Bankwell Financial Group Reports Operating Results for the Third Quarter and Declares Fourth Quarter Dividend

Bankwell Financial Group, Inc. (NASDAQ: BWFG) reported GAAP net income of $9.8 million, or $1.25 per share for the third quarter of 2023, versus $9.2 million, or $1.18 per share, for the same period in 2022.

The Company's Board of Directors declared a $0.20 per share cash dividend, payable November 20, 2023 to shareholders of record on November 10, 2023.

We recommend reading this earnings release in conjunction with the Third Quarter 2023 Investor Presentation, located at http://investor.mybankwell.com/Presentations and included as an exhibit to our October 25, 2023 Current Report on Form 8-K.

Notes Bankwell Financial Group President and CEO, Christopher R. Gruseke:

"We continue to generate quality returns for our shareholders in a complex interest rate environment. Despite the compression of our Net Interest Margin during the current tightening cycle, our team has delivered a 1.16% Return on Average Assets and a 15.16% Return on Average Equity thus far this year. Our commitment to rigorous expense management lays a solid foundation for our financial success. Non-Interest Expense as a percentage Average Assets stands at 1.54% year-to date, putting Bankwell well ahead of industry peers on this key metric. I applaud the efforts and hard work of our team who enable the Company to perform at this level of efficiency."

Third Quarter 2023 Highlights:

• Total gross loans were $2.8 billion, growing $94.7 million, or 3.5%, compared to December 31, 2022.
• Deposits were $2.8 billion, decreasing $32.2 million, or 1.1%, compared to December 31, 2022.
• Brokered deposits decreased $75.3 million, when compared to December 31, 2022.
• FDIC-insured deposits totaled $2.0 billion and represent 71.2% of total deposits as of September 30, 2023.
• As of September 30, 2023, the Bank has $1.7 billion immediately available liquidity, more than two times coverage of uninsured deposits.
• Average yield on 2023 funded loans was 7.23% as of September 30, 2023.
• Return on average assets was 1.19% for the quarter ended September 30, 2023.
• Return on average shareholders' equity was 15.19% for the quarter ended September 30, 2023.
• The net interest margin was 2.85% for the quarter ended September 30, 2023.
• Noninterest expense to average assets was 1.48% for the quarter ended September 30, 2023.
• Investment securities totaled $115.8 million and represent 3.6% of total assets, with HTM securities totaling $15.9 million, or 0.5% of total assets.
• Allowance for credit losses (ACL)-Loans to total loans was 1.06% as of September 30, 2023.

Earnings and Performance

Revenues (net interest income plus noninterest income) for the quarter ended September 30, 2023 were $23.5 million, versus $25.0 million for the quarter ended September 30, 2022. Revenues for the nine months ended September 30, 2023 were $75.9 million, versus $70.4 million for the nine months ended September 30, 2022. The decrease in revenues for the quarter was primarily attributable to an increase in interest expense partially offset by an increase in interest on loans due to higher overall loan yields¹. The increase in revenues for the nine months ended 2023 was primarily attributable to an increase in interest and fees on loans due to loan growth and higher overall loan yields¹ partially offset by an increase in interest expense.

1 - The increase in overall loan yields was 100 bps and 114 bps for the quarter and nine months ended September 30, 2023, respectively.

Net income for the quarter ended September 30, 2023 was $9.8 million, versus $9.2 million for the quarter ended September 30, 2022. Net income for the nine months ended September 30, 2023 was $28.1 million, versus $29.4 million for the nine months ended September 30, 2022. The increase in net income for the quarter ended 2023 was primarily due to the credit for credit losses, partially offset by an increase in noninterest expense, and the aforementioned decrease in revenues. The decrease in net income for nine months ended 2023 was due to an increase in noninterest expense partially offset by the aforementioned increase in revenues.

Basic and diluted earnings per share were $1.25 and $1.25, respectively, for the quarter ended September 30, 2023 compared to basic and diluted earnings per share of $1.19 and $1.18, respectively, for the quarter ended September 30, 2022. Basic and diluted earnings per share were $3.61 and $3.58, respectively, for the nine months ended September 30, 2023 compared to basic and diluted earnings per share of $3.80 and $3.75, respectively, for the nine months ended September 30, 2022.

