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

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NEW CANAAN, Conn., July 28, 2021--(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/

Contacts

Bankwell Financial Group
Christopher R. Gruseke, President and Chief Executive Officer
Penko Ivanov, Executive Vice President and Chief Financial Officer
(203) 652-0166

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