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

By: Bankwell Financial Group, Inc via Business Wire

July 26, 2023 at 17:15 PM EDT

Bankwell Financial Group, Inc. (NASDAQ: BWFG) reported GAAP net income of $8.0 million, or $1.02 per share for the second quarter of 2023, versus $12.0 million, or $1.55 per share, for the same period in 2022.

The Company's Board of Directors declared a $0.20 per share cash dividend, payable August 24, 2023 to shareholders of record on August 14, 2023.

We recommend reading this earnings release in conjunction with the Second Quarter 2023 Investor Presentation, located at http://investor.mybankwell.com/Presentations and included as an exhibit to our July 26, 2023 Current Report on Form 8-K.

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

"Against the headwinds of an inverted yield curve, the Company generated a 0.99% Return on Average Assets and a 12.91% Return on Average Shareholders' Equity this quarter. As we look to the second half of the year, we can revise our prior guidance upward regarding full year 2023 Net Interest Income (“NII”). Prior guidance had indicated a year-over-year decrease to NII of approximately 10%. We can now guide to a 5-6% decline for 2023 NII versus 2022 performance.

Future margin compression can be expected as the Federal Reserve holds short term rates higher for longer than earlier market consensus, however, our operational efficiency and increasing loan yields will provide a cushion against the uncertain policy backdrop. The Company’s year to date non-interest expense was 1.58% of average assets year for the six-month period ending June 30, 2023, while the average loan yield for the same period stood at 5.95%. The average yield on loans originated thus far in 2023 was 7.38%.

Capital and liquidity positions are strong, and we are confident in the credit quality of the loan book.

Please see the Company's recent Press Release regarding the Company’s newly appointed Executive Vice President and Chief Innovation Officer, Ryan Hildebrand. We are delighted to have Ryan join the management team."

Second Quarter 2023 Highlights:

Total gross loans were $2.8 billion, growing $98.2 million, or 3.7%, compared to December 31, 2022.
Deposits of $2.8 billion for the quarter ended June 30, 2023, decreasing $12.0 million, or 0.4% from December 31, 2022.
Non-brokered deposits were $1.8 billion as of June 30, 2023, up by $48 million, or an increase of 2.7% from March 31, 2023; as of July 25, 2023, non-brokered deposits increased an additional $57 million since June 30, 2023.
FDIC-insured deposits totaled $2.0 billion and represent 71.2% of total deposits as of June 30, 2023.
As of June 30, 2023, the Bank has $1.7 billion immediately available liquidity, comprised of cash, AFS securities and borrowing capacity with the FHLB of Boston and FRB.
Immediately available liquidity provides more than two times coverage of uninsured deposits.
Average yield on 2023 funded loans was 7.38% as of June 30, 2023.
Return on average assets was 0.99% for the quarter ended June 30, 2023.
Return on average shareholders' equity was 12.91% for the quarter ended June 30, 2023.
The net interest margin was 3.07% for the quarter ended June 30, 2023.
The efficiency ratio was 49.8% for the quarter ended June 30, 2023.
Investment securities totaled $117.8 million and represent 3.6% of total assets, with HTM securities totaling $15.9 million, or 0.5% of total assets.

Earnings and Performance

Revenues (net interest income plus noninterest income) for the quarter ended June 30, 2023 were $25.4 million, versus $25.0 million and for the quarter ended June 30, 2022. Revenues for the six months ended June 30, 2023 were $52.5 million, versus $45.4 million for the six months ended June 30, 2022. The increase in revenues for the quarter and six months ended 2023 was primarily attributable to an increase in interest and fees on loans due to loan growth and higher overall loan yields¹ for the quarter ended June 30, 2023. The increase in revenues was partially offset by an increase in interest expense.

1 - The increase in overall loan yields was 111 bps and 123 bps for the quarter and six months ended June 30, 2023, respectively.

Net income for the quarter ended June 30, 2023 was $8.0 million, versus $12.0 million for the quarter ended June 30, 2022. Net income for the six months ended June 30, 2023 was $18.4 million, versus $20.2 million for the six months ended June 30, 2022. The decrease in net income for the quarter and six months ended 2023 was primarily due to an increase in the provision for credit losses and an increase in noninterest expense, primarily due to increased FDIC insurance expense, and an increase in salary and employee benefits expense, mainly due to severance costs. The decrease was partially offset by a direct result of the aforementioned increases in revenues.

