ratios. Current period capital ratios are preliminary subject to finalization of the FDIC Call Report. (2) Excludes unvested restricted shares of 178,797, 184,548, 186,485, 163,369, and 170,083 as of September 30, 2021 , June 30, 2021 , March 31, 2021 , December 31, 2020 , and September 30, 2020 , respectively. BANKWELL FINANCIAL GROUP, INC. ASSET QUALITY (unaudited) (Dollars in thousands) For the Quarter Ended September 30 , 2021 June 30 , 2021 March 31 , 2021 December 31 , 2020 September 30 , 2020 Allowance for loan losses: Balance at beginning of period $ 16,672 $ 20,545 $ 21,009 $ 20,372 $ 19,662 Charge-offs: Commercial real estate — (3,814) (163) — — Commercial business — (51) — (75) — Consumer (15) (4) (14) (11) (4) Total charge-offs (15) (3,869) (177) (86) (4) Recoveries: Commercial business 11 16 — 14 — Consumer 1 — 9 — 2 Total recoveries 12 16 9 14 2 Net loan charge-offs (3) (3,853) (168) (72) (2) Provision (credit) for loan losses 134 (20) (296) 709 712 Balance at end of period $ 16,803 $ 16,672 $ 20,545 $ 21,009 $ 20,372 As of September 30 , 2021 June 30 , 2021 March 31 , 2021 December 31 , 2020 September 30 , 2020 Asset quality: Nonaccrual loans Residential real estate $ 1,849 $ 1,160 $ 1,289 $ 1,492 $ 1,596 Commercial real estate 16,314 15,392 19,277 21,093 4,812 Commercial business 1,754 1,780 1,803 1,834 3,760 Construction 8,997 8,997 8,997 8,997 — Total nonaccrual loans 28,914 27,329 31,366 33,416 10,168 Other real estate owned — — — — — Total nonperforming assets $ 28,914 $ 27,329 $ 31,366 $ 33,416 $ 10,168 Nonperforming loans as a % of total loans 1.58 % 1.57 % 1.87 % 2.06 % 0.63 % Nonperforming assets as a % of total assets 1.30 % 1.20 % 1.40 % 1.48 % 0.46 % Allowance for loan losses as a % of total loans 0.92 % 0.96 % 1.23 % 1.29 % 1.25 % Allowance for loan losses as a % of nonperforming loans 58.11 % 61.00 % 65.50 % 62.87 % 200.35 % Total nonaccrual loans declined $4.5 million to $28.9 million as of September 30, 2021 when compared to December 31, 2020 partially a result of the charge-offs recognized in the second quarter of 2021. The Bank continues work-out activity on its nonaccrual loan population. Nonperforming assets as a percentage of total assets was 1.30% at September 30, 2021 , down from 1.48% at December 31, 2020 . The allowance for loan losses at September 30, 2021 was $16.8 million , representing 0.92% of total loans. BANKWELL FINANCIAL GROUP, INC. LOAN & DEPOSIT PORTFOLIO (unaudited) (Dollars in thousands) Period End Loan Composition September 30 , 2021 June 30 , 2021 December 31 , 2020 Current QTD % Change YTD % Change Residential Real Estate $ 90,110 $ 100,260 $ 113,557 (10.1) % (20.6) % Commercial Real Estate (1) 1,337,896 1,266,731 1,148,383 5.6 16.5 Construction 94,665 82,805 87,007 14.3 8.8 Total Real Estate Loans 1,522,671 1,449,796 1,348,947 5.0 12.9 Commercial Business(2) 292,825 279,814 276,601 4.6 5.9 Consumer 9,050 8,883 79 1.9 N/M(3) Total Loans $ 1,824,546 $ 1,738,493 $ 1,625,627 4.9 % 12.2 % (1) Includes owner occupied commercial real estate. (2) Includes $1.6 million , $7.9 million , and $34.8 million of PPP loans at September 30, 2021 , June 30, 2021 and December 31, 2020 , respectively. (3) Metric not meaningful. Gross loans totaled $1.8 billion at September 30, 2021 , an increase of $198.9 million compared to December 