The net interest margin (fully taxable equivalent basis) for the quarters ended September 30, 2023 and September 30, 2022 was 2.85% and 4.12%, respectively. The net interest margin (fully taxable equivalent basis) for the nine months ended September 30, 2023 and September 30, 2022 was 3.04% and 3.81%, respectively. The decrease in the net interest margin was due to an increase in funding costs partially offset by an increase in earning assets.

ACL-Loans

The ACL-Loans was $29.3 million as of September 30, 2023 compared to $30.7 million as of June 30, 2023, for a release of $1.4 million for the quarter ended September 30, 2023. The ACL-Loans as a percentage of total loans was 1.06% as of September 30, 2023 compared to 1.11% as of June 30, 2023. The reduction for the quarter was primarily due to a revision in the CECL methodology given further refinement of the Company's loan portfolio segmentation.

The ACL-Loans was $29.3 million as of September 30, 2023 compared to $22.4 million as of December 31, 2022, an increase of $6.9 million year to date, of which $5.1 million being the CECL transition adjustment to retained earnings. The ACL-Loans as a percentage of total loans was 1.06% as of September 30, 2023 compared to 0.84% as of December 31, 2022. The increase in the ACL-Loans provision for credit losses was primarily driven by loan growth and forward looking CECL macroeconomic factors.

Financial Condition

Assets totaled $3.2 billion at September 30, 2023, a decrease of $2.7 million or 0.1% compared to December 31, 2022. Gross loans totaled $2.8 billion at September 30, 2023, an increase of $94.7 million, or 3.5% compared to December 31, 2022. Deposits totaled $2.8 billion at September 30, 2023, a decrease of $32.2 million, or 1.1% compared to December 31, 2022.

Capital

Shareholders’ equity totaled $257.9 million as of September 30, 2023, an increase of $19.4 million compared to December 31, 2022, primarily a result of net income of $28.1 million for the nine months ended September 30, 2023. The increase was partially offset by the Day 1 CECL adoption of $4.9 million, dividends paid of $4.7 million, and a $1.3 million unfavorable impact to accumulated other comprehensive income. The unfavorable impact to accumulated other comprehensive income was driven by fair value marks on the Company's available for sale investment securities portfolio of $1.4 million partially offset by fair value marks related to hedge positions involving interest rate swaps of $0.1 million. The Company's interest rate swaps are used to hedge interest rate risk.

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 Courtney E. Sacchetti, 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 increased competitive pressures, changes in the interest rate environment, general economic conditions or conditions within the banking industry or securities markets, 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 assets, tangible common equity to tangible assets, tangible common shareholders' equity, fully diluted tangible book value per common share, adjusted noninterest expense, operating revenue, efficiency ratio, average tangible common equity, annualized return on average tangible common equity, return on average assets, return on average shareholders' equity, and the dividend payout ratio are useful to evaluate the relative strength of the Company's performance and capital position. We utilize these measures for internal planning and forecasting purposes. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure.

BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED BALANCE SHEETS (unaudited) (Dollars in thousands)
	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
ASSETS
Cash and due from banks	$	256,973			$	207,345			$	249,812			$	344,925			$	212,175
Federal funds sold		1,122				54,706				27,370				10,754				10,947
Cash and cash equivalents		258,095				262,051				277,182				355,679				223,122
Investment securities
Marketable equity securities, at fair value		1,975				2,017				2,028				1,988				1,973
Available for sale investment securities, at fair value		97,907				99,938				103,171				103,663				95,095
Held to maturity investment securities, at amortized cost		15,885				15,884				15,931				15,983				16,027
Total investment securities		115,767				117,839				121,130				121,634				113,095
Loans receivable (net of ACL-Loans of $29,284, $30,694, $27,998, $22,431, and $18,167 at September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022, and September 30, 2022, respectively)		2,735,242				2,736,607				2,724,514				2,646,384				2,263,432
Accrued interest receivable		15,648				14,208				14,261				13,070				9,552
Federal Home Loan Bank stock, at cost		5,696				5,696				5,234				5,216				5,039
Premises and equipment, net		26,899				27,658				27,619				27,199				27,510
Bank-owned life insurance		51,119				50,816				50,524				50,243				49,970
Goodwill		2,589				2,589				2,589				2,589				2,589
Deferred income taxes, net		9,395				10,014				8,692				7,422				5,952
Other assets		29,326				25,229				20,573				23,013				22,734
Total assets	$	3,249,776			$	3,252,707			$	3,252,318			$	3,252,449			$	2,722,995
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits
Noninterest bearing deposits	$	345,433			$	367,635			$	377,667			$	404,559			$	380,365
Interest bearing deposits		2,423,193				2,421,228				2,420,641				2,396,259				1,906,337
Total deposits		2,768,626				2,788,863				2,798,308				2,800,818				2,286,702
Advances from the Federal Home Loan Bank		90,000				90,000				90,000				90,000				90,000
Subordinated debentures		69,143				69,082				69,020				68,959				68,897
Accrued expenses and other liabilities		64,145				55,949				52,683				54,203				45,896
Total liabilities		2,991,914				3,003,894				3,010,011				3,013,980				2,491,495
Shareholders’ equity
Common stock, no par value		117,181				116,541				115,875				115,018				114,548
Retained earnings		142,205				133,988				127,566				123,640				117,152
Accumulated other comprehensive (loss)		(1,524	)			(1,716	)			(1,134	)			(189	)			(200	)
Total shareholders’ equity		257,862				248,813				242,307				238,469				231,500
Total liabilities and shareholders’ equity	$	3,249,776			$	3,252,707			$	3,252,318			$	3,252,449			$	2,722,995

BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited) (Dollars in thousands, except share data)
	For the Quarter Ended																		For the Nine Months Ended
	September 30, 2023				June 30, 2023			March 31, 2023			December 31, 2022				September 30, 2022				September 30, 2023			September 30, 2022
Interest and dividend income
Interest and fees on loans	$	43,854			$	42,482		$	39,723		$	36,545			$	28,128			$	126,059		$	74,697
Interest and dividends on securities		1,016				1,002			1,000			898				811				3,018			2,305
Interest on cash and cash equivalents		3,393				3,022			3,568			2,150				747				9,983			1,350
Total interest and dividend income		48,263				46,506			44,291			39,593				29,686				139,060			78,352
Interest expense
Interest expense on deposits		23,789				20,777			17,033			11,083				4,092				61,599			8,281
Interest expense on borrowings		1,783				1,738			1,717			1,701				993				5,238			2,137
Total interest expense		25,572				22,515			18,750			12,784				5,085				66,837			10,418
Net interest income		22,691				23,991			25,541			26,809				24,601				72,223			67,934
(Credit) provision for credit losses		(1,579	)			2,579			826			4,272				2,381				1,826			1,165
Net interest income after provision for credit losses		24,270				21,412			24,715			22,537				22,220				70,397			66,769
Noninterest income
Bank owned life insurance		303				292			281			273				271				876			796
Service charges and fees		294				361			286			343				240				941			729
Gains and fees from sales of loans		237				725			931			12				(15	)			1,893			1,224
Other		(48	)			23			28			(100	)			(94	)			3			(237	)
Total noninterest income		786				1,401			1,526			528				402				3,713			2,512
Noninterest expense
Salaries and employee benefits		6,036				6,390			6,081			5,988				5,876				18,507			16,249
Occupancy and equipment		2,146				2,204			2,084			1,919				2,035				6,434			6,378
Professional services		491				692			1,322			912				994				2,505			2,975
Data processing		741				729			671			663				626				2,141			1,969
Director fees		362				453			392			378				325				1,207			1,016
FDIC insurance		1,026				1,050			1,062			898				255				3,138			740
Marketing		184				177			151			112				102				512			254
Other		1,219				946			928			1,601				818				3,093			2,311
Total noninterest expense		12,205				12,641			12,691			12,471				11,031				37,537			31,892
Income before income tax expense		12,851				10,172			13,550			10,594				11,591				36,573			37,389
Income tax expense		3,074				2,189			3,171			2,573				2,417				8,434			7,981
Net income	$	9,777			$	7,983		$	10,379		$	8,021			$	9,174			$	28,139		$	29,408
Earnings Per Common Share:
Basic	$	1.25			$	1.02		$	1.34		$	1.04			$	1.19			$	3.61		$	3.80
Diluted	$	1.25			$	1.02		$	1.33		$	1.04			$	1.18			$	3.58		$	3.75
Weighted Average Common Shares Outstanding:
Basic		7,598,230				7,593,417			7,554,689			7,507,540				7,553,718				7,582,272			7,582,175
Diluted		7,633,934				7,601,562			7,616,671			7,563,116				7,612,421				7,646,837			7,664,123
Dividends per common share	$	0.20			$	0.20		$	0.20		$	0.20			$	0.20			$	0.60		$	0.60

BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)
	For the Quarter Ended															For the Nine Months Ended
	September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022			September 30, 2023			September 30, 2022
Performance ratios:
Return on average assets	1.19	%		0.99	%		1.30	%		1.07	%		1.47	%		1.16	%		1.59	%
Return on average shareholders' equity	15.19	%		12.91	%		17.48	%		13.38	%		15.73	%		15.16	%		17.94	%
Return on average tangible common equity	15.35	%		13.05	%		17.67	%		13.52	%		15.91	%		15.32	%		18.16	%
Net interest margin	2.85	%		3.07	%		3.24	%		3.70	%		4.12	%		3.04	%		3.81	%
Efficiency ratio(1)	52.0	%		49.8	%		46.9	%		45.6	%		44.1	%		49.4	%		45.3	%
Net loan charge-offs as a % of average loans	—	%		—	%		0.02	%		—	%		—	%		0.01	%		—	%
Dividend payout ratio(2)	16.00	%		19.61	%		15.04	%		19.23	%		16.95	%		16.76	%		16.00	%

(1)

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.

(2)

The dividend payout ratio is calculated by dividing dividends per share by earnings per share.

	As of
	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Capital ratios:
Total Common Equity Tier 1 Capital to Risk-Weighted Assets(1)		10.82	%			10.34	%			10.17	%			10.28	%			11.42	%
Total Capital to Risk-Weighted Assets(1)		11.86	%			11.41	%			11.16	%			11.07	%			12.16	%
Tier I Capital to Risk-Weighted Assets(1)		10.82	%			10.34	%			10.17	%			10.28	%			11.42	%
Tier I Capital to Average Assets(1)		9.60	%			9.41	%			9.22	%			9.88	%			11.31	%
Tangible common equity to tangible assets		7.86	%			7.58	%			7.38	%			7.26	%			8.41	%
Fully diluted tangible book value per common share	$	32.55			$	31.45			$	30.56			$	30.51			$	29.68

(1)	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
	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
ACL-Loans:
Balance at beginning of period	$	30,694			$	27,998			$	22,431			$	18,167			$	15,773
Day 1 CECL Adjustment on January 1, 2023		—				—				5,079				—				—
Beginning balance January 1, 2023		30,694				27,998				27,510				18,167				—
Charge-offs:
Commercial business		—				—				(440	)			—				—
Consumer		(31	)			(25	)			(12	)			(11	)			(8	)
Total charge-offs		(31	)			(25	)			(452	)			(11	)			(8	)
Recoveries:
Commercial real estate		—				—				—				—				—
Commercial business		35				32				—				—				21
Consumer		19				10				6				3				—
Total recoveries		54				42				6				3				21
Net loan recoveries (charge-offs)		23				17				(446	)			(8	)			13
(Credit) provision for credit losses - loans		(1,433	)			2,679				934				4,272				2,381
Balance at end of period	$	29,284			$	30,694			$	27,998			$	22,431			$	18,167