Basic and diluted earnings per share were $1.02 and $1.02, respectively, for the quarter ended June 30, 2023 compared to basic and diluted earnings per share of $1.56 and $1.55, respectively, for the quarter ended June 30, 2022. Basic and diluted earnings per share were $2.36 and $2.34, respectively, for the six months ended June 30, 2023 compared to basic and diluted earnings per share of $2.61 and $2.58, respectively, for the six months ended June 30, 2022.

The net interest margin (fully taxable equivalent basis) for the quarters ended June 30, 2023 and June 30, 2022 was 3.07% and 4.01%, respectively. The net interest margin (fully taxable equivalent basis) for the six months ended June 30, 2023 and June 30, 2022 was 3.15% and 3.65%, respectively. The decrease in the net interest margin was due to an increase in funding costs partially offset by an increase in overall loan yields.

Allowance for Credit Losses (ACL)

Provision for credit losses was $2.6 million for the quarter ended June 30, 2023, bringing the ACL-Loans as a percentage of total loans to 1.11%. Provision for credit losses was $0.8 million for the quarter ended March 31, 2023. The increase in the provision for credit losses is mainly attributable to forward looking CECL macroeconomic factors.

Financial Condition

Assets totaled $3.3 billion at June 30, 2023 and remained flat compared to December 31, 2022. Gross loans totaled $2.8 billion at June 30, 2023, an increase of $98.2 million or 3.7% compared to December 31, 2022. Deposits totaled $2.8 billion at June 30, 2023, and remained flat compared to December 31, 2022.

Capital

Shareholders’ equity totaled $248.8 million as of June 30, 2023, an increase of $10.3 million compared to December 31, 2022, primarily a result of net income of $18.4 million for the six months ended June 30, 2023. The increase was partially offset by the Day 1 CECL adoption of $4.9 million, dividends paid of $3.1 million, and a $1.5 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 $0.9 million and fair value marks related to hedge positions involving interest rate swaps of $0.7 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)

	June 30, 2023			March 31, 2023			December 31, 2022			June 30, 2022
ASSETS
Cash and due from banks	$	207,345		$	249,812		$	344,925		$	149,522
Federal funds sold		54,706			27,370			10,754			21,505
Cash and cash equivalents		262,051			277,182			355,679			171,027

Investment securities
Marketable equity securities, at fair value		2,017			2,028			1,988			2,126
Available for sale investment securities, at fair value		99,938			103,171			103,663			94,907
Held to maturity investment securities, at amortized cost		15,884			15,931			15,983			15,917
Total investment securities		117,839			121,130			121,634			112,950
Loans receivable (net of ACL-Loans of $30,694, $27,998, $22,431, and $15,773 at June 30, 2023, March 31 2023, December 31, 2022, and June 30, 2022, respectively)		2,736,607			2,724,514			2,646,384			2,036,626
Accrued interest receivable		14,208			14,261			13,070			8,047
Federal Home Loan Bank stock, at cost		5,696			5,234			5,216			5,064
Premises and equipment, net		27,658			27,619			27,199			27,768
Bank-owned life insurance		50,816			50,524			50,243			49,699
Goodwill		2,589			2,589			2,589			2,589
Deferred income taxes, net		10,014			8,692			7,422			4,768
Other assets		25,229			20,573			23,013			17,014
Total assets	$	3,252,707		$	3,252,318		$	3,252,449		$	2,435,552

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits
Noninterest bearing deposits	$	367,635		$	377,667		$	404,559		$	372,584
Interest bearing deposits		2,421,228			2,420,641			2,396,259			1,660,941
Total deposits		2,788,863			2,798,308			2,800,818			2,033,525

Advances from the Federal Home Loan Bank		90,000			90,000			90,000			105,000
Subordinated debentures		69,082			69,020			68,959			34,500
Accrued expenses and other liabilities		55,949			52,683			54,203			37,060
Total liabilities		3,003,894			3,010,011			3,013,980			2,210,085

Shareholders’ equity
Common stock, no par value		116,541			115,875			115,018			115,599
Retained earnings		133,988			127,566			123,640			109,523
Accumulated other comprehensive (loss) income		(1,716	)		(1,134	)		(189	)		345
Total shareholders’ equity		248,813			242,307			238,469			225,467

