Bankwell Financial Group Reports Record Operating Results for the Second Quarter; Increases Dividend by 29%

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 $6.2 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, 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 , 2021 March 31 , 2021 December 31 , 2020 June 30 , 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 , 2021 March 31 , 2021 December 31 , 2020 June 30 , 2020 June 30 , 2021 June 30 , 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 , 2021 March 31 , 2021 December 31 , 2020 June 30 , 2020 June 30 , 2021 June 30 , 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 , 2021 March 31 , 2021 December 31 , 2020 June 30 , 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 , 2021 March 31 , 2021 December 31 , 2020 June 30 , 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 , 2021 March 31 , 2021 December 31 , 2020 June 30 , 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 June 30 , 2021 March 31 , 2021 December 31 , 2020 Current QTD % Change YTD % Change Residential Real Estate $ 100,260 $ 109,752 $ 113,557 (8.6 )% (11.7 )% Commercial Real Estate (1) 1,266,731 1,183,848 1,148,383 7.0 10.3 Construction 82,805 103,099 87,007 (19.7 ) (4.8 ) Total Real Estate Loans 1,449,796 1,396,699 1,348,947 3.8 7.5 Commercial Business(2) 279,814 267,698 276,601 4.5 1.2 Consumer 8,883 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. 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 , 2021 March 31 , 2021 December 31 , 2020 Current QTD % Change YTD % 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 , 2021 March 31 , 2021 June 30 , 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 , 2021 March 31 , 2021 June 30 , 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 , 2021 March 31 , 2021 December 31 , 2020 June 30 , 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 , 2021 March 31 , 2021 December 31 , 2020 June 30 , 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 , 2021 March 31 , 2021 December 31 , 2020 June 30 , 2020 June 30 , 2021 June 30 , 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 , 2021 March 31 , 2021 December 31 , 2020 June 30 , 2020 June 30 , 2021 June 30 , 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 Balance Interest Yield/ Rate (5) Average Balance Interest Yield/ 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 Balance Interest Yield/ Rate (5) Average Balance Interest Yield/ 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. View source version on businesswire.com : https://www.businesswire.com/news/home/20210728006034/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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