31, 2020 . Excluding PPP loans, gross loans increased by $232.1 million , or 14.6%, at September 30, 2021 when compared to December 31, 2020 . Period End Deposit Composition September 30 , 2021 June 30 , 2021 December 31 , 2020 Current QTD % Change YTD % Change Noninterest bearing demand $ 338,705 $ 328,473 $ 270,235 3.1 % 25.3 % NOW 103,180 136,558 101,737 (24.4) 1.4 Money Market 835,210 814,083 669,364 2.6 24.8 Savings 188,581 173,943 158,750 8.4 18.8 Time 417,147 486,245 627,230 (14.2) (33.5) Total Deposits $ 1,882,823 $ 1,939,302 $ 1,827,316 (2.9) % 3.0 % Total deposits were $1.9 billion at September 30, 2021 , compared to $1.8 billion at December 31, 2020 , an increase of $55.5 million , or 3.0%. BANKWELL FINANCIAL GROUP, INC. NONINTEREST INCOME (unaudited) (Dollars in thousands) For the Quarter Ended Noninterest income September 30 , 2021 June 30 , 2021 September 30 , 2020 Sep 21 vs. June 21 % Change Sep 21 vs. Sep 20 % Change Gains and fees from sales of loans $ 924 $ 814 $ 27 13.5 % 3,322.2 % Bank owned life insurance 271 251 242 8.0 12.0 Service charges and fees 199 217 190 (8.3) 4.7 Gain on sale of other real estate owned, net — — 19 N/A (100.0) Other 43 158 136 (72.8) (68.4) Total noninterest income $ 1,437 $ 1,440 $ 614 (0.2) % 134.0 % For the Nine Months Ended Noninterest income September 30, 2021 September 30, 2020 % Change Gains and fees from sales of loans $ 2,251 $ 27 8,237.0 % Bank owned life insurance 753 726 3.7 Service charges and fees 615 578 6.4 Gain on sale of other real estate owned, net — 19 (100.0) Other 1,213 913 32.9 Total noninterest income $ 4,832 $ 2,263 113.5 % Noninterest income increased by $0.8 million to $1.4 million for the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020 . Noninterest income increased by $2.6 million to $4.8 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 . The increase in noninterest income was driven by resumed loan sales, totaling $0.9 million and $2.3 million for the quarter and nine months ended September 30, 2021 , respectively. In addition, the increase in noninterest income for the nine months ended September 30, 2021 was impacted by a one-time federal payroll tax credit for COVID-19 of $0.9 million , partially offset by $0.4 million of non-recurring interest rate swap fees recognized during the nine months ended September 30, 2020 . BANKWELL FINANCIAL GROUP, INC. NONINTEREST EXPENSE (unaudited) (Dollars in thousands) For the Quarter Ended Noninterest expense September 30 , 2021 June 30 , 2021 September 30 , 2020 Sep 21 vs. June 21 % Change Sep 21 vs. Sep 20 % Change Salaries and employee benefits $ 4,782 $ 3,960 $ 5,295 20.8 % (9.7) % Occupancy and equipment 2,615 3,250 2,266 (19.5) 15.4 Data processing 632 833 529 (24.1) 19.5 Professional services 498 547 374 (9.0) 33.2 Director fees 324 327 301 (0.9) 7.6 FDIC insurance 298 300 176 (0.7) 69.3 Marketing 186 140 151 32.9 23.2 Other 1,035 695 637 48.9 62.5 Total noninterest expense $ 10,370 $ 10,052 $ 9,729 3.2 % 6.6 % For the Nine Months Ended Noninterest expense September 30, 2021 September 30, 2020 % Change Salaries and employee benefits $ 13,511 $ 15,902 (15.0) % Occupancy and equipment 8,271 6,410 29.0 Data processing 1,977 1,558 26.9 Professional services 1,632 1,519 7.4 FDIC insurance 1,001 529 89.2 Director fees 968 883 9.6 Marketing 