Total liabilities and shareholders’ equity	$	3,252,707		$	3,252,318		$	3,252,449		$	2,435,552


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, 2023		March 31, 2023		December 31, 2022			June 30, 2022			June 30, 2023		June 30, 2022
Interest and dividend income
Interest and fees on loans	$	42,482	$	39,723	$	36,545		$	25,141		$	82,205	$	46,569
Interest and dividends on securities		1,002		1,000		898			774			2,002		1,494
Interest on cash and cash equivalents		3,022		3,568		2,150			449			6,590		603
Total interest and dividend income		46,506		44,291		39,593			26,364			90,797		48,666
Interest expense
Interest expense on deposits		20,777		17,033		11,083			1,983			37,810		4,189
Interest expense on borrowings		1,738		1,717		1,701			558			3,455		1,144
Total interest expense		22,515		18,750		12,784			2,541			41,265		5,333

Net interest income		23,991		25,541		26,809			23,823			49,532		43,333
Provision (credit) for credit losses		2,579		826		4,272			(1,445	)		3,405		(1,216	)
Net interest income after provision for credit losses		21,412		24,715		22,537			25,268			46,127		44,549
Noninterest income
Bank owned life insurance		292		281		273			265			573		525
Service charges and fees		361		286		343			249			647		489
Gains and fees from sales of loans		725		931		12			608			1,656		1,239
Other		23		28		(100	)		30			51		(143	)
Total noninterest income		1,401		1,526		528			1,152			2,927		2,110
Noninterest expense
Salaries and employee benefits		6,390		6,081		5,988			5,433			12,471		10,373
Occupancy and equipment		2,204		2,084		1,919			2,193			4,288		4,343
Professional services		692		1,322		912			1,000			2,014		1,981
Data processing		729		671		663			689			1,400		1,343
Director fees		453		392		378			339			845		691
FDIC insurance		1,050		1,062		898			262			2,112		485
Marketing		177		151		112			107			328		152
Other		946		928		1,601			913			1,874		1,493
Total noninterest expense		12,641		12,691		12,471			10,936			25,332		20,861
Income before income tax expense		10,172		13,550		10,594			15,484			23,722		25,798
Income tax expense		2,189		3,171		2,573			3,462			5,360		5,564
Net income	$	7,983	$	10,379	$	8,021		$	12,022		$	18,362	$	20,234
Earnings Per Common Share:
Basic	$	1.02	$	1.34	$	1.04		$	1.56		$	2.36	$	2.61
Diluted	$	1.02	$	1.33	$	1.04		$	1.55		$	2.34	$	2.58
Weighted Average Common Shares Outstanding:
Basic		7,593,417		7,554,689		7,507,540			7,556,645			7,574,160		7,596,639
Diluted		7,601,562		7,616,671		7,563,116			7,614,243			7,639,828		7,683,305
Dividends per common share	$	0.20	$	0.20	$	0.20		$	0.20		$	0.40	$	0.40


BANKWELL FINANCIAL GROUP, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (unaudited)

	For the Quarter Ended								For the Six Months Ended
	June 30, 2023		March 31, 2023		December 31, 2022		June 30, 2022		June 30, 2023		June 30, 2022
Performance ratios:
Return on average assets	0.99	%	1.30	%	1.07	%	1.96	%	1.14	%	1.65	%
Return on average shareholders' equity	12.91	%	17.48	%	13.38	%	22.09	%	15.15	%	19.16	%
Return on average tangible common equity	13.05	%	17.67	%	13.52	%	22.36	%	15.31	%	19.40	%
Net interest margin	3.07	%	3.24	%	3.70	%	4.01	%	3.15	%	3.65	%
Efficiency ratio⁽¹⁾	49.8	%	46.9	%	45.6	%	43.8	%	48.3	%	45.9	%
Net loan charge-offs as a % of average loans	—	%	0.02	%	—	%	—	%	0.02	%	—	%
Dividend payout ratio⁽²⁾	19.61	%	15.04	%	19.23	%	12.90	%	17.09	%	15.50	%

