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.

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