317 512 (38.1) Other 2,383 1,797 32.6 Total noninterest expense $ 30,060 $ 29,110 3.3 % Noninterest expense increased by $0.6 million to $10.4 million for the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020 . The increase in noninterest expense was primarily driven by an increase in occupancy and equipment expense and other expense, partially offset by a decrease in salaries and employee benefits expense. Noninterest expense increased by $1.0 million to $30.1 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 . The increase in noninterest expense was primarily driven by an increase in occupancy and equipment expense, data processing expense, FDIC insurance expense and other expense, partially offset by a decrease in salaries and employee benefits expense. Occupancy and equipment expense totaled $2.6 million for the quarter ended September 30, 2021 , an increase of $0.3 million when compared to the same period in 2020. Occupancy and equipment expense totaled $8.3 million for the nine months ended September 30, 2021 , an increase of $1.9 million when compared to the same period in 2020. The increase in occupancy and equipment expense was primarily due to additional one-time charges 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. Data processing expense totaled $2.0 million for the nine months ended September 30, 2021 , an increase of $0.4 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 $1.0 million for the nine months ended September 30, 2021 , an increase of $0.5 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 the first half 2021. Salaries and employee benefits expense totaled $4.8 million for the quarter ended September 30, 2021 , a decrease of $0.5 million when compared to the same period in 2020. Salaries and employee benefits expense totaled $13.5 million for the nine months ended September 30, 2021 , a decrease of $2.4 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 134 at September 30, 2021 compared to 142 for the same period in 2020. Average full time equivalent employees totaled 127 for the nine months ended September 30, 2021 compared to 151 for the same period in 2020. In addition, salaries and employee benefits expense also benefited by one-time deferrals of $0.6 million for the nine months ended September 30, 2021 in costs associated with a new online banking and other systems. 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 September 30 , 2021 June 30 , 2021 March 31 , 2021 December 31 , 2020 September 30 , 2020 Total Equity $ 196,177 $ 190,795 $ 187,943 $ 176,602 $ 174,267 Less: Goodwill 2,589 2,589 2,589 2,589 2,589 Other intangibles 48 58 67 76 160 Tangible Common Equity $ 193,540 $ 188,148 $ 185,287 $ 173,937 $ 171,518 Total Assets $ 2,226,688 $ 2,269,825 $ 2,244,467 $ 2,253,747 $ 2,193,022 Less: Goodwill 2,589 2,589 2,589 2,589 2,589 Other intangibles 48 58 67 76 160 Tangible Assets $ 2,224,051 $ 2,267,178 $ 2,241,811 $ 2,251,082 $ 2,190,273 Tangible Common Equity to Tangible Assets 8.70 % 8.30 % 8.27 % 7.73 % 7.83 % As of Computation of Tangible Book Value per Common Share September 30 , 2021 June 30 , 2021 March 31 , 2021 December 31 , 2020 September 30 , 2020 Total shareholders' equity $ 196,177 $ 190,795 $ 187,943 $ 176,602 $ 174,267 Less: Preferred stock — — — — — Common shareholders' equity $ 196,177 $ 190,795 $ 187,943 $ 176,602 $ 174,267 Less: Goodwill 2,589 2,589 2,589 2,589 2,589 Other intangibles 48 58 67 76 160 Tangible common shareholders' equity $ 193,540 $ 188,148 $ 185,287 $ 173,937 $ 171,518 Common shares 7,842,824 7,895,101 7,908,630 7,919,278 7,896,503 Less: Shares of unvested restricted stock 178,797 184,548 186,485 163,369 170,083 Common shares less unvested restricted stock 7,664,027 7,710,553 7,722,145 7,755,909 7,726,420 Book value per share $ 25.60 $ 24.74 $ 24.34 $ 22.77 $ 22.55 Less: Effects of intangible assets $ 0.34 $ 0.34 $ 0.34 $ 0.34 $ 0.36 Tangible Book Value per Common Share $ 25.25 $ 24.40 $ 23.99 $ 22.43 $ 22.20 BANKWELL FINANCIAL GROUP, INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES (unaudited) - Continued (Dollars in thousands) For the Quarter Ended For the Nine Months Ended Computation of Efficiency Ratio September 30 , 2021 June 30 , 2021 March 31 , 2021 December 31 , 2020 September 30 , 2020 September 30 , 2021 September 30 , 2020 Noninterest expense $ 10,370 $ 10,052 $ 9,638 $ 13,703 $ 9,729 $ 30,060 $ 29,110 Less: Amortization of intangible assets 9 9 9 84 18 28 54 Other real estate owned expenses — — — — — — 6 Adjusted noninterest expense $ 10,361 $ 10,043 $ 9,629 $ 13,619 $ 9,711 $ 30,032 $ 29,050 Net interest income $ 17,724 $ 16,579 $ 14,655 $ 14,304 $ 13,608 $ 48,958 $ 40,531 Noninterest income 1,437 1,440 1,956 621 614 4,832 2,263 Less: Net gain on sale of available for sale securities — — — — — — — Gain on sale of other real estate owned, net — — — — 19 — 19 Operating revenue $ 19,161 $ 18,019 $ 16,611 $ 14,925 $ 14,203 $ 53,790 $ 42,775 Efficiency ratio 54.1 % 55.7 % 58.0 % 91.2 % 68.4 % 55.8 % 67.9 % For the Quarter Ended For the Nine Months Ended Computation of Return on Average Tangible Common Equity September 30 , 2021 June 30 , 2021 March 31 , 2021 December 31 , 2020 September 30 , 2020 September 30 , 2021 September 30 , 2020 Net Income Attributable to Common Shareholders $ 6,855 $ 6,228 $ 5,690 $ 336 $ 2,991 $ 18,772 $ 5,568 Total average shareholders' equity $ 192,993 $ 191,224 $ 182,058 $ 178,439 $ 173,162 $ 188,794 $ 175,838 Less: Average Goodwill 2,589 2,589 2,589 2,589 2,589 2,589 2,589 Average Other intangibles 54 64 73 153 172 64 190 Average tangible common equity $ 190,350 $ 188,571 $ 179,396 $ 175,697 $ 170,401 $ 186,141 $ 173,059 Annualized Return on Average Tangible Common Equity 14.29 % 13.25 % 12.86 % 0.76 % 6.98 % 13.48 % 4.30 % BANKWELL FINANCIAL GROUP, INC. NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS - QTD (unaudited) (Dollars in thousands) For the Quarter Ended September 30, 2021 September 30, 2020 Average Balance Interest Yield/ Rate (4) Average Balance Interest Yield/ Rate (4) Assets: Cash and Fed funds sold $ 209,500 $ 88 0.17 % $ 312,078 $ 96 0.12 % Securities(1) 105,030 766 2.92 96,448 776 3.22 Loans: Commercial real estate 1,270,375 14,345 4.42 1,087,765 12,570 4.52 Residential real estate 95,100 809 3.40 125,069 1,097 3.51 Construction 88,728 845 3.73 94,984 1,029 4.24 Commercial business 314,484 3,707 4.61 322,066 3,329 4.04 Consumer 8,870 89 3.99 121 2 7.37 Total loans 1,777,557 19,795 4.36 1,630,005 18,027 4.33 Federal Home Loan Bank stock 3,133 16 2.04 7,835 77 3.91 Total earning assets 2,095,220 $ 20,665 3.86 % 2,046,366 $ 18,976 3.63 % Other assets 131,670 132,617 Total