(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
	June 30, 2023			March 31, 2023			December 31, 2022			June 30, 2022
Capital ratios:
Total Common Equity Tier 1 Capital to Risk-Weighted Assets⁽¹⁾		10.34	%		10.17	%		10.28	%		11.10	%
Total Capital to Risk-Weighted Assets⁽¹⁾		11.41	%		11.16	%		11.07	%		11.80	%
Tier I Capital to Risk-Weighted Assets⁽¹⁾		10.34	%		10.17	%		10.28	%		11.80	%
Tier I Capital to Average Assets⁽¹⁾		9.41	%		9.22	%		9.88	%		10.15	%
Tangible common equity to tangible assets		7.58	%		7.38	%		7.26	%		9.16	%
Fully diluted tangible book value per common share	$	31.45		$	30.56		$	30.51		$	28.75
(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
	June 30, 2023			March 31, 2023			December 31, 2022			June 30, 2022
ACL-Loans:
Balance at beginning of period	$	27,998		$	22,431		$	18,167		$	17,141
Day 1 CECL Adjustment on January 1, 2023		—			5,079			—			—
Beginning balance January 1, 2023		27,998			27,510			18,167			—
Charge-offs:
Commercial business		—			(440	)		—			—
Consumer		(25	)		(12	)		(11	)		—
Total charge-offs		(25	)		(452	)		(11	)		—
Recoveries:
Commercial real estate		—			—			—			77
Commercial business		32			—			—			—
Consumer		10			6			3			—
Total recoveries		42			6			3			77
Net loan recoveries (charge-offs)		17			(446	)		(8	)		77
Provision for credit losses - loans		2,679			934			4,272			(1,445	)
Balance at end of period	$	30,694		$	27,998		$	22,431		$	15,773

	As of
	June 30, 2023			March 31, 2023			December 31, 2022			June 30, 2022
Asset quality:
Nonaccrual loans
Residential real estate	$	1,429		$	1,443		$	2,152		$	2,161
Commercial real estate		1,905			1,912			2,781			2,955
Commercial business		2,815			1,528			2,126			787
Construction		9,382			9,382			9,382			9,382
Total nonaccrual loans		15,531			14,265			16,441			15,285
Other real estate owned		—			—			—			—
Total nonperforming assets	$	15,531		$	14,265		$	16,441		$	15,285

Nonperforming loans as a % of total loans		0.56	%		0.52	%		0.61	%		0.74	%
Nonperforming assets as a % of total assets		0.48	%		0.44	%		0.51	%		0.63	%
ACL-loans as a % of total loans		1.11	%		1.01	%		0.84	%		0.77	%
ACL-loans as a % of nonperforming loans		197.63	%		196.27	%		136.43	%		103.19	%
Total past due loans to total loans		1.30	%		0.94	%		0.60	%		1.40	%

Total nonaccrual loans decreased $0.9 million to $15.5 million as of June 30, 2023 when compared to December 31, 2022. Nonperforming assets as a percentage of total assets decreased to 0.48% at June 30, 2023, down from 0.51% at December 31, 2022. The ACL-Loans at June 30, 2023 was $30.7 million, representing 1.11% of total loans.

Past due loans increased to $36.0 million, or 1.30% of total loans, as of June 30, 2023, compared to $16.1 million, or 0.60% of total loans, as of December 31, 2022. Of the June 30, 2023 past due loans, $9.3 million of loans were between 31 - 33 days past due and have subsequently become current.


BANKWELL FINANCIAL GROUP, INC. LOAN & DEPOSIT PORTFOLIO (unaudited) (Dollars in thousands)

Period End Loan Composition	June 30, 2023		March 31, 2023		December 31, 2022		Current QTD % Change		YTD % Change
Residential Real Estate	$	54,631	$	58,541	$	60,588	(6.7	)%	(9.8	)%
Commercial Real Estate⁽¹⁾		1,930,972		1,960,712		1,921,252	(1.5	)	0.5
Construction		219,615		177,115		155,198	24.0		41.5
Total Real Estate Loans		2,205,218		2,196,368		2,137,038	0.4		3.2
Commercial Business		530,913		543,457		520,447	(2.3	)	2.0
Consumer		37,475		19,464		17,963	92.5		108.6
Total Loans	$	2,773,606	$	2,759,289	$	2,675,448	0.5	%	3.7	%
(1) Includes owner occupied commercial real estate.