	As of
	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Asset quality:
Nonaccrual loans
Residential real estate	$	1,408			$	1,429			$	1,443			$	2,152			$	2,137
Commercial real estate		1,898				1,905				1,912				2,781				2,894
Commercial business		7,352				2,815				1,528				2,126				2,380
Construction		9,382				9,382				9,382				9,382				9,382
Consumer		7,917				—				—				—				—
Total nonaccrual loans		27,957				15,531				14,265				16,441				16,793
Other real estate owned		—				—				—				—				—
Total nonperforming assets	$	27,957			$	15,531			$	14,265			$	16,441			$	16,793
Nonperforming loans as a % of total loans		1.01	%			0.56	%			0.52	%			0.61	%			0.73	%
Nonperforming assets as a % of total assets		0.86	%			0.48	%			0.44	%			0.51	%			0.62	%
ACL-loans as a % of total loans		1.06	%			1.11	%			1.01	%			0.84	%			0.79	%
ACL-loans as a % of nonperforming loans		104.75	%			197.63	%			196.27	%			136.43	%			108.18	%
Total past due loans to total loans		1.44	%			1.30	%			0.94	%			0.60	%			0.78	%

Total nonaccrual loans increased $11.5 million to $28.0 million as of September 30, 2023 when compared to December 31, 2022. Nonaccrual loans increased primarily due to three distinct loans:

• One Consumer (insurance premium) loan of $7.9 million. As of October 4, 2023, the loan balance has been reduced to $3.9 million. The Bank holds collateral for the remaining balance, worth approximately two times the outstanding amount.
• Two Commercial business loans totaling $5.5 million, of which approximately 82% is guaranteed by the U.S. Government (SBA).

Nonperforming assets as a percentage of total assets increased to 0.86% at September 30, 2023 from 0.51% at December 31, 2022. The ACL-Loans at September 30, 2023 was $29.3 million, representing 1.06% of total loans.

BANKWELL FINANCIAL GROUP, INC. LOAN & DEPOSIT PORTFOLIO (unaudited) (Dollars in thousands)
Period End Loan Composition	September 30, 2023			June 30, 2023			December 31, 2022			Current QTD % Change			YTD % Change
Residential Real Estate	$	52,908		$	54,631		$	60,588		(3.2	)%		(12.7	)%
Commercial Real Estate(1)		1,955,992			1,930,972			1,921,252		1.3			1.8
Construction		199,972			219,615			155,198		(8.9	)		28.8
Total Real Estate Loans		2,208,872			2,205,218			2,137,038		0.2			3.4
Commercial Business		508,626			530,913			520,447		(4.2	)		(2.3	)
Consumer		52,612			37,475			17,963		40.4			192.9
Total Loans	$	2,770,110		$	2,773,606		$	2,675,448		(0.1	)%		3.5	%
(1) Includes owner occupied commercial real estate.

Gross loans totaled $2.8 billion at September 30, 2023, an increase of $94.7 million or 3.5% compared to December 31, 2022.

Period End Deposit Composition	September 30, 2023			June 30, 2023			December 31, 2022			Current QTD % Change			YTD % Change
Noninterest bearing demand	$	345,433		$	367,635		$	404,559		(6.0	)%		(14.6	)%
NOW		101,719			106,189			104,057		(4.2	)		(2.2	)
Money Market		879,978			879,017			913,868		0.1			(3.7	)
Savings		102,207			108,625			151,944		(5.9	)		(32.7	)
Time		1,339,289			1,327,397			1,226,390		0.9			9.2
Total Deposits	$	2,768,626		$	2,788,863		$	2,800,818		(0.7	)%		(1.1	)%

Total deposits were $2.8 billion at September 30, 2023, a decrease of $32.2 million, or 1.1%, when compared to December 31, 2022. Brokered deposits have decreased $75.3 million, when compared to December 31, 2022.