assets $ 2,226,890 $ 2,178,983 Liabilities and shareholders' equity: Interest bearing liabilities: NOW $ 111,813 $ 51 0.18 % $ 87,890 $ 40 0.18 % Money market 824,203 1,053 0.51 517,638 859 0.66 Savings 182,848 96 0.21 163,135 237 0.58 Time 448,218 1,187 1.05 757,176 2,968 1.56 Total interest bearing deposits 1,567,082 2,387 0.60 1,525,839 4,104 1.07 Borrowed Money 72,960 503 2.70 200,237 1,210 2.36 Total interest bearing liabilities 1,640,042 $ 2,890 0.70 % 1,726,076 $ 5,314 1.22 % Noninterest bearing deposits 341,303 226,473 Other liabilities 52,552 53,272 Total liabilities 2,033,897 2,005,821 Shareholders' equity 192,993 173,162 Total liabilities and shareholders' equity $ 2,226,890 $ 2,178,983 Net interest income(2) $ 17,775 $ 13,662 Interest rate spread 3.16 % 2.41 % Net interest margin(3) 3.39 % 2.67 % (1) Average balances and yields for securities are based on amortized cost. (2) The adjustment for securities and loans taxable equivalency amounted to $51 thousand and $54 thousand for the quarters ended September 30, 2021 and 2020, respectively. (3) Annualized net interest income as a percentage of earning assets. (4) 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 Nine Months Ended September 30, 2021 September 30, 2020 Average Balance Interest Yield/ Rate (4) Average Balance Interest Yield/ Rate (4) Assets: Cash and Fed funds sold $ 315,102 $ 286 0.12 % $ 207,058 $ 468 0.30 % Securities(1) 103,192 2,315 2.99 96,761 2,289 3.15 Loans: Commercial real estate 1,188,049 40,802 4.53 1,094,956 38,460 4.61 Residential real estate 104,320 2,669 3.41 134,369 3,636 3.61 Construction 97,828 2,769 3.73 98,539 3,350 4.47 Commercial business 302,019 10,495 4.58 289,959 10,017 4.54 Consumer 7,601 226 3.97 130 8 8.15 Total loans 1,699,817 56,961 4.42 1,617,953 55,471 4.50 Federal Home Loan Bank stock 4,608 72 2.09 7,547 272 4.81 Total earning assets 2,122,719 $ 59,634 3.70 % 1,929,319 $ 58,500 3.98 % Other assets 119,098 125,957 Total assets $ 2,241,817 $ 2,055,276 Liabilities and shareholders' equity: Interest bearing liabilities: NOW $ 110,637 $ 148 0.18 % $ 76,661 $ 99 0.17 % Money market 781,178 2,944 0.50 473,485 3,213 0.91 Savings 170,749 313 0.24 170,262 1,204 0.94 Time 532,278 4,840 1.22 721,051 10,107 1.87 Total interest bearing deposits 1,594,842 8,245 0.69 1,441,459 14,623 1.36 Borrowed Money 108,737 2,280 2.77 187,177 3,187 2.24 Total interest bearing liabilities 1,703,579 $ 10,525 0.83 % 1,628,636 $ 17,810 1.46 % Noninterest bearing deposits 303,421 201,384 Other liabilities 46,023 49,418 Total liabilities 2,053,023 1,879,438 Shareholders' equity 188,794 175,838 Total liabilities and shareholders' equity $ 2,241,817 $ 2,055,276 Net interest income(2) $ 49,109 $ 40,690 Interest rate spread 2.87 % 2.52 % Net interest margin(3) 3.08 % 2.81 % (1) Average balances and yields for securities are based on amortized cost. (2) The adjustment for securities and loans taxable equivalency amounted to $151 thousand and $159 thousand for the nine months ended September 30, 2021 and 2020, respectively. (3) Annualized net interest income as a percentage of earning assets. (4) 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/20211027006126/en/ Bankwell Financial Group 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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