Gross loans totaled $2.8 billion at June 30, 2023, an increase of $98.2 million or 3.7% compared to December 31, 2022.

Period End Deposit Composition	June 30, 2023		March 31, 2023		December 31, 2022		Current QTD % Change		YTD % Change
Noninterest bearing demand	$	367,635	$	377,667	$	404,559	(2.7	)%	(9.1	)%
NOW		106,189		89,896		104,057	18.1		2.0
Money Market		879,017		874,202		913,868	0.6		(3.8	)
Savings		108,625		117,986		151,944	(7.9	)	(28.5	)
Time		1,327,397		1,338,557		1,226,390	(0.8	)	8.2
Total Deposits	$	2,788,863	$	2,798,308	$	2,800,818	(0.3	)%	(0.4	)%

Total deposits were $2.8 billion at June 30, 2023, a decrease of $12.0 million, or 0.4%, when compared to December 31, 2022.


BANKWELL FINANCIAL GROUP, INC. NONINTEREST INCOME (unaudited) (Dollars in thousands)

	For the Quarter Ended
Noninterest income	June 30, 2023		March 31, 2023		June 30, 2022		June 23 vs. Mar 23 % Change		Jun 23 vs. Jun 22 % Change
Bank owned life insurance	$	292	$	281	$	265	3.9	%	10.2	%
Service charges and fees		361		286		249	26.2		45.0
Gains and fees from sales of loans		725		931		608	(22.1	)	19.2
Other		23		28		30	(17.9	)	(23.3	)
Total noninterest income	$	1,401	$	1,526	$	1,152	(8.2	)%	21.6	%

	For the Six Months Ended
Noninterest income	June 30, 2023		June 30, 2022			% Change
Bank owned life insurance	$	573	$	525		9.1	%
Service charges and fees		647		489		32.3
Gains and fees from sales of loans		1,656		1,239		33.7
Other		51		(143	)	Favorable
Total noninterest income	$	2,927	$	2,110		38.7	%

Noninterest income increased by $0.2 million to $1.4 million for the quarter ended June 30, 2023 compared to the quarter ended June 30, 2022. Noninterest income increased by $0.8 million to $2.9 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The increase in noninterest income was driven by an increase in SBA loan sales and increases in service charges and fees for the quarter and six months ended 2023.


BANKWELL FINANCIAL GROUP, INC. NONINTEREST EXPENSE (unaudited) (Dollars in thousands)

	For the Quarter Ended
Noninterest expense	June 30, 2023		March 31, 2023		June 30, 2022		June 23 vs. Mar 23 % Change		Jun 23 vs. Jun 22 % Change
Salaries and employee benefits	$	6,390	$	6,081	$	5,433	5.1	%	17.6	%
Occupancy and equipment		2,204		2,084		2,193	5.8		0.5
Professional services		692		1,322		1,000	(47.7	)	(30.8	)
Data processing		729		671		689	8.6		5.8
Director fees		453		392		339	15.6		33.6
FDIC insurance		1,050		1,062		262	(1.1	)	300.8
Marketing		177		151		107	17.2		65.4
Other		946		928		913	1.9		3.6
Total noninterest expense	$	12,641	$	12,691	$	10,936	(0.4	)%	15.6	%

	For the Six Months Ended
Noninterest expense	June 30, 2023		June 30, 2022		% Change
Salaries and employee benefits	$	12,471	$	10,373	20.2	%
Occupancy and equipment		4,288		4,343	(1.3	)%
Professional services		2,014		1,981	1.7	%
Data processing		1,400		1,343	4.2	%
Director fees		845		691	22.3	%
FDIC insurance		2,112		485	335.5	%
Marketing		328		152	115.8	%
Other		1,874		1,493	25.5	%
Total noninterest expense		25,332		20,861	21.4	%

Noninterest expense increased by $1.7 million to $12.6 million for the quarter ended June 30, 2023 compared to the quarter ended June 30, 2022. Noninterest expense increased by $4.5 million to $25.3 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The increase in noninterest expense was primarily driven by an increase in salaries and employee benefits expense and FDIC insurance expense.