BANKWELL FINANCIAL GROUP, INC. NONINTEREST EXPENSE (unaudited) (Dollars in thousands)
	For the Quarter Ended
Noninterest expense	September 30, 2023			June 30, 2023			September 30, 2022			Sep 23 vs. June 23 % Change			Sep 23 vs. Sep 22 % Change
Salaries and employee benefits	$	6,036		$	6,390		$	5,876		(5.5	)%		2.7	%
Occupancy and equipment		2,146			2,204			2,035		(2.6	)		5.5
Professional services		491			692			994		(29.0	)		(50.6	)
Data processing		741			729			626		1.6			18.4
Director fees		362			453			325		(20.1	)		11.4
FDIC insurance		1,026			1,050			255		(2.3	)		302.4
Marketing		184			177			102		4.0			80.4
Other		1,219			946			818		28.9			49.0
Total noninterest expense	$	12,205		$	12,641		$	11,031		(3.4	)%		10.6	%

	For the Nine Months Ended
Noninterest expense	September 30, 2023			September 30, 2022			% Change
Salaries and employee benefits	$	18,507		$	16,249		13.9	%
Occupancy and equipment		6,434			6,378		0.9	%
Professional services		2,505			2,975		(15.8	)%
Data processing		2,141			1,969		8.7	%
Director fees		1,207			1,016		18.8	%
FDIC insurance		3,138			740		324.1	%
Marketing		512			254		101.6	%
Other		3,093			2,311		33.8	%
Total noninterest expense	$	37,537		$	31,892		17.7	%

Noninterest expense increased by $1.2 million to $12.2 million for the quarter ended September 30, 2023 compared to the quarter ended September 30, 2022. Noninterest expense increased by $5.6 million to $37.5 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase in noninterest expense was primarily driven by an increase in FDIC insurance expense and salaries and employee benefits expense.

FDIC insurance expense totaled $1.0 million for the quarter ended September 30, 2023, an increase of $0.8 million when compared to the same period in 2022. FDIC insurance expense totaled $3.1 million for the nine months ended September 30, 2023, an increase of $2.4 million when compared to the same period in 2022. The increase in FDIC insurance expense is attributed to balance sheet growth and composition, as well as an increase in FDIC insurance rates.

Salaries and employee benefits expense totaled $18.5 million for the nine months ended September 30, 2023, an increase of $2.3 million when compared to the same period in 2022. The increase in salaries and employee benefits expense was driven by an increase in average full time equivalent employees from 139 at September 30, 2023 compared to 131 for the same period in 2022. In addition, salaries and employee benefits expense increased due to one-time severance costs.

BANKWELL FINANCIAL GROUP, INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES (unaudited) (Dollars in thousands, except share data)
	As of
Computation of Tangible Common Equity to Tangible Assets	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Total Equity	$	257,862			$	248,813			$	242,307			$	238,469			$	231,500
Less:
Goodwill		2,589				2,589				2,589				2,589				2,589
Other intangibles		—				—				—				—				—
Tangible Common Equity	$	255,273			$	246,224			$	239,718			$	235,880			$	228,911
Total Assets	$	3,249,776			$	3,252,707			$	3,252,318			$	3,252,449			$	2,722,995
Less:
Goodwill		2,589				2,589				2,589				2,589				2,589
Other intangibles		—				—				—				—				—
Tangible Assets	$	3,247,187			$	3,250,118			$	3,249,729			$	3,249,860			$	2,720,406
Tangible Common Equity to Tangible Assets		7.86	%			7.58	%			7.38	%			7.26	%			8.41	%

	As of
Computation of Fully Diluted Tangible Book Value per Common Share	September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022
Total shareholders' equity	$	257,862		$	248,813		$	242,307		$	238,469		$	231,500
Less:
Preferred stock		—			—			—			—			—
Common shareholders' equity	$	257,862		$	248,813		$	242,307		$	238,469		$	231,500
Less:
Goodwill		2,589			2,589			2,589			2,589			2,589
Other intangibles		—			—			—			—			—
Tangible common shareholders' equity	$	255,273		$	246,224		$	239,718		$	235,880		$	228,911
Common shares issued and outstanding		7,841,616			7,829,950			7,843,438			7,730,699			7,711,843
Fully Diluted Tangible Book Value per Common Share	$	32.55		$	31.45		$	30.56		$	30.51		$	29.68

BANKWELL FINANCIAL GROUP, INC. EARNINGS PER SHARE ("EPS") (unaudited) (Dollars in thousands, except share data)
	Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
	(In thousands, except per share data)
Net income	$	9,777			$	9,174			$	28,140			$	29,408
Dividends to participating securities(1)		(41	)			(33	)			(125	)			(101	)
Undistributed earnings allocated to participating securities(1)		(209	)			(159	)			(613	)			(529	)
Net income for earnings per share calculation	$	9,527			$	8,982			$	27,402			$	28,778
Weighted average shares outstanding, basic		7,598				7,554				7,582				7,582
Effect of dilutive equity-based awards(2)		36				58				65				82
Weighted average shares outstanding, diluted		7,634				7,612				7,647				7,664
Net earnings per common share:
Basic earnings per common share	$	1.25			$	1.19			$	3.61			$	3.80
Diluted earnings per common share	$	1.25			$	1.18			$	3.58			$	3.75

(1)	Represents dividends paid and undistributed earnings allocated to unvested stock-based awards that contain non-forfeitable rights to dividends.
(2)	Represents the effect of the assumed exercise of stock options and the vesting of restricted shares, as applicable, utilizing the treasury stock method.

BANKWELL FINANCIAL GROUP, INC. NONINTEREST INCOME (unaudited) (Dollars in thousands)
	For the Quarter Ended
Noninterest income	September 30, 2023				June 30, 2023			September 30, 2022				Sep 23 vs. June 23 % Change			Sep 23 vs. Sep 22 % Change
Bank owned life insurance	$	303			$	292		$	271			3.8	%		11.8	%
Service charges and fees		294				361			240			(18.6	)		22.5
Gains and fees from sales of loans		237				725			(15	)		(67.3	)		Favorable
Other		(48	)			23			(94	)		Unfavorable			Favorable
Total noninterest income	$	786			$	1,401		$	402			(43.9	)%		95.5	%

	For the Nine Months Ended
Noninterest income	September 30, 2023			September 30, 2022				% Change
Bank owned life insurance	$	876		$	796			10.1	%
Service charges and fees		941			729			29.1
Gains and fees from sales of loans		1,893			1,224			54.7
Other		3			(237	)		Favorable
Total noninterest income	$	3,713		$	2,512			47.8	%

Noninterest income increased by $0.4 million to $0.8 million for the quarter ended September 30, 2023 compared to the quarter ended September 30, 2022. Noninterest income increased by $1.2 million to $3.7 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase in noninterest income was driven by an increase in gains on SBA loan sales and service charges and fees for the quarter and nine months ended 2023.

BANKWELL FINANCIAL GROUP, INC. NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS - QTD (unaudited) (Dollars in thousands)
	For the Quarter Ended
	September 30, 2023									September 30, 2022
	Average Balance			Interest			Yield/ Rate (4)			Average Balance			Interest			Yield/ Rate (4)
Assets:
Cash and Fed funds sold	$	265,115		$	3,393		5.08	%		$	130,440		$	747		2.27	%
Securities(1)		127,229			953		3.00				120,092			829		2.76
Loans:
Commercial real estate		1,943,725			28,140		5.67				1,512,381			18,830		4.87
Residential real estate		53,966			671		4.97				62,915			586		3.72
Construction		209,154			3,908		7.31				116,256			1,512		5.09
Commercial business		539,185			10,394		7.54				431,917			7,058		6.39
Consumer		44,020			740		6.66				12,145			142		4.65
Total loans		2,790,050			43,853		6.15				2,135,614			28,128		5.15
Federal Home Loan Bank stock		5,696			116		8.13				5,021			31		2.51
Total earning assets		3,188,090		$	48,315		5.93	%			2,391,167		$	29,735		4.87	%
Other assets		78,089									89,173
Total assets	$	3,266,179								$	2,480,340
Liabilities and shareholders' equity:
Interest bearing liabilities:
NOW	$	102,149		$	47		0.18	%		$	119,593		$	52		0.17	%
Money market		922,036			9,064		3.90				828,541			2,346		1.12
Savings		105,366			817		3.08				189,279			474		0.99
Time		1,322,074			13,860		4.16				557,243			1,220		0.87
Total interest bearing deposits		2,451,625			23,788		3.85				1,694,656			4,092		0.96
Borrowed Money		159,103			1,784		4.39				135,221			993		2.87
Total interest bearing liabilities		2,610,728		$	25,572		3.89	%			1,829,877		$	5,085		1.10	%
Noninterest bearing deposits		345,988									383,048
Other liabilities		54,136									36,037
Total liabilities		3,010,852									2,248,962
Shareholders' equity		255,327									231,378
Total liabilities and shareholders' equity	$	3,266,179								$	2,480,340
Net interest income(2)				$	22,743								$	24,650
Interest rate spread							2.04	%								3.77	%
Net interest margin(3)							2.85	%								4.12	%