Salaries and employee benefits expense totaled $6.4 million for the quarter ended June 30, 2023, an increase of $1.0 million when compared to the same period in 2022. Salaries and employee benefits expense totaled $12.5 million for the six months ended June 30, 2023, an increase of $2.1 million when compared to the same period in 2022. The increase in salaries and employee benefits expense was driven by an increase in full time equivalent employees, with full time equivalent employees totaling 141 at June 30, 2023 compared to 132 for the same period in 2022. The increase in salaries and employee benefits expense was also due to one-time severance costs and lower loan originations, which reduces the Bank's ability to defer expenses.

FDIC insurance expense totaled $1.1 million for the quarter ended June 30, 2023, an increase of $0.8 million when compared to the same period in 2022. FDIC insurance expense totaled $2.1 million for the six months ended June 30, 2023, an increase of $1.6 million when compared to the same period in 2022. The increase in FDIC insurance expense is attributed to the overall balance sheet growth, increased use of brokered deposits, and an increase in FDIC insurance rates.


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, 2023			March 31, 2023			December 31, 2022			June 30, 2022
Total Equity	$	248,813		$	242,307		$	238,469		$	225,467
Less:
Goodwill		2,589			2,589			2,589			2,589
Other intangibles		—			—			—			—
Tangible Common Equity	$	246,224		$	239,718		$	235,880		$	222,878

Total Assets	$	3,252,707		$	3,252,318		$	3,252,449		$	2,435,552
Less:
Goodwill		2,589			2,589			2,589			2,589
Other intangibles		—			—			—			—
Tangible Assets	$	3,250,118		$	3,249,729		$	3,249,860		$	2,432,963

Tangible Common Equity to Tangible Assets		7.58	%		7.38	%		7.26	%		9.16	%

	As of
Computation of Fully Diluted Tangible Book Value per Common Share	June 30, 2023		March 31, 2023		December 31, 2022		June 30, 2022
Total shareholders' equity	$	248,813	$	242,307	$	238,469	$	225,467
Less:
Preferred stock		—		—		—		—
Common shareholders' equity	$	248,813	$	242,307	$	238,469	$	225,467
Less:
Goodwill		2,589		2,589		2,589		2,589
Other intangibles		—		—		—		—
Tangible common shareholders' equity	$	246,224	$	239,718	$	235,880	$	222,878

Common shares issued and outstanding		7,829,950		7,843,438		7,730,699		7,752,389

Fully Diluted Tangible Book Value per Common Share	$	31.45	$	30.56	$	30.51	$	28.75


BANKWELL FINANCIAL GROUP, INC. EARNINGS PER SHARE ("EPS") (unaudited) (Dollars in thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
		2023			2022			2023			2022
	*(In thousands, except per share data)*
Net income	$	7,983		$	12,022		$	18,362		$	20,234
Dividends to participating securities⁽¹⁾		(41	)		(33	)		(84	)		(68	)
Undistributed earnings allocated to participating securities⁽¹⁾		(172	)		(224	)		(403	)		(371	)
Net income for earnings per share calculation	$	7,770		$	11,765		$	17,875		$	19,795

Weighted average shares outstanding, basic		7,593			7,557			7,574			7,597
Effect of dilutive equity-based awards⁽²⁾		8			57			66			86
Weighted average shares outstanding, diluted		7,601			7,614			7,640			7,683
Net earnings per common share:
Basic earnings per common share	$	1.02		$	1.56		$	2.36		$	2.61
Diluted earnings per common share	$	1.02		$	1.55		$	2.34		$	2.58

(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. NET INTEREST MARGIN ANALYSIS ON A FULLY TAX EQUIVALENT BASIS - QTD (unaudited) (Dollars in thousands)

	For the Quarter Ended
	June 30, 2023						June 30, 2022
	Average Balance		Interest		Yield/ Rate ⁽⁴⁾		Average Balance		Interest		Yield/ Rate ⁽⁴⁾
Assets:
Cash and Fed funds sold	$	227,777	$	3,023	5.32	%	$	247,013	$	449	0.73	%
Securities⁽¹⁾		128,576		955	2.97			118,534		809	2.73
Loans:
Commercial real estate		1,935,058		27,099	5.54			1,443,239		17,278	4.74
Residential real estate		56,981		643	4.51			66,460		553	3.33
Construction		206,844		3,691	7.06			106,285		1,938	7.21
Commercial business		557,482		10,646	7.55			393,318		5,327	5.36
Consumer		29,326		500	6.84			5,298		45	3.43
Total loans		2,785,691		42,579	6.05			2,014,600		25,141	4.94
Federal Home Loan Bank stock		5,610		98	7.00			3,263		15	1.79
Total earning assets		3,147,654	$	46,655	5.86	%		2,383,410	$	26,414	4.38	%
Other assets		96,603						79,380
Total assets	$	3,244,257					$	2,462,790