(1)	Average balances and yields for securities are based on amortized cost.
(2)	The adjustment for securities and loans taxable equivalency amounted to $52 thousand and $49 thousand for the quarters ended September 30, 2023 and 2022, respectively.
(3)	Annualized net interest income as a percentage of earning assets.
(4)	Yields are calculated using the contractual day count convention for each respective product type.

BANKWELL FINANCIAL GROUP, INC. NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS - YTD (unaudited) (Dollars in thousands)
	For the Nine Months Ended
	September 30, 2023									September 30, 2022
	Average Balance			Interest			Yield/ Rate (4)			Average Balance			Interest			Yield/ Rate (4)
Assets:
Cash and Fed funds sold	$	281,033		$	9,983		4.75	%		$	240,252		$	1,350		0.75	%
Securities(1)		128,554			2,864		2.97	%			117,008			2,392		2.73	%
Loans:
Commercial real estate		1,932,549			79,958		5.46	%			1,433,642			51,104		4.70	%
Residential real estate		56,798			1,957		4.59	%			67,705			1,810		3.56	%
Construction		194,396			10,582		7.18	%			108,249			4,482		5.46	%
Commercial business		546,329			32,073		7.74	%			402,876			17,011		5.57	%
Consumer		30,571			1,489		6.51	%			7,844			290		4.94	%
Total loans		2,760,643			126,059		6.02	%			2,020,316			74,697		4.88	%
Federal Home Loan Bank stock		5,527			308		7.46	%			3,715			61		2.19	%
Total earning assets		3,175,757		$	139,214		5.78	%			2,381,291		$	78,500		4.35	%
Other assets		66,342									89,747
Total assets	$	3,242,099								$	2,471,038
Liabilities and shareholders' equity:
Interest bearing liabilities:
NOW	$	97,741		$	127		0.17	%		$	122,792		$	158		0.17	%
Money market		910,840			23,532		3.45	%			909,106			4,672		0.69	%
Savings		117,984			2,404		2.72	%			194,013			678		0.47	%
Time		1,291,124			35,536		3.68	%			487,792			2,773		0.76	%
Total interest bearing deposits		2,417,689			61,599		3.41	%			1,713,703			8,281		0.65	%
Borrowed Money		161,166			5,238		4.29	%			101,685			2,137		2.77	%
Total interest bearing liabilities		2,578,855		$	66,837		3.47	%			1,815,388		$	10,418		0.77	%
Noninterest bearing deposits		374,943									398,728
Other liabilities		40,192									37,784
Total liabilities		2,993,990									2,251,900
Shareholders' equity		248,109									219,138
Total liabilities and shareholders' equity	$	3,242,099								$	2,471,038
Net interest income(2)				$	72,377								$	68,082
Interest rate spread							2.31	%								3.58	%
Net interest margin(3)							3.04	%								3.81	%

(1)	Average balances and yields for securities are based on amortized cost.
(2)	The adjustment for securities and loans taxable equivalency amounted to $154 thousand and $148 thousand for the nine months ended September 30, 2023 and 2022, respectively.
(3)	Annualized net interest income as a percentage of earning assets.
(4)	Yields are calculated using the contractual day count convention for each respective product type.

 

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