Liabilities and shareholders' equity:
Interest bearing liabilities:
NOW	$	98,048	$	42	0.18	%	$	136,414	$	59	0.17	%
Money market		902,225		8,083	3.59			931,101		1,146	0.49
Savings		112,585		860	3.06			198,304		103	0.21
Time		1,298,170		11,792	3.64			451,508		675	0.60
Total interest bearing deposits		2,411,028		20,777	3.46			1,717,327		1,983	0.46
Borrowed Money		163,138		1,738	4.21			85,092		558	2.59
Total interest bearing liabilities		2,574,166	$	22,515	3.51	%		1,802,419	$	2,541	0.57	%
Noninterest bearing deposits		375,514						407,890
Other liabilities		46,565						34,231
Total liabilities		2,996,245						2,244,540
Shareholders' equity		248,012						218,250
Total liabilities and shareholders' equity	$	3,244,257					$	2,462,790
Net interest income⁽²⁾			$	24,140					$	23,873
Interest rate spread					2.36	%					3.81	%
Net interest margin⁽³⁾					3.07	%					4.01	%

(1)		Average balances and yields for securities are based on amortized cost.
(2)		The adjustment for securities and loans taxable equivalency amounted to $51 thousand and $50 thousand for the quarters ended June 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 Six Months Ended
	June 30, 2023						June 30, 2022
	Average Balance		Interest		Yield/ Rate ⁽⁴⁾		Average Balance		Interest		Yield/ Rate ⁽⁴⁾
Assets:
Cash and Fed funds sold	$	271,328	$	6,590	4.90	%	$	296,239	$	603	0.41	%
Securities⁽¹⁾		129,225		1,912	2.96	%		115,452		1,563	2.71	%
Loans:
Commercial real estate		1,926,852		52,125	5.38	%		1,393,836		32,273	4.61	%
Residential real estate		58,207		1,286	4.42	%		70,125		1,224	3.49	%
Construction		186,684		6,651	7.09	%		104,176		2,971	5.67	%
Commercial business		549,963		21,394	7.74	%		388,249		9,954	5.10	%
Consumer		23,971		749	6.30	%		5,666		147	5.25	%
Total loans		2,745,677		82,205	5.95	%		1,962,052		46,569	4.72	%
Federal Home Loan Bank stock		5,442		193	7.14	%		3,051		29	1.94	%
Total earning assets		3,151,672	$	90,900	5.74	%		2,376,794	$	48,764	4.08	%
Other assets		90,427						89,866
Total assets	$	3,242,099					$	2,466,660

Liabilities and shareholders' equity:
Interest bearing liabilities:
NOW	$	95,494	$	81	0.17	%	$	124,361	$	106	0.17	%
Money market		905,021		14,468	3.22	%		950,131		2,326	0.49	%
Savings		124,387		1,586	2.57	%		196,400		204	0.21	%
Time		1,275,417		21,675	3.43	%		452,676		1,553	0.69	%
Total interest bearing deposits		2,400,319		37,810	3.18	%		1,723,568		4,189	0.49	%
Borrowed Money		162,215		3,454	4.24	%		84,770		1,144	2.68	%
Total interest bearing liabilities		2,562,534	$	41,264	3.25	%		1,808,338	$	5,333	0.59	%
Noninterest bearing deposits		389,608						406,707
Other liabilities		45,494						38,683
Total liabilities		2,997,636						2,253,728
Shareholders' equity		244,463						212,932
Total liabilities and shareholders' equity	$	3,242,099					$	2,466,660
Net interest income⁽²⁾			$	49,636					$	43,431
Interest rate spread					2.49	%					3.49	%
Net interest margin⁽³⁾					3.15	%					3.65	%

(1)		Average balances and yields for securities are based on amortized cost.
(2)		The adjustment for securities and loans taxable equivalency amounted to $102 thousand and $98 thousand for the six months ended June 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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Contacts

Courtney E. Sacchetti

(203) 652-0166